Good morning, everyone, and thank you for joining us. I'm Duncan Tait, Group CEO, and I'm joined by our Group CFO, Adrian Lewis. Here's our agenda for today. I'll give an overview of our interim results for 2024, and Adrian will then go into more detail on the financials, and I'll come back to discuss strategic progress and the outlook. After that, we'll take your questions. The presentation is available on our website, and a recording of today's session will be available later today. I'll start with the highlights of the first half of the year. The major news during the period was the divestment of our U.K. retail business to Group 1 for GBP 346 million. I am very pleased the FCA approved the transaction yesterday evening, and as a result, the deal will complete on the 1st of August.
This is a major strategic inflection point for Inchcape as we become a pure-play operator in automotive distribution. Proceeds from the disposal will provide additional balance sheet capacity for us to invest in future growth to support our capital allocation policy in the context of a healthy pipeline of bolt-on acquisitions. During the first half, we continue to execute against our strategic objectives, delivering a resilient operational and financial performance with 8% revenue growth in constant currency, 4% organic growth, PBT of £226 million, and a reduction in leverage to 0.7x. This performance is evidence of our diversified and scaled business, which helped us to win share in key markets across our regions.
In addition, and taking into account our excellent free cash flow performance in the first half and the strength of our balance sheet, we are accelerating the timetable of our share buyback and increasing the amount from GBP 100 million to GBP 150 million. The share buyback will commence on the 1st of August 2024 and is expected to complete during Q1 2025. Looking ahead, in the near term, we are maintaining our expectations for moderated growth in 2024 at constant currency, and over the medium to long term, we expect to return to higher levels of growth, and this will be driven by recovery across a number of markets, the increasing contribution from recently won distribution contracts, bolt-on acquisitions, the development of our technology capabilities, and our continued focus on cost management.
I joined Inchcape in 2020, and I'm even more excited today than I was four years ago about the potential for Inchcape in a fast-moving and dynamic industry. The business is in excellent shape and extremely well-positioned for the future. Our success over the last four years owes much to the quality of our 18,000 highly talented people around the world. I'm on the road approximately one week in three, meeting our teams across the regions, and I'm always impressed by the enthusiasm, commitment, and innovative mindset of our people. We have built a collaborative, entrepreneurial, and high-performing culture that provides the bedrock from which we can deliver future success at Inchcape. This culture has also been the driver of our strategic transformation from a retail and distribution business to a pure-play distribution company, as you can see from this slide.
Since 2016, we have tripled the number of OEM partnerships and doubled the number of markets in which we operate. Our annualized distribution revenues have tripled, and we have more than doubled the new vehicle volumes we distribute. Our performance in the first half is evidence of the strength of being a pure-play distribution business, with CapEx at less than 1% of revenue, return on capital employed of 28%, and free cash flow conversion of operating profit of 76%. We are already delivering in distribution, which is capital-light, attracts higher margins, is more cash-generative, and delivers higher returns than retail only. Let's now look at the macro backdrop and outlook across our regions. As you know, we are focused on small to medium-sized, more complex but attractive markets, which are higher GDP growth and have low motorization rates.
In the Americas, industry volumes are at historic lows in a number of markets, driven by geopolitical and macroeconomic factors. We are seeing some key markets stabilizing, although it's too early to say whether this is the start of a recovery. Certain subregions, like Central America, have performed well, and overall for the Americas, we remain positive about the region's structural growth prospects over the medium to long term. In Europe, we are seeing some improvement in order intake in certain markets, although there is mixed demand outlook across the region, with Southern Europe remaining strong, with some markets in Northern Europe more challenging. Finally, in APAC, a growth engine for Inchcape, with robust volume growth and a positive growth outlook in most markets.
To highlight the quality and diversity of our business and its prospects in APAC, we will be holding an In the Driving Seat seminar with a deep dive on the region in November. Overall, a positive growth outlook in our regions against a mixed set of trends. With that in context, I'll now hand over to Adrian to take you through the details of the financial results.
