Inchcape on slow road to recovery

Putting people against the wall is often the easy part of a revolution. Making sure things continue to improve after the smoke has cleared and the excitement of change has died down a bit is a much bigger challenge, as Inchcape is finding to its cost.

The car import to Coca-Cola bottling group's shares closed lower last night after barely changed interim profits before exceptional items confirmed what a long haul recovery is going to be. The new hands on the tiller, Sir Colin Marshall's in the chair and chief executive Philip Cushing's, may be firmer than their predecessors', but it will be a while before their names are safe.

As the old adage has it, when a manager with a reputation for achievement arrives at a company with a reputation for underperformance, it is the reputation of the company that tends to remain untarnished.

The profits performance outlined in the table is misleading, including as it does a chunky one-off charge last year as Inchcape started to get to grips with the high-yen induced problems that hit it so hard at the end of 1994. More informative is the underlying picture which showed pre- exceptional profits of pounds 82.8m in the half year to June, barely changed from 1995's pounds 83.3m.

Breaking that down by activity shows what a curate's egg Inchcape still is, even excluding the planned divestments of the Bain Hogg insurance arm and the testing business which new management would really have liked to have sold by now. Busting self-imposed deadlines is not a surefire way to recover the trust of the City.

In cars, more than two thirds of ongoing profits now, a healthy increase in profits from import and distribution was largely undone by poor trading from the motor dealerships. Marketing suffered from margin pressure in potato snacks, falling beer keg sales and start-up costs in Timberland stores.

Bottling slipped a bit thanks to the cost of setting up in Russia and Mr Cushing was fairly cautious about other ventures into "undeveloped" markets before that risky business was more firmly bedded in.

Analysts were left largely underwhelmed by the figures, as the 9.5p slide in the share price to 293p suggested, and full-year forecasts of between pounds 160m and pounds 170m were left unchanged yesterday. At the bottom end of that range, the shares trade on a prospective p/e of 17, which means earnings will have to grow at no less than the forecast 20 per cent next year to justify the still pretty fancy rating.

Having cut the dividend from 15p in 1994 to a forecast 10.6p this time, after the 4.2p interim, there is little yield support to compensate for the risks involved in waiting for the recovery. High enough.