REG - Vertu Motors PLC - Final results for the year ended 28 February 2022
11/05/2022 07:01
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RNS Number : 9983K Vertu Motors PLC 11 May 2022
11 May 2022
Vertu Motors plc ("Vertu", "Group")
Final results for the year ended 28 February 2022
"Gaining market share and investing in brand and technology"
Vertu Motors, the UK automotive retailer with a network of 160 sales and
aftersales outlets, announces its final results for the year ended 28 February
2022 ("Year").
Commenting on the results, Robert Forrester, Chief Executive, 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."
FINANCIAL SUMMARY
Years ended 28 February 2022 2021 2020
Revenue £3,615.1m £2,547.7m £3,064.5m
Adjusted(1) profit before tax £80.7m £24.6m £23.0m
Basic Adjusted(1) EPS 17.92p 5.27p 4.99p
Dividends per share 1.70p - 0.60p
Net Cash / (Debt)(2) £16.2m (£4.5m) (£28.4m)
HIGHLIGHTS
· Record trading results delivered with Adjusted(1) profit before tax
of £80.7m (FY21: £24.6m, FY20: £23.0m), on revenues of £3.6bn
· Vehicle sales volumes ahead of market trends in all areas on a
like-for-like basis compared to FY20 (year ended 29 February 2020)
· Increased gross margin of 12.0% (FY21: 11.8%, FY20: 10.9%) reflects
supply constraints and strong pricing disciplines
· Acquisitions successfully integrated and performing well
· Free Cash Flow of £44.2m in the Year and Net cash(2) of £16.2m as
at 28 February 2022 (FY21 Net debt: £4.5m)
· Underlying corporation Tax charge of £16.1m (FY21: £5.2m)
· Net tangible assets per share of 66.8p (FY21: 50.2p) reflecting
strong asset base, net cash position and cashflow generation
· 11.6m shares repurchased at a value of £7.1m since 20 August 2021,
buyback programme continues
· Final Dividend of 1.05p per share recommended, payable in July
OUTLOOK
· Strong trading performance delivered in key months of March and April
with trading profit of £19.1m (FY22: £19.2m)
· Management focus on operational excellence around costs, conversion
and customer experience
· New and used vehicle supply constraints continue and cost pressures
are evident
· Consumer confidence in the face of rising domestic costs is a
critical determinant to continuing success in terms of demand
· Visible growth pipeline including expansion with the Toyota brand in
the West of Scotland and further multi-franchising opportunities
(1) Adjusted to remove share-based payments charge, amortisation of intangible
assets and impairment charges
(2) Excludes lease liabilities, includes used vehicle stocking loans
Webcast details
Vertu management will make a webcast available for analysts and investors this
morning on the Group's website https://investors.vertumotors.com/results/
(https://investors.vertumotors.com/results/)
For further information please contact:
Vertu Motors plc
Robert Forrester, CEO Tel: 0191 491 2121
Karen Anderson, CFO
Zeus Capital Limited
Jamie Peel Tel: 020 3829 5000
Andrew Jones
Dominic King
Camarco
Billy Clegg Tel: 020 3757 4983
Tom Huddart
Emily Shea-Simonds
CHAIRMAN'S STATEMENT
The Group executed exceptionally well during the year ended 28 February 2022,
delivering a record Adjusted(1) profit before tax of £80.7m (FY21: £24.6m).
There were significant highlights in the Year:
· Delivery of enhancements to the in-house developed technological
capabilities, augmenting the Group's omnichannel sales process (the
Click2Drive tech platform), supported by our growing nationwide dealership
network from Scotland to Exeter and Kent.
· Successful growth achieved, with all acquired businesses fully
integrated into Group systems and processes and delivering higher levels of
profitability than anticipated.
· Strong people focus, with the delivery of enhanced benefits to
colleagues, enrichment of training opportunities and improved engagement
through colleague forums. This has resulted in an increase in the number of
colleagues who consider the Group a great place to work.
· Continued brand focus, with Bristol Street Motors now the top
automotive retail brand (including disrupters) in England and Wales.
Improvements in awareness of the Vertu Motors and Macklin Motors brands also
delivered.
· Application of stringent capital allocation disciplines.
Acquisitions are only undertaken if they meet required return levels.
Dividends were re-established and over 9.7m shares bought back in the Year,
with the buyback programme continuing.
I am very proud to see how every colleague has contributed to the success of
the Group and I would like to thank them for this. The commitment that they
have shown over the past year has been exemplary.
As we enter the new financial year, the economic, social and health effects of
the pandemic are ongoing, and we are mindful of macroeconomic and geopolitical
risks. The Group's excellent financial position, continued investment in its
colleagues and systems and its established track record of execution gives
confidence that we will continue to deliver on our strategic objectives.
Andy Goss, Chairman
(1) Adjusted to remove share-based payments charge, amortisation of intangible
assets and impairment charges
CHIEF EXECUTIVE'S REVIEW
Execution of Strategy
The Group's key long-term strategic goal remains: To deliver growing,
sustainable cashflows from operational excellence in the franchise automotive
retail sector. The strategic objectives of the Group were updated following
a Board review during the Year and are summarised below:
• To grow as a major scaled franchised dealership group and to
develop our portfolio of Manufacturer partners, whilst being mindful of
industry development trends, to maximise long-run returns.
· To be at the forefront of digitalisation in the sector, delivering a
cohesive 'bricks and clicks' strategy:
o Optimise our omnichannel retail offering through leveraging the
'Click2Drive' technology and utilising this important sub-brand to promote its
usage
o Digitalise aftersales processes to improve customer service
o Reduce the cost base of the Group by delivering efficiency using
technology
o Utilise data driven decision making to generate enhanced returns
· To develop and motivate the Group's colleagues to ensure operational
excellence is delivered constantly across the business.
· To develop ancillary businesses to add revenue and returns that
complement the core business.
An update on progress in executing these strategies is set out below:
Developing the Scale of the Group
The Group has an excellent platform allowing it to capitalise on
opportunities:
• Financial capacity
The Group's balance sheet strength is underpinned by a significant freehold
and long leasehold property portfolio and a largely unencumbered inventory of
used cars. This strong asset base, together with a net cash position on 28
February 2022 means there remains significant firepower available to
facilitate the Group's future growth ambitions. This is estimated at around
£90m. The Group will apply its very disciplined approach to acquisitive
growth to ensure that only the right opportunities to drive long term success
and shareholder value are executed.
• Management capacity
The Group has a stable and experienced senior management team, with an
established track record of execution and performance delivery. This team
has very much an "owner" mentality and sets the "tone from the top" to ensure
that the business's culture is appropriate and consistent across all its
operations. This ensures the delivery of the Group's Mission Statement ("To
deliver an outstanding customer motoring experience through honesty and
trust") through application of the Group's Values ("Professionalism, Passion,
Recognition, Integrity, Respect, Opportunity and Commitment"). These matters
are not considered just words but are vital to the Group's success and this is
evidenced by strong awareness of the Values by colleagues.
In April 2022, the Group appointed Bruce Clark as its Chief Technology
Officer, a new position on the Operational CEO Committee of the Group. Bruce
joined the Group in 2013 and will be responsible for IT infrastructure, data
security, software development and data analytics. This appointment will be
augmented by further appointments in the technology area and highlights the
Group's focus on this key area and increasing bandwidth.
• Operational Systems Platform
The Group's in-house developed systems provide uniform processes and control,
as well as live management information and data to allow speedy and
appropriate decision making. Acquired businesses are quickly migrated onto
this scalable technology and process platform to ensure control is quickly
established and performance improvement opportunities are highlighted. The
scale of the Group allows it to continue to increase investment in the
development of systems and operations to further augment the Group's customer
offering and profitability. A 50 strong development team is now in place.
• Brand Strength
The Group operates three major customer facing brands in the UK: Bristol
Street Motors, Macklin Motors and Vertu Motors. Bristol Street Motors
remains one of the largest sector brands, with a UK prompted brand awareness
of approx. 48.7%, currently the third highest ranking franchised automotive
retail brand in the UK, with the brand ranked number 1 on prompted brand
awareness in England and Wales. In Scotland, the Group operates under the
Macklin Motors brand, which has a strong 40% brand awareness. Vertu Motors
is the Group's premium focused brand, with a growing prompted awareness of
approx. 7%. Each of these brands is supported by extensive TV campaigns,
sports sponsorships and partnerships and digital marketing initiatives.
• Execution of growth strategy in the Year
The Group has the brand strength and financial, operational, and management
capabilities to continue to add additional franchised outlets to the
business.
On 12 March 2021 the Group acquired the trade and assets of a Honda car
dealership in Huddersfield, West Yorkshire, which also holds an authorised
repair contract for Mitsubishi, from Hepworth Motor Group. Total
consideration of £0.7m was settled from the Group's cash resources.
On 10 December 2021 the Group acquired the entire issued share capital of
Farmer & Carlisle Holdings Limited, which operated two Toyota franchise
freehold dealerships located in Loughborough and Leicester. The share
capital was acquired for cash consideration of £8.7m (including £0.9m net
cash acquired). Consideration included a payment in respect of goodwill of
£2.35m. The businesses have been fully integrated in terms of the Group's
systems and processes.
The Group was delighted to announce further expansion with Toyota as Macklin
Motors was awarded the franchise in the West of Scotland from 1 April 2022.
The Group intends to develop a total of four dealerships in the coming periods
to cover this extensive territory. The first dealership opened in Darnley,
South Glasgow on the 1 April 2022, in the freehold premises acquired in early
2021. An additional facility will be open in the Autumn. These
developments will augment the Group's existing three Toyota dealerships
located in the East Midlands and create a scaled level of representation with
this much sought-after brand.
