Inchcape plc (LON: INCH), the leading independent multi-brand automotive Distributor with global scale, has announced that it has agreed to sell its Inchcape Fleet Solutions business to Toyota Fleet Mobility GmbH for total cash consideration of £100m. It follows recent disposals of less productive dealerships in the UK, and Retail-only disposals in Australia and China. Inchcape is focused on its core Distribution operations and these disposals have meaningfully streamlined the Group along those lines.
The IFS business leases fleet vehicles and provides fleet management services to B2B customers including Toyota. The scope of the business means there is limited synergy with Inchcape’s UK retail dealership business, where Inchcape acts as a franchisee of brands including BMW, MINI, JLR, Mercedes, VW, Audi, Porsche, Toyota and Lexus. The UK Retail dealership business remains strategically important to the Group, where Inchcape is a top five partner for key OEM partners, supporting the expansion of Group Distribution contracts since 2016.
The transaction consideration is payable in cash at completion and will give rise to a gain on disposal. In the year to December 2018, IFS contributed revenue of £60m and trading profit of £9m. The gross assets of IFS, as included within the Inchcape Group consolidated balance sheet, as at 30 June 2019 were £78m. The transaction is expected to complete in Q4 2019 and as such the impact on Inchcape’s 2019 trading profit will be minimal.
The use of the proceeds will be consistent with Inchcape’s existing capital allocation policies under the Ignite strategy whereby the focus is on growing both organically and inorganically, with any surplus cash returned to shareholders. These capital allocation options are assessed on a regular basis.
Together, the disposal of IFS, six Retail sites in Australia, three Retail sites in China and seven Retail sites in the UK will generate c.£250m of cash inflow to the Group with an overall significant net gain on disposal and on a combined trading profit base of c.£18m.
Stefan Bomhard, Group CEO of Inchcape plc, commented:
“This transaction is a further demonstration of strategic progress and focus on our core Distribution activities which generate 90% of Group trading profit. We are pleased to have been able to further streamline our UK Retail market activities by selling IFS at a good valuation. We remain focused on our Ignite strategy which frames our operational excellence initiatives, has driven 10 Distribution deals since 2016, and sets the foundations for capabilities that will enable us to position Inchcape well for the future. I would like to thank our IFS team for all their hard work and dedication and wish them success under Toyota, Inchcape’s oldest OEM partner.”