Vertu Motors finished the last 12 months by posting profits totalling £80.7m.
In results for the year ended February 28, 2022, and announced via the London Stock Exchange this morning (May 11), the listed dealer group said they showed the business performed at ‘record profitability’ during the year.
Vertu CEO Robert Forrester told Car Dealer: ‘£80.7m profit before tax is fantastic, and certainly gives an injection of cash into the business, which is always useful.
‘We’ve got a very strong balance sheet, we’ve now got net cash after used car stocking loans are taken into account, which is unique, actually, in our industry.
‘The really good thing we’ve managed to achieve is we’ve moved our technology on quite a long way. We’ve got 50 software develops working in the business, and they’re doing great work. That omni-channel, bricks-and-clicks combination I think is going to be the proven model in the sector – I think there’s very little doubt about that.
‘We did double pure online e-commerce sales to 900 units in 12 months, and we sold 89,000 used cars, so I think that tells you something.’
You can watch the full interview with Forrester at the top of this story.
Revenue for the last year stood at £3.61bn with adjusted profit before tax coming to £80.7m – up significantly on the £2.54bn revenue and £24.6m profits recorded in the 2021 financial year.
Adjusted operating profit stood at £87.7m while gross margins increased to 12 per cent (11.8 per cent FY21, 10.9 per cent FY20), with Vertu saying this reflected supply constraints and ‘strong pricing disciplines’.
During the year, Vertu Motors received £6.6m in government support consisting of the Coronavirus Job Retention Scheme and business rates relief.
Vertu sold a total of 166,823 cars last year, of which just over 78,000 were new cars.
Gross profit per unit was £1,921 – up by 31.5 per cent, or £1,461 – while the average selling price was £21,734 – a 17.6 per cent increase.
Gross margin rose from 7.3 per cent to 8.4 per cent despite the significant increase in average selling price.
For used cars, meanwhile, Vertu said it experienced a £38.1m increase in gross profit from secondhand car sales.
There was a 7.1 per cent decreases in the number of used cars sold, while the gross profit per unit of £1,763 was 45.6 per cent higher than in 2021.
Undoubtedly aided by well-publicised sector tailwinds, the group executed well, gained share, strengthened its foundations, positioned itself for the transition to EV and displayed fundamental growth
The average used car selling price was £17,376 – a 19.3 per cent increase – and the gross margin rose significantly to 10.1 per cent from 8.3 per cent.
Commenting on used car prices and Vertu’s performance, chief financial officer Karen Anderson, said: ‘Used vehicle prices rose very significantly against new vehicle values and this undoubtedly drove some used vehicle customers to switch to new vehicles which they perceived to be better value.
‘It is also likely, that the growth in popularity for electric vehicles with greater range is boosting new vehicle demand at the expense of the used car market due to an almost complete dearth of used electric vehicles.
‘Overall, used vehicle transactions in the UK fell 5.1 per cent in 2021 compared to pre-Pandemic levels reflecting these trends.
‘Reduced demand has also seen used vehicle prices start to soften albeit this impact is muted given remaining supply constraints.’
During FY22, Vertu made a number of acquisitions and disposals, including splashing out £302.8m on 12 BMW and Mini dealerships (which contributed £3.8m in Vertu’s overall FY22 profit), £101.7m on four Volkswagen showrooms in West Yorkshire (which contributed £0.9m in overall profit)
The dealer group also bought a Honda outlet in Bradford, Kia in Bradford and a multi-franchise site in Edinburgh, which collectively made a loss of £0.7m.
Its portfolio was also ‘pruned’ with the disposal of a Mitsubishi and Suzuki outlet in Edinburgh.
The group’s total number of dealerships and aftersales outlets now stands at 160.
Commenting on the results, CEO Robert Forrester said: ‘The group performed at record profitability levels in the Year.
‘Undoubtedly aided by well-publicised sector tailwinds, the group executed well, gained share, strengthened its foundations, positioned itself for the transition to EV and displayed fundamental growth, all aided by its investment in the Click2Drive technology platform.
‘The outlook will depend on the available supply of new vehicles and continuing consumer confidence.
‘The group’s excellent financial position provides the resilience to overcome any economic slowdown and resources to continue to grow.’
Vertu also gave an update to its current trading performance, saying March and April 2022 have delivered a trading profit of £19.1m and was ‘in line with prior year levels, which included business rates support and significant pent-up consumer demand as the UK emerged from lockdown’.
Looking ahead to the rest of the year, Forrester said consumer confidence during a cost of living crisis is ‘a critical determinant to continuing success’.
Vertu’s shares undervalued
Sanjay Vidyarthi, of stock brokers Liberum, said: ‘Vertu has delivered a very strong FY22 result. With its strong management team and balance sheet, Vertu remains well positioned to consolidate the market.’
Liberum is also predicting Vertu profits will fall in the next financial year to around £35.4m before tax.
Mike Allen, of Zeus Capital, noted that the results were eight per cent ahead of its forecasts, despite upgrading seven times during the year.
Vertu currently has a market cap of £171m – compared to Cazoo’s £763m.
Allen said: ‘Supply shortages are likely to remain a key feature of both the new and used car markets well into 2023 in our view. While this is underpinning values and margins, the ongoing decline in consumer confidence cannot be ignored and is likely to have some impact as we progress through the year against increasingly difficult prior year comparatives.’
Zeus Capital also expects Vertu’s profit before tax for next year to more than half to £35.4m.
Allen added: ‘Our valuation per share is 100.2p. This does not include the upside potential from M&A or Vertu’s undervalued ancillary businesses.
‘With strong cash generation and asset backing, Vertu shares are considerably undervalued, in our view.’
You can watch our full interview with Robert Forrester at the top of this story