Hello, and welcome to Inchcape's 2026 Q1 results. We are joined today by Adrian Lewis, Group Chief Financial Officer, and Rob Gurner, Head of Investor Relations. If you would like to ask a question during today's call, please press star one on your telephone keypad, or you can submit written questions via the webcast. I would now like to hand the call over to Adrian. Please go ahead.
Thank you, Sergei, good morning everyone, and thank you for joining us. I am Adrian Lewis, Group CFO. Before I update you on Inchcape's performance in Q1, I wanted to say that I'll be covering off our quarterly trading calls from now on. Our full year and half year presentations will continue to be jointly hosted and presented by Duncan Tait, our Group CEO, and myself. Today I will give an overview of trading and strategic execution during Q1 with some details on our regional performance and update you on the outlook for the year ahead, which remains unchanged. We'll have a Q&A session with Rob Gurner, our Head of IR, who will field any questions from the audiocast platform. Let's begin. Inchcape continues to deliver on our strategy and in line with our expectations.
Our Q1 revenue performance benefited from our diversified market and brand portfolio, which provides resilience to our business. Organic revenue growth in the quarter was 6%, and our reported revenue grew by 8% to GBP 2.3 billion. This growth was substantially driven by the continued scaling of our distribution contracts secured in recent years, resulting in share gains in a range of markets together with supportive market conditions in certain regions. In addition, we have continued to expand our core brand portfolio. As a result, we have outperformed our markets during the period with Inchcape volumes up 9% against an Inchcape market growth of 6%. Our volume growth was ahead of our organic revenue growth as a result of share gains and regional mix with the faster-growing Americas, where average selling prices are lower.
It's worth noting that our revenue growth performance in Q1 was against comparators which are relatively soft, and these become more challenging as we progress through the year ahead. In addition, Q1 is generally our smallest quarter of the year due to the overall natural seasonality of our markets. I'll now run through our regional performance, starting with the Americas, where we delivered strong growth with supportive market conditions. Our market volumes in the Americas were up 18%, with very high levels of market growth in Colombia and Peru and a growing Chile. With those favorable demand conditions, we saw strong performance in the region. For the rest of 2026, we continue to expect the market environment in the Americas to remain supportive, with the typical seasonal weighting towards the second half.
Next on to APAC, where market volumes were up 4%, but our market share moderated and we underperformed in the region, continuing the trends we saw in half two 2025. We see further challenges across APAC. The premium segment where we over-index in some markets continues to be weak. In addition, we are seeing increasing competition from Chinese brands in a number of markets, including Australia, where the macroeconomic environment has softened and our core brand performance in that market has been weak. However, there are some partial offsets to this with momentum building across a number of our recently won contracts with Chinese OEMs, including Foton and Deepal in Australia and Great Wall Motors in Indonesia. Looking across the region, and as we mentioned last month, we are taking action to address the challenges and to drive our operational performance across APAC.
These actions include enhanced collaboration with our OEM partners on product positioning and a cost reduction program which is focused on our regional headquarters and in specific markets, as well as the optimization of our contract portfolio in the region. We will provide an update on our progress with these actions at our half year results in July. For the remainder of 2026, we expect to see continued challenges across our markets in APAC, including Australia, which will impact our first half revenue and margins. This will be compounded by some brand supply phasing in half one, which we highlighted in March as our key OEMs reconfigure their facilities for new energy vehicle production. However, the management actions that we are implementing will start to improve our business performance and help support margins in the second half of the year.
On to Europe and Africa, where market volumes are up 1% and we grew our market share. The market outperformance was supported by a strong delivery in our core business, a meaningful contribution from distribution contracts won in recent years, and further supported by a good performance from the recently acquired business in Iceland. Our business in Africa also performed well. We expect to see continued momentum in Europe and Africa for the remainder of 2026, with a full year contribution from the Icelandic acquisition and a growing contribution from contracts won in recent years. Now I'd like to touch on the impact of the Middle East situation on our markets during Q1. Overall, we have seen no direct impact on our business to date, despite there being some immaterial disruption to logistics in our Europe and Africa region.
