Shares in international premium car dealer Inchcape reversed 9.5p to 520.3p today, despite the delivery of strong full-year results and a rise in the dividend payout ratio from 30% to 40%. Investors took profits following a good run since late last year, with the shares having surged north from 350p.
The £2.4 billion cap car retailer's geographical diversity and exposure to high-end brands selling well in faster growing economies is clearly serving it well. Inchcape motored in with annual numbers for calendar 2012 which exceeded forecasts on most metrics this morning. Adjusted taxable profits reached a record £250.3 million, 10% up year-on-year and comfortably ahead of a previous £235.1 million peak achieved before the credit crunch in 2007.
Sales were up 4.4% at £6.1 billion, driven by growth in all geographic segments bar Europe, where sharp declines were seen in troubled Greece in particular. Thankfully for investors, Inchcape derives more than 70% of trading profits from Asia Pacific and emerging markets and as such, is a prime beneficiary of wealth creation and 'premiumisation' trends in these high growth, high margin economies. In many developing nations, consumers are increasingly affluent and aspire to own brands ranging from Porsche and Mercedes-Benz to BMW and Land Rover.
Highlighting better-than-expected sales in the UK, Inchcape flagged up a record profit performance in North Asia, where the company is benefiting from a strong Hong Kong economy and bumper demand from high-rollers in Macau. A best-ever performance was also achieved in Australasia, where Inchcape recently splashed out £78 million on Australia's largest premium automotive business Trivett. This Sydney-based seller of premium and super-luxury brands including BMW, Aston Martin and McLaren has boosted the company's Asia Pacific presence and exposure to the higher margin luxury and premium parts of the market.
Following a year of copiously-strong cash generation, Inchcape closed the year with £276.6 million net cash in its coffers and cheered income-hungry investors with its decision to raise the pay-out ratio to 40%. The total dividend for the year is lifted 32% to 14.5p accordingly.
Responding to the results today, Panmure Gordon number crunchers Mike Allen and Paul Jones, with a 558p published price target for the shares, write: 'Our recommendation remains in Hold territory for now, but the risk/reward profile looks favourable for investors at this juncture.'
