Inchcape plc

Good morning, everyone. I'm Duncan Tate, Group CEO, and I'm joined by our Group CFO, Adrian Lewis. Here's today's agenda. I'll give an update, an overview on market and market context. Adrian will then run through 2025 results and I'll sum up and discuss the outlook for 2026. Today's presentation is available on our website and the recording of today's session will be available later today. After the presentation concludes, We'll take your questions. So let's begin. Inchcape delivered a strong 2025 performance against the backdrop of tariff-related disruption and economic uncertainty, reaffirming the strength of our diversified and scaled business. Our colleagues in the Americas and the Europe and Africa regions posted record PBT performances. Against a number of challenges, APAC delivered a better H2 performance and we're working with our OEM partners and across the value chain to drive further performance improvements. We continue to execute against our Accelerate Plus strategy, winning more distribution contracts and executing an acquisition in a new market for Inchcape. During the year, we returned around £340 million to shareholders, through dividends and buybacks, grew EPS and DPS by 13%. And with leverage of just 0.4 times, we're ready to go again in 2026, starting with a new share buyback program of £175 million. Now, this slide shows how we delivered against all of our key growth drivers on the left-hand side of this chart. That includes the financial metrics I mentioned, including our resilient margins, as well as vehicle volumes, customer and colleague-related metrics. And on those dynamics, we continue to build on our strong customer reputation in the industry with a 6% increase in our scores on reputation.com. In addition, our employee engagement score of 81%, up four points from the previous year, is a clear signal of Inchcape's collaborative, entrepreneurial and high performance culture, which is a testament to the calibre and talent of our 16,000 people across our 40 markets. Last year we generated £315 million in free cash flow, which clearly highlights our cash generative and capital light model. This capital was deployed to drive growth and shareholder returns. with a 13% increase in dividends per share, £238 million invested in share buybacks, and £35 million utilised on the Iceland acquisition. And we have a healthy pipeline of bolt-on M&A opportunities in place to supplement our organic growth. This delivery of our strategy enabled us to deliver return on capital employed of 29%, and helped us grow EPS by 13%. And we continue to execute against our Accelerate Plus strategy by scaling and optimizing our regions. Our objective here is to develop our OEM partner portfolio and geographic footprint, thereby enhancing the resilience in our earnings profile. And this will help to drive our progress against our ambition to achieve 10% market share across our markets. Last year, we grew distribution contracts one in previous years. with these contracts being a key driver of our organic revenue growth. We're also awarded 10 new distribution contracts with existing OEM brands, including New Holland in Ethiopia and Kenya, BYD in Lithuania and Latvia, Xpeng in Colombia, and GAC Ion in Greece, as well as new partners Smart in Colombia, Uruguay, and Ecuador, and Iveco in Hong Kong. To drive operational execution, we continue to optimize our business in a number of ways. Firstly, we further rationalized our brand portfolio, mutually exiting four immaterial contracts with Komatsu in Ethiopia and three Geely contracts in smaller markets in the Americas. In addition, we continue to recycle capital. by divesting non-core assets, and we grew our third-party retail network, enabling broader in-market coverage in a capital-efficient way. We continue to drive the penetration of value-added services, in particular, growing our distribution of relatively high-margin OEM-certified parts, as well as delivering and developing financed insurance products by utilizing our global scale and partnerships. We also optimized our business by further collaborating with our OEM partners on product and inventory management, supported by our consistent execution and differentiated technology-based sales and operation planning processes. To that end, we positioned ourselves well for the second half of the year. from a stock perspective, successfully reducing the buildup of inventory in the first half, with inventory cover at the end of 2025 remaining flat year on year. Our sales and operational planning processes are supported by AI in a number of areas. In our parts business, we run pricing, optimization, and demand models, which enable us to trade tens of thousands of parts at optimal price points. We're also leveraging AI to drive innovation across our business. For example, we recently launched a vehicle pricing algorithm in Chile, which analyzes price to volume elasticity to ensure we price vehicles even more accurately. Back to our optimization activities, we've also taken decisive action on our cost base, reinforcing our devolved operating model, driving efficiencies, and tackling challenges in certain markets. To that end, during the year, we initiated a cost reduction program across the group with a particular focus on the APAC region. Next, I want to discuss our diversified and scaled OEM portfolio. We have longstanding relationships with many OEMs, some of which go back for over 50 years. Our role in the automotive distribution value chain is more important than ever. We continue to support these manufacturers in an increasingly complex and fast-moving environment, growing their volumes and market share in existing markets and helping them to enter new markets. We also have some relatively new OEMs