Inchcape was forced yesterday to justify its plan to allow Peter Johnson, the chief executive, to succeed Sir John Egan as chairman next year in contravention of the Higgs guidelines on boardroom governance.
The car dealership said Sir John, the industrialist who sold Jaguar to Ford, planned to retire by May 2006. It launched a vigorous defence of its plans to ask Mr Johnson, who has run Inchcape since 1999, to stay on for a minimum of three more years, claiming his presence was "pivotal" to the group's future success.
The proposed boardroom shake-up came as the company said it would return £65m to shareholders via a buy-back programme after pre-tax profits fell 8 per cent to £168.3m.
Inchcape warned that unless it ensured continuity at the top of the company following Sir John's retirement, it risked losing some of its key contracts with major overseas manufacturers such as Toyota and Subaru.
It said Mr Johnson played a key role in developing Inchcape's relationships with the international car giants, pointing out that such alliances "in many cases are founded upon associations built up over many years". The company added: "As non-executive chairman, a key element of his role will be to continue to focus on those relationships at the highest level and aid their transition to his successor."
More than one-third of its shareholders back the shake-up, the company said. The Association of British Insurers and the National Association of Pension Funds have also given their blessing, it added.
Sir John, 65, who became chairman of Severn Trent in January, said: "The plans we are announcing will ensure that the value created since 1999 will be protected during the transition to Peter's successor."
In six years, Mr Johnson, 57, has helped Inchcape's valuation to soar from £300m to more than £1.6bn by expanding overseas into countries such as Hong Kong, Singapore and Greece. The company said it had launched a search for a new chief executive and expected to make an appointment this year.
The company said that even after the share buy-back, it could fund its expansion drive into Europe and one day, China.
Inchcape's pre-tax profits were hit by a £9.4m impairment charge and other net exceptional losses after it lost the exclusive right to import and distribute Ferrari and Maseratis car into the UK last year. Underlying profits rose 26.6 per cent to £172m on turnover up 8 per cent at £4.17bn.Reuse content