We are closely monitoring consumer demand trends across our markets, so far these trends have remained unchanged. Now on to strategy. We continue to make progress against our Accelerate+ strategy during Q1. Our objective to scale our business is highlighted by our successful track record in winning distribution contracts, including the award of contracts from Volvo in Ecuador and Deepal in Barbados. We also saw continued momentum from contracts won in recent years, which as I mentioned earlier, made a substantial contribution to our growth performance in the quarter. We are also maintaining a strong focus on optimization across the group through various initiatives in vehicle parts and finance and insurance, with ongoing cost actions and even closer collaboration with our OEM partners. On capital allocation, we remain disciplined and value-focused.
With our commitment to share buybacks, we made continued progress with our latest program of GBP 175 million, and we have repurchased approximately GBP 27 million as at the 29th of April. Consequently, over the last 21 months, we have reduced our share count by around 14% as a result of the share buybacks. On acquisitions, we see these as a critical part of how we will drive shareholder value. To that end, we remain disciplined on valuations as we look across an active pipeline of bolt-on acquisitions, and we continue to look for value accretion, particularly in existing markets. Finally, on to outlook. We are today reiterating our guidance for 2026. We continue to expect a year of growth at constant currency and in line with our medium-term guidance.
We continue to expect another half two weighted revenue and profit performance. This is partly due to an increasing contribution from the Americas, which has a typical second half seasonality. As I mentioned earlier, we continue to expect some brand supply phasing in APAC during the year, and this will skew our business performance in the region to the second half, further supported by the benefits of the management actions we are taking. This year, in line with our medium-term guidance, we expect to deliver EPS growth of greater than 10%. As we said in March, this will be driven by organic volume growth towards the lower end of the 3%-5% guidance range, resilient operating margins of around 6% and a free cash flow conversion rate of circa 100%, which we are deploying through our disciplined approach to capital allocation.
Finally, I wanted to say that in the context of the Middle East and in an uncertain and fast evolving macro environment, we continue to manage our business in an agile and dynamic manner with our OEM partners. In particular, we will maintain a clear and focused approach in adapting our sales and operational planning processes to track any changes that we see in consumer demand. That's it from me. Now let's take your questions. Over to you, Sergei.
Thank you. As a reminder to ask a question over the phone, please signal by pressing star one. You may also submit your questions via the webcast. The first question is from Abby Bell from UBS. Please go ahead.
Morning, both. Just two from me, please. Firstly, on the demand outlook, your statement alluded to lead indicators running stable, but could you give us more detail on what you're tracking and what you think is pointing to in Q2 so far? Appreciate the impact of the conflict in the Middle East is very hard to predict at this stage, but could you share how quickly you've seen consumer confidence impacted or your volumes turn in the past after other crises? Second, on APAC, given your industry tracker shows double-digit growth across most markets and Hong Kong more than doubling in Q1, could you provide a bit more detail about the drivers for the weaker APAC performance and what needs to change for these headwinds to ease and deliver the HQ uplift you're guiding to? Thank you.
There's a lot there, Abby. Thank you very much. Let's start with the lead indicators question. The sorts of things we're looking at are the number of people visiting our websites, the number of test drives that are happening in our showrooms and in the third party dealers that we work with, and the number of people engaging with the various different platforms that we engage with in terms of generating and advertising our brands in the different markets. What we've talked about is no real change in demand and the level and volume of people looking at looking at vehicle purchases in the different markets than we operate.
We operate in markets that tend to see different rates of growth, and you see that in our market tracker. Those demand levels have remained stable. The only thing we have seen in a couple of different markets, particularly where we've seen prices hike in fuel or where there's been duty changes, we have seen some shifts in the types of vehicles people are looking at towards new energy vehicles. Perhaps where that's driven by a taxation change or, as I said, by a fuel incident and fuel shortages such as the ones we're seeing in Australia right now. That does tend to skew some of our lead indicators. That hasn't yet shown up in some of the underlying demand and then the actual orders we're taking.
