Vertu Motors Group pushes for growth after 5th year of record results

Vertu Motors Group has recorded “record group trading performance” as it registered its 5th year of record results with a 16% increase in turnover to the year ended February 28.

The top AM100 performer credited a greater premium mix within its franchised partners – following the “successful integration” of Mercedes-Benz into its brand portfolio – for part of the rise which saw turnover grow from £2.42bn to £2.82bn.

Adjusted profit before tax for the period rose 15% from £31.5m to £27.4m as the official annual financial results statement reported a strong used car performance and growth in higher margin service area.

And following what the statement referred to as “robust trading in March and April 2017” – with significant growth in new retail vehicle profit contribution in the post year-end period despite a 9.7% decline in like-for-like new retail volumes – the accounts stated that Vertu’s board remains confident of the group’s continued aim to grow through acquisition.

Chief executive, Robert Forrester, said: “Today’s results, our fifth consecutive year of growth, evidences our continued delivery of this strategy. Significant acquisitions have been integrated through the year and have enriched the premium mix of the franchise portfolio.

“Record Profit before Tax of £29.8m represented a 14.6% increase for the group, EBITDA rose to over £40m (to £41.4m from £31.5) for the first time and cash conversion was excellent.

“Our strong balance sheet with net cash of £21.0m together with our unutilised debt facilities provide scope for further scaling-up in due course to drive value and further enhance shareholder returns.

“Trading up to the end of April 2017 has been strong giving the board confidence for the future. The full year dividend has been increased by 7.7% (1.3p to 1.4p).”

Vertu ended its financial year with a strong balance sheet to fund future growth with net cash of £21.0m (2016 : £23.1m) and new five-year acquisition banking facility signed in February of £40m, with the potential to add a further £30m.

Push for growth, not just premium

New car volumes in retail rose by 4.4% to 41,525 and used by 13.9% to 81,636 – 6.9% and 7.1% like-for-like – during the reported period.

Fleet and Commercial vehicle sales represented a 23% share of group revenues, the delivery of over 35,000 vehicles realising a total fleet and commercial volumes rise of 1.3% with like-for-like volumes down 1.5%.

Vertu announced plans to complete its withdrawal from the FCA Group’s franchises during 2017, following disposal of its Newcastle Fiat brand centre in September 2016 and the closure of Fiat sales outlets in Cheltenham and Derby in January.

The Group’s one remaining Fiat/Alfa sales outlet will cease operations in Worcester by the end of 2017, it said.

The group has also exited Barnsley SEAT and Worksop Peugeot franchises and disposed of its loss-making Chesterfield Peugeot dealership to Stoneacre.

Among the “successfully integrated” introductions to the group were Hyundai, which was introduced to an existing dealership in Bristol, with Mazda operations at the site ending this month, and a first Mercedes-Benz franchise, delivered in March last year with the acquisition of the Greenoak dealerships in Reading, Slough and Ascot.

The Gordon Lamb acquisition in June 2016 also brought the Toyota franchise to the group for the first time and “further enhanced representation with Land Rover, Nissan and Skoda”, Vertu said.

Leeds Jaguar was also acquired from Inchcape in May 2016.

Vertu reported that its dealerships acquired during 2016 had contributed profit before interest of £1.5m.

Looking towards further acquisitions Forrester told AM that there was a push for growth, not necessarily a push towards premium. He said: “Our concern is return on capital employed and that means that we are happy to grow with premium or volume manufacturers.”

This week Vertu introduced a full online used car retailing provision to its portfolio in 2016. Offering part-exchange valuation and a finance provision.

Forrester said that he hoped this would put the group “ahead of the curve” after a year which saw car revenues rise from £850m in 2016 to £1.04bn in 2017.

“We don’t know what adoption rates will be like, but this has been an internal project and it’s something I’m very proud of,” he said.

The group’s efforts to improve its aftersales performance has seen a rise in service plan provision, with over 100,000 customers paying monthly over a three-year period for services. Aftersales revenues were up 20.1% to £227m (2015: £189m) during the reported period.

Changes at the top

Despite Forrester’s assertion that his stable management team is core to the business, there have been changes at the top of Vertu over the past 12 months.

Tim Tozer, formerly of Inchcape, Autobinck and Chairman of Vauxhall Motors joined the group as a new operations director responsible for a number of franchises while Liz Cope, former global brand and research director of Dyson joined as chief marketing officer

The group, which was established in 2006 and currently operates 121 franchised sales outlets and three non-franchised sales operations from 104 locations across the UK, will bid farewell to former group chairman Bill Teasedale, who served as chairman when the group was initially established.

Teasdale has been a non-executive director since March 2007 and will retire from the board at this year’s AGM, on July 26th.

> Vertu historic financial performance data, director and shareholder information (xlsx)

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