REG - Vertu Motors PLC - Final results for the year ended 28 February 2023
10/05/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230510:nRSJ8539Ya&default-theme=true
RNS Number : 8539Y Vertu Motors PLC 10 May 2023
10 May 2023
Vertu Motors plc ("Vertu", "Group")
Final results for the year ended 28 February 2023
Strong operational performance with excellent cash generation, major
acquisition integrated well, strong current trading
Vertu Motors, the UK automotive retailer with a network of 189 sales and
aftersales outlets, announces its final results for the year ended 28 February
2023 ("Year").
Commenting on the results, Robert Forrester, Chief Executive, said:
"The year was critical for the Group as we undertook our largest ever
acquisition and generated over £4bn of revenues for the first time. The
Helston businesses have now been integrated into our systems platform. The
acid test was how our core Group and new dealerships performed in March and
April and I am delighted to report that the trading result post year end has
been encouraging and gives confidence for the year ahead.
"The reported results reflect a strong profit and excellent cash performance,
both ahead of expectations. As a result, we have chosen to propose a
significantly increased final dividend, delivering a 26.5% higher dividend for
the year as a whole. The business is in a healthy financial and operational
position to further develop and gain from the benefits of scale as sector
consolidation continues."
FINANCIAL SUMMARY
Years ended 28 February 2023 2022 2021
Revenue £4,014.5m £3,615.1m £2,547.7m
Adjusted(1) profit before tax £39.3m £80.7m £24.6m
Basic Adjusted(1) EPS 9.16p 17.92p 5.27p
Dividends per share 2.15p 1.70p -
Free Cash Flow £54.3m £44.4m £48.4m
Net (Debt)(2)/ Cash (£75.3m) £16.2m (£4.5m)
HIGHLIGHTS
· Adjusted(1) profit before tax of £39.3m (FY22: £80.7m), on record
revenues of £4.0bn. Profit slightly ahead of market expectations.
· Acquisitions successfully integrated onto Group systems and processes
and on track to deliver expected synergies and earnings enhancement.
· Group portfolio grown by 31 sales outlets during the Year, including
27 from Helston and 2 from BMW Motorrad acquisitions, contributing to scale
benefit opportunities.
· Free Cash Flow of £54.3m in the Year (FY22: £44.4m) reflecting
excellent working capital management.
· Net debt(2) of £75.3m as at 28 February 2023, significantly ahead of
market expectations (FY22: Net cash: £16.2m).
· Expanded debt facilities agreed in December 2022, including a new
£74.8m 20-year mortgage, an upsized revolving credit facility of £93m with a
third bank added to syndicate, and an increased used vehicle stocking facility
to £70m (from £35m).
· Net tangible assets per share of 65.3p reflecting strong asset base.
· Final Dividend of 1.45p per share recommended, bringing full year
dividend to 2.15p per share (FY22: 1.70p) an increase of 26.5%.
· £5.9m returned to shareholders via repurchase of 10.5m shares during
the Year.
OUTLOOK
· Trading performance in excess of last year delivered in key months of
March and April aided by the contribution from acquisitions.
· Improvement in new vehicle supply evident with continued high Group
order bank of high margin new vehicle orders in place.
· Used vehicle demand remains strong and continued used supply
constraints underpin residual values. Vertu Insights rollout underway to
help optimise used car gross margin.
· Aftersales revenues and profits remain highly resilient aided by
retention products such as service plans and ageing of the vehicle parc.
· Cost pressures, reflecting continued high inflation remain evident
with strategies in place to mitigate where possible.
· Active portfolio management strategy expected to deliver a further
c.£9.5m of assets disposals in next 12 months, £3m above book value.
· Net debt expected to reduce through ongoing strong Free Cash Flow
generation.
(1) Adjusted to remove share-based payments charge, amortisation of intangible
assets, impairment charges and exceptional acquisition costs.
(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 Tel: 0191 491 2121
Phil Clark, Investor relations PClark@vertumotors.com
Zeus (Nominated Advisor and Broker)
Jamie Peel Tel: 020 3829 5000
Andrew Jones
Dominic King
Camarco
Billy Clegg Tel: 020 3757 4983
Tom Huddart
CHAIRMAN'S STATEMENT
The Group again executed well during the year ended 28 February 2023,
delivering an Adjusted(1) profit before tax of £39.3m, slightly ahead of
analysts' expectations which had previously been raised on several
occasions. There were noteworthy highlights in the Year:
· Successful and meaningful scale growth delivered, with an increase of
31 sales outlets in the financial year and the planned integration progressing
well. The Group's strategic objective to grow as a major scaled franchise
automotive retail group is born from the belief that scale benefits can be
maximised in a larger group, which we are demonstrating. Manufacturer
relationships are key to the delivery of these benefits, and I am proud that
the Group has such good relationships with its chosen manufacturer partners.
