7:08 am, January 11, 2023
A leading stock broker has recommended investors buy shares in Vertu Motors following its acquisition of Helston Garages.
Liberum says it believes the purchase was an ‘excellent strategic fit’ for the listed car dealer group and will take it into the top three in the UK.
Analyst Sanjay Vidyarthi believes the £120m deal coupled with the fact the new car market will grow in 2023 leads to a positive outlook for the dealer group.
Liberum lists Vertu as ‘buy’ and raises its target price from 100p to 110p.
Shares in Vertu Motors were trading at 56.1p at the close of business yesterday.
Vidyarthi notes that the deal value was for a value 6.8 times Helston’s EBITDA profit, but explained that when you factor in the leaseholds snapped up as part of the deal this falls to 4.1 times.
Helston came with £66.7m worth of freehold property.
On average, between 2019 and 2022, Helston made an EBITDA profit of £17.7m.
Vidyarthi said: ‘The Helston acquisition is an excellent strategic fit for Vertu Motors.
‘Vertu completed the acquisition of Helston Garages on 19 December and we have updated our forecasts for the deal.
‘Helston was a family-owned business, based in the South-West of England with 28 dealerships being acquired by Vertu, including BMW, Mini, Volvo, Jaguar/Land Rover and Stellantis.
‘Vertu management knew the business well and had been working on a deal for six months.’
At the time the deal went through, Vertu Motors boss Robert Forrester said he was ‘delighted’ with the acquisition.
Vertu Motors was the 5th most profitable car dealer in the latest Car Dealer Top 100 list.
Helston Garages has been trading since 1960 and was founded by David Stanley Carr and Betty Vera Carr in the Cornish village of the same name.
The acquisition was minus 12 of Helston’s VW Group sites which were sold to south coast firm Yeomans. Helston’s Porsche business in Exeter was snapped up by Rybrook.
Vidyarthi said he now believes while further deals are possible for Vertu, the team will focus on integrating the Helston business for the next six months.
He added: ‘The pandemic and subsequent market distortions have made it difficult to strike deals at appropriate valuations, but we think Vertu has achieved this with Helston, taking account of the strategic fit – geography and brands – freehold property and synergies.’
The deal will see Vertu’s revenue leap to £4bn for the 2023 FY and then to £4.6bn in 2024.
It has also raised its profit before tax forecast to £42.9m for 2024, but not adjusted the 2023 performance, predicting that will be around £38.5m.
Vidyarthi wrote in his note to investors: ‘Helston increases the premium brand mix by 24 outlets through BMW, MINI and Jaguar Land Rover and adds Volvo and Ferrari for the first time.
‘In total, Vertu now has 79 premium brand outlets and 107 volume outlets, including motorcycles. All of Helston’s outlets will be rebranded to Vertu Motors (premium brands) or Bristol Street Motors (volume), except Carrs Ferrari.
‘Vertu has a dedicated project management team in place to integrate Helston, with a target completion date of March 2023 for system and process integration.
‘Few others amongst the larger players in the UK are as well positioned to consolidate the market and drive the benefits of scale through an omnichannel proposition in the way that Vertu is achieving.
‘And none of the listed motor retailers has the historic track record of successful growth through acquisition that Vertu has.’
Car Dealer Live – the future of the car dealer – exclusive conference features talks from leading car dealers, Google and Auto Trader among much more. Find out the full event details and book tickets.
