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

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 –