Inchcape’s Q1 car retail revenues 'adversely impacted' by agency model shift

Inchcape chief executive Duncan Tait said that the automotive distribution and car retail PLC had made an “excellent start to 2023”, despite the adverse effects of certain OEMs’ shift to a direct-to-consumer agency model.

The business reported revenues up 50% in total, to £2.7 billion, in the period to March 31, 2023, in a trading statement issued via the London Stock Exchange this morning and stated that its full year results expected to be in line with published market consensus which predict pre-tax profits of £487m.

But as revenues rose by 70% in distribution following the group’s acquisition of the Derco – the largest automotive distributor in Latin America – its retail revenues rose by 8% in a performance hampered by the agency model shift.

It described the retail performance as “a robust performance” in the context of the switch to agency, for certain brands, at the start of the year”, adding: “Revenue growth was adversely impacted by the shift towards Agency for certain brands”.

Inchcape reported that, along with a recovery of new vehicle supplies, the continued growth of its aftermarket operations and the roll-out of its standalone bravoauto used car retail had supported growth in retail revenues.

Its operations are increasingly focussed on its global dirtribution business, however.

Tait said: "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.”

He added: “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."

Today’s trading update comes three months after Inchcape Retail’s annual financial results revealed that it had rebounded from £76.4m pre-tax loss to deliver profitability in 2021.

The AM100 car retail group, part of Inchcape PLC, delivered a pre-tax profit of £6.54m as turnover rose by 22.7% to £1.33 billion (2020: 1.08bn) in the 12-month period to December 31, 2021, documents published via Companies House revealed.

Last month Tait highlighted the success of the automotive PLC’s “portfolio shift towards distribution” as it reported a near-50% growth in profits in its 2022 annual financial results.

Group revenue rose 18% to £8.1 billion, as new vehicle supplies started to recover following post-COVID shortages, with the group reporting that “higher margins and operating leverage” had helped it to a 49.8% rise in pre-tax profits to £373m (2021: £249m).

Last August Steven Eagell confirmed its acquisition of Inchcape’s Toyota dealership in Oxford, over three weeks after AM initially reported the move.

Inchcape’s disposal followed a restructure of its operations overseen by former chief executive James Brearley, who described the plan in an AM profile interview prior to his departure in 2021.

At that point, the PLC completed the sale or closure of 20 dealerships in the space of two years and the loss of the ‘retail’ classification from its London Stock Exchange listing as its global focus shifted towards distribution.

It is now delivering growth with its expanding used car retail division bravoauto, which grew to 17 sites in December.