REG - Inchcape PLC - Trading Statement

InchcapeAnnouncement

27/04/2023 07:00

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RNS Number : 6086X  Inchcape PLC  27 April 2023

27 April 2023

Inchcape plc, the leading global automotive distributor, announces its Q1
trading update

covering the period from 1 January to 31 March 2023

Q1 trading update: continued strong business momentum
 §   The Group has made an excellent start to the year; with full year results
     expected to be in line with published market consensus(1)
 §   Group revenue £2.7bn: up 50% on a reported basis, reflecting the benefit of
     M&A, including Derco, and organic growth of +13%, with growth across all
     regions
 §   Derco's revenue and profit contribution was in line with our expectations;
     delivery of the integration plan is progressing well (including synergy
     targets), we prioritised aligning inventory management practices with those
     employed across Inchcape. Reiterate our operating margin expectation: towards
     the top-end of a typical distribution business (5-7%; pre-synergies).
 §   Expanding our APAC distribution footprint: agreed the purchase of
     Mercedes-Benz's distribution operations in Indonesia (c.£200m annualised
     revenue) and CATS in the Philippines (c.£120m annualised revenue) - with
     completion anticipated in 2H23. Appointed distributor of Tata commercial
     vehicles in Thailand.

Duncan Tait, Group CEO, commented:

"Inchcape has made an excellent start to 2023. Our first quarter results show
a continuation of the trends we experienced at the end of last year, with
organic growth underpinned by the improvement in vehicle supply. Growth in the
Distribution segment was further accelerated by the significant contribution
from new businesses in the Americas - with Derco, Simpson Motors and Ditec all
contributing positively. I am especially pleased with our progress in
integrating Derco, and we remain firmly on track with our plans.

During the quarter we continued to shift the Group's portfolio towards
Distribution, expanding our footprint in APAC. This included Mercedes-Benz's
operations in Indonesia and an agreement to acquire CATS, the leading
distributor of luxury vehicles in the Philippines - another new and exciting
high growth market for the Group. The combination of our broad market
footprint, strong OEM relationships, our digital and data capabilities and our
robust financial position continues to make Inchcape the natural consolidator
in a highly fragmented industry.

Inchcape is a business with great momentum and an exciting future. With a
clear and proven strategy, we are well-positioned to capitalise on further
opportunities for organic growth and market consolidation, and I am confident
we will continue to deliver sustainable growth and long-term value for all our
stakeholders."

Outlook:

Following an excellent start to 2023, and based on prevailing market
conditions, we expect to make strategic, operational and financial progress,
underpinned by the integration of Derco, with full year results expected to be
in line with published market consensus(1).

 Q1 revenue YoY%  Reported  Constant FX  Organic(2)
 Group            +50%      +44%         +13%
 Distribution     +70%      +60%         +15%
 Retail           +8%       +8%          +8%

( )

1: 2023 Adjusted PBT analysts' consensus: £487m (as published on 11 April
2023)

2: Organic growth is defined as sales growth in operations that have been open
for at least a year at constant foreign exchange rates

 

 

 

Update on Derco
 §   Derco's revenue and profit contribution was in line with our expectations
     (with strong performance for certain brands offset by normalising market share
     elsewhere; Aftermarket performance was resilient)
 §   Integration is progressing well; we prioritised aligning inventory management
     practices with those employed across Inchcape and have made good progress in
     Q1. As previously outlined, before the end of 2023 we anticipate a £200m
     working capital inflow from reducing Derco's inventories will be partially
     offset by a working capital outflow across the rest of the Group.
 §   Reiterating our expectation of delivering an operating margin towards the
     top-end of a typical distribution business (5-7%; pre-synergies), confidence
     on the delivery of recurring synergies (of at least £40m; 30% realised in
     2023) and EPS accretion of >15% in 2023 and >20% in 2024.

