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Cash-rich Vertu looking for further expansion

Robert Forrester and his stock market vehicle, Vertu, are doing very well in the eyes of its investors.

Interim results last week for the six months to the end of August were better than expected and the share price rose yet again.

Ten retail sites were added to the group in the half year, but Vertu still has £20 million in cash to accelerate the process of creating a big dealer group.

Vertu is now the ninth largest motor retail group in the country and is poised to use that cash.

A measure of the esteem within which Vertu is held was shown by the rights issue in June.

While the City was running around frantically trying to keep the country afloat with rescue rights issues (Pendragon was a customer in that category), Vertu calmly fronted up with a growth story and asked for £30 million cash for expansion.

Despite the narrowest of discounts – the price was 30p compared with a market price of 32p – the offer was substantially oversubscribed and fully supported by the big three shareholders, Foreign and Colonial, Artemis and Black Rock.

The £10 million of deals done – including Fiat, Chevrolet and Mazda dealerships – were a steal. The price paid collectively was only 4% ahead of property values.

Revenues were £401 million compared with the £423 million for the same period last year. Operating profit was £3.7 million compared to £3.0 million last year. Earnings per share were 1.40p compared with 1.49p.

There are now 45 outlets.

Other than Ford, Vauxhall, the three French and the three brands just acquired, Vertu has partnerships with Honda and Hyundai. The latter has become a favourite and the intention is to find more.

Vertu did very well in playing the used car market which was exceptionally buoyant at the end of the period and made a gross margin of 13.7% compared with only 9% a year ago.

Forrester said September trade was far better than he had expected or shareholders were forecasting. His like-for-like new car sales were up 16% fcompared with a year ago.

Used car like-for-like volumes fell 7.2%, but margins remained strong and overall used car profitability
was up year-on-year.

Mistakes? Forrester does not reckon there is much going wrong, but readily admits that customer satisfaction can still improve.

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