Thank you, Duncan, and good morning, everyone. With the disposal of the UK retail business expected to complete later this week, as Duncan mentioned, it has been treated as a discontinued operation, which means the 2023 comparisons in the income statement have been restated to exclude the UK. We have provided in the appendix of today's presentation our income statement on a continuing operations basis for the full and half years of 2023 and a standalone balance sheet for the UK business. Hopefully, this will help to inform your modeling of the continuing operations of the group. So now let's start with the headline financials. During the period, we generated revenues of £4.7 billion, up 8% in constant currency, with organic growth of 4% and a contribution of 4% from acquisitions. This was partly offset by currency translation headwinds.
Operating margins were 6.3%, reflecting organic revenue growth, with some regional mix and price headwinds impacting gross margins, mostly offset by cost control driving operating leverage and adjusted PBT of GBP 226 million, which on a constant currency basis was 7% above the prior year. We delivered another excellent period of free cash flow generation, producing GBP 226 million, with a 76% operating profit to free cash flow conversion rate, and our return on capital employed was 28%. Net debt reduced to GBP 524 million, driven by a strong working capital performance, and this resulted in a net debt to EBITDA ratio of 0.7 times. Adjusted EPS was GBP 0.347, and today we announced our interim dividend per share, GBP 0.113. To remind you, this is set at one-third of the 2023 full-year dividend. In summary, our performance during the period is evidence of our strategic progress.
The next slide shows the key drivers of our top-line performance, and we grew 8% in constant currency, with 4% organic growth and a 4% benefit from the acquisitions we made in Asia-Pacific last year. APAC delivered strong organic growth of 9%, while Europe and Africa again outperformed the market with 18% organic growth. In the Americas, revenue declined 9% organically, with our volumes down 7% against a 9% fall in industry volumes in Inchcape markets. These growth drivers were offset by a 4% impact from translational currency headwinds driven by the strength of the pound. This slide shows our operating margin performance, and operating margins were down 10 basis points in constant currency, with overhead leverage offsetting gross margin pressure during the period.
Gross margin pressure arose as a consequence of regional mix, a faster-growing vehicle business, but also some pricing pressures in the Americas, which is a consequence of lower industry volumes. On overheads, we continue to be proactive on cost management, supported by Derco cost synergies and more broadly in the Americas and across the group to drive operating leverage. So let's now look at our regional performance in APAC. Revenue grew 24% in constant currency, including organic revenue growth of 9%, and this was supported by market share gains in key markets and a contribution from acquisitions, and with new brands in early stages of development. Operating profit was up 41%, with operating margins up 90 basis points to 7.8%. This was driven by operating leverage and the mix effect of faster-growing, higher-margin businesses.
Looking ahead, we anticipate continued growth in many markets, with margin growth expected to be partially offset by recently won distribution contracts, including Great Wall Motors in Indonesia and Changan in the Philippines. Onto Europe and Africa next, where revenue grew 18% in constant currency, and this was driven by outperformance against the market in Europe, a continuation of order bank normalization, market share growth, and new contract wins growing quickly. Performance in Africa remained resilient. Operating profit was up 25%, with continued elevated adjusted operating margins of 5.2% despite some dilution of accelerating contract wins. Looking ahead, growth is expected to be supported by some improvement in order take, which will partly offset the effect of order bank normalization over the last 18 months, with operating margins in Europe expected to moderate towards historic levels. Now let's look at the Americas, where revenue fell 9% in constant currencies.
The story for this region is that we are proactively managing the business in the context of lower industry volumes. Our market share across the region remained resilient, with key markets stabilizing and Central America seeing growth. Industry volumes across the region were below last year by 9%, and while our volumes fell 7%, demonstrating our outperformance. We also saw a degree of pricing pressure as a number of key markets, which are at historical lows. Operating profit was down 24%, with adjusted operating margins down 110 basis points from H1 2023, but broadly consistent with the H2 2023 run rate. Derco synergies and the wider cost programs have proved to be an underpin to operating margin and have mostly mitigated the deleveraging effect of reduced volumes.
Derco continues to be transformative for our business in the region, helping us scale across the Americas, and this is highlighted by three distribution contracts, one in the Americas in half-one 2024. Looking ahead, we have prudent expectations for short-term volume recovery, but margins are expected to improve in the second half, building on an improved margin exit rate at the end of half-one 2024. This slide shows our income statement for the period. The group delivered operating profit of GBP 299 million, and PBT was GBP 226 million, including a currency headwind during the half. Adjusting items amounted to GBP 31 million, and this was primarily driven by acquisition and integration costs of GBP 23 million, and non-cash, non-operational losses arising from hyperinflation accounting in Ethiopia of GBP 8 million.