The Group also continues to evaluate and execute multi-franchising actions in
its locations to maximise the long-term profitability of each location, and
position the Group well for the EV transition, where we have gained market
share. The Year saw the Group execute on this strategy in several locations
as set out below:
· In June 2021 a new franchise outlet for Citroen was added
alongside the Group's existing Vauxhall outlet in Northampton. This was the
third Citroen outlet added in the last 24 months.
· As planned, the Vauxhall, Renault, Dacia and Hyundai
franchises were added to the Group's existing dealership premises in
Dunfermline, Fife with Ford sales operations having ceased on 30 September
2021.
· The Honda Bikes franchise was added to the Group's
existing Honda dealership in Stockton bringing the total number of outlets in
the Group's Vertu Motorcycles Division to four.
· The Group opened new standalone Renault and Dacia
franchise outlets in Leicester and York.
· The Group gained the MG franchise for the first time
during the Year, and now operates three outlets in Carlisle, Beaconsfield and
Edinburgh. Two more MG outlets are planned.
· The Group opened its first Stellantis multi-brand
aftersales centre in Harlow in November 2021, in premises located near the
Group's existing Peugeot dealership in Harlow, Essex.
· The Hyundai franchise was added to the Group's existing
Honda dealership in Sunderland. In addition, the Peugeot franchise has been
added to the Group's Sunderland Vauxhall dealership.
· In January 2022 a newly built freehold dealership opened
in Newbridge, Edinburgh representing Kia and Peugeot. These franchises
relocated from leasehold premises on the expiration of the lease. The MG
franchise was also included in the new development with this business having
been acquired in December 2021.
· On 1 May 2022, the Group opened a further Bristol Street
Motor Nation used car outlet in newly acquired leasehold premises at Stockton,
Teesside. This is a large used car operation in a prime location in the
town. The development extends the Bristol Street Motors brand into the core
of Teesside for the first time.
The Board continues to actively manage the Group's portfolio of dealerships
and assess further growth opportunities, taking account of future trends in
electric vehicles, whilst utilising strict investment return metrics to ensure
discipline in capital allocation.
Pruning activities were also undertaken during the Year. The Group's single
Mitsubishi and Suzuki outlets in Edinburgh ceased operation during the Year.
In addition, the Group's surplus properties held for resale were sold during
the Year generating cash proceeds of £1.4m.
Digitalisation Developments
• Omnichannel Retail Sales Developments
The Group was the first UK retailer in 2017 to offer full online retailing of
used cars and continues to be at the forefront of developments to provide
customers with innovative ways to purchase and interact online. The
sub-brand 'Click2Drive' was established during the Year to capitalise on
online and omnichannel sales opportunities and to ensure that customers had
the requisite flexibility to purchase vehicles in the manner of their
choosing. This new brand was launched in October 2021 supported by TV
advertising campaigns under the Bristol Street Motors umbrella. The
comprehensive omni-channel Click2Drive offering is now available across the
main three Group brand websites, Bristol Street Motors, Vertu Motors and
Macklin Motors.
At the same time as the 'Click2Drive' brand launch, the Group's online
retailing capability was enhanced by the launch of a 'concierge' service,
aiding customers who may need help with their online vehicle purchase. This
service is provided by a new team within the Sales Customer Experience Contact
centre located in Gateshead. In the first four months of operation, the
concierge service has guided customers through the online purchase journey
taking over 400 vehicle orders and increasing sales conversion in online and
offline channels. The concierge effectively acts as a personal shopper,
co-ordinating all interaction with the customer, including liaison with the
Group's 160 sales outlets.
A migration of the infrastructure running the Group's websites and intranet
applications from physical data centres to the Amazon Web Services (AWS) cloud
was completed in January 2022. This infrastructure has given the Group the
ability to automatically scale its website capacity and early results are very
encouraging. An immediate improvement of a 25% reduction in page load time
was delivered. This led to a 35% increase in the Group's overall Google
Insights score for mobile visitors. These improvements generate an improved
user experience to website users and contribute to longer term improvements in
search engine optimisation performance.
The Group has made a significant investment in cloud-based telephony systems
and a Customer Data Platform (CDP) during the Year. These technologies are
currently in their roll-out phase, and it is expected that it will take to the
end of the calendar year to fully roll these out across the Group's extensive
dealer network. The telephony system will enable more effective tracking of
enquiries and provide real time information to our colleagues on both calls
received and calls made, allowing management to respond more quickly to ensure
the Group delivers outstanding customer experiences. Data contained in the
CDP will be used to improve the effectiveness of marketing activities,
ensuring that we communicate with customers at the right time and with
relevant personalised offers. In addition, such first party data will
improve the efficiency of digital marketing activities. These initiatives
will allow our colleagues to better serve our customers and will help to drive
improved conversion rates on enquiries.
• Digitalisation of Aftersales
The Group's aftersales functions, which include vehicle service and mechanical
repair, accident repair and parts supply, represent a significant and
important proportion of overall profitability. There is an increasingly
important role for digitalisation within the Group's aftersales operations.
The Group's customers can book a vehicle service appointment fully online, 24
hours a day. The number of online bookings made in this way continues to
grow year-on-year, with over 73,000 made in FY22 (FY20: 36,000). In addition,
further development work is underway to deliver self-service and online
functionality to customers after the booking and during the visit. The aim is
to create as effortless a customer journey as possible to increase sales
conversion of additional work identified, average invoice value and future
customer retention.
The Group seeks to capture new aftersales customers as they are looking for
vehicle repairs or service on-line through its digital conquest strategy.
This successful strategy has continued to augment our service operations with
additional bookings from customers who in the main have never used the Group's
aftersales services before. The successful execution of this strategy has
delivered a 143% growth in the number of bookings via this strategy over the
Year. The Group anticipates 28,000 such bookings in the next 12 months.
These bookings tended to be for older vehicles out of manufacturer warranty
periods which is a growing part of the aftersales market.
• Digitalisation to improve efficiency and reduce
cost
The Group has always been very focused on the detailed management of its cost
base and has been successful in the digitalisation of processes to drive
efficiency and therefore reduce costs. Further digitalisation and robotic
process automation has been delivered by the in-house development team in the
Year to improve efficiency in the areas of vehicle administration, inventory
control, smart repair ordering, customer refunds and payment receipts.
Another area identified for technology deployment is in the vehicle valet
arena. A new App to control the activity of the Group's substantial valeting
resource is being developed and will be piloted in May 2022. This App will
link data from our sales and aftersales systems to instruct valet activity,
measure productivity and allow ease of cost allocation, facilitating
efficiency savings and removal of duplicated activity.
Recruiting, Retaining and Developing Colleagues
It is a priority of the Group to develop and motivate the Group's colleagues
to ensure the delivery of operational excellence and outstanding customer
experiences. One of the most significant current challenges in the business
remains workforce recruitment and retention. The number of UK job vacancies
has continued to grow to record levels of 1.3 million (source: ONS), with half
of UK industry sectors showing record highs. The inevitable consequence of
these resource constraints has been wage inflation. The Group is not immune
to these effects and has consistently seen vacancy levels of approx. 500
vacancies over the second half of the Year with recent reductions visible. A
key objective for the Group remains to significantly reduce the number of
outstanding vacancies to ensure customer service levels are met and revenue
opportunities maximised.
A survey conducted in January 2022 saw 88% of colleagues ranking the Group as
a great place to work (up from 85.3% in July 2021). This improvement is in
part due to the initiatives delivered to ensure that the Group remains an
employer of choice in the sector. For example, the enhancement of maternity
pay provisions in the Summer and pay reviews for the majority of
non-management colleagues which were actioned by 1 January 2022. In
addition, in March 2022 the Group announced an enhancement to holiday
entitlement for all colleagues from 23 to 25 days with up to four additional
days available to longest serving colleagues. These initiatives should aid
colleague retention and attraction.
The Group launched dealership colleague forums during the Year, a formalised
way in which colleagues of all levels can provide their feedback on work
matters. Forums have also had the opportunity to access the non-executive
director for colleague engagement, Pauline Best. It was feedback from these
forums that aided Group management on the need for actions in respect of the
colleague initiatives above.
The Group has long been committed to extensive investment in the development
of all colleagues to provide opportunity to those who are talented and driven
to succeed. Programmes include a degree apprentice scheme, technician
apprentice schemes and development programmes to facilitate progression to
management roles in all areas. The Group has also launched a new modern
apprentice programme for service advisors and has recruited 51 out of the
targeted 112 positions to date. In addition, the Group deepened its
partnership with the Dale Carnegie Institute, increasing the scope of online
and offline personal and leadership development training across the Group.
All colleagues now have access to online personal development programmes based
on the principles of Dale Carnegie's book, "How to Win Friends and Influence
People".
Ancillary Businesses
The Group's growing ancillary business division has a dedicated divisional
team to drive the success of the businesses, which include Vansdirect,
AceParts and TaxiCentre. The Group has a strategy to develop such businesses
to add revenue and returns that complement the core businesses.
On 31 May 2021, the Group executed on this strategy to add complementary
ancillary businesses with the purchase of Powerbulbs Online Limited for
£481,000. This business complements the Group's existing AceParts online
parts sales operation, which currently sells to consumers via Marketplaces.
Powerbulbs represents an established ecommerce website, with good reach and
rankings, historically selling to customers both in the UK and substantially
overseas. The business has been integrated into AceParts and has strong
growth prospects.
