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Acquisitions help lift Vertu profits by 72%

Vertu Motors has seen turnover rise by more than a quarter this year following acquisitions of 16 sales outlets and growth in sales at its core business.

Its interim financial results for the six months to September 1 show pre-tax profit rose 72.9% to £4.9 million. Group revenue increased by 27.3% to £511.1m. Much of that £109.8m growth was generated by acquisitions, as businesses bought last year and this year contributed £76m in incremental sales. However, it is seeing sales growth ahead of the national market with its older core businesses, which include Ford, Vauxhall, Renault and Peugeot operations, now that they are recovering their historic market shares following the recession.

Overall profitability on a like-for-like basis rose £0.3m

Gross profit margins have declined in Vertu’s new car retail, used car and aftersales operations, although the business has increased the volume of new and used cars retailed, partly helped by the final throes of scrappage in March.

Chief executive Robert Forrester told AM the margin decline wasn’t a surprise, particularly as used car values were in decline, but if gross margins stayed above £1,000 per unit that was acceptable. “The first half of the year was as it was expected to be,” he added.

After the series of acquisitions in the first half, Vertu still has more opportunities to consider. But the focus will be on organic growth to improve profits from its turnaround dealerships.

“The main thing is to drive performance across our existing businesses. It’s not all about acquisitions. It’s about having a good solid business with the right people on board doing the right things on a daily basis. Though clearly we’d like to continue our acquisition strategy and develop the group,” said Forrester.

The group outperformed the September market, with retail sales down 2.6% compared to the UK’s 19% average decline. Forrester said Vertu earned its manufacturer bonuses without resorting to pre-registrations.

He now wants Vertu to continue to outperform the market through the second half of its financial year, and has its workforce focused on selling skills and marketing. Managers analyse all aspects of the business, from test-drive conversions to closing ratios and follow-ups, and although group-wide processes are in place the business “can always do better,” Forrester said.

Forrester described aftersales as an “immense” opportunity for increased revenue with the right customer focus, service plans, technology and selling skills. Vertu runs regular campaigns across the group focused on a particular area, such as tyres for October’s Tyre Safety Month and an oil campaign in September, which reward the highest-performing service manager with an incentive such as a trip abroad.

 

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