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 overview and market context adrian will then run through our results and outlook for the full year and i'll give an update on our strategic progress and sum up today's presentation is available on our website and a recording of today's session will be available later today after the presentation we'll take your questions so let's begin inchcape continued to deliver on our accelerate plus strategy during the first half amid an evolving market backdrop supported by our diversified and scaled market and brand portfolio Our growth was driven by distribution contracts won in recent years and last year's bolt-on acquisition in Iceland. We remained disciplined on capital allocation. We completed the acquisition of Silver Star in Bulgaria on 1st July, underlining our ongoing focus on value accretive M&A. And we made progress with our £175 million share buyback programme launched in March, which we have today increased by 75 million pounds to 250 million pounds and this highlights our highly cash generative business looking ahead we expect to continue to deliver in line with our medium term guidance of greater than 10 percent eps growth this slide shows the key developments in our industry and how inchcape is addressing these trends through our agile approach across our scaled and diversified business Firstly, our industry is evolving at pace, with the rise of Chinese OEMs and an acceleration of the adoption of their products around the world. These OEMs, many of whom Inchcape has close relations with, are challenging the industry status quo. Traditional players are now looking for new ways to enhance competitiveness, including collaborating with them in areas like manufacturing, technology and product development. This cross industry collaboration will remain a key theme in the coming years. In addition, we will continue to focus our investments, efforts and resources on our OEM partners who we believe will be the industry winners and fit with our business model. Our strategy is based on providing the best delivery for our OEM partners by collaborating with them to drive customer satisfaction. This is particularly relevant for the second trend on this slide, the transition to new energy vehicles or NEVs. While this is a long-term story supported by infrastructure, government incentives and consumer appetite, we see a two-speed world. Many of our markets are well behind the EV curve, while in others like Hong Kong and Singapore, EV penetration is well over 50%. And with that in mind, we continue to prepare for the NEV transition by upgrading our network and ensuring our people are ready for the changes to come in areas like training and health and safety initiatives. Our role is to support our OEM partners with the optimal product mix, pricing and positioning in a market in line with the local pace of transition to new energy vehicles. So ultimately the NEV transition is another opportunity for Inchcape to deliver value for our partners. Finally on this slide and partly driven by the other two trends here, manufacturers are increasingly focused on efficiencies across their cost base and supply chain to drive margins and protect cash flows. We are following suit through continued cost discipline across the business and an ongoing focus on value-added services, in particular finance and insurance, servicing and parts. This approach will help us to deliver against our medium term targets of 6% operating margins and 100% free cash flow conversion. Our industry is evolving at pace and Inchcape will continue to be at the cutting edge of these developments by remaining agile to consistently deliver for our OEM partners and shareholders. Turning from the industry to the markets on this slide, I've set out some of the market context for our first half results. Overall, market volumes across our markets grew by 8%, and Inchcape outperformed the market, growing volumes by 9%. The key overall trends across our regions are the rapid growth of Chinese OEMs and the continued adoption of new energy vehicles. Of course, these trends are connected, given Chinese OEMs' specific focus on NEVs. It is worth noting that 25% of our volumes are now with Chinese OEMs, excluding BYD and Belux. And during the first half, our Chinese OEM volumes increased by around 40%. Moving west to east and starting in the Americas, TIV or market volumes was up 21%. Our volumes were slightly lower at 18% due to our market share weightings in certain markets like Colombia, which grew substantially, where our market share is around 10% compared to 25% in Chile. We grew market share in other markets, including Chile, which saw solid market growth. Our America's market saw a 48% increase in Chinese OEM volumes over the last 12 months. We are benefiting from this trend as a result of our long-standing relationships with the likes of Chang'an and Great Wall Motors. Finally, in the region, there was some short-term disruption to vehicle supply as a result of shipping delays related to the Middle East situation. In Europe and Africa, TIV was up 4% and we outperformed significantly. growing our volumes by 13%, including our Iceland acquisition, and 9% excluding that deal. Europe is seeing moderate EV adoption, but Chinese OEMs have grown share from 7% to 10% over the last year. We are benefiting from their entry into the market, particularly on the top line, having won multiple contracts with the likes of Xpeng, BYD, Chang'an, and GAC Ion in recent years. southern and eastern european markets continue to be resilient while africa remains robust in apac tiv grew by four percent while our volumes were down sixteen percent tiv growth in asia was higher at seven percent with australia remaining at lower levels of growth NEV adoption in the region continued to accelerate, with Chinese OEMs rapidly gaining market share. The region remains highly competitive in most markets, particularly in Australia, as I mentioned in March. NEV penetration there has grown from 20% last year to 35% at the current time, and EV penetration has grown from around 8% in January this year to around 23% in June. In many of our APAC markets, we are underweight with Chinese OEMs, but we do have a number of relatively new relationships with the likes of Photon, which we continue to develop. I'll come back to our management action plan for APAC later. As always, we continue to support our longstanding OEMs with their product lineups, pricing and positioning to ensure we have the optimal mix in each of our markets. Here I've outlined why Ingecape remains the independent distributor of choice for our OEM partners across our scaled and diversified footprint. We manage the cost of complexity for our partners across the value chain with our local expertise supported by our global capabilities. Our AI driven sales and operational planning processes remain our key differentiator to drive market share gains for our OEMs. our long track record performance is evidence of our leading market position and looking ahead you can track our future performance against a clear set of medium term targets published last year in summary against an evolving market backdrop inchcape will continue to be a global winner in the automotive industry that's it from me i'll now hand over to adrian

