TIDMVTU
RNS Number : 6074Q
Vertu Motors PLC
01 March 2021
1 March 2021
Vertu Motors plc ("Vertu Motors" or the "Group")
Trading Update: Trading in line with Analysts' forecasts
Vertu Motors, the UK automotive retailer with a network of 147
sales and aftersales outlets, announces the following update with
regards to the five-month period to 31 January 2021 (the "Period")
ahead of its preliminary results for the year ended 28 February
2021 to be announced on 12 May 2021.
Robert Forrester, Chief Executive of Vertu Motors said:
"I am pleased to report that the Board expect the trading result
for the year ended 28 February 2021, at an adjusted profit before
tax level, will be in line with current Analysts' forecasts of
around GBP23m. The Period includes two national lockdowns, in
November and from 4 January, which closed our sales showrooms.
Despite the impact of these national lockdowns and regional
lockdowns throughout December, the Group's strong marketing
activity, use of omni-channel retailing functionality and cost
control have meant that a creditable trading performance was
attained in the Period. This result has been delivered by a huge
Vertu team effort and I would like to thank every single one of my
colleagues for their hard work and dedication in what has been an
extraordinary period.
Notwithstanding the Government's recently announced roadmap, the
outlook remains uncertain given continuing COVID restrictions,
although Brexit uncertainty is now behind us and the pound's recent
strengthening should help to make cars more affordable to UK
buyers."
Highlights
-- Board expects the Group's trading performance for the year
ended 28 February 2021 to be in line with current Analysts
forecasts of around GBP23m at the adjusted profit before tax level
(29 February 2020: GBP23.5m)
-- Group revenues grew by 4.1% in the Period, reflecting the
impact of significant acquisition activity by the Group in 2020
-- 29 outlets added to the portfolio since 1 January 2020
-- Delivered growth in like-for-like used vehicle margins and gross profit generation
-- Group's like-for-like new retail vehicle volumes declined
13.3%, in line with the market, with stronger margin retention
exhibited
-- Like-for-like new commercial volumes rose 34.0% in the
Period, significantly outperforming the market
-- Like-for-like service revenues from retail customers up by 5.3% in the Period
-- Strong cost control disciplines applied, driving a
significant reduction in operating expenses in the Period
-- Significant progress in technology advancements driving
Group's omni-channel capabilities and use of robotics to improve
productivity
-- Government support received through the furlough scheme and
business rates relief totalled GBP8.2m in the Period
-- Decline in Manufacturer funded new vehicle inventory drove a
GBP0.9m reduction in net finance costs in the Period
-- Net debt as at 28 February 2021 is anticipated to be around
GBP5m-GBP10m, including used vehicle stocking loans and excluding
IFRS 16 lease liabilities (29 February 2020: GBP28.3m)
-- Strong pipeline of potential acquisition and multi-franchising opportunities
Five months ended 31 January 2021 ('Period')
Volumes Increase (decrease) Period-on-Period
Total Like-for-Like Total Like-for- SMMT UK
Like Registrations
Group
revenues +4.1% (3.4%)
Service
revenues(1) +5.7% (3.1%)
Used retail
vehicles 30,000 27,642 (9.1%) (15.7%) -
New retail
vehicles 12,166 10,932 (3.8%) (13.3%) (13.3%)
New
Motability
vehicles 4,591 4,091 +13.6% +3.4% +2.4%
New fleet
cars(2) 7,354 6,502 (22.7%) (31.6%) (14.3%)
New
commercial
vehicles(2) 8,218 8,218 +34.0% +34.0% +11.6%
(1) Includes internal and external revenues
(2) Includes agency volumes
Vehicle sales processes and omni-channel development
The successive closure of sales showrooms as a Government
reaction to the arrival in the UK of the COVID-19 virus in late
February 2020, has led to the rapid development of enhanced
omni-channel functionality in the selling of vehicles to private
customers. These developments have allowed the Group to increase
the efficiency of selling retail vehicles without face-to-face
customer contact prior to the sale being concluded. The Group's
functionality is now at the forefront of the sector, including
recent entrants. These developments include:
-- Enhanced functionality in Group showroom systems adding video
chat, virtual sales presentations and contactless document
signature using SMS, facilitating 'click and collect' activity.
