LONDON -- International motor car dealer Inchcape Plc reported strong profit growth on Monday, helped by record sales in two core markets, and pledged to invest much of the proceeds in Eastern Europe.
Pre-tax profit at the British-based firm grew 30.9 percent to 83.4 million pounds ($151.2 million) in the six months to June 30, 2004.
Unit sales reached a record in Singapore, its biggest profit center, and in Australia. Chief Executive Peter Johnson said the only core markets where its motor sales did not beat broader car market growth were Greece and Belgium. Here, he said, demand for Toyota motors outstripped its ability to supply them.
The company said it was confident of a strong 2004, but that second-half growth was unlikely to be as strong, with demand set to slow in most of its markets.
Inchcape, which also counts the UK as a core market and which has a 42 percent market share in Hong Kong, said it would return any capital not required for investment purposes to shareholders, and raised its dividend payout by 25 percent to 15 pence a share.
But Johnson said he saw significant opportunities to use the strong cash flow to build retail networks in Eastern Europe, where car sales were growing as fast as eight percent a year, compared with flat to two percent in the western Europe, and where the car retail industry was still dominated by small, poorly funded local businesses that lacked the ability to offer big manufacturers a good service.
He said Inchcape's fledgling businesses in the Balkans had already delivered 65 percent volume growth and doubled profits this year.
"We are looking to develop businesses as countries enter the European Union," he said.
Johnson said he also saw China as an exciting investment prospect, albeit further in the future than Eastern Europe.
"We are in the process of talks with a Chinese partner and with BMW, Mercedes and Jaguar about dealerships there," Johnson told Reuters.
"There is a fast-growing middle class in places like Shanghai, Beijing and Guangdong and a market that is going to need to be addressed."