Vertu Motors chief executive Robert Forrester has said that the car retail giant could grow “anywhere at any time” after revealing H1 results which suggest it is scaling the AM100 rankings.
A first half trading update from the PLC behind Vertu Motors, Bristol Street Motors and Macklin Motors this morning (October 5) revealed adjusted profit before tax of £28.2 million (H1 FY22: £51.8m) on revenues up 3.9% at £2bn.
Forrester said in group’s statement that “the business is strategically very well placed with significant firepower to expand its footprint of franchised dealerships across the UK”.
But the Vertu also asserted that “high sector earnings over the last 18 months will be disregarded” in any acquisition negotiations as it continues to drive value from its growth.
Speaking to AM this morning Forrester said that businesses looking to sell “have a choice”, adding: “We have to make sure that the cash that is spent in an acquisition will give us an appropriate return. The amount of goodwill is central to that.
“In my opinion profits were going to be down this year by around 50% this year, and I still don’t think that I’m far out with that, so we have to acquire with that in mind.”
Forrester said that acquisitions were in the pipeline but would give no indication as to where it was looking to add locations or which which brands, adding that locations could be added “anywhere at any time”.
And Vertu Motors board chairman Andy Goss described the business as "one of the few consolidators in the UK car retail market with available firepower".
Vertu Motors already represents more OEM brands than any other car retail group in the UK at its 160 locations, Forrester said.
During its reported period, to August 31, 2022, the group took on Toyota’s West Scotland market territory from Arnold Clark and also acquired online aftermarket parts supplier Wiper Blades.
Vertu sold 43,022 used cars during the trading period. It also sold 42,613 new cars, of which 17,673 were retail units.
Although the average selling price of a used car rose 23.1% on H1 2020, to £19,958 per unit, gross profit per unit of £1,579 represented a decline from £1,665 during a trading period in which rocketing used car values started to ease.
The group said that its overall gross margin of 11.2% (H1 FY22: 11.6%) reflected continued strong pricing disciplines in all areas, however.
Forrester told AM that accurate used car valuations, the increased use of technology to drive sales and aftersales process and energy saving measures would form core elements of the group’s strategy moving forward.
A new online service booking system, described by Forrester as “genius” is set to be implemented across the group in the next six months and was embraced by 50% of customers in a pilot phase.
Over 40,000 service bookings were made online in the Period, a growth of 10% period-on-period.
A streamlining of Vertu’s valuations tools means that part-exchange prices offered to Vertu Motors’ online and showroom customers are now aligned for the first time.
This not only underpins its ‘Click to Buy’ online car sales offering, but will also guide buying decisions for its stock acquisition teams, Forrester said.
Despite a strong financial position demonstrated by the period’s free cash flow of £23.2m in the period, net cash of £17.8m and net tangible assets per share of 71.2p, cost control will remain a priority within the Vertu Motors business, Forrester said.
A 5.3% reduction in the group’s electricity consumption was achieved compared to the six-months ended August 31, 2020.
As well as the process of rolling out LED lighting across its dealership network, the board also recently approved a £3m capital expenditure to invest in solar power generation capability at 46 freehold properties over the next 12 months with the aim of generating around 10% of the group’s electricity requirement.
Forrester said: “We’ve done a good job with energy savings so far, but there’s a lot more we can do.
“A lot of our investment is aimed at taking our energy requirements ‘off grid’, but a lot of it has to do with mindset changes.
“I visited one of our dealerships on a Sunday morning and found all the lights on in an empty workshop. That kind of thing must stop.”