Inchcape retail sees profit drop 21% in 2020
25 February 2021
Inchcape’s retail business in the UK and Europe which experienced a “heavily loss-making” first half of 2020 saw a 21% drop in operating profit on revenue down 25% for the full year, according to its latest PLC parent’s results for 2020.
Turnover came in at £3.01 billion for 2020, down from £4.03bn in 2019, while operating profit finished at £25.4 million, down from £32.2m the year before. However, the international business does not go into finer detail about the exact results in the UK. Last year’s PLC results claimed 2019’s UK and European retail business had a “trading profit” of £17.5m on a turnover of £3.0bn.
Commentary from the group in its results statement said: “We experienced a step-up in the second half, with solid demand for new and used vehicles, as well as aftersales services. During the first half, the UK business received £23m of government support (employment and business rates), but was nevertheless still heavily loss-making. We have not accessed any such support in the second half. Performance improved in the second half as we experienced higher vehicle gross margins and the benefit from our cost-restructuring efforts. We finished the year with operating profit of £25m (vs £32m in the prior period, which included profits from businesses disposed in December 2019, including Inchcape Fleet Solutions), and slightly higher margins than 2019.”
The global Inchcape PLC business saw revenue decline 27% to £6.84bn from £9.38bn in 2019. The group reported a profit before tax (ahead of exceptionals) figure of £129m for 2020, down 61% on the year before, however the statutory figure saw a loss before tax of £128m in 2020 against a profit of £402m in 2019.
During the year Inchape PLC recorded exceptional charges of £257m, largely non-cash, and primarily due to the impact of Covid-19. The majority (£223m) of this relates to goodwill and site impairments. As a result, the reported loss before tax was £128m, compared to a profit before tax of £402m in 2019 – which was supported by gains on disposal of Inchcape’s retail assets.
Commenting on the results Duncan Tait, group CEO, said: “Our 2020 results came in ahead of recently upgraded expectations, supported by increased resilience of demand for both vehicles and aftersales services in the fourth-quarter. The group’s inherently cash-generative business model contributed to the strengthening of our overall financial position during the second half.
“While the Covid-19 situation remains dynamic, as of today almost all of our markets are open. In many markets where we are facing restrictions, we are able to deliver vehicles, offer a click-and-collect service and to continue to perform Aftersales services. These capabilities helped our top-line performance in the second half of 2020 and contributed to the operating margin recovery from the first half.
“In response to Covid-19, the group implemented a significant cost-restructuring programme. This is now substantially complete, and we are leveraging our leaner structure to build a better business for the future. In addition, we continued to rebalance our portfolio towards the more attractive distribution segment, securing new distribution business in both Americas and Europe, and further reducing our retail business.”