Inchcape Reports 13% EPS Growth and Launches £175m Share Buyback

Inchcape’s 2025 results: double‑digit EPS, fresh £175m buyback, and a steady 2026 roadmap

Inchcape has delivered a tidy set of 2025 numbers despite currency headwinds and a tougher APAC backdrop. Adjusted basic earnings per share (EPS) rose 13% to 80.8p, operating margins held at 6.2%, and the board has followed a completed £250 million buyback with a new £175 million programme. Guidance for 2026 calls for more EPS growth of over 10% at constant currency, with a second‑half skew.

Quick definitions for clarity: “Adjusted” strips out one‑off items to show underlying performance. “Constant currency” removes the impact of exchange rates. “Free cash flow conversion” compares free cash flow to adjusted profit after tax.

Key numbers investors should know

Metric (continuing ops)	2025	2024	Change
Revenue	£9,100m	£9,263m	(2)% reported; flat at constant currency; +1% organic
Adjusted operating profit	£563m	£584m	(4)% reported; (1)% constant currency
Adjusted operating margin	6.2%	6.3%	(10) bps
Adjusted PBT	£443m	£444m	Flat reported; +3% constant currency
Adjusted basic EPS	80.8p	71.3p	+13%
Free cash flow	£315m	£462m	(32)%
Free cash flow conversion	104%	151%	Strong, but normalised
Return on capital employed (ROCE)	29%	27%	+190 bps
Leverage (adjusted net debt/EBITDA)	0.4x	0.3x	Low
Total dividend per share	32.3p	28.5p	+13%

Shareholder returns: why the new £175m buyback matters

Inchcape completed a £250 million buyback on 2 March 2026, purchasing approximately 9% of the company’s equity. Since August 2024, two programmes combined have retired about 13% of shares. Management has now launched a fresh £175 million buyback expected to complete over the next 12 months.

My take: buybacks at this scale are powerful for per‑share metrics and signal confidence in the balance sheet. With leverage at just 0.4x and free cash generation still strong, the capital return looks well covered.

Regional performance: Americas strong, Europe & Africa solid, APAC under pressure

Americas – momentum and margin expansion

• Revenue £3,304 million (+1% reported; +5% constant currency).
• Adjusted operating profit £230 million (+11% reported; +16% constant currency).
• Margin up 70 bps to 7.0% aided by resilient gross margins, scale benefits, and £8 million from non‑core divestments.
• Outlook: supportive market conditions and the usual second‑half seasonality point to profitable growth in 2026.

Europe & Africa – outperformance and new markets

• Revenue £3,255 million (+8%); adjusted operating profit £151 million (+6%).
• Margin nudged down 10 bps to 4.6% as expected with early‑stage contract dilution.
• Askja in Iceland (acquired for £35 million cash; £47 million total consideration) is performing well.
• BYD Belux contributes under 5% of regional revenue and is not expected to be renewed on expiry in Q3 2027 – the contract is financially immaterial.

APAC – cost action in a tougher market

• Revenue £2,541 million (down 15% reported); adjusted operating profit £182 million (down 23%).
• Margin down 60 bps to 7.2%, despite £9 million benefit from non‑core asset disposals in H2.
• Australia resilient, but several Asian markets were weak; cost reduction and tighter OEM collaboration underway.
• 2026 will see ongoing challenges with some H1 production disruption, though management expects margins to be supported by actions in train.

Strategy update: contract wins, portfolio pruning, and cash discipline

Volumes rose 3% in 2025, helped by market share gains and new distribution contracts. Inchcape won 10 new contracts, including GAC AION in Greece, Iveco in Hong Kong, and XPENG in Colombia, alongside smart in Colombia, Uruguay and Ecuador, New Holland in Kenya and Ethiopia, and BYD in Lithuania and Latvia. It exited three Geely contracts in smaller Americas markets and certain Komatsu contracts in Ethiopia.

Aftersales – typically steadier and higher margin – delivered 30% of group gross profit. On a reported basis aftersales gross profit was £460 million (down 5%), but excluding the Chile retail aftersales disposal, aftersales grew 4% at constant currency. That mix remains a helpful ballast for margins.

Cash and balance sheet: still robust

• Free cash flow of £315 million with 104% conversion to adjusted PAT.
• Inventory rose to £2,043 million, reflecting supply phasing ahead of OEM production outages and the Iceland acquisition; working capital showed a £31 million inflow (vs £195 million in 2024).
• Adjusted net debt £264 million; net debt including leases £607 million.
• Funding remains straightforward: £900 million RCF (£20 million drawn at year‑end), £140 million private placement notes, and a £350 million bond at 6.5% due 2028; operating comfortably within covenants.

Dividends and dates to note

• Final dividend proposed: 22.8p, taking the full‑year dividend to 32.3p (+13%). Policy remains a 40% payout of adjusted basic EPS.
• Ex‑dividend date: 7 May 2026; record date: 8 May 2026; payment date: 15 June 2026.

2026 outlook: growth, but back‑half weighted

Management expects a year of growth in 2026 at constant currency: organic volume growth towards the lower end of the 3%‑5% range, operating margins around 6%, free cash flow conversion of about 100%, and EPS growth of over 10%. The second half should carry more weight due to regional seasonality and APAC supply phasing.

What looks good, and what doesn’t

Positives

• EPS up 13% despite FX headwinds and APAC softness; ROCE up to 29%.
• Balance sheet strength supports a new £175 million buyback, on top of a completed £250 million programme.
• Americas delivering volume, margin and profit growth; Europe & Africa executing well and expanding footprint.
• Aftersales resilience and cost discipline underpin margins at 6.2%.

Watch‑outs

• Reported revenue down 2% and free cash flow down 32% year on year, with a smaller working capital tailwind and higher inventories.
• APAC remains the swing factor, with pressure likely to persist into H1 2026.
• Adjusting items of £37 million, mainly restructuring and integration, and an effective tax rate on adjusted PBT of 31.4% keep a lid on bottom‑line leverage.
• FX sensitivity remains meaningful – a 1% move in the Euro, Australian dollar, US dollar, or Chilean peso is c.£1 million to adjusted PBT.
• FCA motor finance commission review: exposure is limited to an indemnity related to the sold UK retail business; potential cash outflow is possible but highly uncertain and not currently quantifiable.

Josh’s view: steady compounding with shareholder-friendly capital returns

This is a solid delivery against medium‑term targets: margins resilient, EPS up double digits, and cash returns sustained. The Americas are doing the heavy lifting, Europe & Africa are quietly compounding, and APAC is being actively managed. The new £175 million buyback, a 13% dividend hike to 32.3p, and low leverage indicate confidence without getting reckless.

If management executes the H2‑weighted plan and APAC stabilises, the >10% EPS growth target for 2026 looks achievable at constant currency. Near‑term share price drivers will likely be APAC traction, contract ramp‑ups, and any FX swings. For now, this reads like a quality, capital‑light distributor leaning on its scale, data, and partner relationships to keep compounding –