Earnings call transcript: Inchcape Q3 2025 shows strong revenue growth

Inchcape PLC reported robust financial results for the third quarter of 2025, with revenue reaching £2.3 billion, marking an 8% organic growth. The company also experienced a 7% reported revenue growth, outperforming the market’s 5% growth. Following the release of these results, Inchcape’s stock price increased by 0.74%, closing at 742.5, reflecting positive investor sentiment. According to InvestingPro analysis, the company maintains a "GOOD" financial health score of 2.72, with particularly strong marks in profitability and relative value metrics.

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Key Takeaways

• Inchcape achieved an 8% organic revenue growth in Q3.
• The company completed a £200 million share buyback, reducing shares by 8%.
• New product launches, including Subaru and Toyota, contributed to growth.

Company Performance

Inchcape’s performance in Q3 2025 was marked by significant revenue growth, driven by new product launches and strategic market expansions. The company’s volume growth was notable, with a 13% increase to approximately 91,000 cars. This growth outpaced the overall market growth of 5%, highlighting Inchcape’s competitive edge. The company maintains a healthy return on equity of 23% and a gross profit margin of 17.2%, though InvestingPro data indicates room for margin improvement.

Financial Highlights

• Revenue: £2.3 billion, up 8% organically.
• Organic Revenue Growth: 8%
• Volume Growth: 13%

Outlook & Guidance

Looking ahead, Inchcape is targeting over 10% EPS compound annual growth rate (CAGR) and anticipates continued growth into the next year. The company expects a stronger performance in the second half of the year, although Q4 growth may be slightly less robust than Q3. Trading at a PEG ratio of 0.14 and offering a dividend yield of 3.83%, analysts maintain a bullish stance with an average upside potential of 21%. For comprehensive valuation analysis and detailed financial metrics, explore the full company report on InvestingPro.

Executive Commentary

Duncan Tait, Inchcape’s CEO, stated, "We delivered strong organic revenue growth in the third quarter of 8%." Adrian Lewis, CFO, added, "We’re about driving scale through this organization, leveraging our overhead."

Risks and Challenges

• Competitive pressures in the Asia-Pacific region, particularly in the premium segment.
• Macroeconomic uncertainties that could impact global market conditions.
• Managing inventory levels and supply chain disruptions.

Q&A

During the earnings call, analysts inquired about the contributions of recent contract wins and the challenges in the Asian market. The company also clarified its capital allocation strategy and addressed the impact of price mix on margins.

Full transcript - Inchcape PLC (INCH) Q3 2025:

Sergei, Call Moderator, Inchcape: Hello and welcome to Inchcape’s 2025 Q3 trading update. We are now joined today by Duncan Tait, Group Chief Executive, Adrian Lewis, Group Chief Financial Officer, and Rob Gurner from Investor Relations. If you would like to ask a question during today’s call, please press 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.

Duncan Tait, Group Chief Executive, Inchcape: Very good, thank you, Sergei, 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 scaled the group through the acquisition of Askyr 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 optimizing our business is perhaps most evidenced with the disposal of a retail-only business in Australia, which generated annualized revenue of around £100 million. As we have said before, optimizing 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. 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%. With that, I’ll hand over to Adrian.

Sergei, Call Moderator, Inchcape: 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 TIV 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 comparators 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 regions, 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. It is worth noting that in Chile in September, we saw a very strong market due to regulatory changes pulling demand forward. This will normalize 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 upcycle, 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. 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 at the end of June. As Duncan mentioned, we have maintained our disciplined approach to capital allocation, and alongside the acquisition of Askyr, 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 program 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. Finally, onto 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 optimization 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 rates.

Let’s take your questions.

Question Moderator, Inchcape: Thank you. As a reminder, to ask a question over the phone, please signal by pressing 1. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press 2. Please submit your questions via the webcast. Our first question is from Arthur Thruslov from Sydney. Please go ahead.

