Vertu Motors has reported six-months of growth in operating profit, earnings per share, dividends and return on sales despite revenues remaining flat at £1.45bn.
Delivering its unaudited results for the six months to August 31, 2017, the AM100’s sixth-placed retail group was able to report record profit before tax up 29.4% to £24.2m (2016 H1: £18.7m) and adjusted profit before tax up 7.2% to £20.9m (2016 H1: £19.5m).
Despite a 14.7% fall in new car volumes, stronger margins, a 1.1% increase in used car sales and 4.4% boost for the aftersales side of the business helped the group to achieve profit growth while implementing a determined cost-cutting exercise which left “no stone unturned”, according to chief executive Robert Forrester.
Speaking to AM following the results announcement, Forrester said: “Clearly I am absolutely delighted that we have managed to grow profits, backed by strong aftersales results where warranty work really helped to deliver results.
“But a key driver in these results was our focus on cutting costs. While other businesses have seen costs going up, we have reduced our expense by £800,000 and I think that’s a really impressive result.
“We left no stone unturned in the pursuit of greater efficiencies and that is an approach that we will have to continue.”
Vertu’s operating expenses as a percentage of revenue reduced to 9.5% from 9.6% as the businesses return on sales strengthened to 1.5% (2016 H1: 1.4%).
Forrester said that the closure of loss-making business had taken £4.3m of cost out of the business.
Although this was partly offset by £2.6m annualised costs from acquisitions he said that newly acquired dealerships were performing well.
The £14m sale and leasback of the group’s freehold Jaguar Land Rover dealership property in Leeds to a client of Aberdeen Standard Investments in August was also “good business”, according to Forrester. Its book value was £10m.
Significant sums are being invested in increasing capacity and enhancing the retail environment of the Jaguar Land Rover dealerships with the implementation of the “Arch” concept and similar developments are planned to improve the group’s Mercedes-Benz dealerships, as envisaged at the time of the Greenoaks acquisition in March last year, the group said.
Overall, Vertu’s capital expenditure of £8.2m during H1 was 47.1% down on H1 2016’s £15.8m, leaving the group with period-end net cash of £20.8m (2016 H1: £12.9m) and £30m of unutilised debt facilities.
Forrester said: “Our Group’s net cash position, strong property portfolio and very low level of used vehicle stock financing places us in a unique position to take advantage of consolidation opportunities and to continue to increase returns to shareholders.
“The Board is confident that opportunities to expand the business will arise in the next 18 months and these are likely to be at more attractive valuations.”
Forrester conceded that the group was “a little light in premium” franchises, but said that he was happy with the performance of its volume brands.
Asked whether the group might follow the likes of Sytner and Pendragon with a more used car-focused retail strategy, Forrester said: “No. We won’t be operating car supermarket sites. We still see ourselves very much as a franchised retailer.”
The group will, however, continue to leverage online sales and claims to be the first franchised retail group to offer an end-to-end used car purchase offering.
Vertu was able to increase its returns to shareholders in H1 with 3.8m shares repurchased at an average of 42.8 pence per share resulting in the deployment of £1.6m of cash to date
Its interim dividend was up 10% to 0.55p per share (2016 H1: 0.50p) as it announced the continuation of its share buy-back programme for up to a further £3 million.