in our portfolio on the right-hand side of this slide, who we've worked with for just a few years. Of those, I wanted to highlight that we are seeing BYD continuing to in-source distribution in medium to large scale markets in Europe. This is a BYD only dynamic and we are seeing our other OEM partners rely on Inchcape more than ever before. On the next slide, here's some market context in what was a transforming automotive industry in 2025. In general terms, the new energy vehicle transition is becoming more of a multi-powertrain story. Importantly, as a powertrain agnostic business, and with our deep specialist market knowledge, Inchcape is well positioned to support our OEMs in their individual new energy transition journeys. Overall market volumes across our markets grew by 2% in 2025, with the indirect impact of tariff-related disruption affecting demand in our markets in the first half of the year. Inchcape outperformed the market, growing our volumes by 3%. The macro environment improved in the second half in a number of our markets, particularly in the Americas and the Europe and Africa regions, offsetting a challenging backdrop in Asia. In the Americas, market volumes were up 8% with a multi-drive train approach playing out. In Chile, our largest market there, there was a 3% TIV growth during the year with a stable market environment. Colombia and Peru experienced strong market growth while there was a weaker growth in some markets like Costa Rica. In Europe, another multi-drive train story. Southern European markets like Greece and Bulgaria remain strong, while there was weakness in certain northern European markets like Finland and Estonia. In APAC, BEV adoption continued to accelerate, partly as a result of the successful rollout of BEV in Asian markets. Chinese brands have grown market share across the region in recent years. These dynamics have created a highly competitive environment in most markets in the region. In addition, the premium segment in APAC remains weak, with consumers in that market segment continuing to hold off on buying higher value vehicles. To date, we've not seen any similar weaknesses in the premium segment in our other regions. Finally, on APAC, Australia, one of the largest vehicle markets in which we operate, remains resilient, but it is an increasingly competitive environment. That's it from me for now. I'll hand over to Adrian.

Thank you, Duncan, and good morning, everyone. I'll take you through our results for 2025. We generated revenues of £9.1 billion with organic revenue growth of 1% and resilient operating margins of 6.2%. Distribution contract wins were the significant portion of growth during the year. Adjusted PBT was £443 million, up 3% in constant currency. And our PBT performance was supported by a contribution of £17 million from the gains arising from the divestment of non-core assets, while translational currency headwinds were approximately £19 million. Excluding the disposal gains, our operating margins were 6% and in line with our medium-term targets. Return on capital employed was again very strong at 29%, highlighting the high return capital-like nature of our business. Free cash flow delivery was a highlight as we produced £315 million with a stronger performance in the second half and this was 104% free cash flow to adjusted profit after tax conversion rate and in line with our medium term targets. Closing leverage was 0.4 times down from the 0.6 at the half year and well within our self-mandated headroom of one times. Adjusted basic EPS was 80.8 pence up 13% predominantly as a result of a lower share count from our share buybacks. And today we declared a final dividend per share of 22.8 pence taking the total dividend per share for the year to 32.3 pence up 13% from the prior year. So in summary, our performance in 2025 was a reflection of our continued operational delivery and progress against Accelerate Plus, which ensured we continued to deliver value for shareholders. 2025 was a year of two halves, and as expected, and as we highlighted during the course of 2025, our second half performance was much stronger than the first half, supported by a wide range of product launches across our business. And as a result, we saw stronger half-two growth rates across our regions, supported by product launches. And subsequently, our volumes and revenues swung from negative growth in half-one to positive growth in half-two, helping to drive profits and cash flow in the second half. And for the year, we delivered organic volume growth of 3%, outperforming the market, which grew by 2%. And as a reminder, we have published our usual market tracker today, which shows the key market trends. Now let's look at each of the regions, starting with the Americas. We built positive momentum in the region during 2025, supported by improving market conditions, our excellent performance, and our growth profile in the region highlights the success of our acquisition of Derco in 2022, as well as the other historic acquisitions and contract wins in the region. These transactions have helped us to build scale and market share, and as key markets have turned to growth, we have similarly seen a stronger performance. Market volumes and organic revenue were both up 8%, with growth from our core brands offsetting the impact of the brands we exited in 2024, and this ensured we achieved stable market share across the region. There was a strong performance in our scaled markets including Chile, Colombia and Peru, offsetting the weakness in certain markets like Costa Rica. Operating margins were up 70 basis points to 7% and this reflected resilient gross margins and operating leverage from higher volumes. In addition, we continued to efficiently scale our business through