Inchcape plc

Hello and welcome to InchCade 2025 Q3 Trading Update. We are now joined today by Duncan Tate, Group Chief Executive, Adrian Lewis, Group Chief Financial Officer, and Rob Garner, Head of Investor Relations. If you would like to ask a question during today's call, please press star 1 on your telephone keypad, or you can submit written questions via the webcast. I would now like to hand the call over to Duncan. Please go ahead.

Very good. Thank you, Sergey. And good morning, everyone. And thank you for joining us. I'm here with our CFO, Adrian Lewis, and our Head of Investor Relations, Rob Gurner. I'll give an overview of trading and strategic execution during the quarter before handing over to Adrian for more detail on our regional performance and the outlook, which has remained unchanged since March. We'll then take your questions. Our performance in Q3 was supported by market growth, distribution contract wins and ongoing product launches. However, headwinds remain in Asia. We delivered strong organic revenue growth in the third quarter of 8% and reported growth of 7% against softer comparators and in the context of a market growth of 5%. This reflects the underlying strength and diversification of our business as well as consistent operational execution by our teams. We also continue to make progress against our Accelerate Plus strategy. We further scale the group through the acquisition of Askia in Iceland, an exciting new market for Inchcape, where we are now the market leader. This bolt-on acquisition also helps to further strengthen and diversify our global portfolio of OEMs. Our progress in optimising our business is perhaps most evidenced with the disposal of a retail-only business in Australia, which generated annualised revenue of around £100 million. As we have said before, optimising our retail network is a core pillar of how we operate as a distributor in providing the most efficient route to market. Our execution against Accelerate Plus is also highlighted by our successful track record in winning distribution contracts including the recent addition of GAC Ion in Greece. We're also continuing to optimize our distribution contract portfolio, and in this quarter, we have, in collaboration with our OEM partners, decided to exit four immaterial contracts in certain small Americas markets, which are unlikely to provide the opportunity for mutually viable commercial operation. So to sum up, Inchcape's performance during the third quarter was in line with our expectations and demonstrates our ability to execute against our accelerate plus strategy. This supports our confidence for another year of growth in 2025, in line with our medium-term target to deliver EPS CAGR of more than 10%. And with that, I'll hand over to Adrian.

Thank you, Duncan, and good morning, everyone. During the period, the group generated revenue of £2.3 billion, up in Q3 7% in constant currency and on a reported basis. Reversing out the impact of disposed non-core retail assets and the impact of recently acquired businesses, organic revenue was up 8%, with distribution contract wins contributing around one third of this organic revenue growth. Before looking at the regional detail, at a headline level, the market trends were as expected. Underlying Inchcape TID was up 5%, compared to the first half of the year, where industry volumes in our markets were down 2%. This is in part due to softer comparisons in Q3, but also a continuation of the improving trends we have seen in the Americas and a strengthening rate of growth in Europe. We outperformed the market with our volumes up 13% to around 91,000 cars in the quarter. And we spoke earlier in the year about the need to see a step up in volumes in H2 versus H1, as well as improved growth rates. This is a good indicator of the step up in absolute performance, as we anticipated. Summarizing the region, starting in the Americas, the market environment continues to improve. with our performance ahead of the market. Colombia and Peru continue to see very strong growth, and Chile, on an underlying basis, is showing positive trends. And it is worth noting that in Chile in September, we saw a very strong market, due to regulatory changes, pulling demand forward. This will normalise in Q4. Some markets, like Costa Rica, remained weaker. We are seeing the usual seasonality in the region this year, with our performance underpinned by new product launches and contract wins. Turning to APAC, the macro and competitive dynamics that proved to be a headwind for us in H1 continued, with the premium segment remaining weak. The Singapore market continues along the Certificate of Entitlement up cycle, but remains a highly competitive market, as does Hong Kong. Australia returned to growth in the quarter. Our performance in the region is supported by new product launches, such as the Subaru Forester in Australia and a number of Toyota products in key markets. Demand for these is on track and we expect this to be supportive of an improving performance in comparison to H1. And finally, our business in Europe and Africa. continues to show positive momentum and market outperformance, especially so in Romania and Bulgaria, where we have seen strong growth. Growth was enhanced by the contribution from the contracts announced in recent years across the region, as well as a first contribution from our Icelandic operation. While only a revenue update as expected, we have seen reducing inventory levels since the position to the end of June. And as Duncan mentioned, we have maintained our disciplined approach to capital allocation. And alongside the acquisition of ASCIA, we have now acquired approximately £200 million of our own shares, equating to 8% of the shares in issue as part of our £250 million share buyback programme that will be supportive of EPS growth. In relation to acquisitions, we see these as a crucial part of our growth strategy and we remain disciplined on valuation as we look across a healthy pipeline of bolt-on acquisitions. And finally, on to outlook. Reiterating our position through the year, we continue to expect another year of growth at prevailing currency rates, including the impact of tariffs. Our outlook for this year is based on our expectation for a stronger second half of the year compared to half one and our performance in Q3 is supportive of this. Our performance in the second half continues to be driven by product launches in a number of markets and so far these are progressing in line with our expectations. Additionally, we continue to manage costs, inventory and working capital and you have seen us take further steps in the optimisation of our retail network. We expect to deliver a higher rate of EPS growth relative to profit growth this year, driven by our operating performance and capital allocation, and in line with our medium-term target of greater than 10% compound annual growth rate. So, now, let's take your questions.