Vertu Motors PLC – Unaudited interim results

Vertu Motors PLC – Unaudited interim results

Vertu Motors plc, the automotive retailer with a network of 123 sales and aftersales outlets across the UK, announces its interim results for the six months ended 31 August 2019 (“the Period”).

HIGHLIGHTS

Strategy

·    Values driven business with well invested systems infrastructure and experienced leadership team

·    Financial position enables growth of franchised businesses with Manufacturer partners

·    Developing omni-channel retailing to be at the forefront of the transformation of the automotive retail experience

·    Strong portfolio management and capital allocation including divestment of sub-scale outlets, disposal of surplus properties, share buyback programme and further acquisitions being assessed

Financial

·    £86.7m (5.6%) growth in total revenues to £1.6bn, with like-for-like revenue growth of 2.3%

·    Strong cost disciplines exhibited, like-for-like operating expense growth in the Period slowed to 1.0% (2018 H1: 7.0%)

·    Operating profit of £20.3m (2018 H1: £18.6m)

·    Adjusted1 operating profit of £19.6m (2018 H1: £19.4m)

·    Profit before tax of £16.1m (2018 H1: £17.3m)

·    Adjusted1 profit before tax of £17.1m (2018 H1: £18.1m)

·    Interim dividend of 0.6p per share, up 9.1% (2018 H1: 0.55p per share)

·    Excellent cash conversion of profits with Free Cash Flow1 of £14.6m generated (2018 H1: £1.9m)

1 Adjusted to remove non-underlying items: including share-based payments, amortisation of intangible assets and the impact of adoption of IFRS 16 on the FY20 figures

Capital Structure

·    Significant increase in the level of Adjusted2 Net Cash up to £29.1m (2018 H1: £10.5m) reflecting strong focus on working capital management

·    Strong balance sheet to fund future growth with real estate backing

·    Used car stocking funding utilised of £22.5m (cover of 4.7 times used car stock value) (H1 2018: £19.2m). Substantially lower usage than industry peer group reflecting resilient balance sheet

·    £2.7m of shares bought back in FY20, representing 2.0% of the opening shares in issue, £1.3m of the £3m programme announced at the AGM has been utilised to date.

2 Adjusted to remove used car stocking loans and excludes IFRS 16 lease liabilities

Current Trading and Outlook

·    September like-for-like new retail volumes down 1.6%

·    Used car revenues and high margin service revenues continued growth on like-for-like basis

·    Used car values stable in volume franchises: premium franchise residual values continue to be impacted by new car oversupply in certain franchises

·    September profitability ahead of prior year levels

·    Continuing political uncertainty has potential to undermine consumer demand notwithstanding continued UK economic growth and record employment levels

·    New vehicle supply side issue considerations:

Sterling fluctuations impacting Manufacturer margins and consequent price changes to consumers

EU emission legislation changes and targets may change supply side model mix in late 2019 and 2020 as Manufacturers seek to hit new emission targets

Potential impact of UK departure from EU

·    The Board believes the Group remains on track to meet its overall expectations for the full year

Six months ended 31 August 2019

Increase (decrease) period-on-period

                     Total

         Like-for-Like

SMMT UK

Registrations

Group Revenues

5.6%

2.3%

Service Revenues3

12.2%

8.5%

Volumes:

Used retail vehicles

2.8%

1.6%

New retail vehicles

(7.9%)

(10.1%)

(4.2%)

New Motability vehicles

(2.3%)

(3.0%)

6.6%

New fleet cars4

19.6%

13.8%

(1.3%)

New commercial vehicles4

15.2%

2.0%

12.4%

3 Includes internal and external revenues

4 Includes agency volumes

Commenting on the results, Robert Forrester, Chief Executive, said:

“The Group performed well in the first half against a more challenging backdrop.  We have an experienced leadership team, well invested systems and operationally we are keeping our discipline by doing all the basics very well, delivering a strong customer experience, and leaving the Group in a position to outperform.  The Board is pleased to see continued growth in high margin aftersales revenues and the continued growth in used car volumes.  Cost and excellent working capital control has again been exhibited.

Our omni-channel retailing strategy and discipline around the allocation of capital, coupled with a net cash position, underpins the Board’s confidence in the future.”

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