8:16 am, June 28, 2023
Vertu Motors has told investors that it remains on target to meet its targets for the year after enjoying a strong start to 2023.
In a trading update posted via the London Stock Exchange, the dealer group said it has delivered a ‘trading profit above prior year levels’, despite inflation reaching record highs in recent months.
The firm experienced rising volumes and margins across the board, as publicly-listed dealer groups continue to offer exceptional value to investors.
Last week, UHY Hacker Young’s David Kendrick named Vertu among the listed groups which could be set to go private after Lookers agreed a £465m sale to Canadian car dealer group, Global Auto Holdings.
Among the highlights for Vertu in the first three months of its 2024 financial year has been new car retail and Motability like-for-like volume growth of 10.8 per cent.
Like-for-like new vehicle margins have also remained strong at 7.9 per cent with fleet and commercial vehicle volume growth standing at one per cent.
Meanwhile, like-for-like fleet and commercial vehicle gross margin improved to five per cent, compared to 4.3 per cent last year.
When it came to used vehicles, volumes declined 5.9 per cent, with bosses putting the slide down to ‘ongoing supply constraints’.
So far this year, Vertu’s gross profit per used unit sold has been £1,648 – a tiny drop on last year’s figure of £1,652. Gross margin also fell slightly to 7.8 per cent, compared to 8.1 per cent 12 months ago.
The group’s average used vehicle selling price per unit also grew by 3.4 per cent on a like-for-like basis to over £21,000.
Robert Forrester, CEO Vertu Motors, said: ‘I am pleased to report that trading remains positive.
‘The entire, recently enlarged, Vertu team has put in hard work and dedication once again, and I would like to thank them all.
‘Used car pricing has remained firm and we have gained market share in the new car market. The performance of our high margin aftersales business has remained strong.
‘The integration of Helston Garages is progressing well and is on track to deliver the planned synergies. We are excited about the opportunities our enlarged portfolio will create for Vertu Motors.’
‘Robust’ trading means Vertu is still a ‘top pick’
In response to the trading update, broker Zeus Capital said its forecasts remained unchanged.
The firm said that its analysis suggested that Vertu remains ‘materially undervalued’ with a market cap of £239.2m.
The financial experts estimate an average share valuation of 108p per share – offering a 55 per cent upside to investors.
It has also backed Vertu to bring in improved revenues throughout the year of around £4.7bn.
A Zeus Capital spokesman said: ‘Vertu has released an AGM trading statement confirming a strong first three months of trading in FY24.
‘Ongoing benefits of scale and technology investment continue to generate earnings growth and free cash flows.
‘Aided by the Helston acquisition, trading profit is ahead of prior year levels despite inflationary cost headwinds and the group is confident in meeting full year market expectations for FY24, so previously upgraded Zeus forecasts are unchanged today.
‘We believe recent public market takeover activity highlights the value in the UK franchised motor retail sector and we reiterate our average valuation estimate of 108p per share, offering 55 per cent upside to investors.’
Meanwhile, fellow Broker Liberum described Vertu as its ‘top pick’ for private investors in the motor trade.
The company said: ‘Vertu has delivered a robust Q1 trading performance, with management optimistic on the outlook and no change to our forecasts. The focus is on driving profitable sales growth while keeping a tight control on costs.
‘Meanwhile, there is continuing investment in the business to strengthen Vertu’s competitive advantage.
‘While there has been no approach for Vertu, the sector is in play. Vertu remains our top pick.’
