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SCMP Reporter

Inchcape - Hong Kong's biggest motor vehicle retailer - yesterday launched a surprise overhaul of its worldwide businesses in what the company called its 'most radical change ever'.

 In a bid to limit its exposure to the 'effects of the turbulence in Asia', the group said it would be concentrating wholly on its international motors business.

 It will also demerge and relist its Asian and Middle Eastern marketing services operations and also its South American bottling businesses.

 Chief executive Philip Cushing conceded the Asian economic crisis meant its marketing of fashion goods and branded lifestyle products were likely to struggle next year.

 He also said its Hong Kong motors operation, Crown Motors, was expected to suffer a 51 per cent drop in sales to 35,000 units.

 Inchcape said its Singapore-based marketing businesses, which acts for well-known names such as Kelloggs, SmithKline Beecham and Timberland, would be listed on an 'Asian stock exchange' next year as part of an overall plan to limit the effects of the turmoil in the region on the company.

 The group announced yesterday its pre-tax profits had risen 12 per cent to GBP184.1 million (about HK$2.34 billion) on turnover up only 4 per cent to GBP5.9 billion, but its marketing stream saw operating profits fall 8 per cent to GBP27.7 million.

 Mr Cushing said the group had not yet decided which exchange to list on.

 While the Asian headquarters of the marketing operations is in Singapore, much of the group's senior management are based in Hong Kong, running Inchcape Pacific.

 He declined to comment on the likely value of the separately listed marketing company, but Inchcape said its interest in the net operating assets was worth about GBP240 million.

 The impact of the crisis is expected to sharply depress motor vehicle sales in Hong Kong, Mr Cushing said, but he claimed last year was an exceptional year when about 53,000 vehicles were sold.

 He said Singapore had been experiencing a gradual decline in vehicle sales in the past three to four years but said its Australian operations had had an outstanding year.

 Overall the group's global motors operations saw profits jump 16 per cent to GBP147.2 million as turnover climbed 8 per cent to GBP4.8 billion.

 Mr Cushing said the group's performance last year had been largely unaffected by the crisis as it only began to have an impact when Hong Kong and Singapore were hit at the end of the year.

 'Our exposure to Thailand, Malaysia and Indonesia is much, much smaller than to Singapore or Hong Kong,' he said.

 Inchcape expects only a softening of performance this year.

 The group also intends to sell off its Russian bottling and shipping services business, as part of its plan to focus on motors, and hoped to complete all its divestments by the middle of next year.

 'We believe that it will substantially improve shareholder value,' Mr Cushing said.

 Shares in the group soared almost 12 per cent in early trade on news of the proposed demergers, as analysts forecast that the group would be able to achieve improved earnings as a result of its strategy.



Inchcape embarks on global revamp to limit Asian damage