Strategic Summary
Our experienced management team, strong brands, digital prowess and financial
strength ensure the Group is well positioned to take advantage of the
opportunities arising and the team is ambitious to do so. The Group will
continue to innovate and execute to ensure that it excels in meeting customer
needs and responds to the changing external environment in which we operate.
Capital is allocated to those activities, locations and franchises that are
best placed to meet the competitive challenges arising and to provide the best
growth opportunities and maximise long-term return on invested capital. The
Group will leverage on its proven strengths and execute on cost saving
initiatives, continued development of colleagues, accelerating brand growth
and pursuing new business opportunities.
Other Sector Trends
In addition to the well-publicised digitalisation of sales transactions, the
franchised Automotive Retail sector continues to evolve in the areas of
electrification and agency distribution. Responding to these trends is
clearly top of mind for the Board.
1. Electrification
Consumer appetite for electric vehicles is growing, aided by improvements in
driving range and by a significant increase in the choice of vehicles. Local
and Central Government environmental policies are playing a part in this sales
growth. Despite overall supply constraints in new vehicles throughout the
period, electric and hybrid vehicle sales in the UK saw growth of over 60% in
calendar 2021 compared to 2020 representing a significant market share
increase. The Group delivered volume growth more than these market trends so
increasing its market share.
The Group has ensured that all colleagues are appropriately trained on
electric vehicles, to respond to customer enquiries and provide repair
services. Training in this regard is provided by both the Group's own sales
and aftersales training, with colleagues also attending manufacturer training.
The Group's commitment to the electrification agenda is evidenced by the
fact that the Group has significantly more dealerships approved under the
Government's EVA (Electric Vehicle Approved) scheme than any other UK
retailer. This scheme sets out minimum standards on operating electric
vehicle sales and service outlets and is subject to audit. 21 dealerships
are currently approved, and the aim is to have every dealership approved in
short order to provide customer confidence.
Increased electrification of the vehicle parc requires ongoing investment in
terms of EV infrastructure such as in aftersales capabilities and charging.
The Group invested £0.5m in charging infrastructure in the Year with a
further £1.0m planned in the next 12 months.
2. Agency Distribution
A number of Manufacturer partners in the UK are moving to an agency sales
distribution model. Under this model, in respect of new vehicle sales, the
Manufacturer transacts with the customer while the retailer remains the
physical touchpoint with the customer and undertakes the sales process as an
agent. The dealer-turned-agent receives a commission on each new vehicle
sale, but will own no inventory and will no longer set prices or discounts.
In turn, the dealer is exempted from all significant commercial risks
associated with the sale. There are varying iterations of the agency model
proposed and the picture is evolving.
The Group has long operated on an agency basis for a significant proportion of
fleet and parts sales. The first of the Group's manufacturer partners to
operate the agency model for new retail sales will be Cupra electric vehicles
later in 2022, with Mercedes-Benz passenger cars following from 1 January
2023.
Current Business Priorities
There is no doubt that the Group is now operating in an inflationary cost
environment which has not been evident in its 15-year history to date. It is
therefore more important than ever that the Group ensures there is a focus on
the basics of the business - that operational excellence is pursued as market
conditions may tighten. With this in mind, the Group has established three
immediate priorities in addition to its longer-term strategy:
1. Cost Management
Without curtailing investment in the delivery of the long-term strategic
objectives of the Group, control of costs is essential. The Group is seeking
to avoid inflationary pressures leading to an environment where costs are not
appropriately controlled. The right mindset and culture of cost management
is vital.
The Group has recently relaunched its 'war on waste' initiative to drive
behavioural change amongst our colleagues to save cost, for example around
energy use given escalating costs. The Group's fixed price energy contract
for the supply of electricity ends on 1 October 2022. Pricing in the energy
market has meant that the Group can potentially expect higher than budgeted
increases on the renewal of these contracts increasing costs.
The Group has also identified appropriate capital investment to drive savings,
for example in the fitting of LED lighting in all of the Group's vehicle
repair workshops, an 18-month project of approx. £1.2m capital investment, to
save significant energy use going forward. Further projects to reduce energy
costs are being evaluated.
The Group continues to identify areas in the business where the Group's 50
strong software development team can be put to work to create efficiencies
through use of technology.
2. Maximisation of Conversion of enquiries to revenues
The Group has an objective to increase the conversion of opportunities to
revenues in both the sales and aftersales areas through a focus on process,
measurement and use of technology. Maximising the return from the Group's
marketing spend is a key priority.
The Year has seen the sales processes of the Group continue to evolve, with
the objectives of improving the customer journey and increasing the conversion
of enquiries into sales. The development of the Group's Sales Customer
Experience Centre has driven improved conversion in several ways and the
continued focus on this area will be vital in the months ahead.
A project is now underway to digitise the aftersales service process to
enhance sales conversion and the customer experience.
3. Customer Experience to drive retention
Delivery of the Group's Mission 'to deliver an outstanding customer motoring
experience through honesty and trust' remains vital to improving retention of
customers into both the Group's service departments and for future vehicle
sales. Great experiences boost retention, recommendation rates and profit
per transaction. In addition, positive online reviews provide a fantastic
and vital window into the Group's service delivery for prospective customers.
42% of new retail vehicle customers and 18% of used vehicle customers
currently return to the Group within four years to purchase another vehicle.
The Group is targeting a significant improvement in these measures, through
the execution of its digitalisation and customer focused developments. This
includes the recent establishment of 'renewal hubs' for both new and used car
sales. Colleagues in these hubs contact previous customers at the time they
are likely be in the market to change their vehicles.
CURRENT TRADING AND OUTLOOK
· March & April 2022 Trading
The Group delivered a trading profit of £19.1m (FY22 : £19.2m) in March and
April 2022 ("the post year end period"). This result was in line with prior
year levels, which included business rates support and significant pent-up
consumer demand as the UK emerged from lockdown.
The Group's trading performance in the post year end period is summarised
below, with comparisons shown against March and April 2021.
Like-for-like variance to SMMT Market
Group Total Like-for-Like SMMT Market
Variance Variance Variance
Group Revenue 5.1% 4.3%
Service Revenues(11) 5.8% 5.0%
Volumes:
Used Retail Vehicles (12.9%) (13.2%)
New Retail Vehicles 9.3% 7.4% 7.1% 0.3%
Motability Vehicles (17.4%) (17.2%) (27.0%) 9.8%
New Fleet Cars(12) (22.0%) (24.5%) (34.0%) 9.5%
New Commercial Vehicles (17.4%) (20.0%) (28.1%) 8.1%
(11) Includes internal and external revenues
(12) Includes agency volumes
Group revenue growth was delivered in the post year end period, due to
continued strong vehicle prices. Like-for-like new retail vehicle volumes
grew 7.4% slightly ahead of the market, despite ongoing supply constraints due
to global supply chain shortages, noticeably semiconductors. The Group
significantly outperformed the wider market volume trends in the fleet,
commercial and Motability channels of new vehicle sales. Margins were
robust, benefitting from strong pricing disciplines and quarterly bonus in
March which were absent in the prior year due to the impact of lockdown. The
bulk of the gross profit increase in the post year end period, year-on- year,
arose in the new retail vehicle channel.
The used vehicle market showed increased signs of normalisation in the post
year end period. Consumer demand in the prior year reflected pent-up demand
post lockdowns and a lack of alternative spending channels for consumers such
as holidays. In addition, used vehicle demand has also been impacted by the
high rise year-on-year in used vehicle prices and increased demand for
electric vehicles, which are available in the new car channel rather than
used. Like-for-like volumes of used cars therefore continued to decline as
in H2 FY22.
Constrained supply of used vehicles is set to continue and this has
underpinned used values in the post year end period. As a result, whilst
gross profits per unit traded below FY22 levels, they remained significantly
ahead of historic normalised levels. Higher sales prices resulted in reduced
and more normal gross profit margin percentages.
Like-for-like service activity improved compared to last year by 2.8%.
Internal and retail service work showed year-on-year growth with substantial
shortfalls in warranty work, in part due to declines in the 0-3 year vehicle
parc. As anticipated, aftersales margins reduced due to the impact of higher
technician salary costs.
· Outlook
Shortfalls in the supply of both new and used vehicles in the UK are likely to
continue for some time because of the dislocation in global supply chains
impacting on vehicle production. Such supply constraints helped to underpin
vehicle values and margins throughout March and April. Consumer confidence
in the face of rising domestic costs is a critical determinant to continuing
success, both in terms of demand and used vehicle pricing trends. Management
is focused on operational excellence around cost, conversion and customer
experience and the delivery of the Group's strategic objectives.
