The Investment Column: Inchcape plans more reforms

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The Independent Online
SIR COLIN MARSHALL hardly looks like a dangerous radical. But since he took over the chair at Inchcape two years ago the distributor has been in a state of permanent revolution. First chief executive Charles Mackay walked the plank, clutching a large payoff. He was replaced by Philip Cushing, who embarked on a whirlwind restructuring programme. Insurance broker Bain Hogg and the testing services arms were sold off, the dividend axed and the company spent pounds 55m cutting jobs.

Just when the company seemed to be running normally, the Asian bubble burst, hammering its marketing and motor distribution businesses in the Far East. The result was that the share price, which had been perking up, halved in less than four months.

Sir Colin's response has been to be even more radical. Having slimmed Inchcape down to three divisions - motors, marketing and bottling - the next step is to break them up. So the Latin American Coca-Cola bottling operations will get a listing on the Chilean Stock Exchange, where several similar companies already trade on mouth-watering ratings. The Russian bottling business, which has sucked up cash in the past three years, will be sold to Coca-Cola. And in 1999, when Asian markets have calmed down, the marketing businesses will be demerged.

The result is that Inchcape will become a pure motor group. Whether UK investors want to be handed shares in companies listed in Chile and the Far East is a moot point. But it may not come to that. After all, Bain Hogg was supposed to spun off until insurance group Aon came in with a bid, and Coca-Cola may try to buy the entire business. The shipping business, for which expressions of interest have been received, should also be sold quickly.

Back of the envelope calculations suggest a break-up value north of 250p a share. Given the shares yesterday closed at 211p, up 22.5p, there's enough value hidden in Inchcape for investors to overlook the expected 8 per cent drop in profits, to pounds 165m, this year. Bearing in mind that in these situations it's always better to travel hopefully, worth getting on for the ride.