Vertu sets scene for 2020 in full-year results
03 June 2020
Vertu Motors has used its latest full-year results to set the scene for the year ahead and has even hinted that it could be acquisitive as it was “well-positioned to take advantage of the opportunities which will arise”.
The group’s latest full year results are in line with analyst expectations with adjusted profit before tax at £23.5m for the year to 29 February 2020, against £23.7m last year. The profits come on the back of a revenue up 2.8% to £3.06 billion.
However, it is the period since the year-end that is now the focus. Commenting on the results, CEO, Robert Forrester said: “The year to 29 February 2020 was robust for Vertu, but now the COVID-19 crisis and impact are clearly the focus. I have spent the best part of 20 years getting people into motor dealerships and the last two months effectively keeping them out. We entered the lockdown with a strong balance sheet, minimal use of used car stocking loans and excellent relationships with our banks, all of which means we have sufficient liquidity to weather this crisis.”
Looking ahead, Mr Forrester added: “The month of March initially tracked well with good vehicle sales demand for the first two weeks of the month before dipping in the week running up to lockdown. Manufacturers’ supported the group with enhanced or guaranteed bonuses and paid out on reduced volumes. Adjusted profit before tax delivered in the month was £5.9m, well below normal levels.
“With lockdown severely impacting operations, April and May saw combined losses incurred of £20m, which were significantly improved on the group’s initial forecasts at the start of the COVID-19 crisis.”
Analysts viewed the results in a positive light with praise for the group’s smaller than expected cash burn.
“Cashflow performance has been the focus of the group during lockdown and the Board are delighted with the progress made in collecting receivables, delivering stock and controlling costs,” said Mr Forrester.
“Cash levels have been significantly higher than the group’s initial forecasts with cash balances at 22 May of £44.7m, up from £30.0m disclosed on 7 May.
“Given the heightened uncertainty of any forecast at this current time, it is inappropriate to provide any guidance with respect to market expectations.
“The board sees the group as well-positioned to take advantage of the opportunities which will arise. As a well-managed group with strong culture, brands and systems, the group has the ambition to grow in scale as the sector consolidates as a result of the acceleration of numerous trends. With its strong liquidity, disciplined approach to capital allocation and its partnership with manufacturers, the group looks forward with confidence.”
OPERATIONAL AND OUTLOOK HIGHLIGHTS
- Adjusted1 profit before tax of £23.5m in line with expectations, despite absorbing costs and losses of £0.7m in relation to recent acquisitions (2019: £23.7m)
- 12 sales outlets added in year including the addition of 3 new franchise partners to the Group’s portfolio
- Strong management, supported by scalable, sector-leading in-house developed systems, provides assurance of tight control of operations and swift execution of strategies
- Deployment of new technologies accelerating progress in both omni-channel retailing and increasing efficiency in transaction processing across the business
- Meticulous planning undertaken for the re-opening of dealerships in a safe and socially distanced way
- Strong balance sheet with low debt levels results in significant liquidity being in place, aided by supportive banks and Manufacturer partners
- Group is very well positioned to take a larger role in the sector through consolidation and growth opportunities and has the ambition to do so
- £82.3m (2.8%) growth in revenues to £3.1bn, with like-for-like revenue growth of 1.2%
- Excellent aftersales performance with like-for-like revenue growth of 4.6% delivering a 5.9% growth in gross profit
- Stable used vehicle volume and margins delivered, despite pricing volatility in first half and absorption of additional preparation charges from aftersales
- Like-for-like fleet and commercial revenue growth of 5.3% delivering £5.6m additional total gross profit
- Strong cost control exhibited with like-for-like operating expense growth of 1.4% (2019: 4%) and total underlying operating expenses representing 10.0% of revenues (2019: 9.9%)
- Growth in Adjusted1 operating profit to £29.1m (2019: £27.4m)
- Non-cash impairment charge of £14.4m included in non-underlying charges
- Profit before tax of £7.3m (2019: £25.3m)
- Underlying earnings per share increased to 5.12p (2019: 5.10p)
- No final dividend is recommended
- Net tangible assets per share of 46.0p (2019: 44.9p)
- Adjusted2 net debt of £2.8m at 29 February 2020 (2019: net cash £22.9m)
1 Excludes non-underlying items 2 Excludes amounts drawn on used vehicle stocking loans