Good morning everyone. Thanks very much for taking my question. First question just on capital allocation. Can you just remind us how you think about the scenario in which there would be another buyback at full year? Second question from me. Obviously, your price mix element is slightly sort of negative 5% or thereabouts in the quarter. Are you able to just talk about how that likely impacts margin and things like, yeah, how the price mix likely impacts margin, please? I know that’s something that has been a concern to people in the run-up to this. Thank you.

Duncan Tait, Group Chief Executive, Inchcape: Very good. Good morning, Arthur. Adrian, over to you for both, please. Thank you, Duncan. Thanks, Arthur, for the questions. I’ll start with capital allocation, and I think our policy, Arthur, is really clear. What we said in our medium-term guidance that was issued in March is that on the back of a very highly cash-generative business, turning profit after tax into cash at around 100%, we’ll pay dividends with 40% of EPS, and then we will do share buybacks and M&A. The balance between those two with the cash that we generate will be decided based on a disciplined approach to valuation, and that’s in the context of our own shares and a very healthy pipeline of bolt-on acquisitions. As I said in my words, we are super excited about expanding the scale of this group.

We were very pleased to find value in the Askyr deal and continue to look at a pipeline of bolt-ons that I think can add scale to this group. As we have done this year, you can expect us to be disciplined about how we do that in 2026. On price mix, what you’ve seen, and you’ve absolutely got it right, look, 13% volume growth in the context of a market growth of 5% and an organic revenue growth of 8%. What you’re seeing there, and that delta between the 13 and the 8, is really about a faster growing Americas region, a faster growing Europe and Africa region, where we play in segments that have a lower average selling price in comparison to Asia, which in proportion to the rest of the group is smaller in proportion than it was in previous years.

A third of our Americas business is Chinese brands, and a third of our growth rate this year has come from new contracts wins, which, as you know, is skewed towards Chinese brands. What that’s doing is bringing down the average selling price. We’ve been pretty consistent around our view on margin and how we think about margin as we look forward at around circa 6%. I don’t think you should think about that price mix and changing mix within the business as a headwind to margin. We’re about driving scale through this organization, leveraging our overhead, and that’s what’s going to underpin margins as we look into the medium term.

Thank you. Just one follow-up. Obviously, about 18 months, 12 to 18 months ago, you presented some data on the profit progression in new contracts. Is it reasonable to think that these contracts that are growing very nicely are progressing in line with what you presented in the Driving episode? I think it was in May 2024, if I remember correctly.

Yeah, I think, Arthur, great question. I’ll take this one, Duncan, if I may. You started to see us disclose the contribution that they are making to our overall growth. It’s around a third of the 8% that’s come from contracts that have been signed over the recent few years. I think net net, we’re at about 50 contracts in aggregate that we’ve signed over the last few years, and the vast majority of them are still in year one and year two. That five-year timeline that we presented back in that In the Driving Seat webinar of how the average contract evolves, I think we’re still pretty consistent with, and we’re seeing those 2022 and 2023 contracts starting to climb up that curve.

I’d say one thing we have noticed, it sometimes takes us a little bit longer to get from the moment of signing through to products in the market. Sometimes it’s getting through a homologation process, getting all the right vehicle specification documents into local governments, where we’re working with brands that aren’t necessarily used to working in export markets and international markets. That’s taking us a little bit longer to get out of the blocks, perhaps, but the trajectory of maturity continues to be on that archetype as we presented in May last year.

Fabulous. Thank you very much.

Thank you very much, Arthur.

Question Moderator, Inchcape: Thanks. Our next question is from Amy Bell from UBS. Please go ahead.

Hi, morning both. Just wanted to ask two questions about the growth building blocks. Firstly, your comment that a third of the growth was from contract wins, so this is about 2.7% of organic revenue growth. Should we assume that is the rough contribution you’d expect in Q4 and at the start of next year? You’ve won a lot of contracts over the past year, as you mentioned, so can you give any help on the timing of the ramp-up going forward? That would be great. Secondly, your markets were clearly strong this quarter as well, but as you’ve mentioned, there was some volume pull forward in markets like Chile, and it sounds like you expect Q4 to be slightly softer. Putting the two together, contract wins and end markets, do you expect Q4 to see positive growth at this stage? Thank you.