 
Channel review

The commentary that follows covers the period from 1 January to 31 March
2023.  Unless otherwise stated, all figures are quoted on an organic basis.

During the quarter, Group revenue increased 50% on a reported basis,
reflecting the benefit of M&A, including Derco, and organic growth of
+13%, with growth across all regions.

In Distribution, revenue increased 70% on a reported basis, reflecting the
consolidation of Derco and the benefit from Simpson Motors and Ditec, both
acquired in 2Q22. Organic growth increased 15%, supported by improving new
vehicle supply and Aftermarket growth.

In Retail, revenue grew 8%, a robust performance in the context of the switch
to Agency (for certain brands) at the start of the year. The underlying
performance was stronger as supply improved.

 

 Distribution  Q1 organic revenue YoY%: +15%

Americas

 §   Good performance despite several markets lapping challenging comparators;
     market share gains for brands that were supply constrained during 2022
 §   Continued growth of Aftermarket and bravoauto roll-out supported growth in
     Used revenue

APAC

 §   Performance in Singapore and Hong Kong in line with our plan (expect
     improvement from late-2023); reopening of border with China has increased
     order books in Hong Kong
 §   Rest of Asia saw a continuation of its growth trend
 §   In Australasia, continued strong momentum underpinned by improving vehicle
     supply and a long order book. bravoauto gaining traction.

Europe & Africa

 §   Double-digit growth in Europe in vehicles (new and used) supported by better
     vehicle supply; with a particularly strong performance in Romania, Greece and
     Bulgaria. Still early days for bravoauto, but business progressing well.
 §   Africa performance underpinned by robust growth of Aftermarket

 

 Retail(3)  Q1 organic revenue YoY%: +8%

 

 §   Underlying volume growth in new vehicles. Significant improvement in used
     vehicle revenue supported by a more established bravoauto business.
 §   Revenue growth was adversely impacted by the shift towards Agency for certain
     brands

 

3: UK and Poland

 

 

 

 
Market abuse regulation statement

This announcement contains inside information.

 
Conference call today

A conference call for analysts and investors will be held today, Thursday 27
April, at 08:30 (UK time).

Dial-in details: +44 (0)330 551 0200 / 0808 109 0700

 

A replay of the call will be available via the Company's website,
www.inchcape.com (https://www.inchcape.com/) later today.

 

 

Financial calendar
 Ex-dividend date for 2022 final dividend  11(th) May 2023
 Record date                               12(th) May 2023
 Annual general meeting                    18(th) May 2023
 2022 final dividend payment               19(th) June 2023
 Half year results                         27(th) July 2023
 Q3 trading update                         26(th) October 2023

 
Contacts
 Inchcape plc:
 Raghav Gupta-Chaudhary              Investor queries  +44 (0)7933 395 158  i (mailto:investors@inchcape.com) nvestors@inchcape.com
                                                                            (mailto:investors@inchcape.com)
 Krishma Arora

 Media enquiries (Brunswick Group):
 Kate Holgate / Helen Smith                            +44 (0)20 7404 5959  inchcape@brunswickgroup.com (mailto:inchcape@brunswickgroup.com)

 

 

About Inchcape
Inchcape is the leading global automotive distributor, with operations across six continents. Through the unique expertise of our people, our suite of cutting-edge technology products, and our approach to advanced data analytics, we provide the platform for the world's leading mobility companies to accelerate their ambitions in markets where we and our partners want to succeed.
Our distribution platform connects the products of mobility companies with customers, and our responsibilities span from product planning and pricing, import and logistics, brand and marketing to operating digital sales, managing physical sales and aftermarket service channels.
Inchcape is driven by its purpose of 'bringing mobility to the world's communities, for today, for tomorrow and for the better'. We are committed to making a positive contribution to the communities in which we operate, for our people, for society and for the planet. The Group is headquartered in London and employs around 19,000 people globally.

www.inchcape.com (http://www.inchcape.com)

 

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