Inchcape plc

Hello and welcome to HK's 2026 Q1 results. We are joined today by Adrian Lewis, Group Chief Financial Officer, and Rob Gurner, 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 Adrian. Please go ahead.

Thank you, Sergey, and good morning, everyone, and thank you for joining us. I am Adrian Lewis, Group CFO. Before I update you on Inchcape's performance in Q1, I wanted to say that I'll be covering off our quarterly trading calls from now on. Our full year and half year presentations will continue to be jointly hosted and presented by Duncan Tate, our Group CEO, and myself. So today I will give an overview of trading and strategic execution during Q1 with some details on our regional performance and update you on the outlook for the year ahead, which remains unchanged. We're gonna have a Q&A session with Rob Gurner, our head of IR, who will field any questions from the audio cast platform. So let's begin. InchHead continues to deliver on our strategy and in line with our expectations. Our Q1 revenue performance benefited from our diversified market and brand portfolio, which provides resilience to our business. Organic revenue growth in the quarter was 6% and our reported revenue grew by 8% to £2.3 billion. This growth was substantially driven by the continued scaling of our distribution contracts secured in recent years. resulting in share gains in a range of markets together with supportive market conditions in certain regions. In addition, we have continued to expand our core brand portfolio. As a result, we have outperformed our markets during the period with intricate volumes up 9% against an intricate market growth of 6%. Our volume growth was ahead of our organic revenue growth as a result of share gains and regional mix with the faster growing Americas where average selling prices are lower. It's worth noting that our revenue growth performance in Q1 was against comparators which are relatively soft and these become more challenging as we progress through the year ahead. In addition, Q1 is generally our smallest quarter of the year due to the overall natural seasonality of our markets. I'll now run through our regional performance starting with the Americas where we delivered strong growth with supportive market conditions. Our market volumes in the Americas were up 18%, with very high levels of market growth in Colombia and Peru and a growing Chile. With those favourable demand conditions, we saw strong performance in the region. For the rest of 2026, we continue to expect the market environment in the Americas to remain supportive, with a typical seasonal weighting towards the second half. Next on to APAC, where market volumes were up 4%, but our market share moderated and we underperformed in the region, continuing the trends we saw in half two 2025. We see further challenges across APAC. The premium segment, where we over indexed in some markets, continues to be weak. And in addition, we are seeing increasing competition from Chinese brands in a number of markets, including Australia, where the macroeconomic environment has softened and our core brand performance in that market has been weak. However, there are some partial offsets to this with momentum building across a number of our recently won contracts with Chinese OEMs, including Photon and Deepal in Australia and Great Wall Motors in Indonesia. Looking across the region, and as we mentioned last month, we are taking action to address the challenges and to drive our operational performance across APAC. These actions include enhanced collaboration with our OEM partners on product positioning and a cost reduction programme, which is focused on our regional headquarters and in specific markets, as well as the optimisation of our contract portfolio in the region. We will provide an update on our progress with these actions at our half year results in July. For the remainder of 2026, we expect to see continued challenges across our markets in APAC, including Australia, which will impact our first half revenue and margins. This will be compounded by some spray and supply phasing in half one, which we highlighted in March, as our key OEMs reconfigure their facilities for new energy vehicle production. However, the management actions that we are implementing will start to improve our business performance and help support margins in the second half of the year. Onto Europe and Africa, where market volumes are up 1% and we grew our market share. The market outperformance was supported by a strong delivery in our core business and meaningful contribution from distribution contracts won in recent years. and further supported by a good performance from the recently acquired business in Iceland. And our business in Africa also performed well. We expect to see continued momentum in Europe and Africa for the remainder of 2026, with a full-year contribution from the Icelandic acquisition and a growing contribution from Contract 1 in recent years. And now I'd like to touch on the impact of the Middle East situation on our markets during Q1. Overall, we have seen no direct impact on our business to date, despite there being some immaterial disruption to logistics in our Europe and Africa region. We are closely monitoring consumer demand trends across our markets, and so far, these trends have remained unchanged. And now on to strategy. We continue to make progress against our Accelerate Plus strategy during Q1. Our objective to scale our business is highlighted by our successful track record in winning distribution contracts, including the award of contracts from Volvo in Ecuador and Deepal in Barbados. We also saw continued momentum from contracts won in recent years, which, as I mentioned earlier, made a substantial contribution to our growth performance in the quarter. We are also maintaining a strong focus on optimisation across the group through various initiatives in vehicle parts and finance and insurance with ongoing cost actions and even closer collaboration with our OEM partners. On capital allocation, we remain disciplined and value focused. With our commitment to share buybacks, we made continued progress with our latest programme at £175 million and we have repurchased approximately £27 million as at 29th April. Consequently, over the last 21 months we have reduced our share count by around 14% as a result of the share buybacks. On acquisitions we see these as a critical part of how we will drive shareholder value and to that end we remain disciplined on valuations as we look across an active pipeline of bolt-on acquisitions, and we continue to look for value accretion, particularly in existing markets. And finally, on to outlook. We are today reiterating our guidance for 2026. We continue to expect a year of growth, a constant currency, and in line with our medium-term guidance. We continue to expect another half-two weighted revenue and profit performance, This is partly due to an increasing contribution from the Americas, which have a typical second half seasonality. And as I mentioned earlier, we continue to expect some brand supply phasing in APAC during the year. And this will skew our business performance in the region to the second half, further supported by the benefits of the management actions we are taking. So this year, in line with our medium term guidance, we expect to deliver EPS growth of greater than 10%. And as we said in March, this will be driven by organic volume growth towards the lower end of the 3% to 5% guidance range, resilient operating margins of around 6%, and a free cash flow conversion rate of circa 100%, which we are deploying through our disciplined approach to capital allocation. And finally, I wanted to say that in the context of the Middle East and in an uncertain and fast-evolving macro environment, we continue to manage our business in an agile and dynamic manner with our OEM partners. In particular, we will maintain a clear and focused approach in adapting our sales and operational planning processes to track any changes that we see in consumer demand. That's it from me. So now let's take your questions. Over to you, Sergio.

Thank you. As a reminder, to ask a question over the phone, please signal by pressing star 1. You may also submit your questions via the webcast. Now, my first question is from Amy Bell from UBS. Please go ahead.