Inchcape, the British-based group which is Hong Kong's largest car retailer, yesterday announced a 15.1 per cent drop in headline pre-tax profits as the Asian financial crisis ate into its core motors operations. The group, which earlier this year announced a strategic overhaul that envisaged selling its Asian and Middle Eastern marketing businesses and its bottling operations, said pre-tax profits for the six months to June had fallen to GBP60 million (about HK$757.26 million), from GBP70.7 million. Operating profit at its Far East operations, which include Hong Kong, fell 45 per cent to GBP12.7 million, while profits in its Southeast Asian division slumped 55 per cent to GBP6.6 million. Chief executive Philip Cushing said he could not give any indication when the downturn might end. 'My crystal ball is no better than anyone else's,' he said. 'I am not relying or expecting any market improvement in the next half-year.' The group, which claims to have 40 per cent of the domestic vehicle market, expects only 35,000 vehicles to be sold in Hong Kong this year, down 34 per cent from last year. In the first half, 16,000 were sold overall, down from 18,000 in the same period last year. 'The market is very competitive . . . prices have dropped and margins are not big,' Mr Cushing said. The group reported operating profits at its Far East motors business had fallen 46 per cent to GBP9.5 million, and in Southeast Asia had eased by 16 per cent to GBP5.1 million. Inchcape's overall motors business performed much more strongly however, as operating profits rose by 16 per cent to GBP61.7 million, and would have risen 25 per cent at constant exchange rates, with Asia accounting for a quarter of earnings. Its import and distribution business, which makes up more than 75 per cent of Inchcape's motors operating profit, rose 27 per cent, with strong performances from Britain, Australia and Greece. The group also revealed that it had decided to dispose of its Asian and Middle Eastern marketing businesses separately, after potential buyers indicated they were interested in one or other of the businesses, but not both. In addition the company said that it was widening its approach to the divestments - originally envisaged as a flotation - but which could involve a trade sale. 'In the light of trading and stock market conditions, and a number of approaches Inchcape has received, it is evaluating other divestment operations,' the company said. Inchcape NRG, its office automation joint venture, which Inchcape is also looking to divest from, also saw profits fall to GBP2.9 million, from GBP3.1 million, due to tough market conditions in Thailand. It said that despite its decision to seek other divestment alternatives, shareholders could still expect a substantial cash return after all its proposed disposals were completed. Overall the group's marketing operations saw profits slump 45 per cent to GBP8.7 million, as demand for tractors in Thailand and Malaysia, construction products in Hong Kong, the mainland and Taiwan, and branded products across the region, saw a fall in sales. However, the group said it benefited from reduced losses and overheads in Japan and Thailand, and in the Middle East its growth in retail and some consumer goods agencies balanced start-up losses in a new logistics facility and lower margins in the liquor business. Inchcape also announced a US$187 million deal to sell its Russian bottling operation to Coca-Cola, and is looking to sell for cash - rather than its original intention to demerge - its South American bottling operation. It said it was in talks with the Chilean bottler Embotelladora Arica and Coca-Cola.