We also note that on the 28th of July, the Ethiopian government announced a change in the way that it manages its currency to an exchange-based regime. As of the 30th of June, the net assets in our Ethiopian business were GBP 155 million, including cash of GBP 94 million. Ethiopia was an immaterial contributor to growth in the first half, both in constant and actual currency terms, and in absolute terms, a low single-digit proportion of group profit. We will continue to monitor the impact of this change, working with our local teams and banking partners. The effective tax rate increased to 32.7%, partly due to the impact of mix and a Pillar Two tax cost. We expect our effective tax rate to decline over time with structural improvements following the U.K. disposal.
We maintain a strong focus on cost management, and we reduced overheads despite the increased scale of the business, with a ratio of adjusted overheads as a percentage of revenue reducing to 10.9% from 11.4%. Now moving on to our finance costs. Overall, net finance costs were slightly higher than the prior period, but lower sequentially. While interest costs are partly linked to the interest rate environment, they are also directly connected to our growth and success as a company, and our net finance costs total GBP 74 million for the period. The first element here is net interest of GBP 34 million, which is directly linked to the cost of corporate facilities in the group, and in particular, our corporate debt. This element declined due to a reduction in average debt, which offsets some short-term cash-funded inventory flows during the period.
Looking ahead, net interest will reduce as the organic cash-generating capability of the group and the proceeds from the UK retail disposal enables us to deleverage. The second element of interest relates to leases, which is GBP 9 million, and this is linked to our physical infrastructure and will grow as we grow and expand our business. The costs associated with inventory finance were GBP 26 million during the period. We expect this to increase as we grow the business and as we align the commercial operating models of acquired businesses, and will reduce if interest rates begin to fall. The final element is the GBP 5 million of fees and FX costs, which have been reducing as we drive structural efficiency.
We produced another excellent free cash flow performance, highlighting the cash-generated nature of our business model, with adjusted free cash flow of GBP 226 million, which is an operating profit conversion rate of 76%. This was supported by a strong working capital inflow of GBP 82 million, driven by disciplined inventory management, particularly in the Americas. Inventory fell to GBP 2 billion from the GBP 2.7 billion at the end of 2023 due to an improvement in inventory efficiency across the group and the exclusion of UK retail inventory. As a consequence of our strong free cash flow performance, net debt reduced from GBP 601 million at the end of last year to GBP 524 million, equating to leverage of 0.7 times after dividend payments were made during the period of over GBP 100 million.
Looking ahead, we expect leverage to continue to reduce, supported by further strong underlying free cash flow performance and the cash to be received from the UK transaction. This provides us with the capacity to continue to follow our capital allocation policy, as you have seen today with the expansion and acceleration of our buyback program. This slide serves as a reminder to how we allocate capital in priority order, focused on organic investment, dividend payments of 40% of Adjusted EPS, and value accretive acquisitions, with a healthy pipeline of bolt-on acquisitions at the current time. The fourth element of our capital allocation policy is share buybacks. Taking into account the excellent underlying free cash flow performance in the first half of the year and the group's strong balance sheet, we are accelerating our share buyback and increasing the amount from £100 million to £150 million.
The buyback will commence on the 1st of August and is expected to complete during the first quarter of 2025. You can see that our excellent free cash flow performance continues to support capital allocation. That's all from me. I'll now hand back to Duncan.
Thank you, Adrian. We made further progress during the period in continuing to execute against our strategy. This slide shows the portfolio of some of our OEM partnerships categorized by manufacturer origin. We have a globally scaled, diversified, and prestigious portfolio, which is unrivaled across our industry. Our portfolio of OEMs is the key foundation for our business. We've worked with a number of OEMs like Toyota for over 50 years and have recently expanded into existing and new markets with other long-standing partners like Mercedes.