This is due to operational delivery and a strong, mutual respect.
· The delivery of operational excellence and digitalisation has seen
further development of the Group's in-house analytics systems. A new 'Vertu
Insights' used vehicle stock management tool to ensure profit opportunities
are maximised is being rolled out. In addition, investment in self-service
check-in technology has been made to enhance customer choice, reduce friction
in the customer journey and aid the productivity of our colleagues. The
Group's scale justifies investment in the in-house development of systems
delivering both for customers and enhanced cost efficiency. These scalable
platforms have been quickly rolled into the acquired dealerships and further
work is now underway to maximise Group-wide efficiency benefits using
technology.
· There has been continued application of stringent capital allocation
disciplines:
o Acquisitions targeting returns above cost of capital, have been
delivered. The Group has continued to apply a multi-franchising strategy to
maximise the profit opportunity in certain physical locations and to align
with Manufacturer representation plans. It is clear that consolidation will
continue within the automotive retail sector. The Group is in an excellent
position to take advantage of this. Our Manufacturer partners are keen for
us to grow with them, the board has the ambition to do so, and the Group has
the financial firepower to expand with appropriate opportunities.
o The annual dividend, a vital element of shareholder return has been
increased by 26.5% reflecting the continued strong free cash generation.
Additionally, the Group has also returned £5.9m to shareholders through the
repurchase of over 10.0m shares in the Year. A buyback authority for a
further £3m of buybacks is in place.
The Group has continued to progress towards increasing its sustainability and
to reduce its environmental impact. £1.2m has been invested in green
technologies such as solar panels and LED lighting in the Year, with a
remaining £3.2m planned for such installations in FY24. The investment in
solar panels has been made in connection with the Group's energy strategy
which seeks to self-generate 10% of the Group's energy needs via onsite solar
energy.
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 continued to show over the past year has been exemplary.
As we enter the new financial year, 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 and deliver scale benefits in the enlarged Group.
Andy Goss, Chairman
(1) Adjusted to remove share-based payments charge, amortisation of intangible
assets, impairment charges and exceptional acquisition costs.
CHIEF EXECUTIVE'S REVIEW
Strategy Summary
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 are summarised below:
• To grow as a major scaled franchised dealership group and to
develop our portfolio of Manufacturer partners, while 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 and cost optimisation and efficiency:
o Optimise our omnichannel retail offering and promote our brands to drive
enquiry levels.
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 automotive retail dealership business.
An update on progress in executing these strategies is set out later in this
report.
Key Sector Trends
The franchised automotive retail sector continues to evolve in the areas of
electrification and agency distribution. Responding appropriately to these
trends is top of mind for the Board.
1. Electrification
The UK Government has recently re-asserted its plan to ban the sale of new
petrol and diesel cars in the UK from 2030 despite the European Union
introducing delays to implementation of their ban and flexibility around
synthetic fuel ICE vehicles. Despite overall supply constraints in new
vehicles throughout 2022, electric and hybrid vehicle registrations in the UK
saw growth of over 20% in calendar 2022 compared to 2021, representing a 7%
market share increase. Nevertheless, there has been a cooling of demand for
electric vehicles (BEV) from consumers in the last 6 months and this is
reflected in ordertake, if not in registration data due to continued long lead
times. The rising cost of electricity increasing running costs and
inadequate UK public charging infrastructure have all had an impact on demand
and public perception.
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, and colleagues attending Manufacturer training. The
Group is investing in accreditation to the national EV accreditation scheme
promoting standards in electric vehicle retailing and servicing. Moreover,
electric vehicle mystery shops have taken place monthly across the business
where mystery shoppers visit dealerships to assess effectiveness in retailing
electric vehicles.
Increased electrification of the vehicle parc requires ongoing investment in
terms of EV infrastructure such as in aftersales capabilities and charging
facilities. The Group invested £0.4m in charging infrastructure in the Year
with a further £1.6m planned in the next 12 months.
2. Agency Distribution
A number of Manufacturers in the UK have indicated they will move to an agency
sales distribution model over varying timescales. 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 and customer contact as an agent. The
retailer-turned-agent receives a commission on each new vehicle sale but will
own no inventory and will no longer set prices or discounts. There are
varying iterations of the agency model proposed and the picture is evolving
both legally and in detailed implementation.