thank you duncan and good morning everyone i will take you through our results for the first half of 2026 and our outlook for the full year we generated revenues of 4.7 billion pounds with reported revenue growth of nine percent up seven percent in constant currency which includes organic revenue growth of five percent our top line performance was primarily driven by supportive market conditions and the contribution from distribution contracts won in recent years Adjusted operating margins were down 40 basis points to 5.3%, driven by margin contraction in APAC, but partly offset by margin expansion in the Americas and Europe and Africa. While operating profit was flat year on year at £248 million, adjusted PBT was £188 million, down 10% in constant currency, due to higher net finance costs. as a result and with a slightly higher effective tax rate in the half offset by the impact of share buybacks adjusted eps was flat at 35.5 pounds free cash flow to profit after tax conversion was higher at 65 with free cash flow of 84 million pounds generated and our balance sheet remains in good shape with closing leverage of 0.5 times EBITDA, slightly higher than the full year 25 close, but down from the 0.6 times in June 25 and well within our self-mandated ceiling of one times. In summary, at a group level, we saw progress in the first half of 2026 driven by the Americas, Europe and Africa, mostly offsetting a challenging Australia. Here is the revenue bridge with the building blocks of our 9% revenue growth. We grew 5% organically with a further 2% related to our Iceland acquisition. In addition we benefited from translational currency tailwinds of 2% and at prevailing rates we expect broadly similar currency tailwinds for the second half. volumes grew by nine percent on an organic basis as well excluding our acquisitions and disposals last year and we saw a small change in the average selling price due to the mix of regions and brands As I mentioned earlier, operating profit was flat and one of the benefits of our diversified geographic profile is that lower operating profit in APAC has been offset by the operating profit growth in the Americas and Europe and Africa, together with around £6 million of translational effects. Operating margins declined by 40 basis points on a reported basis to 5.3%, with margin expansion in two regions offset by margin reduction in APAC, principally Australia, which I will cover in more detail shortly as part of my regional review, starting with the Americas on the next slide. In the Americas region we saw continued positive momentum as conditions were overall helpful and especially so in Colombia and Peru where we saw strong market tailwinds supporting our growth and good performance in Chile where market growth was in the mid single digit territory. In the region market volumes were up 21% and our volumes were up 18% and organic revenue growth was 13%. The variance between our volume growth and the organic revenue growth was due to a price mix across our product ranges. This highlights the benefits of our scaled and diversified brand portfolio across a broad range of leading European, Japanese and Chinese OEMs. The latter of which now represents over 40% of our new vehicle volumes in the region and demonstrates the benefits of acquisitions and investments made in recent years, in particular, Durkheim. operating margins were up 50 basis points to 6.5 percent reflecting resilient gross margins operating leverage from higher volumes amid cost disciplines it is also notable that there was some late disruption to vehicle supply across the industry in the region during the period as a result of shipping situation related to the middle east And for the full year, we expect the environment in key markets to remain supportive, driving further momentum and profitable growth, with the usual seasonal weighting towards the second half. In APAC, market volumes were up 4%, while our volumes were down 16% and our organic revenue declined 7%, reflecting some mix into higher-priced markets, especially in Singapore and in Hong Kong. There was a stabilising of our position in Asia supported by the impact of management actions. Australia performance was weak and below our expectations at the start of the year. This was down to a unique set of factors at play during the period, directly connected to the Middle East situation. There has been significant fuel disruption both on price and availability, which drove a rapid shift in consumer purchasing trends towards lower priced and new energy vehicles and as Duncan mentioned earlier, with NEV rapidly expanding to 35% of total sales. our key brand partners performance was further impacted by supply constraints affecting our product mix and competitiveness leading to our operational underperformance it's worth noting that our chinese brands in australia photon and depow continue to ramp up during the period and as a result of lower revenues and gross margin compression particularly in australia adjusted operating margins contracted by 290 basis points to 3.5 we made good progress on management actions in the regions including cost reduction plans and enhanced collaboration with our oem partners duncan will discuss these management actions in more detail later on Across APAC we are exiting 13 immaterial distribution contracts which contribute revenue of around £140 million on an annualised basis and these contracts are dilutive to profitability. For the full year we expect that management actions with further contract exits and a reduced cost base will