Inchcape (LON:INCH) reported a “resilient” third-quarter performance, with reported revenue rising 7% to £2.5 billion, as growth in the Americas and Europe and Africa offset continued pressure in Australia.
Group Chief Financial Officer Adrian Lewis said revenue increased 5% at constant currency, including 1% organic revenue growth. Volumes rose 3%, compared with total industry volume, or TIV, growth of 9%. Chinese original equipment manufacturer, or OEM, partners accounted for about 25% of group volumes during the quarter.
Lewis said recently won distribution contracts contributed enough growth in aggregate to more than offset the decline in Australia. The company maintained its forecast for organic volume growth at the top end of its 3% to 5% guidance range, while lowering its expected adjusted operating margin to about 5.5% for fiscal 2026 because Australia is now expected to dilute group margins.
Americas Growth Supported by Demand Despite Supply Disruption
In the Americas, Inchcape’s volumes increased 10%, trailing TIV growth of 24%. Lewis said the difference largely reflected supply disruption previously flagged in July, which temporarily affected market share in certain markets.
Approximately 36% of regional volumes came from Chinese OEMs. Lewis said Inchcape’s relationships with those manufacturers in the Americas extend back more than two decades and provide customers with a broad range of products and powertrains.
During the question-and-answer session, Lewis said demand conditions remained supportive, particularly in Colombia and Peru. Inventory and logistics constraints began to ease late in the third quarter, which he said should support improved market share and relative performance in the fourth quarter. Chile remains a low-single-digit growth market operating at historically low levels, he added.
The company also expects its normal second-half seasonal weighting of revenue and profit in the region.
Australia Remains a Drag on Performance
APAC volumes fell 37% in the third quarter, against TIV growth of 5%, with Australia representing the principal challenge. Australian volumes declined about 50% in what Lewis characterized as a dynamic but flat market.
The Australian market has experienced fuel-related disruption and a rapid customer shift toward new-energy vehicles. Electric-vehicle penetration increased from 8% at the start of the year to around 24% during the third quarter, according to Lewis.
Inchcape said the competitiveness of its key OEM partner’s brand deteriorated, exacerbating its underperformance and creating margin pressure. The company is undertaking a comprehensive review of product range and positioning with its OEM partner, including discussions about powertrains, product configuration and market positioning.
Lewis said the business remains profitable but has shifted from being margin accretive to group results to being dilutive. He said the company would continue to adjust its cost base and operating model in line with market-share expectations, while noting that its Foton business in Australia is performing well and seeing growing demand.
Management said a recovery in Australia is unlikely to be immediate, as product changes require time to implement. Lewis declined to provide specific guidance on the shape of performance in 2027.
Contract Portfolio Changes and Strength in Europe and Africa
Inchcape has agreed to mutually exit 15 contracts so far this year as part of its APAC management action plan. The actions include cost reductions, closer work with OEM partners and optimization of the contract portfolio. Lewis said the full benefits will take time to filter through, though exits from contracts that had diluted profitability should support margins over time.
The company also announced the exit of its BYD contract in Belgium and Luxembourg at the end of 2026, earlier than originally planned. The contract represented less than 3% of group revenue and was margin dilutive, Lewis said. He described the transition as orderly and said Inchcape remained on good terms with BYD.
Europe and Africa delivered the strongest regional volume growth, with volumes up 21%, including 16% organic growth, against TIV growth of 2%. Inchcape cited broad-based gains across core European brands, market-share gains in several countries and contributions from recently secured distribution contracts, many involving Chinese OEMs.
Over the past four years, the company has won 17 new contracts in the region, around 80% of them with Chinese OEMs. Its Iceland acquisition continued to perform well, while its Bulgarian business had a good start following the acquisition of Silver Star, the Mercedes-Benz distributor in Bulgaria.
Capital Allocation and Full-Year Outlook
Inchcape completed and announced several bolt-on acquisitions during the quarter, including a transaction involving Volvo in two Americas markets and Jaguar Land Rover in one market. The company said these deals broaden its product and brand portfolio. It also continued its £250 million share buyback program, repurchasing about £170 million of shares so far this year.
Over just more than two years, Inchcape has repurchased approximately 18.5% of the company, Lewis said.
The company reiterated expectations for free-cash-flow conversion of more than 100% of profit after tax in fiscal 2026. Lewis said management does not anticipate an inventory issue in Australia, emphasizing the group’s demand-led inventory process and maintaining its free-cash-flow guidance.
Inchcape expects adjusted earnings per share growth of approximately 10% in fiscal 2026, supported by one-off tax benefits from corporate reorganizations in parts of the group and currency translation tailwinds at prevailing exchange rates. Lewis said the tax-related actions should provide a low-single-digit percentage contribution to earnings growth this year, while the company’s medium-term effective tax rate guidance remains around 31%.
Lewis reiterated Inchcape’s medium-term objective of delivering more than 10% compound annual EPS growth through the end of 2030.
About Inchcape (LON:INCH)
Inchcape is the leading global automotive distributor, with operations across six continents. By combining our in-market expertise with our unique technology and advanced data analytics, we create innovative customer experiences that deliver outstanding performance for our partners – building stronger automotive brands and creating sustainable growth. Our distribution platform connects the products of mobility company partners with customers, and our responsibilities span product planning and pricing, import and logistics, brand and marketing to operating digital sales, managing physical sales and aftermarket service channels.