The Board believes that the Group is strategically very well placed to
capitalise on the challenges and opportunities in the UK automotive retail
sector and remains confident in the prospects for the Group. Its strong
balance sheet, management and technological capability underpin this
confidence. The Group's excellent relationships with its chosen Manufacturer
partners underpin further growth opportunities, which are likely to
accelerate.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The lockdown restrictions throughout parts of FY21 and, to a lesser extent,
the start of FY22 disrupted the Group's operations significantly. The tables
below include comparatives to both the years ended 28 February 2021 (FY21) and
29 February 2020 (FY20) to help a better understanding the Group's
performance. The Group's income statement for the Year is summarised below:
FY22 FY21 FY22 Var to FY21 FY20 FY22 Var to FY20
£'m £'m % £'m %
Revenue 3,615.1 2,547.7 41.9% 3,064.5 18.0%
Gross profit 435.4 301.0 44.7% 334.1 30.3%
Operating expenses excluding Government support (354.3) (303.7) (16.7%) (301.9)
(17.4%)
Government support(5) 6.6 36.5 (81.9%) - -
Operating expenses reported (347.7) (267.2) (30.1%) (301.9) (15.2%)
Adjusted Operating profit 87.7 33.8 159.5% 32.2 172.4%
Net Finance Charges (7.0) (9.2) 23.9% (9.2) 23.9%
Adjusted Profit Before Tax 80.7 24.6 228.0% 23.0 250.9%
Non-Underlying items(6) (1.9) (2.2) 13.6% (15.7) 87.9%
Profit Before Tax 78.8 22.4 251.8% 7.3 979.5%
Taxation (18.8) (6.1) (208.2%) (4.3) (337.2%)
Profit After Tax 60.0 16.3 268.1% 3.0 1,900%
(5) includes receipts under the Coronavirus Job Retention Scheme and business
rates relief
(6) Non-underlying items represent share-based payment charge, amortisation of
intangible assets and impairment charges
The Group delivered a record result in the Year, generating an adjusted profit
before tax of £80.7m. (FY21 £24.6m, FY20 £23.0m).
Revenue grew to £3.6bn, a growth of £550.6m (18.0%) compared to the
pre-pandemic FY20. Acquisitions completed after 1 March 2019 contributed
additional revenues of £480.1m, whilst the execution of pruning activities of
disposals generated a revenue reduction of £48.2m. Rising vehicle prices
were largely responsible for the underlying £118.7m (3.9%) increase in Core
Group revenues.
Gross margins remained strong, aided by the sector tailwinds, at 12.0% (2021:
11.8%, 2020: 10.9%).
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
FY22 FY21 FY22 FY20 FY22
£'m £'m Var to FY21 £'m Var to FY20
Revenue
New 969.9 739.7 230.2 862.5 107.4
Fleet & Commercial 772.0 578.4 193.6 708.5 63.5
Used 1,584.4 1,008.4 576.0 1,235.4 349.0
Aftersales 288.8 221.2 67.6 258.1 30.7
Total Group Revenue 3,615.1 2,547.7 1,067.4 3,064.5 550.6
Gross Profit
New 80.6 54.3 26.3 62.7 17.9
Fleet & Commercial 35.5 23.2 12.3 25.8 9.7
Used 154.4 93.9 60.5 102.1 52.3
Aftersales 164.9 129.6 35.3 143.5 21.4
Total Gross Profit 435.4 301.0 134.4 334.1 101.3
Gross Margin
New 8.3% 7.3% 1.0% 7.3% 1.0%
Fleet & Commercial 4.6% 4.0% 0.6% 3.6% 1.0%
Used 9.7% 9.3% 0.4% 8.3% 1.4%
Aftersales(7) 47.1% 49.3% (2.2%) 46.9% 0.2%
Total Gross Margin 12.0% 11.8% 0.2% 10.9% 1.1%
(7) Aftersales margin expressed on internal and external revenues
The total volumes of vehicles sold by the Group and like-for-like trends
against market data are set out below:
FY22 FY21 Like-for-like FY20 Like-for-like
FY22 FY22
Units Units % Var to FY21 Units % Var to FY20
Used retail vehicles 88,772 65,847 28.6% 84,771 (7.1%)
New retail cars 33,366 25,437 21.4% 32,701 (14.6%)
Motability cars 8,404 8,806 (6.9%) 9,722 (21.4%)
Direct fleet cars 14,089 9,917 33.7% 17,053 (34.9%)
Agency fleet cars 4,664 4,693 10.7% 5,704 (26.0%)
Total fleet cars 18,753 14,610 26.9% 22,757 (28.0%)
Commercial vehicles 17,528 15,618 10.6% 17,596 (2.0%)
Total New vehicles 78,051 64,471 16.1% 82,776 (16.2%)
Total vehicles 166,823 130,318 22.5% 167,547 (11.6%)
FY22 v FY21 FY22 v FY20
Group Variance to market(8) UK Market Group Variance to market(8) UK Market(9)
New Retail Car 4.2% 17.2% 2.5% (17.1%)
Motability Car 2.4% (9.3%) 3.1% (24.5%)
Fleet Car 25.5% 1.4% 6.0% (34.0%)
Commercial (6.8%) 17.4% 3.2% (5.2%)
(8) Represents the variance of like-for-like Group volumes to the UK trends
reported by SMMT
(9) Source SMMT
Used retail vehicles
The used vehicle market in the UK, has seen unprecedented market dynamics
throughout the Year. The impact of the Pandemic reduced the new and used
vehicle market due to lockdowns together with creating new vehicle production
disruption which impacted on the supply side. Constrained supply of used
vehicles has consequently been apparent driving increased vehicle prices and
margins and leading to record used vehicle profitability. Record retail
margins were boosted by strong profits on the disposal of trade vehicles.
A period of strong customer demand was seen as the UK emerged from lockdown in
April 2021, aided by increased consumer savings rates, the absence of
alternative spending options and a shift away from public transport. This
strong demand meant that the April to June 2021 period was the best quarter on
record for used vehicle transactions in the UK(9), growing 6.6% on
pre-pandemic 2019. In all other months in calendar 2021, UK used vehicle
transactions fell year-on-year compared to pre-pandemic levels (2019). 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% 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.
The Group keeps the UK used vehicle demand, pricing and supply environment
under constant review. This focus ensures that an appropriate balance
between volume and margin is maintained. The Group utilised a mix of
strategies to secure used vehicle inventory despite shortages of supply,
including direct purchases from consumers and utilising both central
purchasing capabilities and its extensive local dealership management to
source supply.
A 40% rise in prices over the Year has meant that overall used vehicle
inventory levels in the Core Group increased by £21.5m. Ensuring a good
supply of used vehicle inventory left the Group well placed to capitalise on
the favourable market conditions, resulting in a record profit performance
both in used cars and for the Group as a whole.
Group gross profit from the sale of used vehicles totalled £154.4m for the
Year (FY21: £93.9m; FY20: £102.1m). When comparing to the more stable
period of the year ended 29 February 2020 (FY20), the following like-for-like
variances arose:
· £38.1m increase in gross profit generated from used vehicle sales
· 7.1% decrease in the number of used retail units sold
· Gross profit per unit of £1,763, a rise of 45.6% from £1,211
· Average selling price of £17,376 per unit, a 19.3% increase
· Gross margin rising substantially to 10.1% from 8.3%
(9) Source: SMMT
New retail cars and Motability sales
UK retail registrations significantly improved, by 17.2%, over the FY21
comparative period which was impacted by longer and more complete lockdowns.
Compared to the pre-pandemic year ended 29 February 2020 (FY20), UK new
vehicle retail registrations actually fell by 17.1%, reflecting reduced supply
of new cars and March 2021 being a month where showrooms were closed to
customer visits. Well documented component shortages together with
disruption at factories and within the global supply chain have all adversely
affected new vehicle supply. Against this backdrop, the Group's
like-for-like new retail vehicle volumes declined by 14.6% when compared to
the year ended 29 February 2020. The Group therefore outperformed the market
decline of 17.1%. Despite supply constraints dampening UK new vehicle
registrations, sales of electric and hybrid vehicles have significantly
increased with the SMMT highlighting new retail registrations of these
vehicles having increased by 101.3% in FY22 compared to FY21. The Group saw
like-for-like sales of electric and hybrid vehicles grow by over 170% in the
Year and consequently grew its market share in this vital and growing
channel. Ordertake has been very strong and the Group's order bank levels
for new retail vehicles remain at record levels, with over 16,000 new retail
vehicles ordered in the Year remaining undelivered as at 28 February 2022.
This figure represents 48% of new retail vehicles sold by the Group in the
year ended 28 February 2022.
UK Motability registrations were also impacted by supply constraints and
declined by 24.5%, compared to FY20. The Group's Motability volumes,
declined by 21.4% over the same period on a like-for-like basis, slightly
ahead of the market and representing a UK market share of 4.8%. The Group is
Motability's largest partner in the UK.
Issues in the supply chain, meant that many of the Group's Manufacturer
partners reduced or removed volume targets. The reduction in supply in a
period of robust demand and reduced pressure to achieve volume targets, led to
improved gross profit retention aided by the application of effective pricing
disciplines. Consumers have been increasingly accepting of long lead times,
especially as the rise in used vehicle prices significantly reduced the cost
to change to a new vehicle. Compared to the year ended 29 February 2020, the
following trends were apparent on a like-for-like basis for the New Retail and
Motability sales channel:
· A £7.2m increase in gross profit generated, despite a 14.6% reduction
in the number of new retail units sold
· Gross profit per unit of £1,921, a rise of 31.5% from £1,461
· An average selling price of £21,734 per unit, a 17.6% increase
· Gross margin rising to 8.4% from 7.3% despite the significant increase
in average selling price
Fleet & Commercial vehicle sales
The UK car fleet market continues to see reduced activity as the restrictions
in the supply of new vehicles caused many Manufacturers to divert limited
capacity to higher margin retail channels. Retailers also benefit from this
protection of their higher margin channels. Registration volumes in the UK
car fleet market declined 34.0% in the Year compared to the year ended 29
February 2020. Like-for-like, the Group delivered 15,518 fleet cars in the
Year, representing a decline of 28.0% compared to FY20, which was ahead of the
market trends. Margins strengthened due to supply constraints, pricing mix
changes and the Group adopting strong pricing disciplines.