These long-term relationships highlight that we are delivering for our OEM partners on a consistent basis across a range of markets over a long period of time. We also have a number of relatively new partnerships with Chinese OEMs. We expect to achieve more growth with these OEMs as they seek to leverage our geographic presence and as we look to categories beyond passenger vehicles. Evidence of our success in this regard can be seen on this slide. This shows the new distribution contracts won during the first half and the related markets, including the annual industry volumes of those markets. Three of these contracts are with Chinese OEMs. In the Americas, where we are further leveraging Derco relationships. In addition, I'm delighted to say that overnight, our team in Australia has won a distribution contract with Foton, the largest Chinese commercial vehicle manufacturer.
On the right, we give an update of the developments of other contracts won in recent years. As you can see, we're making good progress. We're driving initial volumes with Great Wall Motors in Indonesia, supported by a strong product range and brand positioning. In the Philippines, we've refreshed our third-party retail network to support the Changan rollout. We've been working with BYD in Belgium for over two years, and we continue to support them in driving volume growth in a key EV market in Europe. Finally, we ran a successful launch for Subaru in Ecuador in the period to support the brand roadmap there. We expect to win further distribution contracts to help us drive market share with more OEM partners in more markets.
We continue to enhance our distribution platform through the development of our proprietary data and digital analytics capabilities, which help to drive superior performance for Inchcape and our OEM partners. Our two key technologies are DXP, our customer experience platform, and DAP, our data analytics platform. DXP is a fully functional omnichannel customer-facing platform, which enables us to capture significant customer and vehicle data. DAP provides advanced analytics and machine learning, leverages our data, and drives smarter, faster, and better business decisions. These elements are supported by a common global technology stack and driven by specialists in our digital delivery centers in the Philippines and Colombia. During the first half, we expanded the breadth of coverage of our core AI solutions into our recently acquired businesses, and we developed and deployed new market-leading AI solutions, including an AI-based quotation capability for repair services.
We continue to make excellent progress in digital and data, which is a key differentiator for the group, helping us to better support and develop OEM partnerships. We see many exciting opportunities for growth and innovation ahead. To sum up today, Inchcape delivered a resilient performance in the first half with a strengthened balance sheet. We increased our share buyback to £150 million with an accelerated timeline. We are reaffirming our guidance for 2024 at constant currency. As Inchcape becomes a pure-play automotive distributor, we are well-placed for future growth, supported by a healthy pipeline of acquisitions and contract wins. Let's now take your questions, firstly from people here in the room, then from the phone lines, and finally from the webcast via our head of IR, Rob. If you could limit your questions to just two per person, that would be most appreciated.
Morning. Sanjay Vidyarthi at Panmure Liberum. Just one for me on EVs, and particularly in APAC. If you could give us an update on the trends you're seeing there. I think BYD may be taking a bit of share in Singapore, but I'd just like to hear your thoughts on the impact of EVs across APAC.
Sure. Let me make a comment. First of all, if we step back, globally, EVs continue to reduce. I know there's lots of talk at the minute about increase, about EV sales reducing. They are still growing, and they're growing in our markets. Our OEM portfolio, I think, is well-matched to the movement in our markets towards EV. Now, what we've seen recently across APAC, if I think about Hong Kong and Singapore, we've seen further penetration of EV vehicles during the period, Inchcape taking its fair share of those. We're also seeing BYD enter some of those markets. We are forming partnerships with BYD in other markets, for instance, commercial vehicles in Singapore. We expect that to continue, and I think we're well-positioned, Sanjay, for that.
Thank you.
Hi, good morning. Andy Grobler from BNP Paribas Exane. Two from me, if I may. One, just on interest charges and debt. Two in one, if I may. What was the average debt during the period? Because as a proportion of your quoted debt, it's still quite high. Two, related, what are your expectations for interest charges for the full year, given all of the moving parts? Secondly, just in Latin America, where markets have been challenging, could you just chat through some of the bigger markets, Colombia and Chile in particular, and what you're seeing? Thank you.
Sure. Do you want to do one? I'll do one, and you do two.
Sure. Thank you, Andy. Interest charges during the period, they were consecutively lower than they were in the previous period. In relation to average debt, you're absolutely right. There is obviously a shape to our debt profile. You can see that in the debt charge in relation to the, or the interest charge in relation to the debt. That is partly driven by the working capital cycle that we see in the group. It's a very normal part of the group. Also, in the second quarter, actually, we did see quite a bit of inventory inflow to support that very strong organic growth rates that you saw in Europe. That's particularly in areas where we have some limited supply terms, and they were cash funded, which caused some of that shape.
