Inchcape on bumpy road with second profits alert
Shares in one of Britain's biggest car dealers were involved in another nasty City prang today after Inchcape issued its second major profit warning in less than two months and scrapped the full-year dividend.
Inchcape specialises in upmarket marques, and is the UK's major retailer of the likes of Mercedes-Benz, BMW and Lexus, having previously reasoned that if volume sales of cars weaken, people will always aspire to and upgrade to the smarter car.
But the financial crisis has ripped up the Inchcape business model as the credit crunch has seen unprecedented falls in car sales in the UK - off 37% at the last count - and is now ravaging the industry globally. Inchcape trades in Australia, Singapore, Hong Kong and Russia.
The company today said like-for-like sales for the 11 months to the end of November are down 4.9% against a fall in the first nine months of just 1%. Profit margins had been running at 4.8% in the first three months, but they have now been dragged down to 4.3% for the year to date.
When Inchcape warned on its 2008 profit levels in October - at which stage it also said its 2009 profits should be downgraded too - the shares dived more than a third to 78p.
The company today said it should hit City profit targets of £190 million for 2008. But it warned its lowered target of £150 million for 2009 is too high. A redundancy programme could see up to 700 UK staff axed.