-- Addition of the option to reserve vehicles on the Group's
websites in June 2020. Since launch almost 3,000 customers have
used this functionality, paying a GBP99 deposit to reserve their
chosen vehicle and take it off sale.
-- Improving the user experience and functionality for Group
customers to complete a used vehicle purchase purely on-line,
including the launch of our own part exchange valuation tool.
Transactions completed purely online have grown 360% year-on-year
in the Period.
The Group has fine-tuned its marketing strategy and execution in
the Period, building on the strong foundation of its four core
bands of Bristol Street Motors, Macklin Motors, Vertu Motors and
Farnell. Significant investment in TV campaigns as well as
extensive, well-executed digital campaigns have led to high enquiry
levels. Customer reticence to buy used cars without a test drive
and review of the car pre-purchase have been partially overcome
with a 14-day money back guarantee. Free delivery within 30 miles
also encourages a more contactless experience.
Driven by the success of these developments, in the Period the
Group retailed 16,757 new retail and Motability units and 30,000
used cars despite being subject to significant restrictions for
much of the Period.
In addition to these customer-facing developments, enhanced
system integration has been delivered allowing the sales
administration back office processes to be streamlined
significantly, moving to electronic document storage and using
in-house developed robotic process automation to add efficiency and
reduce cost.
We have implemented changes to the structure of the vehicle
finance commission earned by the Group as a credit broker, in line
with new requirements of the FCA to remove discretionary commission
models. These changes were in place prior to the FCA deadline of 28
January 2021. Early indications are that these changes have not had
a material impact on trading performance.
Used vehicle sales
In the Period, UK used vehicle supply remained constrained, as
fewer new vehicle transactions have restricted fresh supplies of
part exchanges into the wholesale markets. Wholesale pricing in the
UK saw some declines from November onwards, particularly in some
volume franchises, but not enough to eradicate the strong gains
seen over the summer months.
The Group's like-for-like volume of used vehicles sold in the
Period fell by 15.7%, with activity impacted by successive lockdown
restrictions. Like-for-like gross profit per unit, however, grew
23.3% to GBP1,497 from GBP1,214, with much of this growth arising
in the Group's premium dealerships, where significantly reduced new
vehicle supply and removal of the oversupply of nearly new vehicles
have significantly benefitted used vehicle margin retention. Core
Group gross profit generated from used vehicle sales in the Period
grew by GBP1.7m.
New retail car and Motability sales
The UK new vehicle market recorded 1.6 million registrations in
the 12 months to 31 December 2020 (SMMT), a decline of 29.4% on
2019, reflecting an obviously turbulent and difficult year and
reductions in tactical registration activity. Supply-side
considerations, such as the impact of a weak pound in the Period on
the profitability of Manufacturers importing vehicles into the UK,
the regulatory environment with regards to emissions and COVID-19
related constraints on trading, all had an impact.
SMMT data showed a 13.3% decline in UK private registrations in
the Period. The Group's like-for-like volumes of new retail
vehicles sold also declined by 13.3% in the Period, in line with
the market. The Group took 3.5% of the UK new retail market in the
Period.
Motability volumes grew 3.4% in the Period on a like-for-like
basis, compared to a rise in UK registrations in this channel of
2.4%. The Group has always had a strong focus on Motability sales
and this focus has led to the Group taking market share in the
Period (representing 4.6% of the market). The Group is responsible
for the largest fleet of Motability vehicles in Great Britain and
this makes a significant contribution to Group aftersales
revenues.
In the Period, Group margins on the sale of new retail and
Motability units improved and gross profit per unit increased by
10.7%. New vehicle profit in the Period benefitted from the timing
of Manufacturer volume bonus receipts from the strong July to
September quarter. Like-for-like gross profits from the sale of new
retail and Motability vehicles consequently grew GBP0.5m compared
to the prior year Period.