The light commercial vehicle market in the UK rebounded after the lockdown,
due in part to strong underlying demand from key sectors, notably construction
and home deliveries. Nevertheless, UK van registrations fell 5.2% in the
year to 28 February 2022, when compared to FY20 levels, as production and
supply issues also impacted this sector. The Group saw a 2.0% fall in the
like-for-like volume of new commercial vehicles sold, ahead of the market
trends, compared to FY20. This market outperformance by the Group was aided
by a strong performance from the Group's Vansdirect business. The Group sold
5.0% of UK new light commercial vehicles in the Year.
When compared the year ended 29 February 2020, the following fleet and
commercial trends were seen on a like-for-like basis:
· A £6.7m increase in gross profit, despite a reduction in the number of
units sold
· Record gross profit per unit of £957, a rise of 50.2% from £637
· Gross margin rising to a record 4.6% from 3.6%
Aftersales
The Group's aftersales operations are a vital contributor to Group
profitability, generating 38% of total gross profit.
Overall, compared to the Year ended 29 February 2020 (FY20) the following
like-for-like trends in aftersales performance were witnessed:
Service Accident & Smart Repair Total
Parts
£'m £'m £'m £'m
Revenue(10) 131.0 149.2 22.5 302.7
Revenue(10) change (0.0) 0.8 3.9 4.7
Revenue(10) change (%) 0.0% 0.5% 21.2% 1.6%
Gross profit change (0.4) 1.7 1.4 2.7
Gross margin(11) FY22 (%) 76.7% 22.5% 37.8% 47.1%
Gross margin(11) FY20 (%) 77.0% 21.5% 38.4% 46.9%
(10) includes internal and external revenues
(11) margins in aftersales expressed on internal and external revenues
· Service
The Group's service performance has been impacted by higher-than-average
levels of technician vacancies and by covid related absences. As set out in
the Strategy section of this announcement, the Group took action to address
colleague recruitment and retention through a Group wide salary review. This
was implemented for technicians in November 2021 and technicians saw the
highest percentage increases.
Partly because of resource constraints including covid-related absences,
like-for-like, the Group sold 4.9% less service hours in the year to 28
February 2022 when compared to the pre-pandemic year to 29 February 2020.
Most of this shortfall in hours arose from a reduction in warranty work
undertaken by the Group on behalf of its Manufacturer partners. A decline in
the 0-3 year parc in the UK, due to reduced new vehicle registrations in the
last two years, along with fewer journeys being undertaken in the early part
of FY22 due to lockdowns, contributed to this decline in warranty work. Some
weakness in internal hours sold was also apparent, driven by reduced volumes
of vehicles sold in the core Group. The Group was successful in
maintaining core retail service hours sold at FY20 levels, through strong
execution of retention and aftersales processes and the active targeting of
conquest business particularly of older vehicles.
The Group's customer retention strategies focus on ensuring vehicle sales
customers return to the Group for their service, whether they have purchased a
new or used vehicle. Service plans, through which customers pay monthly or
upfront for their annual service are a vital part of retention. The Group
has been successful in improving the penetration of service plan sales on used
vehicles over the Year, selling over 31,000 plans, representing approx. 38% of
all retail used cars sold. The Group has over 160,000 live service plans
including manufacturer service plans. Excellence of customer service is
vital to retention, with the Group having a strong vehicle health check
("VHC") process, where any items requiring attention are highlighted in a
video provided direct to the customer. The customer can then give their
approval for any repairs required. On average, the Group sells £86 of work
identified by this process to each customer.
Strong execution resulted in like-for-like service revenues being stable
compared to FY20 despite the reduction in hours sold. Gross margin
percentages on vehicle servicing declined slightly to 76.7% (FY20: 77.0%) in
the Core Group reflecting the remuneration action taken to address technician
resource constraints, which increased cost of sales in the service department.
· Parts
Parts revenues in the Core Group grew £0.8m compared to FY20, as the Group
gained market share offset by increasing adoption of the agency distribution
model in certain franchises in recent periods as previously reported.
As a new development in the Group's Aftersales Customer Experience Centre,
inbound parts phone enquiries from retail customers are now being centralised
with orders taken in Gateshead for the Group's dealerships. This unit
started in early 2021, delivered revenues of £2.9m in the Year and enhanced
customer experiences, augmenting the Group's high margin parts sales.
Rollout to all Group dealerships of this function is now nearing completion.
Gross margins in parts rose from 21.5% to 22.5% as the Group took market share
in the Group's premium franchises, delivered excellent customer experiences
and benefited from agency parts operations being a higher proportion of the
Group activities. In agency operations, the Group records no revenues or
cost of sales, except a handling fee representing 100% gross margin.
· Accident and Smart Repair
The Group has significantly expanded its Smart Repair operations, which now
has 88 colleagues providing mobile cosmetic, windscreen and alloy wheel
repairs serving both the Group's dealerships and external customers across the
UK. The expansion of the Group's Smart Repair operations account for over
50% of the increase in revenues in this channel.
During the Year, the Group moved responsibility for all of the Group's
accident repair centres out of the dealership divisional operations, into a
new standalone division, concentrating solely on the management of this
channel. In the first half of the Year, less journeys were made in the UK
due to Pandemic restrictions and widespread home working, with the result that
fewer accidents were recorded and therefore this reduced activity in the
Group's accident repair centres. Activity recovered in the latter part of
the Year and this, coupled with the increased management focus on this
channel, meant that Core Group revenues grew slightly over the Year.
Margins of 37.8% were achieved (FY20 38.4%). The decline arose due to the
mix impact of higher smart repair activities and technician salaries and
material costs increasing, which could not be passed onto insurance providers
under fixed pricing arrangements.
Acquisitions, Disposals and Closures
Acquisitions made since 1 March 2019 have contributed an additional £4.5m of
profit before tax to the Group compared to FY20, summarised as follows:
FY22 FY20 FY22 Variance to FY20
Revenue PBT Revenue PBT Revenue PBT
£m £m £m £m £m £m
BMW/MINI Acquisition (Dec 2020) 302.8 3.8 - - 302.8 3.8
Yorkshire Volkswagen Acquisition (Jan 2020) 101.7 0.9 9.1 (0.4) 92.6 1.3
Other acquisitions 85.3 (0.7) 0.6 (0.1) 84.7 (0.6)
Total Acquisitions 489.8 4.0 9.7 (0.5) 480.1 4.5
Dealership sales or closure 2.4 (0.1) 50.6 (0.1) (48.2) -
Total Non-Core 492.2 3.9 60.3 (0.6) 431.9 4.5
The contribution from acquisitions is above the levels envisaged at the time
of purchase, reflecting market tailwinds and solid execution of the
integration strategy.
The scaled BMW/MINI dealership acquisition reached its first anniversary as
part of the Group in December 2021. Prior to their acquisition by the Group,
these 12 sales outlets were heavily loss making. The Group successfully
executed its plan to drive performance improvements, aided by the immediate
integration with Group systems and processes. A first-class BMW/MINI
experienced divisional team has been assembled. The acquisition was expected
to be loss making in FY22 and earnings neutral by the year ending 28 February
2023 (FY23). Aided by the Group's actions and favourable market conditions,
these outlets have performed significantly in excess of these expectations,
contributing a profit of £3.8m in FY22.
The other significant acquisition in the period since 1 March 2019 was the
purchase of four Volkswagen Passenger car dealerships in West Yorkshire in
January 2020. These businesses contributed £0.9m to Group profitability in
FY22.
Other acquisitions include the addition of a Honda outlet in Bradford, Kia in
Bradford and a multi-franchise site in Edinburgh, together with the
acquisitions made in FY22 described in the strategic update. Collectively
these outlets contributed a loss of £0.7m with the timing of acquisitions in
FY22, in particular, having an impact on returns given the seasonality of
profitability in the automotive retail sector.
Operating Expenses
A summary of Core Group operating expenses is set out below:
FY22 FY21 FY22 Var to FY21 FY20 FY22 Var to FY20
£'m £'m £'m £'m £'m
Salary costs 176.7 165.0 11.7 168.5 8.2
Marketing costs 31.6 22.5 9.1 27.7 3.9
Vehicle and valeting costs 29.7 25.3 4.4 32.0 (2.3)
Property, rates and energy costs 38.4 36.0 2.4 36.9 1.5
Other 28.5 30.1 (1.6) 28.8 (0.3)
Core Group operating expenses before Government Support 304.9 278.9 26.0 293.9 11.0
Non Core operating expenses 49.4 24.8 24.6 8.0 41.4
354.3 303.7 50.6 301.9 52.4
Government support (CVJRS receipts and rates relief) (6.6) (36.5) 29.9 - (6.6)
Group Net Operating Expenses 347.7 267.2 80.5 301.9 45.8
Reported operating expenses of £347.8m, increased by £45.9m compared to the
year ended 29 February 2020. This increase was partially offset by
Government support of £6.6m and as a consequence the increase excluding this
support was £52.4m. Dealerships acquired or sold in the period since 1
March 2019 generated a net £41.4m of this increase. Underlying Core Group
operating expenses therefore grew, by £11.0m when compared to FY20.
The Group received significant government support in the prior year due to the
dealership closures of the first national lockdowns. In the Year, support
levels significantly reduced, with just £0.2m of net receipts from the
Coronavirus Job Retention Scheme, for which no claims were submitted after the
end of April 2021 when dealerships fully re-opened. In addition, business
rates support in the Year had a value of £6.4m. Under the business rates
relief scheme, business rates on English retail premises remained fully
supported until 30 June 2021, with relief thereafter capped at £2m, whilst
rates support continued at the Group's dealerships located in Scotland.
