Vertu Motors’ directors have asserted that the group has sufficient liquidity to exit the COVID-19 coronavirus lockdown and “capitalise on trading opportunities” in an interim trading statement.
In the statement, issued via the London Stock Exchange today (May 7), the AM100 car retail group laid out the measures it has taken to protect the business and its staff so far and detailed its plan for a return to operation once the Government's restrictions on showroom operations are lifted.
In an interview with AM yesterday (May 6) Cambria Automobiles chief executive, Mark Lavery, conceded that his group would be considering the “possibility of over 100 redundancies” when the Government's coronavirus job retention scheme’s (CJRS) furlough period ends.
It followed assertions from the Chancellor of the Exchequer, Rishi Sunak, that there would be no “cliff edge” end to furlough funding under the Government’s Coronavirus Job Retention Scheme (CJRS).
There was no mention of such action in Vertu’s statement today, but speaking to AM last week, Vertu chief executive, Robert Forrester, said that “a very measured approach” was required to ensure that his businesses resources could be backed by demand.
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Vertu, which had initially set-out a "proxy re-opening date of May 11", said that it had built-up an order bank of 825 retail 749 fleet and commercial vehicle orders since the March 24 lockdown and planned to deliver those when lockdown restrictions were lifted.
Internet sales enquiries for April were around 37% of last year's levels, meanwhile, and boosted by a TV marketing campaign which highlighted digital options available for customers.
Aftersales operations generated £1.7 million in sales during the same period, meanwhile, as 98 of its 133 locations employed 18% of the group’s technicians to provide service and repair services to key workers, vehicles undertaking essential activities and vulnerable.
“The group's central contact centre has been operating very effectively from home and, in recent days, additional colleague resource has been added to enable service bookings to be diarised from June onwards,” it said.
Vertu said that it was fortunate that it had a very strong balance sheet, with low levels of debt and significant assets (including land and buildings worth £186m) and liquidity at the start of the disruption period.
Adjusted net debt, excluding used vehicle stocking loans, was £2.8m at 29 February 2020 and the Vertu drew a further £10m of its revolving credit facility in March 2020.
Additional working capital facilities have been approved by the Group's bankers, it said, providing substantial headroom against our forecast cash flow requirements for the next six months.
These cash flow forecasts assume a resumption of dealership showroom activity by the beginning of June.
Vertu said that it had used vehicle stock (excluding demonstrators) of £121.3m as of February 28 and this had risen to £136.8m reflecting March trading patterns.
An additional £10m used vehicle stocking facility has been agreed taking total available vehicle stocking facilities to £45m.
“This facility increase has not yet been drawn upon given that the current cash balances held by the Group stand at circa-£30m,” it said.
Vertu added: “As a consequence of these actions in relation to the Group's financial position, the directors are confident that the Group has sufficient liquidity to exit the lockdown restrictions and to capitalise on the trading opportunities arising as markets return to a more normal level of activity.”
Vertu placed 80% of its workforce on furlough under the Government's coronavirus job retention scheme’s (CJRS) following March’s lockdown orders from Prime Minister Boris Johnson.
Forrester told AM last week that the £2,500 monthly cap on wages as part of the scheme had not been observed by the group, however, in a bid to support its employees’ income.
Vertu’s executive directors waived 30% of their basic salary and pension contribution for each month of dealership sales closure in respect of the pandemic, which includes April and May, meanwhile, as non-executive directors took a corresponding reduction in fees.
In the agreement of the Remuneration Committee, the executive directors also waived any annual bonus entitlement, with executive directors have waiving their right to the LTIPs issued in the year ended February 29, 2020.
No LTIPs will be awarded for the year ending 28 February 2021.
Other senior management of the Group have waived 20% of their basic salary and pension contribution for each month of dealership sales activity closure.
Careful control of site closures has delivered other cost savings, including an approximate 60% saving on dealership energy costs compared to the month prior to closure.
Vertu added: “Manufacturer partners continue to be highly supportive in terms of reducing cost of franchises during this period.”
Vertu said in today’s statement that its employees had “been outstanding during the pandemic”, extending its thanks to “each and every one of them”.
It said that the continued health and safety of employees and customers remained its primary concern, adding that “meticulous planning had been undertaken for the re-opening of dealerships in a safe and socially distanced way, with strict guidelines and the use of personal protection equipment (PPE) where appropriate, once restrictions are lifted.”
The group plans to train all colleagues in these matters prior to re-opening and will ensure that customers are well informed as to the protocols, including the implementation of timed appointments in sales and service and social distancing requirements.
“Dealership sales showrooms will open when restrictions are lifted with a phased return of colleagues from furlough likely to be adopted to balance resource levels and opportunity,” it said.