Fleet & Commercial vehicle sales
The Group's like-for-like sales of new commercial vehicles grew
34.0% compared to the prior year Period, with the SMMT reporting
growth of 11.6% in UK registrations in the Period. The Group has
been successful in improving market share in commercial vehicles
with performance aided by the Group's online commercial vehicle
sales operation, Vansdirect, which traded successfully throughout
the Period. The Group took 5.2% of the new commercial market in the
Period.
In contrast, the Group's like-for-like volumes in the fleet car
channel fell by 31.6%, against a 14.3% fall in the UK fleet market.
Sales in this channel are highly correlated to Manufacturer
appetite to support this low margin channel. A number of Volume
Manufacturers reduced support, and therefore volumes, in the fleet
car channel as supply constraints led to a prioritisation of more
profitable retail channels and other markets.
Importantly, the Group grew like-for-like gross profit per unit
in the Fleet and Commercial channels and consequently Core Group
gross profit generation rose GBP1.2m in the Period.
Aftersales
Overall, aftersales in the Core Group saw a GBP1.9m year-on-year
decline in gross profit in the Period. This decrease arose from a
3.1% decline in like-for-like Service revenues (including internal
revenues). Reduced vehicle preparation work was undertaken in the
Period, driven by the fall in the volume of vehicles sold. In
addition, continued reductions in Manufacturer warranty work,
driven by reduced vehicle journeys, drove a 20.7% decline in Group
warranty revenues in the Period. The Group achieved 5.3% growth in
revenues from retail service customers in the Period and it is
pleasing to see growth in this high margin channel reflecting the
Group's strong customer retention processes. Pricing disciplines,
the performance of rigorous vehicle health checks, and the
increasing use of video technology to aid sales conversion,
contributed to continued growth in average invoice values on retail
work. Lack of journeys has also contributed to a decline in
accident repair work which reduced the Group's repair and trade
parts revenues in the Period.
Core Group aftersales margins rose to 49.1% from 46.7% in the
Period as a result of the change in mix to higher margin retail
service work and reduced parts revenues.
Operating expenses
Despite growth in the number of sales outlets operated by the
Group, the Period saw a significant year-on-year reduction in
operating expenses. Government support received through the
furlough scheme and business rates relief totalled GBP8.2m in the
Period. Operating expenses as a % of revenues fell to 9.6% compared
to 10.4% in the prior year Period.
The impact of showroom closures and the national lockdown drove
lower activity levels, reducing variable costs, and a switch to
online colleague training saved travel and associated expenses. The
Group has enhanced the effectiveness of its marketing activity
driving down cost per enquiry, in addition, the impacts of the
lockdown saw a delay to some sales event spend in the Period.
The balance of savings delivered relate to the Group's
previously announced headcount reduction programme, which has
generated annualised cost savings of GBP10m, enabled through the
use of technology to improve efficiency of process, as well as a
strong focus on sustainable cost reduction and control.
Interest costs
Net finance costs fell GBP0.9m in the Period compared to the
prior year. Interest on bank borrowings increased by GBP0.3m as a
result of higher drawings on the Group's facilities in respect of
acquisitions made in the financial year to date. New vehicle
stocking charges decreased by GBP1.3m in the Period. Lower levels
of funded new vehicle inventory were seen as supply reduced from
the peaks of the first lockdown period in the UK.
Portfolio changes
On 7 December 2020, the Group acquired the business and assets
of a market area of 12 sales outlets located in York, Sunderland,
Teesside, Durham and Malton. These five locations each represent
the BMW and MINI franchises, in addition to a BMW Motorrad
motorcycle operation in Sunderland and a used car operation located
in York (which the Group anticipates franchising in the coming
months). These businesses have now been fully integrated into the
Group's financial and operational systems platform and have
performed in line with their business plans in the Period. These
businesses are expected to be at least earnings neutral by the year
ending 28 February 2023 (FY23).
The Group has a strategy to multi-franchise certain of the Group
locations where this generates enhanced returns. The Period saw the
Group execute on this strategy in a number of locations, with
further franchise additions currently being planned for execution
over the coming months. Key franchising activities were:
-- Added two new franchise outlets for Citroen, alongside
existing Ford outlets in Macclesfield and Worcester.