The Group has long operated on an agency basis for a significant proportion of
fleet and parts sales. The first of the Group's significant manufacturer
partners to operate the agency model for new retail sales was Mercedes-Benz
passenger cars which moved to a genuine agency model on 1 January 2023. The
implementation has been successful from a systems perspective and the Board
will monitor how the change impacts volume and profit levels, albeit remaining
cognisant that the change to agency is, of course, only one of a number of
factors which impacts volume and profit. The Volkswagen Group brands and
Volvo are likely to be the next in line for agency implementation.
Update on execution of Group Strategy
Developing the Scale of the Group
The Group has an excellent platform allowing it to capitalise on growth
opportunities and deliver scale benefits:
• Financial capacity
The Group's balance sheet strength is underpinned by an extensive freehold and
long leasehold property portfolio and a largely unencumbered inventory of used
vehicles. This strong asset base, together with a comparatively low level of
debt including used vehicle stocking loans, means there remains significant
firepower available to facilitate the Group's further growth ambitions. The
Group will continue to 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. The Group
has always invested in training programmes to ensure its talent pipeline is
developed, and many of the Group's colleagues have benefitted from this
training and have been promoted into management roles as a result. A 'Next
Generation' two-year talent programme, to develop the next generation of the
Group's senior management, has recently been launched to augment the Group's
existing training initiatives.
• 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 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
enhance profitability through maximising margins and increasing productivity
to reduce costs. The Group's 54 colleague strong development team ensures
continued improvement and scalability of platforms.
• Brand Strength
The Group operates three major customer facing brands in the UK: Bristol
Street Motors, Macklin Motors and Vertu Motors. Bristol Street Motors
represents the franchise sectors leading brand in England and Wales in terms
of prompted brand awareness (54%: Source: YouGov). In Scotland, the Group
operates under the Macklin Motors brand, which has a strong 49% prompted brand
awareness. Vertu Motors is the Group's premium focused brand, with a growing
prompted awareness of approx. 8%, in England. This is likely to be much
boosted by the significant expansion of the brand in the South West in 2023.
Each of these brands is supported by TV campaigns, sports sponsorships and
partnerships and digital marketing initiatives. Tangible scale benefits
arise from this strategy.
Growth
The Group has the brand strength and financial, operational, and management
capabilities to continue to add additional franchised outlets to the
business. The Board remain ambitious to do so. The Group also continues to
evaluate and execute multi-franchising actions in its locations to maximise
the long-term profitability of each location.
The Year saw the Group execute on this strategy, increasing its number of
sales outlets by a net 31 over the Year, as set out below:
· Acquisitions
On 17 December 2022 the Group completed the acquisition of Helston Garages
Group Limited ('Helston') adding 28 predominantly premium franchised sales
outlets in the South West. This acquisition radically enhanced the Group's
scale and reach into the South West of England. The integration of these
acquired dealerships onto the Group's systems and processes is now complete,
with the acquired Ferrari business and a standalone accident repair centre
operation, being the final businesses to have transitioned in April 2023.
At the time of the Helston acquisition, the Group announced expected synergies
of at least £3.2m to be delivered for FY25. The Board believe that the
Group is well on track to deliver this outcome.
On 31 October 2022 the Group acquired the business and assets of two BMW
Motorrad outlets in Shipley, near Bradford, and Rotherham from Saltaire Motor
Company Limited subsequent to the acquisition, on 1 March 2023, the freehold
interest in the Rotherham dealership was purchased for £0.5m. These
businesses have been rebranded to trade under the Vertu brand and have been
fully integrated into the Group. The Group is now the largest UK partner of
BMW Motorrad as it continues to grow its motorcycle operations.
· Multi-franchising and new outlets
On 1 April 2022 the Group opened Macklin Motors Toyota in Darnley, South
Glasgow. This dealership represented the first of several dealerships to be
opened, following the Group being awarded the Toyota franchise in the West of
Scotland territory. The second dealership, located in the Group's former
Ford premises in Hamilton, opened on 21 October 2022 following a full
refurbishment alongside the Mazda franchise. These two outlets are expected
to make a positive profit contribution to the Group in FY24. A third
representation point for Toyota in Scotland, which will be in Ayr, will be
developed as a new build dealership over the next financial year. It is
currently anticipated that the development will cost approximately £4.5m
including the purchase of land for the development. The development is
currently subject to a planning application.
On 1 May 2022, the Group opened a further Bristol Street Motor Nation used car
outlet in newly acquired leasehold premises at Stockton, Teesside.
