05 March 2024 , 11:26
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Car dealership Inchcape has reported a significant increase in annual profits but has warned that growth will slow down in the coming year.
The company saw a 24% rise in pre-tax profits to £413 million for 2023, with sales up by 12%, excluding the boost from a recent acquisition. However, it predicts that growth will "moderate" in 2024 and plans to focus even more on controlling costs due to tougher trading conditions.
This news caused Inchcape's shares to fall by 9% in Tuesday morning trading. The company didn't provide much information about the review of its UK retail business, which it confirmed at the end of January might be sold.
It only mentioned that the review is still in the "initial stages". As part of this strategic review, Inchcape is reconsidering its ambitions for used car supermarket chain bravoauto, which is part of its vehicle lifecycle services (VLS) division.
Inchcape is already reducing the number of bravoauto sites across the UK. This comes at a challenging time for the used car market, as prices have risen due to a supply shortage. However, values fell last autumn, putting pressure on dealership profit margins.
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Inchcape 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." The group is working harder on managing costs to make sure growth is steady, even when the market changes a lot. Car dealers are also facing scrutiny because the financial watchdog is looking at how they sold car finance deals.
The Financial Conduct Authority (FCA) started looking in January to see if people should get money back for being overcharged on car loans after complaints. Inchcape said in its report: "We look forward to the outcome of the FCA review and the clarity that this will bring for customers, lenders and dealers."
The company's results show that the money it made from selling cars in places like the UK, Poland, and bravoauto went down by 17% to £40 million last year. This happened mostly because prices dropped and knocked profit margins. Inchcape has plans to cut back on bravoauto and 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."