Vertu Motors chief executive Robert Forrester has said the AM100 PLC will continue to drive a “big brand” profile after adding 30 car retail outlets in 15 months.
Forrester was speaking to AM this morning (May 12) after the group revealed a like-for-like revenue decline of 21.6%, to £2.5bn (2020: £3.1bn), and adjusted profit before tax ahead of analyst forecasts, up 7% at £24.6m (2020: £23.0m), in annual financial results for the period to February 28, 2021.
Emerging from a period heavily impacted by the COVID-19 coronavirus pandemic with a strong balance sheet, Forrester revealed a desire to add further retail outlets while driving the brand’s profile – initially rebranding its Farnell Jaguar Land Rover sites as Vertu in a move to three core brands.
“Adding 30 sites in 15 months is significant growth by any standards but we have big plans in multi-franchising in the year ahead and we are also planning further acquisitions,” Forrester said.
“We represent more brands than any other dealer group in the UK, but there is one brand we want to add and through multi-franchising we hope to bring brands to new territories.”
In the reported period Vertu added 18 sales outlets, including the addition of new franchise partners BMW, Mini and BMW Motorrad through the £19.6m December acquisition of Inchcape’s Cooper division.
Two months earlier it had acquired Sandicliffe’s Nottingham Kia business for £1.9m. That business has now been consolidated into the group’s Volkswagen franchise at West Bridgford, Nottingham.
Vertu’s multi-franchising strategy saw the Citroen brand added to its existing Ford dealership operations in Worcester and Macclesfield, meanwhile, as the group also added Peugeot to an Edinburgh dealership which already represented Kia, Suzuki and Mitsubishi.
Despite the accelerated growth in a challenging period, Forrester highlighted the group’s strong balance sheet and cashflow to underline the group’s strong position.
He said: “The thing that grew profitability was stronger gross margin of 11.8% and cost control.
“We made £10m of annualised cost savings in the period, which has helped the business along with the free cash flow.”
Vertu delivered record free cash flow of £48.4m in the trading period and Forrester also indicated that net tangible assets per share of 50.2p (2020: 46.0p) reflected a “very strong asset base”.
During 2020 Vertu pivoted successfully towards online car retailing with the launch of its Click2Drive digital sales offering, which helped it achieve 121,527 vehicles sales in 2020, down 27% on the previous year’s 166,432.
In the three-month period to the end of March, it delivered 38,446 new and used (retail and fleet) vehicles from despite the impact of ‘Lockdown 3’, 257 of which were purchased completely online by the group’s customers.
Online and on TV
Forrester told AM that the group has the tools to ensure it can remain “agnostic” about customers’ desire to trade online or in-person.
But he is in no doubt that his Vertu business will have to leverage its scale and new levels of marketing punch in order to compete with a growing number of market disruptors, including Cazoo.
In 2020 Vertu begun sponsorship of Formula One coverage on Channel Four with Macklin Motors as well as striking up sponsorship deals with Durham and Yorkshire County Cricket teams and gaining the naming rights to Newcastle’s’ Eagles Community Arena.
It also positioned Vertu as its premium division and will now re-brand its Farnell dealerships under that name.
Forrester said: “Our high-profile marketing is here to stay. If you’re going to be successful, you’re going to have to have big brands.
“Take Coca-Cola, for example. Why do you still see them on television? In terms of building a profile, it doesn’t stop.”
He added: “The growth achieved by the group to date has been impressive. Consider that 15 years ago we didn’t exist as a business.
“Now we have the tech platform to offer maximum flexibility for our customers, we have new cars, used cars and servicing, which provides us with a strong profit stream.
“We’re aware of the disruptors and I think all their marketing spend will see the gap close in terms of consumer awareness, but we have a well-placed and resilient business.”
Forrester told AM that the semiconductor supply shortages currently impacting car production across the globe would impact sales volumes – most likely in Q3 – and used car values, which look set to continue their recent rise.
But, despite the market headwinds, Vertu’s board expect the group will deliver an adjusted profit before tax for the year ending February 28, 2022, in the range of £24m to £28m.