In terms of outlook, as we've said today, we expect interest costs to reduce, particularly in relation to the interest cost charge that relates to our debt level, principally because of the strong cash flow, the lower average debt, but also from the proceeds of the U.K. I think in relation to inventory financing charges, which form part of our interest costs, they will continue to track growth for us as a business. As we continue to grow, we'll continue to see those costs change with our growth rates.
Thank you, Adrian. In terms of the Americas, if we take a step back, we have two-speed Americas in Inchcape. Caribbean and Central America is growing very nicely for us. In fact, Adrian and I have both been in Central America this year already. They're growing very nicely. You know those markets in South America have seen TIV declines.
In fact, I was in Chile and Colombia in the first half. The situation, you just see year-over-year TIV declines. If you look sequentially, that is a different picture, and we're seeing those markets stabilize. Now, what is the Inchcape team doing there? They're behaving like all Inchcape teams around the world. They are close to their markets, managing their cost base well, all over inventory, and they're performing really well, as you can see from our market shares in the first half. We're winning more contracts. Adrian referenced three contracts we've won already this year. Stabilizing. Then, if you look at how I see H2 versus H1, you'll see we gave you a hint in the slide deck that the exit rates or margins in H1 were stronger, and we expect H2 profitability to increase sequentially.
Thanks.
Microphone on its way.
Thank you, Duncan. Thank you, Adrian. A couple from me, please. Obviously, a little bit complicated this morning with the retail disposal coming out. Just to confirm that you're sort of happy with where consensus expectations are. Coming into this, GBP 515 million of PBT, I guess GBP 40 million-GBP 50 million of retail EBIT coming out, and then maybe GBP 10 million of interest going the other way. That sort of gets you to GBP 470 million, GBP 480 million, which I would say is in line with the GBP 515 million. Is that what you're expecting? First question. Second question was on organic growth. Obviously, you're quite harsh in terms of how you define organic growth, I believe, and that you don't put new contracts in there. Are you able to split the non-organic growth between M&A and new contracts o ne? Thank you.
Thank you. Both of those are coming to you.
That's fine.
One thing, just first of all, Arthur, I would say is we're becoming an even simpler group with the disposal of the U.K. I'm super pleased we're becoming a pure-play distributor. But with that, Adrian, the complicated questions are yours.
Thank you very much, Duncan. I might take the second one first because it's the easiest one. Arthur, sorry, actually our contract wins are in our organic growth number. They were a small proportion of the growth contributor to the 4% that we quoted this morning. Hopefully, that one clarifies the technical one. In relation to consensus, look, it is a complicated period for us as we are transitioning. I think what you should take from us today is we are reiterating our guidance. We continue to expect to see a moderated level of profit growth on a constant currency basis.
That's what we said at the end of the first quarter and during the first half of this year. Now, what we've done, hopefully for you in the appendix to the deck today, is to give you the 2023 comparator so you can see that very clearly in what it is. Look, profit growth in the first half of 7% on a constant currency, slightly above that moderated level because that moderation is in relation to our midterm guidance. We feel like we're on track. We feel like we're delivering growth, and we're reiterating our guidance and stand by what we said earlier in the year.
Thank you.
Good morning. First question, just on Ethiopia or the Americas, what share of profit in that region, I guess over the last few years, have you actually managed to repatriate to the group in terms of cash? What hasn't been repatriated? What's been done with that? Then secondly, just maybe an update. I saw a thing on the synergies. What was the run rate at the end of the first half? What was that money spent on in terms of the exceptionals? Thank you.
Can we just clarify the first question, please?
Yes. I guess it was in terms of adjusted operating profit generated out of Africa, what share of that actually gets repatriated in terms of cash to the group purposes versus stays in the region?
Both of those?
Yes.
Just for the sake of it, I heard you mention Americas. Just to clarify, Ethiopia sits within the European and African segment, obviously. What I've said today is there's been a recent change, which is going to create a very interesting environment. Ethiopia was a low contributor to group profits, low single digits in terms of its proportionality.
