9:01 am, October 4, 2023
Vertu’s acquisition of Helston Garages has boosted its half-year results, setting a new record for revenues in the process.
Interims for the six months ended August 31 posted today (Oct 4) reveal strong trading for Vertu Motors, while buyers are circling its key rivals Pendragon and Lookers.
Revenues grew by over 21 per cent to £2.4bn in the first six months of the year – a new record.
Adjusted profit before tax jumped too, up from £28.2m in the same period last year to £31.5m, while its interim dividend grew by 21.4 per cent to 0.85p per share.
Vertu chairman Andy Goss said the firm’s acquisition of Helston Garages ‘aided’ the increase in profit before tax.
Vertu acquired the lion’s share of the family-run business in December 2022, which added 28 dealerships and saw Volvo return to the portfolio. Vertu also began a new relationship with Ferrari.
During the period, Vertu increased sales of new cars by 20.8 per cent to 51,488 and used cars by 2.1 per cent to 43,921.
The results detailed new measures rolled out during the period, including a self-service online check-in service at its dealerships, the sale of an accident repair centre in Newcastle for £1.6m, and the addition of Screwfix CEO John Mewett as non-executive director to the board.
Vertu also agreed a sub-lease of a former Cazoo outlet in Tamworth, Staffordshire, which has subsequently opened as a Bristol Street Motor Nation used car outlet.
The Bristol Street Motor Nation outlet in Stockton, which opened on March 1, 2022, will soon be rebranded as a Nissan dealership, and is planned to open on December 1, 2023.
Meanwhile, Vertu also agreed a sub-lease of a former Stratstone Jaguar dealership in the west of Newcastle upon Tyne.
The site will be refurbished for the relocation of Vertu’s existing Vauxhall franchise from nearby Scotswood Road in the city, and is planned to open on November 1, 2023.
The dealership vacated by the Vauxhall operation will open as a Ford car and commercial vehicle facility.
During the first half of the year, Vertu Motors also closed a BMW/Mini dealership in Malton, Yorkshire, and sold a Ford showroom in Stroud, Gloucestershire, for £0.9m.
Commenting on the results, chief executive Robert Forrester said: ‘The group has delivered 11.7 per cent year-on-year profit growth benefiting from increased scale.
‘The consistent strategies around digitalisation, cost efficiency, smart capital allocation and the development of our management and colleagues is providing a firm grounding to deliver value to our shareholders.
‘The interim dividend increase of 21.4 per cent shows the group’s financial strength and the progress being made.’
He added: ‘Trading in the key month of September was strong, reflecting the plate change in new cars.’
‘Confusing messaging’
In his accompanying review of the six-month period, Forrester highlighted electrification and the transition to agency sales as areas that will ‘influence the group’s development and performance in the coming years’.
On electrification, he attacked the government’s recent move to delay the ban on the sale of new petrols and diesels but also impose a strict ZEV mandate, calling it ‘confusing’.
Moreover, he said the move might ‘further contribute’ to increased supply of new EVs from carmakers while also continue to ‘mute’ retail demand.
‘Manufacturers are therefore seeking to stimulate retail demand for these vehicles through the offer of discounted prices and supported finance rates,’ he said.
‘These market dynamics combined with the ZEV mandate have the potential to disrupt the recovery of the new car market in the next few years.’
On the topic of agency sales, Forrester said: ‘The implementation is at an early stage across the sector (a number of manufacturers have stated they will not make the transition).
‘The board believe that on the basis manufacturers require, in either an agency or traditional franchised setting, a visible retail network (including aftersales) making an appropriate return to investors, we consider that medium-term returns will remain attractive in either model.
‘We will continue to monitor business performance by manufacturer as has always been the case.’
Looking ahead, Forrester said full-year profits were anticipated to be ‘in line with expectations’.
Vertu still undervalued
Analysts agreed the six-month performance was strong, but again concluded Vertu Motors remains undervalued.
Liberum said the business was navigating a ‘complex market… well’.
‘We maintain our view that Vertu is the highest-quality motor retailer amongst its listed peer group and so deserves a rating at least in line with peers, if not higher.’
It has given Vertu a price-to-earnings ratio of 6.6 for 2024, saying: ‘A 2024 calendar year end price-to-earnings ratio of 6.6x is just too cheap for a business with an excellent growth track record and a strong balance sheet, in prime position to consolidate the market.
‘Value in the sector has been highlighted by the bid premia for Lookers and Pendragon.’
Zeus Capital concluded: ‘Recent takeovers and proposals in the quoted UK motor retail sector highlight how Vertu is undervalued.’
Pictured at top is Vertu’s Jaguar Land Rover dealership in Exeter
