Inchcape cautions over slowing growth in 2024

Car dealership Inchcape has posted surging annual profits but warned that growth will pare back over the year ahead.

The firm posted a 24% hike in pre-tax profits to £413 million for 2023 after sales lifted 12%, when stripping out the boost from a recent acquisition.

But it said growth was expected to “moderate” in 2024, adding that it will keep an “even stronger” focus on costs in the tougher trading conditions.

Shares in the firm tumbled 9% in Tuesday morning trading.

Inchcape gave little update on the review of its UK retail business, after confirming at the end of January that it was considering a possible sale of the arm, except to say that the review remains in the “initial stages”.

It revealed that “in light of our review of strategic options for the UK retail business, we are re-evaluating our ambitions” for used car supermarket chain bravoauto as part of its vehicle lifecycle services (VLS) division.

The firm is already slashing the number of bravoauto sites across the UK.

It comes amid a tough used car market, which has seen prices surge due to a supply shortage, but values slumped last autumn, putting pressure on dealership profit margins.

Inchape said: “2024 is expected to be another year of growth, albeit moderated, with the group maintaining prudent expectations for recovery in 2024 in certain markets, which are weaker than previous years.

“To that end, the group is driving an even stronger focus on cost management to deliver a moderated short-term growth profile, in the context of broader market dynamics.”

The car dealership market is also under pressure amid a financial regulator’s probe into historic car finance selling practices.

The Financial Conduct Authority (FCA) opened a review in January into whether people could be owed compensation for being charged too much for car loans, following a high number of complaints.

In its results, Inchcape said: “We look forward to the outcome of the FCA review and the clarity that this will bring for customers, lenders and dealers.”

Its results showed that underlying earnings in the firm’s retail business – including the UK, Poland and bravoauto – fell 17% to £40 million last year, largely as prices fell and knocked profit margins.

On plans to make more cuts to bravoauto, Inchcape said: “We intend to further reduce the scale of bravoauto to its profitable core, particularly given our continued strategic focus on reducing our retail-only footprint.”