In terms of repatriation, you can see from the cash reserves in that market; it's been an environment where getting cash out of that market has been difficult. The amount of cash is fully disclosed on our balance sheet at the year-end, technically as trapped. I think the initial reaction to what the government are doing is may create a more free-flowing currency situation in that market. We're quite optimistic around the future and the medium term, what the change in the Ethiopian government policy. But it is very early days at this stage. In terms of the Americas, look, I think we haven't quoted a number. What you should take from what we've said today is we are on track for the synergy program.
In fact, when you look at in aggregate, our synergy program, plus the moderation in our costs that our businesses do when you tackle lower levels of volumes in a market, we are delivering a very good performance. Actually, if you look in the Americas alone, which you can't see, our overhead ratios are flat year-on-year in a declining market. That is a testament to the efforts of the teams and the structural changes we are making. It will set us up very well for growth and operating leverage when the business comes back. You asked around what proportion of the adjusting items. About GBP 18 million of the GBP 23 million that we quoted in relation to acquisition and disposals was related to the Derco synergies. What was it spent on?
If you remember what we said at the start of the year, this is the year of really the physical infrastructure. Think about we have three vehicle processing and storage compounds where vehicles are received into the country, processed, and then sent out to the dealer networks. We're bringing that into one in Lo Boza in Santiago. Similarly, with parts warehousing type of facilities. This is the year of physical alignment, as well as some continued operational and process alignment.
Adrian, I'll add one thing to that. The reduction in our physical distribution centers in Chile, in particular, we have a huge distribution center that we acquired with Derco. We've applied our S&OP algorithms and our parts algorithms to reduce physical inventory space, which has enabled us to close the legacy Inchcape and the legacy Derco centers to go into those sites. I am super happy about what that team is doing.
Thank you.
James Bayliss from Berenberg here, just one very quick here. Just one from me. On inventory, you mentioned some of the performance has been driven by that focus on process and efficiency, as well as working to align recent acquisitions with the group's core working capital model. On that latter part, can you give us a sense of how much work has still to be done there on bringing those acquired businesses in line with the rest of the group? Or should we be thinking about that part as largely done? Thanks.
Yeah, sure. Yeah, thank you. We are super pleased with the progress we've made in inventory. Just so everybody is on the same page, we started the year with around GBP 2.8 billion worth of inventory.
Once you exclude the UK, which is around GBP 300 million, we've closed the year just over GBP 2 billion. Great progress in terms of reducing inventory across the group. In part, that is, as you say, James, generally our S&OP processes and the investments we've made in the way we work, the data we use to make our decisions, showing up in terms of our operating model, and indeed doing that in some of the businesses we acquired in the third quarter of last year in Asia Pacific. Do I think there's more to go? Look, I think we're getting to a point where there may well be more opportunity to bring inventory cover down, but we just need to make sure we continue to manage that really carefully. But we're super pleased with the progress we've made in the first half.
This is part of being a brilliant distributor, making great decisions about what stock we bring into the countries, understanding demand profiles, and moderating that down and up as we see consumer activity change. It's part of our core competencies.
Morning. James Wheatcroft from Jefferies. Just a follow-up on your comment, Duncan, around diversifying beyond passenger vehicle categories. Maybe just thinking about where it stands today and what we should be thinking about into the future.
Sure. James, we generally speak, and most of our conversation this morning has been around our core mission to grow our passenger vehicle distribution business. That's most of the conversations we have. What you'll see later in the year when we do our in the Driving Seat session in November is we also have a much bigger opportunity, or sorry, a significant opportunity beyond passenger vehicles in light commercial vehicles and other commercial vehicle categories.
I think the announcement we made overnight in Australia about taking Foton into Australia is a nice example of that. The Ford contract win that we had in Estonia with Ford's strong commercial vehicles portfolio is another example of that. But today, light commercial vehicles are a relatively small part of our business. We also have an increased opportunity, I think, also with OEMs like Toyota to also increase commercial vehicles' penetration into our markets. More to say on that later in the year, but I'm quite excited about where we might end up with light commercial vehicles.
Hiya. Thank you very much for taking my questions. Two from me. The first is around your inventory financing costs. Could you please remind us how much of these are centralized and how much of these are country-specific? Then the second one is, could you give a little bit of context around the run rate out of H1 in the Americas versus going into H1?