Work was finalised on the introduction of sales outlets for Vauxhall and
Citroen alongside the Group's Peugeot operation in Harlow. The outlets
opened in November 2022 following the move of the aftersales operation off
site to a new larger dedicated aftersales operation.
The LEVC franchise commenced covering Scotland and the North East of England
as part of the Group's Taxi Centre operation.
Subsequent to the year end, on the 24 April 2023, the Group agreed a sub-lease
of a former Cazoo outlet in Tamworth, Staffordshire. The outlet will be
operated as a Bristol Street Motor Nation used car outlet and is anticipated
to open in July 2023.
· Active portfolio management and changes
The Board continues to actively manage the Group's portfolio of properties and
dealerships and assess further growth opportunities, utilising strict
investment return metrics to ensure discipline in capital allocation.
During the course of the year, the Group took pruning actions to ensure
business fitness, appropriate capital allocation and creation of value.
Since FY18, the Group has received cash proceeds of £6.2m from the sale of
surplus properties, £1.2m more than book value.
Additional surplus properties are held by the Group and are expected to be
disposed in the next 12 months. Cash proceeds at £9.5m are anticipated in
due course, circa £3m in excess of book value.
The Group's single Jeep sales outlet in Beaconsfield ceased operation and the
Ford outlet in Hamilton closed to allow for the redevelopment of the site for
the Toyota franchise alongside Mazda. In addition, the Group closed its
accident repair centre in Chesterfield in the Year to facilitate further
multi-franchising including the addition of the MG franchise expected to open
in August 2023.
In January 2023, the Group disposed of a small Peugeot outlet in Honiton,
acquired as part of the Helston acquisition the month earlier. This business
was sold to the Snows Group, including responsibility for the property
lease. This optimises the Group's Peugeot representation in the area, as
Peugeot is also represented in nearby Exeter and the franchise will not
continue in Honiton.
The pruning process continued post the year end when on 31 March 2023, the
Group closed operations at its BMW/MINI outlet in Malton, Yorkshire. The
Malton property lease ceases shortly. This action will reduce operating
expenses and limit future capital expenditure as the Group seeks to retain
sales and service customers in its nearby York BMW and MINI dealerships.
On 30 April 2023, the Group sold the trade and assets of its standalone
accident repair operation in Newburn, Newcastle upon Tyne at above net book
value. The business did not make a sufficient financial return on invested
capital. The sale included the leasing of the long-leasehold property to the
buyer. The Group has now agreed to sell the long-leasehold interest for
£1.4m to a property investor with completion expected shortly. Cash
proceeds are above net book value and are included in the £9.5m referred to
above.
Jaguar Land Rover have announced their Re-imagine strategy, which creates a
House of Brands: Range Rover, Defender, Discovery and Jaguar. Jaguar will be
a luxury electric vehicle brand with reduced points of sale reflecting its
repositioning. The Group currently operates six Jaguar outlets, alongside
the Land Rover brand. From November 2024, only the Group's outlet in Leeds
will continue to represent both Jaguar and Land Rover brands. Intangible
assets relating to the terminated Jaguar operations of £1.5m have been
written off as a non-underlying, non-cash impairment charge in the Year.
Digitalisation Developments
· Omni-channel Retail Sales
We have seen no major increase in the propensity for customers to transact a
vehicle purchase purely on-line. This appears to be evidenced by the
retrenchment of on-line operators who had hoped to be sector disrupters.
Consumers continue to value a blended retail experience with a desire to
complete tasks digitally as well as visiting a dealership to touch, feel and
test drive their new vehicle (''omni-channel retailing''). In FY23, we
focused on increasing the number of on-line vehicle sales reservations rather
than driving pure on-line sales, as reservations convert to a sale at more
than twice the rate of a traditional vehicle sales enquiries. The Group took
over 14,800 on-line vehicle reservations in FY23, up 100% on the previous
year.
We continue to reap the benefits of placing much of our customer facing
technology infrastructure into the cloud provided by Amazon Web Services.
This has increased up-time and resilience, as well as enabling further
synergies between our outlets and digital environments. We now offer
consistent, automated vehicle valuations across all our outlets and these are
mirrored on both our "Sell My Car" and "Click 2 Drive" on-line customer
journeys. This provides transparency and promotes trust. During the Year we
developed new dealership sales experience/process software built on the same
platform that underpins our eCommerce journeys. The Group also developed a
digital customer referral system and process which has now been rolled out.