cost discipline and capital recycling with an £8 million contribution to profits from non-core asset divestments. And for 2026, we expect the market environment to remain supportive, with a typical seasonal weighting towards the second half resulting in a profitable growth for the year. In APAC, our market volumes, which were down 1%, Our organic revenue declined 12%. As expected, our second half performance was an improvement on the first half as a result of product launches. In Australia, our largest business in the region, it is increasingly competitive. And our business remained resilient, supported by our growing and diversified brand portfolio. However, we underperformed in our Asian markets. With a proliferation of Chinese brands increasing the competitive intensity, particularly in markets where bear penetration is high. And additionally, in some markets, the premium segment remained weak. And as a result of lower revenues, operating margins contracted by 60 basis points to 7.2%, despite a £9 million contribution to profits from non-core asset divestments in half-day. Actions were instigated during the year to protect margins, including our enhanced collaboration with our OEM partners on product positioning. We also initiated a cost reduction program focused on the regional headquarters and certain underperforming Asian markets to ensure we are more agile in a fast moving and dynamic environment. For 2026, Australia is expected to remain stable, but challenges in other markets in the region are expected to continue. We expect operating margins this year to be supported through the ongoing implementation of the management actions I mentioned. And additionally, production disruption is expected to impact certain APAC markets in half one. This disruption relates to production reconfiguration by some of our OEMs, which will have a short-term impact on supply. Onto Europe and Africa, where we again delivered well and outperformed in a growing market. Market volumes were up 3%, with our organic revenue growth ahead of the market at 6%, supported by a contribution from distribution contracts won in recent years. And as Duncan mentioned earlier, BYD continues to insource automotive distribution in medium to large scale markets in Europe. We have a contract with them in Belgium and Luxembourg, which contributed less than 5% of regional revenue, and around one third of our 6% regional organic growth. At a group level, this contract represents less than 2% of group revenue and less than 1% of group adjusted PBT. So it's a financially immaterial contract in the context of the group and the region. And while we have performed well for BYD in BALUX since our appointment in 2022, Given the commercial approach in medium to large scale markets in Europe, we do not anticipate that this contract will be renewed. It expires in Q3 27. Our role in the value chain is a critical part of how OEMs access markets where we specialize. And as Duncan mentioned, we are not seeing other similar moves by other OEMs. Now back to my regional review of Europe and Africa. Our acquisition in Iceland is performing well, and there was a particularly strong performance across our business in southern Europe. supported by good consumer take-up of a range of hybrid products and strong growth in the market. Africa continued to grow through distribution contract expansion, operating margins with down 10 basis points to 4.6, but in line with historical norms, with gross margin resilience and operating leverage from scale, offsetting the initial dilution from immature distribution contracts. During 2026, growth rates are set to slow in certain markets, which will be partly offset by the full contribution of Iceland, as well as continued operational execution and momentum across the region and the growing contribution from the multiple contracts won in recent years. And on to our financial performance, and this slide shows our income statement. We delivered adjusted operating profit for the year of £563 million, down 1% in constant currency. Regional mix impacted gross margins, but this was largely offset by the continued cost discipline, where our overhead to revenue ratio fell by 20 basis points. Adjusted net finance costs decreased by £19 million to £123 million, driven by lower average net debt and a more favourable interest rate environment. Adjusting items amounted to an expense of £37 million, and this was primarily driven by one-off costs relating to acquisition and integration of £10 million, mainly in relation to the final stages of the DRCO integration. And there were also restructuring costs of £23 million, broadly split evenly between the cost reduction actions that I mentioned earlier and the continuation of our back-office restructure following the UK disposal. And adjusted PBT was £443 million, 3% higher on a constant currency basis. And the effective tax rate was flat at 31.4%. Adjusted basic EPS was up 13% to 80.8 pence, and up 17% in constant currency, so well ahead of our medium-term target. And this was supported by a reduced number of shares in issue as a result of the share buyback programs executed during the year and the effect of averaging from the buyback program in 2024. Now, this slide shows our net debt bridge. Intracad has a strong balance sheet supported by consistently strong free cash flow generation, which ensures we can execute a disciplined approach to capital allocation. Having generated over £300 million in free cash flow, dividend payments amounted to £101 billion, and share buybacks amounted to £238 million as we executed our capital allocation policy. There was net M&A spend of £29 million, including the £35 million in cash invested in the Iceland deal. And the net of these elements saw leverage fall