Duncan Tait, Group Chief Executive, Inchcape: Okay, thanks very much, Abby. Good morning. Adrian, you again. Morning, Abby. Thanks for the questions. Yeah, a third of our growth absolutely came from contract wins. We’re really pleased with that. Those contracts which I referred to earlier as the sort of 2022 and 2023 contracts are really beginning to hit their straps as we expected to. When we look at the maturity curve that we expect to see, we expect them to provide a contribution into Q4, and I think I’d point you to our medium-term guidance framework, which talks about a market outperformance. Markets growing at around 1% to 2%, 2% to 3% outperformance to give a 3% to 5% volume growth. That’s the sort of framework to how you should think about rolling forward the contribution from these contracts that we’ve been running over recent years.

As I said, a lot of them are still in the foothills of their growth maturity curve, and we’ve got work to do to make sure that they contribute as we expect them to over the 2026, 2027, and 2028 time period. On growth rates, looking into Q4, as we’ve said in the statements and in our words, Q3 had some softer comps, so I would expect Q4 to be a growth quarter for us, but I wouldn’t expect it necessarily to be as strong as we have seen in Q3, in part due to the comparators. Is that helpful, Abby?

Yeah, that’s great. Thank you. Just a quick follow-up. Do you think you’ll be disclosing the contract contributions going forward in your remarks or materials?

I think we’ve heard investors and our analyst community loud and clear that a greater level of disclosure in this regard is helpful, so you should expect to see us start to talk about how it contributes to the group both strategically and in the near-term results.

Brilliant. Thank you.

Thank you.

Question Moderator, Inchcape: Thanks, Abby.

Sergei, Call Moderator, Inchcape: Thank you. We’ll now take our next question from David Brockton from Deutsche Numis. Please go ahead.

Duncan Tait, Group Chief Executive, Inchcape: Thank you very much. I also have two questions as well. Firstly, could I just return to the price mix headwind from the first question? I guess one element there that’s been contributing has been a softer premium market, particularly in Asia. As you look towards next year for the business, can you just comment on whether those pressures should ease as you lap this year, or is that on a worsening trend in that segment, please? The second question relates to Australia. Just a clarification for me. Can you confirm you’re now completely out of retail activity in Australia? Is the sort of strategy evolved there, or am I missing something because I thought there was a sort of a benefit to the partially integrated model there? Thank you. Very good. Thank you, David. Look, I’ll take those. Specifically about Asia, we’ve seen two dynamics in Asia this year.

One is more pressure on the premium segment, and we’ve seen those declines, which we referred to at our interims, of a 40% decline in the premium market in Indonesia, as an example. Generally across Asia, it’s a really, really competitive environment. Do I expect 2026 to see a big step up or an improvement in that environment in Asia? I think our teams are executing pretty well, but do I expect the premium segment to bounce upwards or for the competition and the competitive environment to reduce? No, I don’t. I think we will continue to execute well, but Asia is super competitive and the premium segment is still quiet. What I would say, going back to the way Adrian’s encouraging us to think about 2026, is we should apply our medium-term growth framework to how we think about 2026.

In terms of Australia and retail, let’s be clear about what we’re trying to do. We have had a program over the last half a decade or so of reducing our exposure to pure retail, like the UK business where we don’t have distribution contracts, but we had end retail. In Australia, what you see us do is take those dealerships in Brisbane, which are supporting OEMs where we’re not the distribution partner. That is the business we’ve sold. It’s exactly like you’ve seen us do in the UK, the way you saw us exit Russia and other businesses in that regard. In terms of our distribution business, retail is super important. We don’t need to own and control all of it. In fact, in Australia, we own about 20% of the retail, physical retail that supports our distribution contracts in that country.

I would remind you we’ve just launched Photon in Australia also. Wonderful. Very clear. Thank you very much. Thanks, David.

Sergei, Call Moderator, Inchcape: Thank you. Our next question is from Akshat Kakkar from JP Morgan. Please go ahead.