In FY24 we will roll out a further enhanced vehicle sales process which
provides an updated "Click2Drive" platform. This upgrade to our web
platforms and dealerships will allow for on-line customers to have an enhanced
selection of additional products and risk based personalised finance rates as
well as a "Total Cost of Ownership" calculator. These enhancements further
align the on-line and in dealership sales processes so removing friction and
customer frustration. In addition, this will aid consumers in calculating
the "true cost" of changing their vehicle in a market with multiple and often
complex drivetrain options, enhancing customer experience particularly given
customer concerns over the cost of living at present.
· Data Model and Customer Data Platform
During FY23 the Group continued to scale our data capability, augmenting our
existing team with an experienced Head of Data and Analytics. This new role,
alongside other investments in the data and business intelligence teams, now
numbering seven colleagues, will enable the launch of a comprehensive data
warehouse in Q1 FY24. Utilising existing infrastructure, this will provide a
bedrock of data for the Group and the opportunity to drive further
efficiencies across our finance, dealership and marketing functions.
Initial use cases built upon the data warehouse include:
· Feeding consistent and accurate data to our newly developed Customer
Data Platform, further increasing the personalisation, targeting and ROI of
our marketing spend.
· Powering the "single version of truth" for our enhanced used car
analytics platform ''Vertu Insights'' which is scheduled for first release in
June. This will build on the success of the Vertu Analytics tool launched in
2019, and further enable us to maximise margin and speed of sale in used
vehicles.
· Improving sales conversion by providing real-time Customer
Relationship Marketing and vehicle information to colleagues interacting with
customers through the recently deployed Cloud Telephony platform.
The business operates in an increasingly complex technology environment and
the above developments can only be undertaken by a business with scale. As
with important cyber risk investments, once the platform is developed, scale
benefits accrue as more outlets are added to the platform.
· Digitalisation in Aftersales
The Year saw significant investment through the introduction of a third-party
digital self-service check-in system for customers to use in the Group's
service departments. Customers can check in from home or use the instore
kiosks where they can safely deposit their vehicle keys. This provides
increased choice and convenience for Customers and helps to reduce the need to
further resource our aftersales departments at busy "pinch point" periods at
the start and end of the day. Initial customer feedback has been excellent,
and the Group has seen increased penetration of add-on sales in service from
customers using this facility.
The Group has historically used a third party to provide service customers
with deferred payment term of 3 months following a service visit where
additional repair work is purchased. We have started the roll out of an
in-house developed deferred payment option for service customers, which will
substantially reduce the cost to the business of offering this service.
Working capital is expected to increase by c. £3m following the rollout, with
a reduction in cost evident and no material credit issues anticipated. The
offering has a powerful impact on converting work from Visual Health Check
activity and drives higher average invoice values. This functionality can be
used instore or remotely by customers and is executed by the same SMS
signature technology already in use in the sales process. The roll out of this
across all Group sales outlets will be complete in the first half of FY24.
· Digitalisation to improve efficiency and reduce cost
As the Group integrated the Helston acquired dealerships, some highly
efficient finance processes were identified that could improve the Group's
existing processes. Inspired by this, a new project has commenced investing
substantial development resource to improve the productivity of the Group's
financial processing. This will mirror some of the approaches taken in a
project in the Group's vehicle administration function three years ago, where
substantial efficiencies and cost savings of £2.5m were delivered.
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. Workforce recruitment and retention remains a challenge for UK
business, with the number of UK job vacancies remaining above 1.0 million
(source: ONS), throughout 2022. The inevitable consequence of these resource
constraints, especially when coupled with cost-of-living pressures, has been
wage inflation. The Group has been successful in reducing vacancy levels
from the highs of 500+ vacancies in FY22. Current vacancy levels are
approximately 300 colleagues in the core Group, a level much closer to
historic run rate of 5%.
A survey conducted in February 2023 saw 83% of colleagues ranking the Group as
a great place to work and this reflects well both on the Group's culture and
the strategies that have been pursued. The Group targets an improvement in
the score to 85% and will work through dealership colleague forums, a
formalised way in which colleagues of all levels can provide their feedback
locally, to drive an improvement in this score.
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.
Ancillary Businesses
The Group's ancillary business division has a dedicated divisional team to
drive the success of the businesses, which include Vertu Vehicle Accident
Repair, Vertu Cosmetic Repair, Vansdirect, AceParts and Taxi Centre. The
Group has a strategy to develop such businesses to add revenue and returns
that complement the core dealership businesses.
Vansdirect had a strong year, underpinning the Group's significant market
share gain in the Commercial vehicle market. Financial performance has been
robust.
