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Investing.com -- Shares of Inchcape (OTC:INCPY) (LSE:INCH) fell sharply by 8.5% as the company reported a decline in first-quarter revenue.
The automotive distributor’s group revenue dropped by 5% to £2.1 billion at constant FX compared to the same period last year, with organic growth also down by 5%. The reported revenue saw an even steeper decline of 8%, although analyst expectations from Jefferies for the full year 2025 estimate a growth of 3%.
The company’s performance was influenced by a challenging first quarter in the Asia-Pacific region, where Total (EPA:TTEF) Industry Volumes (TIV) decreased by 7%, excluding Thailand. This included significant downturns in Hong Kong and Indonesia, with declines of 35% and 17%, respectively. However, the Americas (excluding Argentina) saw a modest increase of 4%, and Europe experienced a 3% drop in TIV.
Despite the revenue decline, Inchcape reaffirmed its medium-term targets through 2030, which include 3-5% organic growth, approximately 6% margins, 25-30% Return on Capital Employed (ROCE), and £2.5 billion in free cash flow from FY25 to FY30. The company also emphasized its new capital allocation strategy, prioritizing cash returns over mergers and acquisitions.
This includes a £250 million share buyback program to run until March 2026, which represents about 8% of the current market capitalization, with £55 million already repurchased.
Jefferies analysts commented on the company’s outlook, stating, "We argue that a positive re-rating is warranted over time for a pure-play distributor due to attractive characteristics in the financial model (high margins, high returns, strong cash flow)."
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