Inchcape said it expected to be debt free by the end of the year as the UK car scrappage scheme helped moderate the declining global automobile market.
The car dealer said its full-year results would be “significantly” better than expected, although it cautioned that the market looked less robust going into 2010, when profits are expected to remain flat. Net debt stood at £28m at the end of July.
The shares closed up 6.7 per cent, or 2.2p, at 35p.
The better-than-expected trading statement prompted Investec, the group’s broker, to raise its full-year pre-tax profit figures from £120m to £140m for 2009; it expects 2010 profits to be static at £140m.
“We are very pleased with our third-quarter performance,” said André Lacroix, chief executive.
“The market remains very challenging around the world, but we’re benefiting from our self-help initiatives. We have taken a lot of costs out, we have taken 2,350 positions out of our payroll over the past 12 months, and we have closed 31 sites . . . so, against previous expectations, the group’s resilience to this downturn is much stronger than expected in terms of profit and cash flow.”
For the three months to September 30, turnover fell 13.4 per cent compared with the same period last year, and was down 16.5 per cent in constant currency terms. Like-for-like sales were down 9.7 per cent in the third quarter and 13.7 per cent in constant currency terms.
However, third-quarter turnover was up 2.2 per cent compared with the second quarter, indicating that the market may be bottoming out.
The company said the UK’s car scrappage scheme had helped stem some of the falling demand, resulting in a much stronger third quarter in the UK market than the group had expected.
However, Inchcape sounded a note of caution that underlying demand for new cars remained weak.
Excluding scrappage, new car registrations in the UK were down 15.1 per cent compared with 2008 and down 28.6 per cent compared with 2007.
Sales picked up in Hong Kong in the third quarter, and Inchcape said it was continuing to gain market share in sluggish markets in Singapore and eastern Europe as well as in Australia, where the market is improving.
The UK, Hong Kong and Australia together account for more than half of the group’s total sales.
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