Broker snap: Encouraging signs at Inchcape

29th Jul 2009 13:33

Panmure Gordon has turned bullish on Inchcape after the car dealer's better than expected results on Wednesday morning."Inchcape delivered an adjusted PBT [profit before tax] of £65.4m, which compares to our forecast of £50.2m and £130.3m last year. This reflected a LFL [like for like] reduction of 13% with margins weakening across the board," Panmure Gordon noted."Net debt at £28.1m (vs. £408m at the year end) was significantly better than our expectations reflecting the impact of the rights issue (£234m) with strong operating cash generation of £217m driven by a very good working capital performance," the broker said.The company's recent push into Russia has not worked out so well but the UK, Australasia and South Asia businesses appear to be mainly responsible for results that were not as bad as expected. The outlook for the second half remains cautious, the broker notes, with car scrappage schemes round the world coming to an end. "While there are some encouraging signs, visibility remains limited and recovery momentum still feels fragile at this stage," Panmure Gordon believes. Nevertheless it has upgraded the stock from "hold" to "buy" and pushed its price target up to 29p from 25p.