During this Year, the Group augmented its on-line parts sales business,
Aceparts, with the purchase of Wiper Blades Limited. This business was
acquired for a net cash consideration of £2.4m. Aceparts sells parts to
customers via Marketplaces, with over a million listings on eBay and makes on
average 3000 despatches per day. Wiperblades.com augmented this business
with a direct sales platform with established reach and good rankings.
The Vertu Cosmetic Repair business delivered further growth in the Year. The
majority of its business remains servicing the Group dealership network, but
some external work is undertaken. Over 65,000 vehicles had bodywork repair
and 56,000 wheels were repaired by our fleet of 106 vans and a number of
dedicated fixed sites. This business will continue to grow in scale during
the current year.
The Group added the LEVC franchise to its taxi sales business, the Taxi
Centre. Aided by this additional franchise the business, which has been in
operation for over 20 years, delivered over 800 taxis in the Year.
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, 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.
CURRENT TRADING AND OUTLOOK
· March & April 2023 Trading
The Group delivered a trading profit above prior year levels in March and
April 2023 ("the post year end period") despite the impact of significant cost
headwinds driven by inflation, with Core Group gross profit generated up by
£4m compared to prior year. The overall improvement in profitability was
driven by the contribution from the Helston acquisition completed in December
2022.
Like-for-Like revenue growth was delivered in the post year end period,
predominantly due to continued strong growth in Motability new vehicle sales
volumes.
The UK new vehicle market saw a growth in total registrations in March and
April in the fleet and commercial and Motability channels. This improvement,
driven from an easing of supply chain challenges, has led the SMMT to upgrade
its outlook for 2023 to 1.83m registrations (previously 1.79m). New retail
volumes have been stable.
Like-for-like total new vehicle volume growth of 5.1% was delivered on the
back of continued year-on-year strength in the Motability channel, with the
Group's Motability like-for-like volumes up 64.6% in the post year end
period. In a continuation of the trends seen throughout FY23 outlined above,
new vehicle margins remained robust. Overall, the Core Group delivered
increased gross profit from the sale of new vehicles in the post year end
period. New vehicle order banks remain at high levels with nearly 39,000
outstanding orders to be delivered, compared to 35,000 at 28 February 2022.
The UK used vehicle market has remained resilient, whilst continued stability
of used vehicle prices is exhibited. Like-for-like volumes of used cars sold
by the Group declined 8.4% with gross profits per unit up. Volumes were down
year-on-year due to timing of heavily marketed Group used car events in the
prior year period which drove volumes. The Group continues to have a tight
control of used vehicle inventory.
Like-for-like the Group delivered improved gross profit from all aftersales
channels in the post year end period compared to last year. Service revenues
in the Core Group grew by 4.6% with margins reduced as expected due to the
impact of higher technician salary costs.
As anticipated, the Core Group saw an increase in operating expenses in the
post year end period, with energy costs, recent salary actions and the Group's
investment in IT infrastructure all contributing to this rise in costs.
Overall, Group operating expenses as a percentage of revenue were at slightly
higher levels than in FY23.
· Outlook
The Board is very optimistic for the future, with confidence in the Group's
ability to deliver on targeted acquisition synergies, a robust order bank, and
encouraging trading results in the first two months of FY24. There are signs
of improving new vehicle supply whilst constraints in used vehicle supply in
the UK are likely to continue helping to underpin vehicle values and
margins. Against this backdrop, the Board remains mindful of the impact of
inflationary pressures and higher interest rates. Management is focused on
operational excellence around cost, conversion and customer experience and the
delivery of the Group's strategic objectives through enhanced performance
coming from scale. The Board anticipates that full year results for FY24
will be in line with current market expectations.
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, scale, management and technological capability underpin this
confidence. The Group's excellent relationships with its chosen Manufacturer
partners support further growth opportunities, which are likely to continue to
present themselves.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The Group's income statement for the Year is summarised below:
FY23 FY22 Variance
£'m £'m %
Revenue 4,014.5 3,615.1 11.0%
Gross profit 448.4 435.4 3.0%
Operating expenses excluding Government support (399.6) (354.3)
Government support(5) - 6.6
Operating expenses reported (399.6) (347.7) (14.9%)
Adjusted Operating profit 48.8 87.7 (44.4%)
Net Finance Charges (9.5) (7.0) (35.7%)
Adjusted Profit Before Tax 39.3 80.7 (51.3%)
Non-Underlying items(6) (6.8) (1.9) (257.9%)
Profit Before Tax 32.5 78.8 (58.8%)
Taxation (6.9) (18.8) 63.3%
Profit After Tax 25.6 60.0 (57.3%)
(5) represents business rates relief
(6) Non-underlying items represent acquisition costs, share-based payments
charge, amortisation of intangible assets, impairment charges and exceptional
acquisition costs.