Salary costs in the Core Group increased by £8.2m compared to FY20
representing 75% of the underlying increase in Core Group operating
expenses. Variable pay and commission levels represented most of this
increase exceeding FY20 levels by £6.4m. This was the result of the record
profitability delivered, with many colleagues' and management bonuses linked
to profitability achieving maximum capped levels. In addition, increases in
sales commissions were seen due to increased gross profit generation. The
remaining increase in salary costs relates to additional headcount in both the
Group's new Customer Experience Centre for sales and expansion of the team of
in-house developers, partially offset by the impact of higher than historic
vacancy levels across the Group. A Group wide pay review was rolled out to
non-management colleagues from January 2022 with only moderate financial
impact in FY22. The pay review for technicians occurred earlier in November
2021 but the impact of this review is apparent in gross margin, as technician
salary costs are included in cost of sales.
The Group invested an additional £3.9m in television and other advertising in
the Year as part of the strategy to grow awareness of the Group's three
customer facing brands.
Other costs include the investment in digitalisation, in particular the
enhancement to cloud-based telephony and the development of the CDP and the
investment in data security, which increased Core Group costs by £1.8m
compared to FY20. This remains a vital strategic area of investment for the
Group. Partially offsetting the impact of the above cost increases were
savings delivered in areas such as vehicle costs, as supply constrained the
Group's demonstrator vehicle fleet and travel, curtailed through working from
home and the switch to online delivery for many of the Group's in-house
training programmes.
Net Finance Charges
Net finance charges fell by £2.3m year-on-year as analysed below:
FY22 FY21 FY22 Var to FY21 FY20 FY22 Var to FY20
£'000 £'000 £'000 £'000 £'000
New vehicle Manufacturer stocking interest 1,702 3,582 (1,880) 3,918 (2,216)
Interest on bank borrowings 1,701 1,874 (173) 1,418 283
Used vehicle stock funding interest 142 317 (175) 630 (488)
Interest on lease liabilities 3,581 3,632 (51) 3,595 (14)
Interest income (163) (174) 11 (405) 242
Net Finance Charges 6,963 9,231 (2,268) 9,156 (2,193)
The bulk of the reduction in net finance charges arose in interest charged by
Manufacturers on funded new vehicle inventory. This reduction is due to the
continued issues in the supply chain which have led to reduced new vehicle
stock which require funding. Total new vehicle stock as at 28 February 2022
was £275m (2021: £438m).
Interest on bank borrowings in the Year declined to £1.7m from £1.9m in FY21
as the Group generated significant cash. This resulted in the repayment of
£10m of the Revolving Credit Facility in June 2021 and reduced utilisation of
used vehicle stocking loans.
Pension Costs
The accounting surplus on the Group's closed defined benefit pension scheme
(Scheme) increased to £9.1m as at 28 February 2022 (2021: £6.2m). Actual
investment returns were more favourable than previously assumed. In
addition, the defined benefit obligation reduced over the Year on changes in
assumptions such as a higher discount rate being applied, following a rise in
corporate bond yields together with an increase in expected future inflation.
The Scheme invests in an LDI portfolio which aims to fully hedge the Scheme's
interest rate (relative to gilts rather than corporate bonds) and inflation
risk. Changes in the discount rate and inflation would therefore be mostly
offset by a change in the value of the Scheme's assets. A net actuarial gain
of £2.8m was recognised in the Statement of Comprehensive Income for the
Year.
Tax Payments
In the June 2021 Finance Act, it was enacted that the rate of corporation tax
in the UK will rise from 19% to 25% on 1 April 2023. This has resulted in
the Group's deferred tax obligations being measured at the higher rate of 25%
in the Year. The impact of this change has increased the Group's tax charge
in the Year by £2.9m.
The Group's underlying effective rate of tax (ignoring the deferred tax
adjustment above) for the Period was 19.9% (FY21: 21.3%). The overall
effective tax rate, impacted by the revaluation of deferred tax obligations,
increased to 23.8% (FY21: 27.2%). The total tax charge for the Year rose
from £6.1m to £18.8m reflecting these changes and the significant increase
in profitability. The Group continues to be classified as "low risk" by HMRC
and takes a pro-active approach to minimising tax liabilities whilst ensuring
it pays the appropriate level of tax to the UK Government.
Cash Flows
Free cash flow of £44.2m (FY21: £48.4m) was generated in the Year. The
Year saw a £28.0m absorption of working capital.
The significant rise in used vehicle prices, led to a £31.5m increase in
year-end used vehicle inventory levels, despite a decline in the number of
units held compared to 28 February 2021. Constraints on new vehicle supply
saw significant reductions in the level of both new vehicle consignment
inventory and the associated Manufacturer funding. These movements did have a
cash impact in so far as they led to a net cash outflow because of the unwind
of the VAT cash flow advantage on such funded vehicles of £32.0m. Working
capital was also absorbed as the Group's demonstrator fleet started to return
to more normal levels, absorbing £3.3m.
Constrained new vehicle supply resulted in an £24.3m cash inflow from a
reduction in the level of fully paid new vehicle inventory held by the
Group. The supply constraints have also led to record order bank levels,
leading to a £12.0m increase in the value of vehicle deposits held against
outstanding orders, a cash inflow in the Year.
Financing and Capital Structure
The Group has a balance sheet with shareholders' funds of £331.9m (2021:
£275.9m) underpinned by a freehold and long leasehold portfolio of £236.4m
(2021: £229.2m) and net cash (excluding lease liabilities) of £16.2m as at
28 February 2022. The Group's conservative financing and capital structure
resulted in a strong tangible net assets position of £237.5m as at 28
February 2022, representing 66.8p per share.
The Group has a committed acquisition debt facility of £62m, maturing in
February 2024, with the potential to add a further £15m which is currently
uncommitted. £44m of this committed facility was drawn as at 28 February
2022. The Group operated comfortably within all covenants during the Year.
The Group periodically makes use of used vehicle stocking loans provided by
third party banks, subject to interest and secured on the related used vehicle
inventories. At 28 February 2022, amounts utilised on such facilities
totalled £11.6m. These balances are offset against cash in the calculation
of Net Cash/Debt. The Group has a £35m facility under these arrangements
and held £155m of used vehicle inventory at 28 February 2022 resulting in
used vehicle stock being largely unencumbered.
Capital Allocation
Consideration of capital allocation is central to the Board's decision
making. The Board proactively believes that the Group's funding structure
should remain conservative and that the application of the Group's debt
facilities to fund activities or acquisitions which meet the Group's hurdle
rates for investment, will enhance return on equity and increase cash profits
in the future.
Cash returns to shareholders in the form of dividends are an important part of
the Company's capital allocation decision making process and remain a priority
for the Board. The Group applies a dividend policy of a cover of three to
four times normalised adjusted earnings per share, with the record results of
FY22 leading to a much higher cover on earnings per share than the stated
strategy.
An interim dividend of 0.65p per share was paid in January 2022. The Board
recommends a final dividend in respect of the year ended 28 February 2022 of
1.05p per share to be approved at the annual general meeting on 22 June
2022. This dividend will be paid, subject to shareholder approval, on 29
July 2022. The ex-dividend date will be 30 June 2022 and the associated
record date 1 July 2022.
The Group also values the benefits of repurchasing shares where prices are
trading below intrinsic and net asset value. On 26 August 2021, the Group
announced the recommencement of its Share Buyback Programme. From 26 August
2021 to 28 February 2022, the Group repurchased 9,751,009 shares representing
2.5% of shares in issue. This buyback exercise utilised a total of £6.0m of
cash in the Year with shares purchased at an average price of 61.5p per
share. A further £3m buyback programme was announced on 2 March 2022.
Since the year-end, 1,815,980 shares have been repurchased at an average
price of 59.0p per share, with £1.9m of this latest buyback programme
remaining.
The Group also deploys capital in its extensive franchised dealership
network. Subsequent to the year end, the Group purchased the freehold and
long leasehold interests in its extensive multi-franchise site located in
Derby for £7.1m. The Group has operated the 5.5-acre Derby multi-site since
September 2012 under short leasehold arrangements. There are four separate
buildings on the site, currently representing the Nissan, Skoda, Renault &
Dacia and Peugeot franchises, along with a standalone Bristol Street
Motornation used vehicle outlet. The purchase of the freehold and long
leasehold interests secures the long-term future of this strategically
important location for the Group.
