Vertu Motors chief executive has said that maintaining the car retail group’s strategic “discipline” to achieve growth in turnover and profits during the six month period to August 31, 2019.
Interim financial results published by the AM100 franchised retail group today (October 9) revealed that it had achieved an £86.7m (5.6%) growth in total revenues to £1.6bn, with like-for-like revenue growth of 2.3%.
Profit before tax rose 4.9% to £17.3m during the period.
Vertu chief executive, Robert Forrester, said: "The Group performed well in the first half against a more challenging backdrop.
“We have an experienced leadership team, well invested systems and operationally we are keeping our discipline by doing all the basics very well, delivering a strong customer experience, and leaving the Group in a position to outperform.
“The board is pleased to see continued growth in high margin aftersales revenues and the continued growth in used car volumes. Cost and excellent working capital control has again been exhibited.
“Our omni-channel retailing strategy and discipline around the allocation of capital, coupled with a net cash position, underpins the Board's confidence in the future."
While Vertu’s new car sales volumes declined by 10.1% on a like-for-like basis, it achieved a gross profit per unit up 3.9% at £1,418 (H1 2018: £1,365) thanks to strong pricing principles and the achievement of volume targets set by its manufacturer partners.
Growth in like-for-like fleet volumes included agency volumes up by 13.8% and used car volumes and revenues were up 1.6% and 3.3%, respectively.
Vertu also recorded an 8.5% increase in like-for-like service revenues in the period alongside a growth in gross margin percentage on vehicle servicing to 76.9% (H1 2018: 75.8%).
In his first chairman’s statement since taking over from outgoing non-executive chairman Peter Jones, Andy Goss said: “I am pleased to report that the Group has delivered a resilient result for the Period against a backdrop of continued Sterling weakness, weaker consumer confidence and pricing instability in the used vehicle market.”
Vertu generated higher levels of free cash flow during the reported period – at £14.6m, compared to £1.9m in H1 2018 – which it said had been aided by “reduced capital expenditure and robust control of cost and working capital in the period”.
The Group continued to buyback shares, purchasing 2% of the share capital, and was also able to propose a 9% increase in the interim dividend to 0.6p per share.
Goss said: “Overall the Group has remarkably delivered higher operating profits in the Period and the Board believes the Group remains on track to meet its overall expectations for the full year.”
Commenting on its acquisitions during H1, 2019, Vertu’s interim financial statement said that new businesses had contributed an additional £0.2m, with the Vans Direct business making a positive contribution despite reduced supply of a number of core van product lines ahead of the introduction of WLTP.
It said that these supply constraints had “a material impact” which is expect to reverse in the remainder of 2019.
The acquisition of Hughes Group and Hughes of Beaconsfield in June 2018, made an additional positive contribution, meanwhile.
But Vertu said that its board believes there is “significant scope to increase the profitability of both these businesses” in future periods.
The Hughes Mercedes-Benz business in Beaconsfield and Aylesbury has been fully integrated under a single management structure with the Group's adjacent market area in Slough, Reading and Ascot, resulting in significant synergies being obtained, it said.
In his report on Vertu’s interim results statement, Zeus Capital analyst Mike Allen, said: “While the outlook is no doubt uncertain, we believe the group is well positioned to cope with market uncertainty given its strong balance sheet, rising FCF generation (FCF yield in 2021E of 9.9% rising to 11.4% in 2022E) and strong track record of delivering disciplined growth.”