Sure. Both of those for you, please.
Very good. Let's take the inventory financing costs. If I remind you, if I take you back, if I can, to what we said in the in the Driving Seat webinar where we set out the articulation of how our working capital cycle works and where those inventory financing costs are. At a very, very simple level, they're all locally entered into, but the currencies of them typically link to the major currencies of the world. The inventory financing facilities are typically linked to the country of purchase. Whether that be Japanese yen, U.S. dollar, euro, or renminbi, they're typically the current currencies of our purchase.
Then we take hedging mechanisms between that and the functional currencies of the operations. When we think about the drivers of interest costs, which may be the question behind your question, actually it's linked to the major currency interest rates as opposed to the Chilean peso, for example. In relation to the run rate comments we've made, as you quite rightly point, we've made comments around a stronger exit rate in terms of margins. What we saw was some of the work that we were talking about earlier come to fruition in terms of overhead rates and absolute levels of costs falling in the second quarter in the Americas, helping to support a higher level of operating margins. When we look into the second half, we expect to see a higher level of operating margin without a significant uplift in volumes.
When we think about what's going to be a tailwind for us next year, all of the good work the teams are doing locally about making sure we've got the right cost base for the markets we face into will pay dividends in the second half as we see margins lift.
Thank you.
I think we've finished with questions in the rooms. Let's move to the phone lines, if we could, please.
We will now begin questions from the phone line. To ask a question on the phone line, please signal by pressing star one on your telephone keypad. We'll pause for a moment to assemble the queue. We'll take our first question from the line of Akshat Kacker from JPM. Your line is open. Thank you. Good morning. Two questions, please. The first one on Europe and Africa.
When I think about the distribution volumes and market share wins in the region, they have been clearly above expectations, as well as the operating profit result in recent times. In the release, you have again mentioned that you expect margins to moderate, but you're still seeing a very strong order intake going into the second half. Could you just help us with how we should think about performance going into the second half, but also in 2025 for that region, please? That's the first question. The second one is on APAC. Could you just comment on order intake and the volume momentum that you're seeing in terms of new vehicle sales going into the second half in the APAC region, please? Thank you.
Sure. Let's do a dog and pony show on those. Actually, first response in terms of your question on Europe and Africa. Look, I think that team has done an exceptional job in the first half. You can see that with market share gains, particularly in our Toyota markets in Europe, where we have been delivering in great partnership with Toyota against a strong order bank. I stand by what we've said for some time, which is as we eat through that order bank, we will see a reduction in performance in our Europe business to more like normal levels.
We are seeing the signs of better order intake in our markets. You use the word very strong. I would not say very strong. I'd say we are seeing good signs of better order intake, particularly in those southern European markets. But we will see sequentially a reduction in PBT in our Americas business in the second, sorry, in our Europe and Africa business in the second half. Mr. Lewis, do you want to add to that?
I have nothing to add to your Europe and Africa comments. In terms of APAC, good momentum, actually. If you think about what we've reported this morning, 9% organic growth and 24% constant currency growth in APAC. We have seen Singapore continue on its up cycle. We've seen Hong Kong perform very strongly in the first half of the year. We've seen a resilient Australasia business. There is a little bit of noise because of supply volumes in the Australasia business, but overall, consumer demand has remained resilient. In the first half, you're also seeing the benefit of those acquisitions that we made in the third quarter of last year.
Now, we annualize those, obviously, so I don't expect total growth to be the same, but we certainly expect organic growth to continue to support operating leverage and margin growth in the region. Then if I may, just two things to add to that, Akshat, which is in Singapore, for the avoidance of doubt, we are on the up cycle in Singapore, and we are taking our fair share of TIV as that market continues to grow on the up cycle in Singapore.
Understood. Thank you.
Thank you very much.
There are no further questions on the conference line. I want to hand back to the ever-capable.
Very good. To the lovely Rob.
Hi, Rob. Just to also reiterate, when we talk about APAC, we do have an in the Driving Seat in November where we're giving a deep dive on the region. One question from David Brockton at Numis. In fact, I'd say two and a half questions. First question is, do you expect to see pricing pressure in the Americas moderating as key markets stabilize, or could this worsen in H2 and beyond? The second and a half question is, what does the bolt-on acquisition pipeline look like, and what drove the consideration to increase the buyback from GBP 100 million to GBP 150 million?