positively impact half to margins and free cash flow and will enhance our product range across the region. asian markets will continue to stabilize but we expect ongoing competitiveness in key markets australia is expected to remain weak but our second half performance will be supported by the impact of management actions improved product availability and bix from our key oem partner on to europe and africa where we again delivered underlying market outperformance supported by the growth from contracts won in recent years and the iceland acquisition Market volumes were up 4% and we outperformed with organic revenue growth of 7%. Our Icelandic acquisition contributed a further 7% to the top line growth in total and our volumes grew by 13%. Our growth was broad based across the region with another strong performance in our southern European markets. Adjusted operating margins were up 20 basis points to 5.1%, with gross margin resilience and scale offsetting the dilution from early stage contracts and some minor supply disruption in Africa related to the Middle East situation. For the full year, we anticipate continued operational execution and momentum, with further growth from contract wins and the impact of Silver Star acquisition in Bulgaria in half two, which completed on the 1st of July. This is expected to offset the region's typical half one weighted seasonality. Onto our income statement, where I wanted to touch on some of the key items. Net finance costs increased by 14 million pounds, driven by higher interest rates, increased levels of inventory financing and the impact of currency timing in the prior year. There are adjusting items of 64 million pounds, 62 million of which relates to the significant restructuring underway across the business. Included in this is 28 million pounds in relation to the de-recognition of some of the value of the distribution contracts we are exiting in APAC. There was also 22 million pounds related to site exits and headcount reduction, particularly in APAC, and a further 12 million pounds in inventory write downs. Of these restructuring costs, we expect around £18 million to be cash items, of which £13 million has already been spent. Onto tax, our underlying tax rate increased to 31.4%, slightly above our guidance range of 30 to 31%, driven by geographic mix. Adjusted EPS was unchanged at 35.5 pence, reflecting lower profits and a higher tax rate offset by the benefits of share buybacks. This slide shows our net debt bridge over the last 12 months, which highlights our strong balance sheet supported by consistently strong free cash flow generation and underlines the half-to weighting of our cash flows. As I said earlier, cash conversion in the half was 65%, but looking back at the last 12 months to the end of June 2026, it's been 112%. on an ltm basis we generated 327 million pounds in free cash flow and maintained our disciplined approach to capital allocation share buybacks amounted to 167 million pounds dividend payments were 116 million pounds and we invested 38 million pounds in acquisitions mainly the iceland transaction and after a £39 million impact from FX and other items, the net of these elements saw leverage fall slightly to 0.5 times net debt to EBITDA from 0.6 from the prior year. Which brings me to our disciplined capital allocation approach. We will continue to pay dividends at 40% of basic EPS with the interim dividend representing one third of the previous year's total dividend. So this means an interim dividend of 10.8 pence up 14% from the prior year. We will continue to act with discipline to balance capital allocation between value accretion from share buybacks and bolt-on acquisitions with leverage below one times EBITDA. We are 40% of the way through our current £175 million share buyback programme and we are today increasing the programme by £75 million to £250 million. This top-up highlights our disciplined and balanced approach to capital allocation. We expect the programme to be completed by the end of February 2027. And on M&A, we integrated our Iceland acquisition and completed the Bulgaria deal earlier this month. and we will continue to focus on value accretive M&A to support future growth. To sum up this slide, our capital allocation policy remains focused on shareholder value. Turning now to the outlook for 2026. We expect to deliver a year of strong EPS growth in line with our medium term guidance of greater than 10% EPS growth through to the end of 2030. For this year, this will be driven by organic volume growth at the top end of our 3% to 5% guidance range, and we expect to deliver operating margins for the year of circa 6%, supported by scale and cost discipline. Given our strong free cash flow performance in the first half and our expectations for the rest of the year, we are now targeting free cash flow conversion of over 100%. Our performance this year will continue to be supported by our disciplined approach to capital allocation with an increased share buyback program and the contribution of our recent value accretive acquisitions in Bulgaria and Iceland. This slide shows the regional drivers of our outlook this year and highlights the benefits of our diversified geographic portfolio. We expect a stable performance at constant currency with positive momentum in the Americas, Europe and Africa and a stabilising Asia, offsetting a weak Australia. Growth in 2026 will include translational currency tailwinds at prevailing exchange rate and the contribution from the Silver Star acquisition. As we have mentioned previously, we continue to expect that our performance in full year 2026 will be half too weighted. expect to deliver an uplift in new vehicle volumes of around 20 000 vehicles in half two from the 180 000 vehicles we distributed in the first half and this is very similar to the volume uplift from half one to half two that we achieved last year this year the uplift will be supported by the usual half two weighted seasonality in the americas In APAC, our half two volumes and margins will be supported by improved product availability and mix, with margin benefits coming through from the actions we are taking in that region. We expect a stable half two performance in Europe and Africa compared to the first half, with the region's typical first half weighting seasonality offset by the contribution of the Silver Star acquisition in half two. So that's it from me. I'll hand back now to Duncan.

