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Vertu impresses as it posts first trading results

Vertu has posted a creditable first set of interim results. Shares rose 3% to 66p on the announcement, ahead of the 60p initial placing but way behind the 101.5p peak achieved following the Bristol Street Motors acquisition last March.

The business, incorporated on November 1, 2006, didn’t begin trading until it bought Bristol Street.

It has since acquired three other businesses, taking the network to 42 franchised and five non-franchised operations. Market capitalisation is £59m.

The interim results, which exclude the two plate-change months of March and September, saw Vertu turn over £290.3m for an operating profit of £900,000 – a 0.3% return. It has operating cash flow of £21m and low gearing of 20.5%.

Like-for-like new car sales were up 8.4% year-on-year, while used car volumes for the Bristol Street business have risen 12.4%. All volume bonus targets were achieved without resorting to pre-registering, although the group admits that bonuses were offset by lower margins due to discounting to stimulate demand.

One analyst told AM: “With no March or September sales, to make a profit at all is a good performance. Vertu has made more progress than many would, given those conditions.”

Robert Forrester, Vertu chief executive, said the results were in line with his and the City’s expectations. He said the group was pursuing economies of scale in areas such as purchasing of utilities, stationery, oil, advertising (it has cut 16 ad agencies down to one) and consumer finance, but added that management control was crucial to ensure those economies were not lost elsewhere in the business.

“We want to create a group within our management capacity and our financial capacity. We will take the economies of scale but we won’t expand beyond our capacity,” Forrester said.

“On finance, we have the capacity to make acquisitions but crucially we have £12m surplus property. Once this is realised in 2008 we will have substantial capacity for growth.”

Vertu also has the management capacity for further growth after building a strong team with numerous former Reg Vardy employees. Like Reg Vardy, Forrester has reorganised his group into a divisional structure with franchises and business units reporting to specific operational directors.

“This is a core 1% return on sales business and we will seek to improve that through our performance improvements,” said Forrester. Turnover next year is estimated at just over £700m.

New initiatives include a showroom dealer system due for roll-out this month that will improve management control and optimisation. By the end of the year, each dealership, region and franchise will have its own website.

“The websites will give us the flexibility to hit local marketing with local offers,” said Forrester.

  • Vertu has identified two greenfield sites to build new Motor Nation used car superstores. It would take the number of Motor Nation centres to five. Both are expected to begin trading early next year.
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