Good morning, Duncan, Adrian. A couple of questions, please. The first one is on the mutual exits from the small contracts in Americas that you’ve talked about. I see that three of them are with Geely, and obviously this comes on the back of the exit from Chile at the end of last year as well. I do remember that you have a global cooperation agreement with Geely, sorry. Just a question on Geely still is an important distribution partner, and how are your discussions actually evolving with them? If you could just share some more details, that would be helpful. The second one is on Asia, and I appreciate it’s a Q3 trading call. You’ve talked about a very competitive environment. There are continuous headwinds. Could you talk about the margin recovery potential for that region going into the second half, please?

We’ve obviously come down from the 8% to 9% margins in the last few years to 6.5% in the first half, but now we have higher volume contribution and positive momentum from product launches. Could you just talk about Asia margins, please? Thank you.

Duncan Tait, Group Chief Executive, Inchcape: Yeah, sure. Let me clarify your second question. Are you talking about the Americas region?

Asia.

It’s Asia. Okay, very good. Thank you very much. I just wanted to clarify that. I’ll take the first question and Adrian on the second. You’re right. Let’s put this in context. We’ve won over 50 contracts over the last few years, many of them in our Americas business, with OEMs from Europe, from Japan, and from China. We did sign a global relationship with Geely just a few years ago. If you look at the Geely brand itself, yes, we have now exited the contracts that we signed in the Americas. We have done so on a highly collaborative basis with our OEM partner, and we genuinely wish them all the very best as those contracts move to other third parties. Actually, let’s not forget, we’ve also signed a whole bunch of contracts with Smart, which is a Geely joint venture with Mercedes.

We have our Volvo business also in the Americas, and I’d hope that we would have some more Volvo businesses over time. In terms of our relationship with Geely Group, I think that’s in super shape. Those particular brands that we’ve exited, they’re better off with other parties running those distribution contracts in those small markets in Central America. In respect of margins, actually, and you took the words right out of my mouth, this is a trading update, so I won’t comment very specifically. Safe to say you’re absolutely right. The descaling effect we saw in the first half of a second half skew of volumes weighed on margins. We’ve seen that scale come back in the third quarter and expect to do so with product launches in the fourth quarter. We launched Subaru Forester into Australia. We’ve got some product going into Singapore and Hong Kong.

EV going into Hong Kong with the BZ3X started this month. We’ve got the NOA product going into Singapore. They play in certain segments which will be helpful to us, particularly in MPV fleet and taxi. We should see the rescaling effect in Asia. Safe to say that premium segment continues to be weak, and referring to Duncan’s comments around it being a very competitive environment. We’ve seen an improved performance in Q3 in the context of a market that is now flat and in the context of our half one performance. I want you to sort of hear the words of caution of Asia being a difficult environment for us, but that rescaling effect will be supportive of a better margin profile in half two. Thank you both.

Sergei, Call Moderator, Inchcape: Thanks very much, Akshat. Thank you. Our next question is from Andrew Nassi from Peel Hunt. Please go ahead.

Yeah, morning everyone. A couple of questions from me as well. First of all, given the significance of the new contracts in terms of the growth profile, can you just give some color around the pipeline in terms of signing up new contracts, whether that’s sort of OEM or region? Secondly, we cast our minds back to the disposal of the UK retail operations. I think from recollection, you retained some of the liabilities from any potential mis-selling of consumer products and commissions and what have you. Given the recent FCA paper, do you see any exposure for the group there in terms of that historic disposal, please?

Duncan Tait, Group Chief Executive, Inchcape: Very good. Good morning, Andrew. I’ll take one. Adrian will follow up on number two. In terms of contracts, we’ve won a lot, as I keep on saying on this call and in our previous engagements, and they’re starting to come through in our revenue growth in the second half, which I am pleased about. Generally, I’ve said this group will win somewhere around high single into double digits contracts annually. This year so far, gross number is nine. Do I think we’ll sign a few more contracts before the end of the year? Most likely. Are we going to hit 10-ish every year? This is a bit of a lumpy business in terms of contract wins, but the teams are doing well, and we’re talking to key OEM partners across our three regions.