thanks adrian here is a reminder of accelerate plus our strategic framework that has 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 we continue to execute against our accelerate plus strategy in the first half Our objective is to develop our OEM portfolio and geographic footprint, thereby enhancing the resilience in our earnings profile. Starting with scale, so far this year we have won five new distribution contracts with Volvo in Ecuador, Deepal in Barbados, Subaru and Xpeng in Brunei, and GAC Ion in Romania. The Silver Star acquisition in Bulgaria strengthens our market position and expands our brand portfolio in that market. With Mercedes-Benz, Daimler trucks and buses, our acquisition in Iceland continues to perform well. We continue to optimize our business in a number of ways to drive operational execution. We are focused on commercial discipline and let me give you three examples of this in the first half. Firstly, we significantly rationalized our brand portfolio in APAC with 13 contract exits, as well as two exits in the Americas, all agreed with our OEM partners. Our clear and decisive portfolio management enables us to focus on our priority brands and markets and will support our future financial performance. Portfolio management has been part of the Inchcape story for a while as we continue to filter out those contracts that we do not think will provide the requisite value for us or our OEM partners. They also enable our teams to prioritize and focus on the high value and high potential contracts. The 15 contracts exited in H1 are immaterial to the group. Last year in aggregate, they represented around 5,000 new vehicles, equivalent to approximately 1.5% of the group's total volumes. Secondly, we further leveraged our third party retail network, enabling broader in-market coverage in a capital efficient way by exiting or selling our own retail sites across our regions. thirdly 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 developing and delivering finance and 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 technology-based sales and operational planning processes. We have also taken decisive action on our cost base, driving efficiencies and tackling challenges in certain markets. This included a management action plan in APAC, which I'll now discuss. Our actions in APAC were initiated last year to address the challenges we are facing in the region. Some of these challenges relate to the increasingly competitive environment and some are a result of our operational underperformance in certain markets. We have made excellent progress with these actions to date and we are building momentum in restructuring our business in the region as we rebuild a platform for future growth. Our plan is focused on two areas, operational execution and enhanced collaboration with our OEM partners. I want to thank Phil Jenkins, our interim APAC CEO and his executive team in driving our actions in both of these areas and in helping position our APAC business for its next phase of development. With Phil returning to his role as our Chief M&A Officer, last week we announced the appointment of Ian Burton as our new APAC CEO. Ian, who officially starts with us next week, is a highly experienced international business leader with more than three decades of leadership experience across APAC, Europe and Africa. I'm looking forward to working with Ian in developing our APAC business. We also made a number of new management appointments across the region in H1, both at the regional headquarters and in a number of key markets. In addition, we are significantly reducing our headcount and assessing a number of non-core businesses for disposal including the exit of some of our retail operations. These actions will help us become a leaner and more agile organization, a business that is better equipped to drive enhanced collaboration with our OEM partners. To that end, a key focus for our APAC team this year has been the orderly exit of 13 distribution contracts to help drive efficiencies, profits, and cash flows. These contracts, all agreed with our OEMs, are immaterial and dilutive to profitability. They include Stellantis brands in Australia and the Philippines, LDV and KGM in New Zealand and Aura in Hong Kong. In addition, our JLR business in Thailand has been classified as an asset held for sale in our accounts today. We expect more contract exits to come in the second half and into the future, including some of our more recently won contracts. We are also collaborating with our OEM partners on a refreshed approach to product mix across the region. We are working with our partners on the launch and repricing of models, ensuring we enhance competitiveness and agility in a fast-evolving market environment. To sum up, we have made excellent progress in our management action plan for APAC and there's more to come. I expect continued challenges in the region in the short term, but I remain very confident about our long-term prospects. We have long-standing OEM relationships with the likes of Toyota and Lexus, supplemented by new partnerships in the region including Photon in Australia and Mercedes-Benz in Indonesia and the Philippines. With that in mind, our management action plan, supported by the strength and increasing diversity of our OEM partnerships, is building a strong platform for future growth. Just to sum up today, we made good progress in the first half of the year amid an evolving market backdrop. We continue to deliver against our strategy, exercising further discipline in our approach to capital allocation. Looking ahead, we expect to continue to deliver strong EPS growth this year and beyond in line with our medium term guidance. Finally, here's 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 more than 10% compound annual growth of EPS. That's it for the presentation, so let's take your questions. Starting with questions over the line, and then from the webcast via our head of IR, Rob.