UK dealer group Inchcape raised its annual earnings outlook on Thursday, as a strong rebound in demand after the lifting of coronavirus lockdowns helped eclipse a revenue shortfall from supply challenges.
A global chip shortage spurred by a pandemic-driven trend towards digitization has been hitting companies in the auto industry, including UK car dealers already suffering following Britain's decision to leave the European Union.
"Whilst the widely reported supply issues are not expected to improve until well into 2022, we are confident that margins will remain robust through this period, mitigating the likely impact on our topline," CEO Duncan Tait said in a statement.
Inchcape, which sells new and used cars including premium brands such as BMW, Audi and Mercedes-Benz, posted a third-quarter revenue of 1.9 billion pounds ($2.61 billion), up 10 percent on an organic basis compared with a year earlier, but still 2 percent down compared with 2019.
The London-listed company now expects an annual profit of at least 290 million pounds on the back of stronger margins. In June, Inchcape had said its annual earnings will exceed market consensus of 216 million pounds. It had pre-pandemic annual earnings of 326 million pounds.
"While the ongoing supply shortages have had some impact on our topline performance, the Group has, to date, benefited from higher vehicle gross margins," the company said.
Inchcape, which operates in over 30 markets and also sells car parts, added that sales in its Asia-Pacific division, which account for nearly half of the group's revenue, bore the brunt of the supply issues and localized pandemic-related curbs.
Inchcape is Europe's sixth-largest dealership group by revenue, according to Automotive News Europe's 2019 Guide to Europe's Biggest Dealers. It has 159 new-vehicle franchise points in the UK.