It hasn't yet shown up in the cars that people are purchasing through us. They're the sorts of things that we look at on a day- to- day. How long does it take before we see changes in demand or changes in the macro environment impact demand? That varies enormously by market. One of the things that we do as a group is we invest a lot of money in AI and technology that help us link those changes in website traffic and sort of underlying indicators demand, which are different by market, and that's what feeds into our sales and operational planning processes, and that's what feeds how many vehicles we bring into our markets.
It can be some months sometimes before you see those macro indicators really have an impact in demand, and you see that in our market tracker with the markets that we're working in aggregate, up 6% across the first quarter. Onto APAC and Q1. You're right, we've seen some very strong market performance, market growth numbers. Hong Kong was an outlier. That's arisen as a result of a regulatory change and a taxation change where the incentives on electric vehicles have been effectively substantially withdrawn, which has pulled a lot of demand forward. You see in our market tracker Hong Kong up over 100% in the quarter. That's not a sustainable level of growth in the market. We don't see the Hong Kong market materially growing this year.
In terms of the management actions we're taking across a number of fronts, collaboration with our OEM partners, really working with our OEMs across the different, whether it's the Japanese OEMs, whether it's the European OEMs or our Chinese OEMs, to make sure we've got the right products that are best presented as those markets evolve. They're the things that sometimes take a little bit of time before they hit the market, which is why they will be more supportive in the second half. That, together with supply phasing in our core brand in Australia, will also support a better second half. Finally, the management actions we're taking around cost. We'll give more detail on some of those actions, particularly around our portfolio of brands that we're working with across APAC in our July results announcements.
I think that covers all your questions, Abby, hopefully.
Yes. Thank you.
We'll now move to our next question from Tim Ramskill from Bank of America. Please go ahead.
Morning, Adrian. Two from me, please. The first is just, I guess you're facing a dynamic of positive operational leverage in the Americas and then the opposite within APAC. Are you broadly anticipating those two effects offset each other? There might be some meaningful profit moves even if at a group level. As I say, a bit of setting off each other. The second question, just coming back to APAC, I'm keen to understand have all the actions you feel you need to take, have they been made already? Have all those actions happened, and is there more to come? Again, maybe just expand on when you feel the benefits of the work you've done there, we will start to see.
Is it just H2 or does it flow through into 2027? Thank you.
Thanks, Tim. In terms of that operating leverage question, effectively I hear what you're saying is the offset between the Americas and APAC. Yeah, we've underlined guidance today, our job is to manage a portfolio of businesses in a diverse set of geographies with a diverse set of brands to deliver on our medium-term guidance of around 6% from a margin perspective. Part of the operating leverage that we will see in the Americas will help to offset some of the challenges we're seeing in APAC, that's why we've been able to underline our guidance, which is as I said earlier, in line with our medium-term targets.
In terms of APAC and the management actions we are taking, I've given a few examples. Some of the, some of it has already come into bear. If you think about the BZ3X, which is a new EV playing in Hong Kong, and that pulled forward a demand, we've been a beneficiary of that. We've got RAV4 hybrid coming into the market. We've repriced some of our luxury MPV products in Hong Kong to support a more competitive positioning of our brands there. That's just the start. There's much more to come around cost. Also we've talked about optimization of our brand portfolio. We haven't been specific about that because we're working with our partners to make sure we do all of those things in the right way, and we'll say more about that in July.
You think the benefits will be sort of very evident in H2, or we have to be a bit more patient?
Yeah, the benefits will start to support a better position in H2. Yes, that's what we said in our statement earlier. Yeah, sorry I didn't cover that part of your question.
No, no. All good. Brilliant. Thank you.
Thank you.
