Inchcape plc

Thank you, George. Good morning, everyone, and thank you for joining us. I'm joined on the call by our CFO, Adrian Lewis, and our Head of Investor Relations, Rob Gerner. I'll begin by giving an overview of the group's performance and outlook before handing over to Adrian, who will give more details. We'll then take your questions. Inchcape's strong performance in Q3 was another demonstration of the resilience and diversified nature of our business. We delivered revenue growth of 35%, including 10% organic growth. Our distribution business delivered organic growth of 13%. This was supported by continued momentum from APAC with broad-based growth across our markets. Our performance in Europe was strong, driven by the continued unwind of our order bank, though new consumer demand across Europe remains muted. In the Americas, there was growth in the majority of our markets in the region, and we are delivering market share gains and accelerating our cost synergy program this year to offset softer markets in Chile and Colombia. On Durco, we are delighted with the progress made on integration. I want to reiterate that Durco is a superb business. It gives us further scale and diversification in the Americas and brings us new, long-standing OEM relationships. Furthermore, we are supporting some of those OEMs in markets outside the Americas, as evidenced by our global strategic agreement with Great Wall, with whom we are already establishing a market presence in Indonesia. On that point, we made excellent strategic progress across the group during the period. We won five new distribution contracts with leading Chinese OEM Chang'an in the Philippines and across four African markets. This partnership was developed primarily as a result of Derco's long-standing relationship with Chang'an. These wins take us to 16 contract wins and acquisitions so far this year, compared to just five in the whole of last year. and this is further evidence that we are building a global market-leading distribution platform from which to support our OEM partners. Importantly, we continue to build a strong pipeline of future potential contracts to help support organic growth. Our diversified market footprint, strong OEM relationships, and our robust financial position ensure that Inchcape will remain the natural consolidator in a fragmented industry. To that end, we completed all three previously announced acquisitions in APAC, in the Philippines, Indonesia and New Zealand, and we are also continuing to invest in our market-leading digital and data capabilities to support the performance of our distribution business. Our digital and data capabilities are helping us to drive the development of our vehicle lifecycle services initiatives. In this area, we continue to be agile in adjusting and optimising our capacity in Bravo Auto as we develop a number of business models in various markets. The development of our digital parts platform in Australia is going extremely well and we continue to plan a rollout of the platform in other markets in APAC next year. We'll continue to provide a further update on VLS at our full year results in March. Moving to outlook. Based on prevailing market conditions and considering accelerated cost synergies and the contribution from acquisitions, expectations for full year 2023 results remain unchanged. These expectations were originally outlined at our interim results in July. I'll now hand over to Adrian to take you through the details of our performance during the period.

Thank you, Duncan, and good morning, everyone. In Q3, the group generated £2.8 billion of revenue, up 35% on a reported basis and up 37% in constant currency. On an organic basis, revenue grew by 10%. Distribution revenue increased by 47%. The M&A impact largely reflects the consolidation of Durco. And on an organic basis, distribution revenue increased 13%. Let me give you now more colour on each of the distribution regions. In the Americas, we delivered a resilient performance with growth in the majority of our markets, market share gains and accelerated cost synergies, offsetting softer markets in Chile and Colombia. We are especially pleased with our share performance in the softer Chile market, where share has been running well ahead of the prior year and ahead of half one run rates. In APAC, there was continued momentum with broad-based growth across our markets, including Hong Kong and Singapore. And there was further positive momentum in Australia, where our market share with Subaru continues to improve. Our APAC region was further supported by the completion of the three acquisitions during the quarter. In Europe, there was good growth in key markets driven by the continued unwind of our order bank. New consumer demand in Europe remains muted. The group's performance in Africa was solid and will be further supported by our contract wins in East Africa with Chang'an. On Derco, as mentioned earlier, we have proactively accelerated our cost synergy programme and we now expect to deliver an in-year benefit of up to £20 million. From our previous expectations of an in-year benefit of around £13 million this year, we remain on track to deliver the full £40 million of annualised cost synergies in 2024. We continue to expect Derco to deliver operating margins at the top end of the 5% to 7% range typical of a distribution business this year, and that is before synergies, of course. And in the context of a more challenging operating environment in the likes of Chile and Colombia, I am particularly pleased with the progress we are making in improving Derco's working capital position. And we have now reduced Derco's excess inventory that was £200 million at the start of the year by 50% in improvement from the July position where we had got through 20%. And this is great progress given the market circumstances. Our continued focus on aligning inventory management practices to those employed across Inchcape is working well. And importantly, given the market conditions, we have continued to work proactively with our OEM partners to revise down previously agreed orders for new vehicles as we move towards 2024. And as a result of our progress in this area and with further alignment of trading terms, we continue to see a working capital opportunity at Durco to be delivered by the end of 2023. And also, as we said earlier this year, this will be partially offset by a working capital outflow across the rest of the group as we started from a highly optimised position. Overall, we are pleased with the progress we've made with the integration of Derco and the operational performance of the business to date. Moving to retail, where reported revenue was robust with an increase of circa 2%. Volume growth was mainly in the fleet sector, offsetting the change in revenue recognition relating to the agency model. Excluding this, revenue growth would have been around 12%. This robust performance reflects the strength of our retail business amid a challenging consumer sentiment environment. So overall, the group delivered another strong performance in Q3, highlighting the continued resilience and diversification of our business. That's it from me. Duncan, back to you to sum up.

Thank you, Adrian. Intricate produced another strong performance in the third quarter with double-digit organic growth, and I'm pleased with our ongoing momentum. Given our continued strategic progress, I remain highly confident about the medium to long-term future of the group. Adrian and I are now ready to take your questions.