Inchcape takes £198m hit following WLTP
Inchcape’s UK and Europe retail sales declined nearly 4% and trading profit declined more than 70% in 2018 due to the impact of WLTP emissions regulations. The firm has also taken a £198 million “exceptional impairment” due to reduced margin expectations, according to the Inchcape’s latest results.
The global retail and distribution firm blamed a contraction in margins to 0.5% from 1.6% in the prior year.
“Our UK business has seen a 7% market decline in new car volumes, but more importantly a further 30% contraction in diesel new car volumes,” said group chief executive Stefan Bomhard in the company’s stock market announcement.
“[This] has led to an oversupply of diesel new car product in the market. In addition, the new WLTP [regulations] led to supply shortages of certain models in the second half of the year given delays in product testing. Inchcape’s OEM brand exposure emphasised the impact of both trends to the business in comparison to the wider market. These trends, alongside negative operational gearing, weakened our margins over the year. Given current trading margins we have reduced our near-term margin expectations and taken a £198m non-cash exceptional impairment to the carrying value of goodwill and site-based assets.”
Mr Bomhard added: “Whilst the UK market remains challenging, we have started 2019 with a cleaner stock profile, improved centralised processes and have actions underway to rationalise our cost base.”
Inchcape’s retail revenue for 2018 in UK and Europe ended the year down 3.7% at £3.06 billion on 2017’s results. Trading profits for the division were down 71.5% at £14.8m.