-- Exited the Citroen franchise in Leicester through the sale on
28 February 2021 of the business and assets to Robins and Day. The
leasehold premises have been retained by the Group and will re-open
with another Manufacturer franchise in due course.
-- On 1 March 2021, added the Peugeot franchise to the Group's
Edinburgh dealership, already representing Kia, Suzuki and
Mitsubishi. This business is currently located in leasehold
premises but will relocate into a new purpose-built freehold
dealership on the expiration of the current lease in twelve months'
time.
-- On 1 March 2021, the Group opened a used vehicle 'Macklin
Motornation' operation in newly acquired freehold premises in
Glasgow. The business is located adjacent to the Group's existing
Ford and Nissan sales outlets in the south of the city. It is
envisaged that the new operation will be franchised in the
future.
-- On 30 November 2020, the Group disposed of its wheelchair
accessible vehicle (WAV) business, Versa, to Gowrings Mobility, a
well-established WAV operator with over 50 years in the industry.
The Group will supply vehicles for conversion to the enlarged
entity. The disposal generated GBP1.7m of cash. In FY20 the
business delivered a loss before tax of GBP68,000.
The Board continues to actively manage the Group's portfolio of
dealerships and assess further growth opportunities, utilising
strict investment return metrics to ensure discipline in capital
allocation.
Future prospects
The Board expects the Group's trading performance to be in line
with current analysts forecasts of around GBP23m adjusted profit
before tax for the year ended 28 February 2021.
Uncertainties remain over the trading performance of the Group
into the new financial year because of the ongoing COVID
restrictions and the economic uncertainty arising. Guidance for
FY22 and future years remains withdrawn at this time.
The strong balance sheet, experienced leadership team and strong
systems capability mean the Group is well placed to capitalise on
the significant opportunities for growth that exist within the UK
automotive retail sector. The Board considers that scale is an
increasingly important success factor in the sector and therefore
has ambitious growth aspirations for the Group. The pipeline of
potential acquisition and multi-franchising opportunities is
strong, with expansion only to be undertaken following a robust
assessment of capital allocation metrics.
The Group will announce its preliminary results for the year
ended 28 February 2021 on 12 May 2021.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
For further information please contact:
Vertu Motors plc Tel: 0191 491 2121
Robert Forrester, CEO
Karen Anderson, CFO
Zeus Capital Limited Tel: 020 3829 5000
Jamie Peel
Andrew Jones
Dominic King
Camarco Tel: 020 3757 4983
Billy Clegg
Tom Huddart
Notes to Editors
Vertu Motors is the fifth largest automotive retailer in the UK
with a network of 147 sales outlets across the UK. Its dealerships
operate predominantly under the Bristol Street Motors, Vertu,
Farnell and Macklin Motors brand names.
Vertu Motors was established in November 2006 with the strategy
to consolidate the UK motor retail sector. It is intended that the
Group will continue to acquire motor retail operations to grow a
scaled dealership group. The Group's acquisition strategy is
supplemented by a focused organic growth strategy to drive
operational efficiencies through its national dealership network.
The Group currently operates 143 franchised sales outlets and 4
non-franchised sales operations from 114 locations across the
UK.
Vertu's Mission Statement is to "deliver an outstanding customer
motoring experience through honesty and trust".
Vertu Motors Group websites - www.investors.vertumotors.com
/www.vertucareers.com
Vertu brand websites - www.vertumotors.com /
www.bristolstreet.co.uk / www.vertuhonda.com / www.vertutoyota.com
/ www.macklinmotors.co.uk / www.farnelllandrover.com /
www.farnelljaguar.com / www.vertuvolkswagen.com /
www.vertumercedes-benz.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTTPMTTMTJTTRB
(END) Dow Jones Newswires
March 01, 2021 02:00 ET (07:00 GMT)
Vertu Motors (LSE:VTU)
Historical Stock Chart
From Feb 2024 to Mar 2024
Vertu Motors (LSE:VTU)
Historical Stock Chart
From Mar 2023 to Mar 2024