On July 3, Vardy announced record profits - up 33.5 per cent to £33.5m - for the year ended April 30 on turnover up 6.4 per cent to £1,388m. Operating margins were up, sales of premium vehicles were up by 56 per cent, and Vardy revealed it had a £100m war chest to spend on acquisitions as it chased a £2bn turnover.
“The group has had its most successful year of trading on record,” said chairman Sir Peter Vardy. “Operating cashflow is at an all-time high. Our motor division is in a net cash position providing us with a strong balance sheet capable of funding a significant expansion programme.”
But the financial markets did not share Vardy's confidence. The next day's Independent newspaper told its readers that “rising interest rates could limit demand” in the motor retail sector, before advising them to “consider taking profits” from Vardy stock, and to “sell at 350p”.
Vardy has also been suffering from the general malaise in the City when £45bn was wiped from values of shares across the market. Its stock fell 21p to 321.5p, the highest fall in the sector, although Inchcape and Pendragon shares both fell 17.5p.
But Gerard Murray, chief executive officer, told AM that Vardy's core business was strong and that the financial markets should have faith in the company and the retail motor sector.
“Margins are holding up well, particularly in the prestige sector. We are in a position to move this business to a more mature level,” he says.
“We have an ambitious acquisition strategy and want to grow with all our franchises. “We are also confident that we can take advantage of new block exemption rules to strengthen our position.”
Murray points out that oversupply in the volume sector was creating fragility in the market, which has been exacerbated by uncertainty over interest rates. “But this is a business where there aren't many surprises any more as far as the financial world is involved,” he adds.