There's been a little chat re Vertu Motors (LON:VTU) after interim results and below is a comment I made in this excellent post by leoleo73 - https://www.stockopedia.com/co...

I've put it here so anyone interested in vertu can easily find it.

Here is a segment from my spreadsheet analysis of Vertu Motors (LON:VTU) looking at unit volumes:

5bbf206488fd8VTU_unit_volumes.png



So unit volume is up slightly over double since acquiring Bristol Motors. However, when adjusted for volume they have acquired each year and also lost (closed down, sold on) the adjusted amount is less than they started with.

Maybe the above doesn't matter. I felt it did and it was the catalyst for making me a bit uneasy about my Vertu holding, particularly as I was struggling to find the improving trend on RoC they talk so eloquently about in reports and presentations.

The fact that they have been very focused on premium brand acquisition when their bread and butter non premium stuff is cheap as chips and unfashionable and Merc etc is hot hot hot makes me think that they have a historic capital allocation problem.

IMO the above hints at a capital allocation problem. They have raised a lot of equity over the years:

5bbf2078a2f6fVTU_equity_finance.png



The total value of equity raised is £145m against the current market cap of £145m! They stated last year that they are moving to debt to finance acquisitions from now on and year end debt was net £8.7m versus -£20.8m FY17.

On the face of it debt to finance acquisitions doesn't look clever based on past performance. Nor does equity, but at least that won't accumulate financial risks in the same way...so on balance they should stick to equity, just in case cash flows have a rough period. It was the decision to acquire again that was the final straw for me (I made a little over 20% plus dividends for holding) as I felt strongly that they should prove they are making sustainable growth in shareholder returns.

Anyway, I do not think Vertu is a basket case. I think management seem very competent in many regards for the space. However, I feel that 10+ years into…

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