That is definitely three questions.
Shall I do one and three?
Yeah. Great.
Well, let me do one and three. Pricing questions. If I refer you back to the comments I made earlier, Americas in aggregate, the markets were about 9% lower, and our volume growth, or our volume performance, was around 7%. There was about a 2% delta in terms of our overperformance, and we also reported minus 9% organic growth. There's also about 2% pricing pressure. Do I expect to see that continue?
Look, I think there's a bit of vehicle mix. When markets are at low points, it is very natural to see consumers switching into smaller, lower-cost, lower-value vehicles. I don't expect to see it continue to accelerate and for that gap to widen, but nor do I expect to see it go the other way and to see pricing uplifts over time. It's part of our job as a distributor is to just make sure we're bringing the right stock into the markets and with our inventory that has reduced in the Americas during the first half. I think the teams have done a great job in that regard. You asked about the GBP 150 and why increase the buyback. One of the messages we've led with this morning is we have had a very strong balance sheet performance in the first half.
Our operating profit to cash flow conversion rate was 76%, and that's above our guidance on the back of some of that working capital improvements that we've made. It is that additional free cash flow that we have generated put through the lens of our capital allocation policy, which has led us to increase the buyback. I'm sure Duncan will comment on acquisition in a second. In the context of a fully materially delevered balance sheet and acquisition flows, which are likely to be 2025, we thought it was appropriate to increase the share buyback to 150 and indeed accelerate the timeline. We're going to commence that buyback immediately. Duncan, over to you.
Very good. Look, in terms of our expansion, in terms of contract wins and M&A, I'd say two things. First, on contract wins, you've seen us deliver 4 in the first half, another one overnight.
We will continue to win contracts for distribution in our three distribution regions. Going to the specific point you made around M&A, look, we have a healthy pipeline, and I reiterate, healthy pipeline of bolt-on acquisitions across our three distribution regions. We are in active conversations with those companies now, but I do not expect cash outflows for those until 2025. We continue to look for accretive acquisitions for the group, and we remain disciplined in terms of valuation, market, and OEM portfolio, with an emphasis of building scale, as we said in the Driving Seat webinar in May, in existing markets. At the same time, we continue to look for attractive new markets for Inchcape.
Another question from Patrick Vermeulen at Ascot House. To what extent will you be able to hold onto overhead improvements as and when volumes recover, presumably in the Americas?
That can only be you.
Yeah, absolutely. Patrick, thank you very much for the question. I think if you think about what we've been doing over the last 18 months since the Derco acquisition, particularly in relation to the synergies program, these are structural changes that will stick in the Americas. Then more laterly, as those markets have seen lower levels of volume, we have been moderating down our cost base so that we have the right operating model for that region. For us to have been able to hold overall overhead ratios flat in a market that is 9% lower than it was this time last year, I think that's, as I said earlier, a testament to the team. The structural savings will stick, and it will support operating margins as we see those markets rescale.
Very good. This is the final question from Jamie Powell at Lansdowne. Can you give a bit more of a sense of where you think leverage will be going into 2025, particularly if rates begin to normalize?
Yeah, there's slightly two questions there. Leverage, I think you can see we've reported net debt of GBP 524 million at 0.7 times. We've also announced today that the proceeds from the UK will be received on Thursday. That will substantially delever the balance sheet. You can expect, and I think you can fairly straightforwardly do the math in terms of that. The free cash flow of the business will continue to support both the buyback, both the dividend outflows that we have. As Duncan said, with 2025 acquisition flows expected, we expect to close the year with a substantially delevered balance sheet.
Very good. Thanks very much, Rob. Thanks, Adrian. Well, look, that's the last of our questions. Let me sum up. With the approval of the FCA for the UK transaction, we become a pure-play distributor. We have delivered a resilient performance in the first half. We've closed more distribution contracts. We've increased and accelerated our share buyback. With a pipeline of more contract wins and a healthy pipeline of bolt-on acquisitions, we remain positive about the future of Inchcape. Thank you very much for being with us today. Have a super Tuesday. Thank you.