to 0.6 times EBITDA, down from the 0.6 seen at the half year, providing the group with capacity to continue to allocate capital to drive growth and shareholder value. Which brings me to our capital allocation approach, which remains disciplined and returns-based. We will continue to pay dividends at 40% of earnings. We will continue to act with discipline in the balance of capital allocation between the value accretion from share buybacks and value accretive acquisitions whilst running leverage below one times EBITDA. And having completed the Iceland deal last year, we will continue to activate our healthy pipeline of bolt-on acquisitions, acting with discipline on valuations. We see merit and strategic value in expanding the scale of the group. However, a large deal is not currently in our consideration set in the near term. And since August 2024, we have repurchased £400 million in shares through our share buyback programme, reducing our shares in issue by around 13%. And today we are announcing a new share buyback programme of £175 million, which is expected to complete over the next 12 months. And it is worth noting that of the 2025 buyback program, where we repurchased 9% of our equity, only around half of this has been recognized in EPS, with the effect of averaging, and this will provide a tailwind to EPS for 2026 of around 4% to 5%. Our capital allocation policy will help to drive EPS growth and deliver further value for shareholders whilst retaining the capacity to expand through acquisitions. So to sum up my section, here is a reminder of our medium-term targets, which we are reiterating today. To the end of 2030, we expect to generate £2.5 billion in free cash flow. We will deploy this free cash flow to drive shareholder value with a consistent dividend policy and in excess of 10% compound growth in EPS. So that's it from me. I'll now hand back to Duncan.

Hey, thanks, Adrian. So I wanted to give you a midterm review of how we have transformed Inchcape's investment proposition over the last six years, driving growth and value for shareholders. Over that period, we have become a pure play automotive distribution business, divesting of a number of retail-only assets and ensuring our business is more resilient, higher margin, and generating better returns and more cash. Over decades, we have built an unrivaled diversified portfolio of global OEM partners, winning over 50 contracts with a range of the world's best manufacturers since 2019. As a distributor, our powerful commercial relationships with these partners operate across global, regional and local levels. We have continued to deliver a strong performance for them, supported by our differentiated data-driven approach, nearly doubling our distribution revenues. We've also delivered a 200 basis point improvement in our operating margins, from 4% in 2019 to 6% today. increasing return on capital employed over that period from 22% to 29%. Driven by this growth and strategic focus, we've generated £2.3 billion in total free cash flow and raised around £900 million in cash from the divestment of non-core retail-only assets. This has enabled us to return £1.3 billion to shareholders through dividends and buybacks. while we continue to invest in value-accretive acquisitions. EPS grew 35% over the period. And I hope that by reinforcing our track record of delivery, this gives you a sense of what we expect to deliver in the coming years as a capital-light automotive distribution pure play. We have a compelling capital allocation policy and clear, medium-term operational and financial ambitions, which we are very confident of delivering against. And to that end, as a management team, we're extremely excited about the future for Inchcape. Now, this is a reminder of our Accelerate Plus strategic framework, and that's enabled our performance as we continue to scale and optimize our business. and we will continue to deliver against our medium-term ambitions supported by our strategic enablers outlined here. So finally for me today, onto the outlook for 2026. We expect to deliver a year of growth at constant currency in line with our medium-term guidance. This will be achieved by the delivery of organic volume growth towards the lower end of our 3% to 5% guidance range, supported by contract wins. We expect continued momentum in the Americas and Europe and Africa regions, while we are decisively addressing the challenges in APAC. We expect to deliver resilient operating margins of circa 6% this year, in line with our medium-term guidance, supported by further penetration in after-sales and financed insurance, enhanced collaboration with our OEM partners, and our actions on cost reduction. We also expect to deliver free cash flow conversion of circa 100% and EPS growth of more than 10%. Our performance this year will be skewed to the second half due to usual seasonality in the Americas and supply chain phasing in APAC. We also reiterate our medium term targets, which will be delivered through our highly cash generative and capital light business model and a disciplined approach to capital allocation. to deliver greater than 10% EPS CAGR to the end of 2030. So just to sum up, Ingecape delivered a strong 2025 performance, reaffirming the strength of our diversified and scaled business as we continue to execute against our Accelerate Plus strategy. We expect to deliver another year of growth in 2026, and our confidence about our prospects for the year is underlined by our new £175 million share buyback programme. So that's it for the presentation. So let's take your questions, firstly from people here in the room, then the phone lines, and finally from the webcast via our head of IR, Rob. My word, what a popular morning. James, can we go to you first, please?