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Vertu trading ahead of expectations

Vertu Motors has seen a 16.6% increase in like-for-like new retail volumes in the first four months of 2013 and is expecting a positive result for the remainder of this year.

In the dealer group’s AGM statement, it has revealed that fleet operations over the same period have seen a like-for-like volume increase of 26.8%.

Used vehicle sales rose by 4.7% in the period, against a market which Experian has reported to have declined during the first quarter of 2013.

Vertu Motors chairman Paul Williams said the group has maintained strong pricing disciplines ensuring that used vehicle gross margins have strengthened during the first four months of the year.

The group’s focus on marketing, pricing and inventory management has improved its strong used car return on investment.

In aftersales, Vertu grew like-for-like sales, gross profits and net profits during the period on the back of continued investment in service sales training, processes and through the sale of service plans and improvements in customer service.

Overall gross margins were stable compared to the same period last year. Margins in both vehicle sales and aftersales increased although the overall margin achieved was a reflection of a change in the sales mix with vehicle sales, where margins are lower, representing 61.2% of the group’s total revenues during the period (2012: 59.2%).

As a result of the overall momentum in the business, the Group has recorded like-for-like profit growth in each of its activities of new retail and used car sales, fleet and commercial vehicle sales and vehicle servicing.

Total revenue grew by 30.8% with like-for-like revenues growing by 13.2%.

Portfolio changes

Vertu sold its Iveco heavy truck operations at the start of June, enabling management to focus on the core activities of selling and servicing cars and light commercial vehicles.  This disposal generated £2m of cash.

The group was also acquisitive in June and it bought the entire issued share capital of Albert Farnell Limited, comprising three Land Rover dealerships in Bradford, Leeds and Guiseley.  The purchase consideration of £31m was paid from the proceeds of a £50m placing of new ordinary shares in the company in June.

Vertu also acquired the trade and certain assets of two Volkswagen dealerships in Lincoln and Boston for an estimated consideration of £3m.

These two acquisitions introduced new franchises to the group’s portfolio, which is consistent with its strategy of building a scaled automotive retail group which represents the major manufacturers present in the UK new car market.

Vertu has also opened a new Seat site in Birmingham, located in a newly refurbished leasehold site, as well as a new Nissan site in Northampton. Vertu's Harrogate Vauxhall dealership, acquired on a short term lease in December 2012, will be relocated to another newly built freehold dealership location.

Williams said: "During the four months to June 3-, the group has continued to trade ahead of management’s expectations, primarily reflecting more favourable market conditions in the new and used UK car markets.

"The outlook for the new car market remains favourable with continued growth anticipated in the private market.  The used car market remains stable, and the continued pursuit of the group’s strategies to improve customer service and retention in aftersales should ensure that the opportunities to grow in this area are realised.

"The board remains confident the group is well placed to maximise the opportunity for profitable growth both from favourable market conditions and from the turnaround in profitability of recent acquisitions."

Williams believes the group is well financed to make further acquisitions and will add new franchises to the group's portfolio of brands.



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Comments

  • Investor in Vertu - 28/07/2013 19:41

    Thank you for the update. Vertu continues to work hard and I am grateful. Some strong growth in a fast growing market. Is Vertu growing faster than the UK car market generally?. Is it correct from the above that margins are, however, the same because of the portfolio mix?. Given Vertu's margins are so much lower than the other major dealerships this is not so impressive. How has headcount increased over this period?. If headcount is growing less than sales then the company is incurring some significant expenses elsewhere which I hope are about acquisition costs rather than customer service/training etc costs which are obviously not yielding the margins one might expect. Please make sure increasing margins is a focus of the strategy.