The Group generated an adjusted profit before tax of £39.3m (FY22 £80.7m).
Revenue grew to £4.0bn, a growth of £399.4m (11.0%) compared to the prior
year. Acquisitions completed after 1 March 2021 contributed additional
revenues of £183.2m and have contributed a loss before tax of £0.9m as new
start-up operation and the seasonality of losses in acquisitions undertaken
post September led to losses as anticipated. Rising vehicle prices were
largely responsible for the underlying £233.8m (6.5%) increase in Core Group
revenues.
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
FY23 FY22 Variance
£'m £'m
Revenue
New 1,121.9 969.9 152.0
Fleet & Commercial 897.6 772.0 125.6
Used 1,658.2 1,584.4 73.8
Aftersales 336.8 288.8 48.0
Total Group Revenue 4,014.5 3,615.1 399.4
Gross Profit
New 98.4 80.6 17.8
Fleet & Commercial 42.3 35.5 6.8
Used 125.2 154.4 (29.2)
Aftersales 182.5 164.9 17.6
Total Gross Profit 448.4 435.4 13.0
Gross Margin
New 8.8% 8.3% 0.5%
Fleet & Commercial 4.7% 4.6% 0.1%
Used 7.5% 9.7% (2.2%)
Aftersales(7) 44.5% 47.1% (2.6%)
Total Gross Margin 11.2% 12.0% (0.8%)
(7) Aftersales margin expressed on internal and external revenues
The total and like-for-like volumes of vehicles sold by the Group and trends
against market data are set out below:
Total Units Sold % Like-for-Like Units Sold %
FY23 FY22 Variance FY23 FY22 Variance
Used retail vehicles 82,561 88,772 (7.0%) 78,208 86,949 (10.1%)
New retail cars 33,727 33,366 1.1% 31,484 32,644 (3.6%)
Motability cars 11,029 8,404 31.2% 10,507 8,184 28.4%
Direct fleet cars 18,259 16,015 14.0% 18,024 15,898 13.4%
Agency fleet cars 5,236 5,172 1.2% 4,349 5,095 (14.6%)
Total fleet cars 23,495 21,187 10.9% 22,373 20,993 6.6%
Commercial vehicles 17,710 17,528 1.0% 17,523 17,512 -%
Total New vehicles 85,961 80,485 6.8% 81,887 79,333 3.2%
Total vehicles 168,522 169,257 (0.4%) 160,095 166,282 (3.7%)
( )
( ) UK Market year-on-year change(9) Group year-on-year change v UK market(8)
New Retail Car (1.9%) (1.7%)
Motability Car 8.1% 20.3%
Fleet Car (3.6%) 10.2%
Commercial (17.2%) 17.2%
( )
(8) Represents the year-on-year variance of like-for-like Group volumes
compared to the UK trends reported by SMMT
(9) Source SMMT
Used retail vehicles
Three consecutive years of muted new vehicle registrations in the UK has led
to a constrained supply of used vehicles. Based on current registration
predictions for 2023, the number of sub 5 year old cars on the road in the UK
is expected to fall further by 4% in 2023; and be 27% below 2019 levels.
Overall, over 2.0 million new car sales have been lost in the last three years
with an inevitable flow through into reduced used car supply. These supply
trends, suggest that in a stable demand environment, UK used car pricing
dynamics are unlikely to change in 2023, even though average prices remain
high. Residual values have seen an increase of 19% over 2022, and currently
remain some £1,900(10) ahead of 'normal'. An exception to this overall
benign picture, however, is electric vehicles. Used EV supply is growing
rapidly, albeit from a very low base, and it is anticipated that, one in seven
1-3 year-old cars in the UK parc will be electric by the end of 2023.
Consequently, used EV supply is now outstripping demand (which is impacted by
the same dynamics discussed in the previous section regarding new vehicles).
As a result, used EV prices in the UK have now fallen for seven consecutive
months, and by approximately 30%, compared to a 1.4% fall in petrol vehicle
averages(11). These falls are now likely to bottom out and a new, more
affordable base price established for used electric vehicles. EV sales in
used cars represent c. 4% of Group volumes.
