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Inchcape shares weak as it warns of challenging year ahead although 2017 profits see strong growth

Stefan Bomhard, Inchcape's group chief executive, said: “In 2018, we anticipate a more challenging year given continued supply and demand imbalance in our Retail markets particularly over the first half of the year"

Car lot
Inchcape reported a 9.5% increase in 2017 pre-exceptional pre-tax profits to £382.5mln

Inchcape PLC (LON:INCH) saw its shares reverse on Tuesday after it warned of a more challenging year ahead, weighed by its retail arm, as it unveiled strong growth in 2017 profits along with an increased dividend for the year.

The FTSE 250-listed global motor dealer reported a 9.5% increase in 2017 pre-exceptional pre-tax profits to £382.5mln, up from £349.4mln a year earlier, as revenue rose by 14.2% to £8.9bn.

READ: Inchcape shares in reverse gear after broker starts coverage of car retailer with a negative call

The company said it saw a strong underlying performance in its distribution arm - which accounted for 79% of its profits - with trading profit from the division up 22.2% to £346.3mln.

However, there was a notable fall in trading profits at the company’s’ retail arm, which dropped by 11.5% to £105.3mln.

Stefan Bomhard, Inchcape's group chief executive, said: “In 2018, we anticipate a more challenging year given continued supply and demand imbalance in our Retail markets particularly over the first half of the year as well as new vehicle decline in Singapore, despite continued momentum across the rest of our businesses.“

But, he concluded: “Overall, we expect to deliver a resilient constant currency performance over 2018."

The company hiked its full-year dividend by 12.6% to 26.8p per share, up from 23.8p in 2016, and also announced a new share buyback of up to £100mln as part of its continued focus on capital allocation.

In early morning trading, Inchcape shares were down 2.7% at 681p.

Quick facts: Inchcape

Price: 605 GBX

LSE:INCH
Market: LSE
Market Cap: £2.41 billion
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