7:58 am, May 10, 2023
Vertu Motors revenue topped £4bn for the first time in 2023 – but profit for the group more than halved.
In results for the listed dealer group’s full year ending February 28, 2023, Vertu posted profit before tax of £39.3m, down on the record £80.7m earned the year before.
That drop in profit was expected, though, and Vertu says it was still ‘slightly ahead’ of market expectations.
A final dividend of 1.45p per share has been recommended bringing the full year dividend to 2.15p per share. Shares in the group were trading at 57.6p this morning.
Chief executive Robert Forrester said: ‘The year was critical for the group as we undertook our largest ever acquisition and generated over £4bn of revenues for the first time.
‘The Helston businesses have now been integrated into our systems platform. The acid test was how our core group and new dealerships performed in March and April and I am delighted to report that the trading result post year end has been encouraging and gives confidence for the year ahead.
‘The reported results reflect a strong profit and excellent cash performance, both ahead of expectations.
‘As a result, we have chosen to propose a significantly increased final dividend, delivering a 26.5 per cent higher dividend for the year as a whole.
‘The business is in a healthy financial and operational position to further develop and gain from the benefits of scale as sector consolidation continues.’
Retail new car sales were up 1.1 per cent at 33,727 units, while Motability sales grew 31.2 per cent to 11,029 for the firm.
In total, Vertu sold 85,961 new cars in the year, up 6.8 per cent on the year before.
Rising vehicle prices were also ‘largely responsible’ for a £233.8m increase in core group revenue.
Used car sales fell seven per cent – down to 82,561 units – while profit per unit fell from the record £1,748 achieved in 2022 to £1,530 per used car sold in 2023.
The average selling price of a used car for Vertu was £19,987.
Vertu said it is now rolling out an ‘Insights’ data tool across its dealerships to help manage profit generation, stock turn and control inventory.
Vertu FY23 key facts
- New car sales – £1.121m
- Fleet and Commercial – £897.6m
- Used car sales – £1.658m
- Aftersales – £336.8m
- Total: £4.014bn
Broker Zeus Capital said this morning it thinks Vertu still looks ‘materially undervalued’. It edged up its earnings forecast for the current year to £48m.
Liberum, meanwhile, told investors to ‘buy’ with the latest results two per cent ahead of its expectations.
Sanjay Vidyarthi said: ‘Strategically, Vertu is building a strong competitive advantage through investment in its people and IT infrastructure. The acquisition pipeline remains healthy.’
Free cash flow for Verrtu has improved to £54.3m compared to £44.4m which the group says ‘reflects excellent working capital management’.
Banking facilities have also been increased with a revolving credit facility of £93m and a £70m used car stocking loan increased from £35m.
During the year, Vertu said it also repurchased 10.5m shares returning £5.9m to shareholders.
Commenting on agency sales changes, which Mercedes rolled out at the start of the year and Volvo and VW are likely to implement soon, Vertu said the board ‘will monitor how the changes impact volume and profit levels’.
Forrester added: ‘The group has long operated on an agency basis for a significant proportion of fleet and parts sales. The first of the group’s significant manufacturer partners to operate the agency model for new retail sales was Mercedes-Benz passenger cars which moved to a genuine agency model on January 1.
‘The implementation has been successful from a systems perspective and the board will monitor how the change impacts volume and profit levels, albeit remaining cognisant that the change to agency is, of course, only one of a number of factors which impacts volume and profit.’
Looking ahead to the current year, March and April has exceeded last year’s performance, said Vertu, thanks to the recent acquisitions.
New car supply has improved and the group has a ‘high bank’ of orders in the pipeline. Vertu also noted used car demand remained strong and continued supply issues are keeping values up.
Vertu chairman Andy Goss added: ‘As we enter the new financial year, the group’s excellent financial position, continued investment in its colleagues and systems and its established track record of execution gives confidence that we will continue to deliver on our strategic objectives and deliver scale benefits in the enlarged group.’
In 2023, Vertu grew by acquiring 31 sales outlets – 27 from its deal to buy the lion’s share of Helston Garages and two BMW Motorrad bike dealerships.
David Kendrick, CEO of UHY Hacker Young, told Car Dealer thinks there could be more acquisitions ahead for Vertu.
He said: ‘These are a solid set of results, slightly back on 2022 but to be expected and what we have seen across the board in the main.
‘With the acquisition of Helston Garages, this will have clearly created distraction and disruption, therefore the group looks well positioned to deliver a strong 2024 result with supply easing and operational efficiencies coming through from integration.
‘They have plenty of cash too so maybe further expansion is on the horizon?’
