Shares in Inchcape (INCH) motored 5.6% higher to 805.5p after the global automotive distributor said it expects to deliver 2021 pre-tax profit ‘significantly’ ahead of the £2.16 million market consensus forecast.

There was also relief as the company assured investors that semiconductor shortages have had limited impact on the business to date.

Chief executive Duncan Tait is off to a very fast start. Since he took the wheel at the car distribution and dealership firm at the beginning of the July last year Inchcape’s shares are up more than 60%.


Since its first quarter update (29 April 2021), where Inchcape said trading was ahead of expectations, the ‘encouraging trends observed across the business have continued’.

Performance has exceeded management’s expectations, with Inchcape’s businesses benefiting from both ‘an uptick in demand and margin resilience’.

‘We expect the strong first half performance will underpin our full year results,’ insisted Inchcape, headquartered in London but operating in 36 global markets with a portfolio of the world’s leading automotive brands.

‘There is still a high level of uncertainty about the second half, both in terms of the pandemic situation and issues relating to supply due to shortages of semiconductors, which have had a limited impact on the group to date,’ added the company.


Peel Hunt analyst Andrew Nussey said the uptick in demand is being driven by continued retail recovery in the UK and Russia, though he noted that ‘determining how much extra activity is “pent-up” versus “underlying” is still difficult to establish.’

Nussey increased his 2021 pe-tax profit estimate from £214 million to £235 million to give earnings per share of 43.9p, an upgrade from 39.9p, though he is sticking with his £275 million pre-tax profit estimate for 2022 for now.

Maintaining his ‘buy’ rating on Inchcape, the analyst raised his price target from 850p to 900p to reflect the positive momentum in the business as well as the ‘growing visibility on revenue, margins and cash’.

Russ Mould, investment director at AJ Bell, commented: ‘Chip shortages have hit production of new cars, creating a very tight supply situation, while demand has been boosted as we move out of lockdown and as people are reluctant to use public transport to get around.

‘It’s no wonder Inchcape is pointing to higher-than-expected profit, though notably this is still likely to be below pre-pandemic levels.

‘Chip shortages could move from being a fuel injection to a speed bump if they mean Inchcape itself is struggling to source the cars people want and when they want them.

‘Inchcape does at least benefit from a distribution-focused model and global diversification with its revenue streams running the gamut from new and used car sales, finance and insurance products to high-margin aftersales.’


Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account.

Issue Date: 18 Jun 2021