We'll now move to our next question from Akshat Kacker from JPMorgan. Please go ahead.
Morning, Adrian. Akshat from JPMorgan. A couple of questions, please. The first one on the macro environment, when we think about higher logistic costs and inflation uncertainties, we've definitely had a few of those over the last years, could you just remind us on how these are discussed and negotiated with the OEMs, please? Just the process, if you could just run us through that. The second question is, just trying to get some more details by region, if possible, in terms of the Q1 trading update. You've talked about volumes up nine, organic growth up six. Could you just give us some more clarity across the regions, if that's possible? Thank you so much.
Very good. Okay. If I take the macro and the effects of inflation from a logistics perspective, there's various different ways we work. If I think about the Latin American business logistics, we take fairly long positions on and in relation to some of our other parts of the world, so somewhere like Europe or Asia Pac, where we typically work with our OEMs who have substantial logistics operations in the region to price vehicles at a landed cost level. Any inflation that comes through is in the round part of a negotiation of how we manage product, how we manage price, and how we manage our position of those brands in any given market.
That's a monthly and quarterly and annual conversation that we have with our OEM partners. It's very closely linked to that sales and operational process, operational planning process that I mentioned earlier and we talk about so very much, 'cause that is at the very, very center of being an absolutely brilliant distributor. Understanding where the cost base, where the vehicles are being priced. Where they sit competitively and how we might need to moderate specifications or adjust the portfolio in any given market to make sure it has the best, the very best possible chance of success. That's part of what we do. That's part of how we engage with our OEMs every day, every week, and every month of the year, at a market level.
From a sort of unpacking the regional position, I think what we've said is, look, APAC was a region that was up 4% and our market share moderated, so we underperformed the market, continuing some of the themes we saw in the second half. We talked a bit about our core brand in Australia due to some supply phasing, performance being weak, and you can see that in some of the market share stats which are available on the public in the public domain. You look at the Americas, which is a nice offset to that, with a region where we have scaled positions in the likes of Colombia and Peru, where you've seen very strong growth.
Colombia and Peru up 30%-40% each. Chile, our single largest market in the group, up 6%, that was a fairly flat start to the quarter, but March was a mid-teens growth, positive momentum there. We've called that market at around 330 for this year. Last year it was 310. Long run average for Chile is a 350-375 market, up to 400 at times. There's runway for that market to grow, but we just continue to hold our position around the speed of that bounce back. Europe and Africa is a relatively benign market around 1%, but our business outperformed the contracts we've won in recent years and the core performance of our core brand in Europe with hybrid products performing very, very well.
We've seen much stronger growth than the 1% seen in that market. You'll see more about that at a numerical level again in July when we unpack the regions a little bit more.
Thanks, Adrian.
Thank you.
We'll now take our next question from David Brockton from Deutsche Bank. Please go ahead.
Thank you very much. Good morning. I've just got a question to sort of understand Australia, the Australian dynamic a bit better. It seems like the intense competition you flag in Asia at the full year is now present in Australia as well. Can you just maybe touch on how broad-based that is? Is it any particular brands that are driving that? Then secondly, is there any reason why, given that it does seem to have spread a bit within the APAC region, why it wouldn't spread anywhere else across the business? Thank you.
Very good. Look at Australia. We've talked about increasing and intensifying competition from Chinese brands in Australia. That's very consistent with what we said at the end of last year as well, 'cause we saw the trends starting to come through. Chinese brands last year in Australia were just over 20%, and in the first quarter of this year, they're just in and around the 30% level. I won't call out any one particular brand that's made those gains. As I talked about, our core brand in that market was performed weak. We've also seen good performance and good momentum building in our Deepal brand, which is an EV product.
We've also seen the Foton brand that we brought into that market start to gain some traction as we step into that ute segment, or trucks as you may know it, more colloquially. That's some of the dynamics that's happening in Australia. We saw them happening last year, it is a highly competitive market. In a market where there's a bit of disruption in terms of fuel, customer choices are beginning to evolve a little bit. As I said earlier, we've seen some of that, some of those lead indicators of what people are searching for on websites change a little bit into favor of new energy vehicles. Why wouldn't that transpire across the rest of the group?