Karen Anderson, CFO
CONSOLIDATED INCOME STATEMENT (AUDITED)
For the year ended 28 February 2022
Underlying items 2022 Non-underlying items 2022 Total 2022 Underlying items 2021 Non-underlying items 2021 Total 2021
(Note 2) (Note 2)
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 3,615,052 - 3,615,052 2,547,665 - 2,547,665
Cost of sales (3,179,632) - (3,179,632) (2,246,642) - (2,246,642)
Gross profit 435,420 - 435,420 301,023 - 301,023
Operating expenses (347,753) (1,934) (349,687) (267,240) (2,153) (269,393)
Operating profit / (loss) 87,667 (1,934) 85,733 33,783 (2,153) 31,630
Finance income 3 163 - 163 174 - 174
Finance costs 3 (7,126) - (7,126) (9,405) - (9,405)
Profit / (loss) before tax 80,704 (1,934) 78,770 24,552 (2,153) 22,399
Taxation 4 (16,062) (2,708) (18,770) (5,217) (867) (6,084)
Profit / (loss) for the year attributable to equity holders 64,642 (4,642) 60,000 19,335 (3,020) 16,315
Basic earnings per share (p) 5 16.64 4.44
Diluted earnings per share (p) 5 15.96 4.36
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (AUDITED)
For the year ended 28 February 2022
2022 2021
£'000 £'000
Profit for the year 60,000 16,315
Other comprehensive income / (expenses)
Items that will not be reclassified to profit or loss:
Actuarial gains / (losses) on retirement benefit obligations 2,801 (2,619)
Deferred tax relating to actuarial (gains) / losses on retirement benefit (700) 498
obligations
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges 503 (6)
Deferred tax relating to cash flow hedges (96) 10
Other comprehensive income / (expense) for the year, net of tax 2,508 (2,117)
Total comprehensive income for the year
attributable to equity holders 62,508 14,198
CONSOLIDATED BALANCE SHEET (AUDITED)
As at 28 February 2022
2022 2021
£'000 £'000
Non-current assets
Goodwill and other indefinite life assets 103,470 99,192
Other intangible assets 1,797 1,948
Retirement benefit asset 9,055 6,246
Property, plant and equipment 254,133 246,664
Right-of-use assets 78,278 81,152
Total non-current assets 446,733 435,202
Current assets
Inventories 475,027 597,391
Trade and other receivables 51,839 59,375
Cash and cash equivalents 83,793 67,828
610,659 724,594
Property assets held for sale - 1,369
Total current assets 610,659 725,963
Total assets 1,057,392 1,161,165
Current liabilities
Trade and other payables (529,086) (688,948)
Current tax liabilities (3,734) (1,573)
Derivative financial instruments (13) -
Contract liabilities (11,752) (12,395)
Borrowings (12,283) (6,582)
Lease liabilities (14,132) (14,126)
Total current liabilities (571,000) (723,624)
Non-current liabilities
Borrowings (55,343) (65,777)
Lease liabilities (74,698) (76,975)
Derivative financial instruments - (497)
Deferred income tax liabilities (13,023) (9,180)
Contract liabilities (11,447) (9,172)
Total non-current liabilities (154,511) (161,601)
Total liabilities (725,511) (885,225)
Net assets 331,881 275,940
Capital and reserves attributable to equity holders of the Group
Ordinary share capital 35,942 36,917
Share premium 124,939 124,939
Other reserve 10,645 10,645
Hedging reserve 4 (403)
Treasury share reserve (1,586) (2,791)
Capital redemption reserve 3,785 2,810
Retained earnings 158,152 103,823
Total equity 331,881 275,940
CONSOLIDATED CASH FLOW STATEMENT (AUDITED)
For the year ended 28 February 2022
2022 2021
Note £'000 £'000
Cash flows from operating activities
Operating profit 85,733 31,630
Profit on sale of property, plant and equipment (9) (432)
Profit on lease modification (269) (234)
Amortisation of other intangible assets 407 436
Depreciation of property, plant and equipment 14,365 12,333
Depreciation of right of use asset 16,658 15,643
Impairment charges 131 1,452
Movement in working capital (27,973) 29,640
Share based payments charge 1,061 373
Cash inflow from operations 90,104 90,841
Tax received 135 188
Tax paid (14,479) (6,692)
Finance income received 39 23
Finance costs paid (6,798) (9,440)
Net cash inflow from operating activities 69,001 74,920
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and borrowings acquired (9,508) (21,489)
Acquisition of freehold and long leasehold land and buildings - (2,713)
Proceeds from disposal of a business - 1,698
Purchases of intangible assets (44) (264)
Purchases of other property, plant and equipment (16,571) (11,844)
Proceeds from disposal of property, plant and equipment 1,605 972
Net cash outflow from investing activities (24,518) (33,640)
Cash flows from financing activities
Proceeds from borrowings 7 5,699 22,760
Repayment of borrowings 7 (10,638) (19,705)
Principal elements of lease repayments (15,786) (15,342)
Sale/(purchase) of treasury shares 951 (2,004)
Cash settled share options (403) -
Repurchase of own shares (6,014) -
Dividends paid to equity holders (2,327) -
Net cash outflow from financing activities (28,518) (14,291)
7 15,965 26,989
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year 67,828 40,839
Cash and cash equivalents at end of year 83,793 67,828
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (AUDITED)
For the year ended 28 February 2022
Ordinary Share Other Hedging reserve Treasury share Capital redemption reserve Retained Total
share capital premium reserve reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 March 2021 36,917 124,939 10,645 (403) (2,791) 2,810 103,823 275,940
Profit for the year - - - - - - 60,000 60,000
Actuarial gains on retirement benefit obligations - - - - - - 2,801 2,801
Tax on items taken directly to equity - - - (96) - - (700) (796)
Fair value gains - - - 503 - - - 503
Total comprehensive income for the year - - - 407 - - 62,101 62,508
Sale of treasury shares - - - - 1,025 - (74) 951
Issuance of treasury shares - - - - 180 - (15) 165
Repurchase of own shares - - - - - - (6,014) (6,014)
Cancellation of repurchased shares (975) - - - - 975 - -
Dividends paid - - - - - - (2,327) (2,327)
Share based payments charge - - - - - - 658 658
As at 28 February 2022 35,942 124,939 10,645 4 (1,586) 3,785 158,152 331,881
The other reserve is a merger reserve, arising from shares issued as
consideration to the former shareholders of acquired companies.
The treasury share reserve relates to shares acquired in previous financial
years by Ocorian Limited, the Trustee of Vertu Motors plc's Employee Benefit
Trust ("EBT"). The shares were purchased by the Trustee to be held for the
purposes of the EBT and may be used to transfer shares to individuals when
options are exercised. This could include the Company's Long Term Incentive
Plan ("LTIP"), the Company Share Option Plan ("CSOP") or Partnership Share
Options ("PSO"), under which each of the executive directors of the Company,
the Company's other PDMRs and certain other senior managers are potential
participants and is therefore regarded as having a notional interest in these
shares.
During the year, 2,715,927 shares were transferred from the EBT on exercise of
vested CSOP and LTIP awards and a further 430,105 shares were transferred to
the Executive Directors in satisfaction of 50% of the annual bonuses awarded
in respect of the year ended 28 February 2021. 4,141,272 shares remain in the
EBT at 28 February 2022.
For the year ended 28 February 2021
Ordinary Share Other Hedging reserve Treasury share Capital redemption reserve Retained Total
share capital premium reserve reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 March 2020 36,917 124,939 10,645 (407) (803) 2,810 89,272 263,373
Profit for the year - - - - - - 16,315 16,315
Actuarial losses on retirement benefit obligations - - - - - - (2,619) (2,619)
Tax on items taken directly to equity - - - 10 - - 498 508
Fair value losses - - - (6) - - - (6)
Total comprehensive income for the year - - - 4 - - 14,194 14,198
Issue of treasury shares - - - - 16 - (16) -
Purchase of treasury shares - - - - (2,004) - - (2,004)
Share based payments charge - - - - - - 373 373
As at 28 February 2021 36,917 124,939 10,645 (403) (2,791) 2,810 103,823 275,940
NOTES
For the year ended 28 February 2022
1. Basis of preparation
Vertu Motors plc is a Public Limited Company which is listed on the AiM market
and is incorporated and domiciled in England. The address of the registered
office is Vertu House, Fifth Avenue Business Park, Team Valley, Gateshead,
Tyne and Wear, NE11 0XA. The registered number of the Company is 05984855.
Whilst the financial information included in this announcement has been
computed in accordance with UK IFRS, this announcement does not itself contain
sufficient information to comply with UK IFRS's. The Group audited
consolidated financial statements that comply with IFRS's will be published on
the Group's website, www.vertumotors.com (http://www.vertumotors.com) .
The consolidated financial statements have been prepared on the going concern
basis under the historical cost convention, as modified by the revaluation of
financial assets and liabilities (including derivative financial instruments)
at fair value.
In order to prepare the financial statements on the going concern basis, the
Directors have considered detailed financial projections for a period of 12
months from the date of signing the financial statements ('Review Period').
These projections are based on the Group's detailed annual business plan for
the year ending 28 February 2023 as well as the known financial performance of
the Group in the period subsequent to 28 February 2022, projected forward to
cover the Review Period ("Base Case"). The Directors have considered these
financial projections in conjunction with the Group's available facilities.
The Directors have also considered sensitivity analysis performed in respect
of these forecasts to model the impact of various severe but plausible
downside scenarios including continued restricted supply of new and used cars
or reduced demand for service work as a consequence of a reduced vehicle parc,
in excess of that already allowed for in the Base Case scenario planning. This
analysis did not indicate any issues with the Group's ability to operate
within its banking facilities during the Review Period.
Based on the forecast information available and the sensitivity analysis
performed as set out above, the Directors believe it is appropriate to prepare
the annual financial statements on the going concern basis.
The financial information presented for the years ended 28 February 2022 and
28 February 2021 does not constitute the Company's statutory accounts as
defined in Section 434 of the Companies Act 2006 but is derived from those
financial statements. The auditors' reports on the 2022 and 2021 financial
statements were unqualified. A copy of the statutory accounts for 2021 has
been delivered to the Registrar of Companies. Those for 2021 will be
delivered following the Company's annual general meeting, which will be
convened on 22 June 2022.
Accounting policies
The annual consolidated financial statements of Vertu Motors plc are prepared
in accordance with UK IFRS. The annual report has been prepared on the going
concern basis under the historical cost convention, as modified by the
revaluation of financial assets and liabilities (including derivative
financial instruments) at fair value through profit or loss.
