Bottom Line: Bidding for a car lot

GEORGE INCH, the new chief executive of Central Motor Auctions, has his work cut out if he is to successfully manoeuvre the company out of what appears to be a rather daunting cul-de-sac.

After six months' pondering, Mr Inch has identified precious few opportunities to add value in car auctioning. 'The business is becoming commoditised,' he said yesterday.

Customers - both buyers and sellers of second-hand cars - are hard-bitten dealers who keep constant pressure on prices. Volumes are erratic and the company also has to address some self-inflicted damage.

According to Mr Inch, CMA has suffered because previous management cut sales and marketing expenditure in an ill-judged attempt to reduce costs.

As a result, profits for the half- year to 30 April sank from pounds 536,000 to pounds 228,000. The operating profit margin languishes at a paltry 4 per cent.

The company was pushed to an interim loss by two exceptional items totalling pounds 500,000. About half this was spent writing off the value of new computer software that turned out to be useless. Most of the rest went towards compensating the former joint managing director, Steve Kendall, for loss of office. He left in January.

On the brighter side, Mr Inch has developped a potentially promising plan for the future.

He wants to reduce the group's dependence on auctioneering and expand as a 'used car disposal manager'.

Mr Inch wants CMA to handle the servicing, valetting, valuing and delivery of second-hand motors, as well as holding auctions for them.

The expanded service will be aimed at fleet operators like Cowie or Lex.

The strategy is a sound one but it may be several years before any benefit is seen in terms of profit. In the meantime, CMA has to struggle on with the auctions.

It should make enough in the second half to break even for the current full year.

The best to be hoped for 1995 however, is for CMA to restore profits to 1993 levels. That puts the shares, down 1p at 99p, on a p/e of 22.

The shares have further to fall.