In summary, you should expect us to sign a few more before the end of the year. Andrew, in relation to the UK retail disposal, your recollection is absolutely correct. We did provide an indemnity in certain circumstances where that FCA investigation was going to come back to us, as was appropriate at the time. The FCA is in their redress scheme, is in a consultation period, so it wouldn’t be appropriate for me to comment on how that would conclude before that does conclude. I’d just point you back to what we said in our half-year statements. We had an unquantified contingent liability sat in our disclosure schedules, and we’ll have to reconsider our position post the consultation period as that plays through for consumers through the third and fourth quarter, and you’ll see more in our full-year financial statements in the spring.

Okay, great. Thank you.

Thanks, Andrew.

Sergei, Call Moderator, Inchcape: Thank you. As a reminder, to ask a question, please signal by pressing 1. We’ll now take our last question today from Sanjay Vidyarthi from Palmyra Liberum. Please go ahead.

Duncan Tait, Group Chief Executive, Inchcape: Morning. Just one for me. I’m just looking at the TIV data that you provided. Just a couple of ones that I’d like to pick out on. Hong Kong, is there anything in terms of phasing there in that being up 43% in Q3? And then just across Europe, there’s been remarkable strength, double-digit growth across most of the markets. What’s driving that? Thanks. Good morning, Sanjay. Over to Adrian for both. Thank you. Hong Kong data, yeah, look, you’ll remember last year we talked about tough comps in the first half and weaker comps in the second half, and what you see in the Hong Kong data is a little bit of that playing through. Hong Kong is a 10,000 units, 10 to 11,000 units a quarter business.

We’re lapping an 8,000 unit quarter in Q3, and that’s because there was a pull forward into Q1 last year, oh, sorry, Q2 last year with some regulatory changes where they changed the taxation rates applied to EVs on imports. That’s what skewed the market. 12,000 cars in the quarter is a pretty decent quarter in what is a highly competitive market. There’s nothing in this year’s phasing that would indicate that’s a pull forward, but we see that market as being a broadly 40,000 unit market and pretty stable at that level through the year. In relation to Europe, yeah, look, absolutely, we’ve seen a very strong market performance. There are some nuances in there, both a slightly weaker comp, and you can see that in the historics. Romania has a slight inflated number, I would say, because of some, again, some regulatory changes there.

We’d expect that to level out a bit into the fourth quarter, and you can see some fairly spiky quarterly data with Romania, big negative, big positive. I’d encourage you in this circumstance for Europe to look at a full-year rate of growth for the market as a barometer for momentum in the region. Okay, understood. Is there any kind of distortion there from EV sales, or is there anything to think about on that? Not just Romania, but across Europe? No, no, I would point to Belgium and Luxembourg as being a market that is shifting towards EV very quickly in relation to some taxation changes that came into effect at the start of this year, and that’s a market that is shifting quite quickly to EV, and BYD, where we’re distributing for them, we’ve been a real winner in that space in that regard.

That’s when we talk about some of the momentum we’re seeing in those contracts. That BYD Belgium contract is one of those early ones where we’re seeing that business gather pace. That’s the only EV point I would make, and obviously you can see the market data there was fairly flat, but it is a market that’s shifting to EV. I wouldn’t read the other market growth rates as an indicator of an accelerated EV adoption curve. Okay, understood. Thanks very much. Thanks very much, Sanjay. Thank you. It appears there are currently no further questions. With this, I’d like to hand the call back over to Duncan for closing remarks. Over to you, sir. Thanks very much, Sergey. Thank you for joining us this morning, everyone. To summarize, our performance in Q3 was supported by market growth, distribution contract wins, and ongoing product launches, while headwinds remain in Asia.

We reiterate our outlook for 2025, and we remain well placed to deliver on our target of greater than 10% EPS growth over the medium term. That’s it from us. Please get in touch with Rob if you’d like a follow-up on anything we’ve discussed today. Bye.

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