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Vertu Motors positioned to realise ‘ambitious growth aspirations’ after extraordinary 2020

Robert Forrester, Vertu Motors chief executive

The Vertu Motors board has said that the AM100 car retail group is positioned to realise “ambitious growth aspirations” after crediting a huge Vertu team effort for a creditable 2020 trading performance.

In a trading update published by the PLC this morning (March 1) chief executive, Robert Forrester, revealed that the board expects its trading result for the year ended February 28, 2021, at an adjusted profit before tax level, to be “in-line with current analysts' forecasts of around £23m”. 

And the group, which operates Bristol Street Motors, Macklin Motors, Vertu Motors and Farnell retail divisions, also saw revenues rise by 4.1% during the period thanks, in part, to the addition of 29 new franchised outlets.

Forrester said he was “pleased” to report the group’s positive outcome in a year heavily impacted by the effects of the COVID-19 pandemic. He said: “This result has been delivered by a huge Vertu team effort and I would like to thank every single one of my colleagues for their hard work and dedication in what has been an extraordinary period.”

Forrester added: “Notwithstanding the Government's recently announced roadmap, the outlook remains uncertain given continuing COVID restrictions, although Brexit uncertainty is now behind us and the pound's recent strengthening should help to make cars more affordable to UK buyers."

Vertu said in its trading update that a rapid shift to a digitally-led retail and aftersales operation in 2020’s lockdown periods had helped to maintain its momentum.

Maintaining momentum

End-to-end online car sales grew 360% during the period it said, as click and collect, free delivery within 30 miles of a dealership site and a 14-day money back guarantee all helped to drive 16,757 new retail and Motability units and 30,000 used cars sales.

Over 3,000 customers used the group’s new £99 reserve online functionality, introduced in June 2020.

Although Vertu's used car sales volumes fell by 15.7%, its like-for-like gross profit per unit grew 23.3% to £1,497 (from £1,214), with much of this growth arising in its premium dealerships, where “significantly reduced new vehicle supply and removal of the oversupply of nearly new vehicles have significantly benefitted used vehicle margin retention”.

Core Group gross profit generated from used vehicle sales in the Period grew by £1.7m, it said.

Vertu’s new retail sales declined in-line with SMMT data, which showed a market-wide dip of 13.3%.

Motability volumes grew 3.4%, against a UK-wide rise of 2.4%, however, and the group improved its gross profit per unit on new car retail sales by 10.7%.

As a result, like-for-like gross profits from the sale of new retail and Motability grew £0.5m compared to the prior year.

While Vertu’s new Vansdirect business helped it to achieve growth in the LCV sector, its like-for-like volumes in the fleet car channel fell 31.6%, against a 14.3% fall in the UK fleet market.

After like-for-like gross profit per unit rose in the fleet and commercial channels, the group said that Core Group gross profit generation had risen by £1.2m.

In aftersales, the group saw a £1.9m year-on-year decline in gross profit after a 3.1% decrease in like-for-like service revenues.

It said that reduced vehicle journeys resulting from the COVID-19 lockdowns had driven a 20.7% decline in group warranty revenues in the period. 

Group aftersales margins rose to 49.1% from 46.7% as a result of the change in mix to higher margin retail service work and reduced parts revenues, however.

Cost controls

Tight cost control also helped the group reduce its net debt to between £5 million and £10m as of February 28 (29 February 2020: £28.3m) in a period which saw it receive £8m in Government support through the Coronavirus Job Retention Scheme’s (CJRS) furlough initiative and business rates relief.

Previously announced headcount reductions have generated annualised cost savings of £10m, while a decline in manufacturer-funded new vehicle inventory also drove a £0.9m reduction in net finance costs, Vertu said.

Vertu now operates a network of 147 sales and aftersales outlets after portfolio changes in 2020.

Completion of its biggest acquisition of the period came on December 7 when it acquired the business and assets of a market area of 12 BMW and Mini sales outlets in York, Sunderland, Teesside, Durham and Malton from Inchcape Retail’s Cooper division. 

It also added two new franchise outlets for Citroen, alongside existing Ford outlets in Macclesfield and Worcester; sold its Citroen Leicester business to Robins and Day; added a Peugeot franchise in Edinburgh; acquired the Sandicliffe Kia Nottingham; opened a used vehicle 'Macklin Motornation' operation in newly acquired freehold premises in Glasgow; and disposed of its wheelchair accessible vehicle (WAV) business, Versa, to Gowrings Mobility (generating £1.7m).

In an appraisal of the group’s trading prospects for the year ahead, Vertu’s trading update said: “The strong balance sheet, experienced leadership team and strong systems capability mean the group is well-placed to capitalise on the significant opportunities for growth that exist within the UK automotive retail sector. 

“The Board considers that scale is an increasingly important success factor in the sector and therefore has ambitious growth aspirations for the group. 

“The pipeline of potential acquisition and multi-franchising opportunities is strong, with expansion only to be undertaken following a robust assessment of capital allocation metrics.”

Vertu will announce its preliminary results for the year ended February 28, 2021, on May 12.

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