Q3 2023 Business Update: Sustained Growth and Strategic Progress

Third Quarter Operations: Continued growth, supported by our resilient and diversified business:

• Revenue of £2.8 billion, with reported growth of 35% and organic revenue growth of 10%¹.
• Another strong performance in Distribution, with organic revenue growth of 13%¹.
• Continued momentum in APAC, with broad-based growth across all our markets.
• Solid performance in Europe supported by the ongoing reduction of order banks, while new consumer demand remains weak.
• Growth in most markets, increased market share, and accelerated cost synergies in the Americas, offsetting weaker markets in Chile and Colombia.

Strategic Objectives – Further progress:

• Five new distribution contracts signed with Changan in the Philippines and across East Africa, with continued development of future pipeline contracts.
• Acquisitions completed in Indonesia, the Philippines, and New Zealand².
• Inchcape's digital and data capabilities continue to support core business optimization and the development of vehicle lifecycle service initiatives.

Derco – Integration on track:

• Accelerated cost synergies and annualized cost-related synergies in FY23 of up to £20 million, on track to achieve at least £40 million by the end of FY24.
• Continuing to expect operating margins to approach the upper end of the 5% to 7% range, before synergies, in FY23.
  Excellent progress in improving Derco's working capital position, with excess inventory reduced by 50%.

Outlook: FY23 guidance reiterated:

Based on prevailing market conditions and considering accelerated cost synergies and the contribution from acquisitions, the Group's expectations for FY23 results remain unchanged, as outlined in Inchcape's H1 2023 results on 27 July 2023³.

Duncan Tait, Group CEO, commented:

“Inchcape delivered another strong performance in the third quarter. We achieved continued momentum in APAC, supported by acquisitions, while our business in Europe and Africa performed well. In the Americas, we are gaining share in key markets, and the integration of Derco remains on track.

“Driven by the highly cash-generative and asset-light characteristics of our business, Inchcape will remain a key consolidator in a highly fragmented market. As a result of our market-leading positions, diversified businesses, and digital and data capabilities to support our OEM partners, we remain confident in the medium- and long-term outlook for the Group.”

1. Organic growth is defined as sales growth in operations that have been open for at least one year at constant exchange rates.
2. These acquisitions, expected to contribute combined annualized revenues of approximately £400 million, include the Mercedes-Benz distribution operations in Indonesia, CATS; a leading luxury vehicle distributor in the Philippines, and Great Lake Motor Distributors, which distributes SAIC's Maxus brand in New Zealand.
3. The previous guidance, as disclosed in Inchcape's H1 2023 results on 27 July 2023, was that FY23 results were expected to be at the upper end of the published market consensus range as of 12 May 2023. At that time, the 2023 consensus range for adjusted PBT among analysts was between £470 million and £506 million.

Q3 2023 Business Summary

The following commentary covers the period from 1 July to 30 September 2023. Unless otherwise stated, all figures are quoted on an organic basis.
During the quarter, Group revenue increased by 35% as reported, reflecting both the benefit of acquisitions and strong organic growth of +10%.

In Distribution, revenue increased by 47% as reported, with organic growth of 13%:

• The Group delivered resilient performance in the Americas, with growth in most markets, market share gains, and accelerated cost synergies offsetting weaker markets in Chile and Colombia;
• There was continued momentum across the APAC region, with broad-based growth in our markets, including Hong Kong and Singapore. There was ongoing momentum in Australia, where market share continues to improve.
• The region was further supported by the completion of three acquisitions during the quarter;
• The Europe and Africa region was driven by a stronger Europe, supported by continued order bank reductions. New consumer demand remains weak across the region.
• In Retail, reported revenue increased by 2%, with organic growth of 1%, supported by new vehicle volume growth from a stronger fleet market offsetting weak consumer demand. Excluding the impact of the agency model in the UK, organic retail growth was 12%.