Well, if you think about the Americas business, in many of our markets, Chinese brands are already above 30%, and we build a very good business and we have very long-standing and broad-based partnerships with Chinese brands in that part of the world. Europe and Africa is very much at the starting point of that journey, The contracts we have won in recent years will help us to continue to grow our share in that market, across a range of OEMs. We're in a world where we should recognize it is an intensifying competitive set with an increasing number of players in the market.
Okay, great. Thank you very much.
As a reminder, to ask a question over the phone, please signal by pressing star one. You may also submit your questions via the webcast. Our next question is from Arthur Truslow from Citi. Please go ahead.
Good morning, Adrian. Good morning, Rob. A couple from me, please. First question, can you just remind us how many contracts you won in 2023 and 2024, and how long it typically takes to get to sort of meaningful levels of profit per contract? Perhaps, you know, GBP 1 million or so per contract. Second question, can you just talk a little bit about the contract and M&A pipeline? I guess obviously two contract wins in Q1, if I remember correctly. You know, what's the nature of what's in the pipeline there? Also in terms of M&A, is it sort of very much bolt-on type stuff that you're looking at or bigger bits and pieces? Thank you.
Very good. In 2023 and 2024, which contracts did we win? I'll speak more broadly if I can. We've won over 50 contracts. About 80% of them are with Chinese brands in various different markets across all three of our regions we've secured contracts. Typically speaking, we bring those brands in, and what we've talked about in the past, we bring them in with very relatively low levels of capital deployment as we test and learn how those brands feature and operate in a given market. It takes us one, two, or three years to really figure that out, and it's only really in year three, four, and five where we start to see those brands scale and gain real traction.
Now, we've learned an awful lot about how to bring these brands into markets over the last years, and we're getting better at it every single time. One of the things we have learned is that when we sign contracts, it's taking us a little bit longer to get those brands into market. Sometimes that's navigating homologation processes, it's getting specifications at a very granular level agreed with our OEM partners or getting production and allocation set up for us. It's taking us a bit longer to get brands launched than we'd perhaps originally thought. It's still in that once we've got the brand into the market, it's still taking us one, two, and three, up to four to five years before we get real scale in a given market.
Scale is 1%-2% of the local market share. That's what we say on average these brands are going to deliver. On contract wins and M&A pipeline, what we've said in the past is we saw the very high levels, I think it was 22 contracts we signed in 2023, was over what the normal run rate would be, and we would expect to sign mid-to-high single digits on an annualized basis, and two in the first quarter puts us on our run rate for around that sort of level. We're still seeing contracts win at the run rate we would expect them to be won.
From an M&A pipeline perspective, we have a range of opportunities that we are working with partners on. It is in the bolt-on space, that is what we've said. We've also ruled out acquisitions in the near term in APAC whilst we focus on execution in those markets. Think Latin America, think Europe and Africa as opportunities. As you would expect us to do, we continue to act with discipline around valuation. We continue to look at share buybacks as a viable source of deployment. We also see value, and if I look at that business we acquired in Iceland last year, that is performing very, very well.
If I look at the way the markets are performing and the businesses we are able to build following Derco in Latin America, we see deploying capital effectively in M&A as a real part of delivering Accelerate+ over the coming years.
Brilliant. Thank you very much.
Thank you. It appears there are currently no further questions over the phone and neither over the webcast. With this, I'd like to hand it back over to Adrian for closing remarks. Over to you, sir.
Thank you, Sergei, thank you for joining us this morning. To summarize, Inchcape performed well in the first quarter, we remain well-placed to deliver our target of more than 10% EPS growth this year and over the medium term. That's all from us. Please get in touch with Rob if you'd like any follow-up on today's discussion.