The accounting policies adopted in this report can be found on our website,
www.vertumotors.com (http://www.vertumotors.com) , and are consistent with
those of the Group's financial statements for the year ended 28 February 2021.
Segmental information
The Group adopts IFRS 8 "Operating Segments", which determines and presents
operating segments based on information provided to the Group's Chief
Operating Decision Maker ("CODM"), Robert Forrester, Chief Executive
Officer. The CODM receives information about the Group overall and therefore
there is one operating segment.
The CODM assesses the performance of the operating segment based on a measure
of both revenue and gross margin. However, to increase transparency, the
Group has included below an additional voluntary disclosure analysing revenue
and gross margin within the reportable segment.
Year ended 28 February 2022
Gross
Revenue Gross Profit Gross Margin
Revenue Mix Profit Mix
£'m % £'m % %
Aftersales (*) 288.8 8.0 164.9 37.9 47.1
Used cars 1,584.4 43.8 154.4 35.5 9.7
New car retail and Motability 969.9 26.8 80.6 18.5 8.3
New fleet and commercial 772.0 21.4 35.5 8.1 4.6
3,615.1 100.0 435.4 100.0 12.0
Year ended 28 February 2021
Gross
Revenue Gross Profit Gross Margin
Revenue Mix Profit Mix
£'m % £'m % %
Aftersales (*) 221.2 8.7 129.6 43.1 49.3
Used cars 1,008.4 39.6 93.9 31.2 9.3
New car retail and Motability 739.7 29.0 54.3 18.0 7.3
New fleet and commercial 578.4 22.7 23.2 7.7 4.0
2,547.7 100.0 301.0 100.0 11.8
* Margin in aftersales expressed on internal and external revenue. A
significant part of the role of the service department is to support the
vehicle sales department and therefore this is considered to be an important
measure for the purpose of monitoring departmental performance
2. Non-underlying items
2022 2021
£'000 £'000
Impairment charges (131) (1,452)
Share based payments charge (1,396) (265)
Amortisation (407) (436)
Non-underlying loss before tax (1,934) (2,153)
Non-underlying items are presented separately in the Consolidated Income
Statement to enhance comparability of trading performance between periods.
Details of current and deferred tax arising in respect of non-underlying items
is shown in note 4.
3. Finance income and costs
2022 2021
£'000 £'000
Interest on short-term bank deposits 39 24
Net finance income relating to defined benefit pension scheme 124 150
Finance income 163 174
Bank loans and overdrafts (1,701) (1,874)
Vehicle stocking interest (1,844) (3,899)
Lease liability interest (3,581) (3,632)
Finance costs (7,126) (9,405)
4. Taxation
2022 2021
£'000 £'000
Current tax
Current tax charge 16,350 5,279
Adjustment in respect of prior years 14 (137)
Total current tax 16,364 5,142
Deferred tax
Origination and reversal of temporary differences (245) 76
Adjustment in respect of prior years (147) (95)
Rate differences 2,798 961
Total deferred tax 2,406 942
Income tax expense 18,770 6,084
Profit before taxation 78,770 22,399
Profit before taxation multiplied by the rate of corporation tax in the UK of 14,966 4,256
19% (2021: 19%)
Non-qualifying depreciation 638 560
Non-deductible expenses 432 305
Goodwill impairment - 276
Effect on deferred tax balances due to rate change 2,798 961
IFRS 16 adjustment 77 31
Property adjustment 41 (30)
Permanent benefits (49) (43)
Adjustments in respect of prior years (133) (232)
Total tax expense included in the income statement 18,770 6,084
A summary of the Group's tax expense in respect of underlying and
non-underlying items is as follows:
Non-underlying items 2022 Non-underlying items 2021
Underlying items 2022 Total Underlying items 2021 Total 2021
2022
£'000 £'000 £'000 £'000 £'000 £'000
Profit / (loss) before tax 80,704 (1,934) 78,770 24,552 (2,153) 22,399
Taxation (16,062) (2,708) (18,770) (5,217) (867) (6,084)
Profit / (loss) after tax 64,642 (4,642) 60,000 19,335 (3,020) 16,315
Effective tax rate 19.90% 23.83% 21.25% 27.17%
The Group's underlying effective rate of tax is 19.90% (2021: 21.25%) which is
higher than the standard rate of corporation tax in the UK as a result of the
impact of non-qualifying depreciation and non-deductible expenses in the year
ended 28 February 2022.
In the June 2021 Finance Act it was enacted that the rate of corporation tax
in the UK would rise from 19% to 25% on 1 April 2023. This has resulted in the
Group's opening deferred tax obligations being remeasured at 25% in the year.
The impact of this change has increased the Group's charge by £2,885,000.
The overall effective tax rate of 23.83% includes tax on non-underlying items
(2021: 27.17%).
5. Earnings per share
Basic and diluted earnings per share are calculated by dividing the earnings
attributable to equity shareholders by the weighted average number of ordinary
shares during the year or the diluted weighted average number of ordinary
shares in issue in the year.
For the purposes of calculating the weighted average shares in issue, shares
held by the Group's employee benefit trust are excluded as rights to dividends
on such shares have been waived.
Details of the shares held in the Group's employee benefit trust are included
in the notes to the consolidated statement of changes in equity.
The Group only has one category of potentially dilutive ordinary shares, which
are share options. A calculation has been undertaken to determine the number
of shares that could have been acquired at fair value (determined at the
average annual market price of the Group's shares) based on the monetary value
of the subscription rights attached to the outstanding share options.
The number of shares calculated, as set out above, is compared with the number
of shares that would have been issued assuming the exercise of the share
options.
Underlying earnings per share is calculated by dividing underlying earnings
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the year.
2022 2021
£'000 £'000
Profit attributable to equity shareholders 60,000 16,315
Non-underlying loss after tax (note 4) 4,642 3,020
Underlying earnings attributable to equity shareholders 64,642 19,335
Weighted average number of shares in issue ('000s) 360,651 367,092
Potentially dilutive shares ('000s) 15,222 7,134
Diluted weighted average number of shares in issue ('000s) 375,873 374,226
Basic earnings per share 16.64p 4.44p
Diluted earnings per share 15.96p 4.36p
Basic underlying earnings per share 17.92p 5.27p
Diluted underlying earnings per share 17.20p 5.17p
6. Dividends per share
An interim dividend of £2,327,000 (0.65p per share) in respect of the year
ended 28 February 2022 was paid in January 2022.
A final dividend of 1.05p per share is to be proposed at the Annual General
Meeting on 22 June 2022. The ex-dividend date will be 30 June 2022 and the
associated record date 1 July 2022. The dividend will be paid, subject to
shareholder approval, on 29 July 2022 and these financial statements do not
reflect this final dividend payable.
7. Reconciliation of net cash flow to movement in net debt
2022 2021
£'000 £'000
Net increase in cash and cash equivalents 15,965 26,989
Cash inflow from proceeds of borrowings (5,699) (22,760)
Cash outflow from repayment of borrowings 10,638 19,705
Cash movement in net debt 20,904 23,934
Capitalisation of loan arrangement fees - 75
Amortisation of loan arrangement fees (206) (175)
Non-cash movement in net debt (206) (100)
Movement in net debt (excluding lease liabilities) 20,698 23,834
Opening net debt (excluding lease liabilities) (4,531) (28,365)
Closing net cash/(debt) (excluding lease liabilities) 16,167 (4,531)
Lease liabilities at 1 March (91,101) (96,894)
Capitalisation of new leases (14,132) (12,098)
Disposal of lease liabilities 617 2,549
Interest element of lease repayments (note 3) (3,581) (3,632)
Cash outflow from lease repayments 19,367 18,974
Lease liabilities at 28 February (88,830) (91,101)
Closing net debt (including lease liabilities) (72,663) (95,632)
8. Business combinations
On 10 December 2021, the Group acquired the entire issued share capital of
Farmer & Carlisle Holdings Limited and its subsidiary companies Farmer
& Carlisle Limited and Farmer & Carlisle (Leicester) Limited (together
"Farmer & Carlisle") which operated Toyota dealerships in Loughborough and
Leicester. Estimated total consideration of £8,724,000 was settled from the
Group's existing cash resources, with a further £538,000 paid on completion
to settle Company borrowings.
On 12 March 2021, the Group acquired the trade and assets of a Honda
dealership in Huddersfield, West Yorkshire, which also holds an authorised
repair contract for Mitsubishi, from Hepworth Motor Group. Total consideration
of £739,000 was settled from the Group's existing resources.
On 31 May 2021, the Group acquired the entire issued share capital of Power
Bulbs Online Ltd, a global vehicle lighting business, as well as Power Bulbs
Ltd, a dormant company. Total consideration of £481,000 was settled from the
Group's existing cash resources.
On 30 June 2021, the Group acquired the trade and assets of a Renault Dacia
business in Leicester from Renault Retail Group UK Limited to operate from the
Group's existing leasehold premises in Leicester, following the sale of the
Group's Citroen business from the same location in the previous financial
year. Total consideration of £347,000 was settled from the Group's existing
cash resources.
On 23 December 2021, The Group acquired the trade and assets of an MG business
in Edinburgh from Frasers of Falkirk Limited, to operate from the Group's
newly built multi-franchise dealership in Edinburgh. Total consideration of
£67,000 was settled from the Group's existing cash resources.
9. Post balance sheet events
On 6 April 2022, the Group acquired the freehold and long leasehold interests
in its extensive multi-franchise site located in Derby, for consideration of
£7,100,000.
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