The Group monitors the pricing and supply environment and has continued to
develop its used vehicle pricing and analytical tools to optimise gross profit
generation and stock turn and control inventory. An enhanced version of this
tool, Vertu Insights, is currently being rolled out to assist the Group's
dealerships in inventory pricing and management disciplines.
Overall, the number of used retail vehicles in stock at 28 February 2023
compared to 28 February 2022 fell by 2.3% in the Core Group, whilst the
overall value of Core used retail inventory was £6.8m lower. The Group has
been running stocks tighter with a view to maximising margin, return on
investment and to reduce exposure to any consumer downturn impacts. The
Group's like-for-like used vehicle volumes were 10.1% lower in the Year
reflecting both the prevailing supply and demand dynamics in the market, and
the exceptional conditions of last year. Margin per unit did decline year on
year from the exceptional levels of last year but the Group is still achieving
gross profits per unit significantly better than the pre-pandemic norm.
Core Group gross profit from the sale of used vehicles totalled £120.2m for
the Year. Excluding the exceptional result delivered in FY22 of £153.1m,
this represents the highest level of Core Group annual used vehicle gross
profit delivered. The following like-for-like variances compared to last
year arose:
· £32.9m decrease in gross profit generated from used vehicle sales
compared to the exceptional level of profit achieved last year.
· 10.1% decrease in the number of used retail units sold, reflecting the
reduced supply in the market and rebalancing of volume and margin.
· Gross profit per unit of £1,530, down from the exceptional £1,748
achieved in FY22. This remains above historical norms for the Group.
· Average selling price of £19,987 per unit, a 11.9% increase.
· Gross margin of 7.7% (FY22: 9.8%) reflective of higher sales prices and
more normalised gross profit per unit.
The Group measures customer experience on used cars via the JudgeService third
party platform. The Net Promoter Scores throughout the Year have been very
strong at c.85%, which is sector leading amongst major market players. Great
service goes hand-in-hand with profitability and future retention, which is so
vital in creating a sustainable business.
(10) Source: Autotrader
(11) Source: CAPHI: April 2023 Car market overview
New retail cars and Motability sales
UK retail car registrations declined 1.9% in the year to 28 February 2023,
marking a third consecutive year of muted registrations, linked to well
documented production and logistics challenges for global vehicle
Manufacturers. Against this backdrop, the Group's like-for-like new retail
vehicle volumes declined by 3.6% when compared to the prior year, slightly
behind the market. This was driven in part by strong comparatives in FY22
where the Group strongly outperformed the market trends coming out of
lockdowns. Overall, the Group marginally increased UK retail market share to
4.1% (FY22: 4.0%) aided by acquisitions. The Group's order bank levels for
new retail vehicles remain high but have reduced over the Year as would be
expected as production issues slowly unwind. New retail vehicles ordered but
remaining undelivered as at 28 February 2023 totalled approximately 12,900
units (28 February 2022: 16,000).
UK Motability registrations benefitted from pent up demand, as already
extended contracts came to an end and supply came through from Manufacturers,
rising 8.1%, compared to FY22. The Group's Motability volumes significantly
outperformed the market, growing 28.4% on a like-for-like basis and
representing an increasing UK market share of 5.9% (FY22: 4.8%). The Group
is Motability's largest partner in the UK with over 34,500 vehicles on the
fleet. These vehicles require an annual service funded by Motability in the
Group's service departments.
The continued supply constraints and consequently reduced pressure to achieve
volume targets, led to improved gross profit retention, aided by the
application of effective pricing disciplines. It was this improved gross
margin that drove a year-on-year improvement in core retained gross profit in
new vehicle sales. The following trends were apparent on a like-for-like
basis for the New Retail and Motability sales channel:
· A £13.7m increase in gross profit generated, aided by stronger
margins.
· Gross profit per unit of £2,182, a rise of 13.2% from £1,928
representing a record for the Group despite the higher mix of lower margin
Motability volumes.
· An average selling price of £24,128 per unit, a 9.8% increase.
· Gross margin rising to 8.8% from 8.3%.
In new vehicles, sales customer experience is measured by the Group's
Manufacturer partners. Approximately 70% of the Group's Core sales outlets
delivered experience levels above national average levels.
Fleet & Commercial vehicle sales
The UK car fleet market saw reduced activity compared to historic levels for
much of the Year as Manufacturers prioritised constrained supply to higher
margin retail channels. However, in latter months, fleet supply has
significantly improved and has been growing faster than retail registrations.
Registration volumes in the UK car fleet market declined 3.6% in the Year
as a whole. In contrast to a market decline, the Group delivered 22,373
fleet cars on a like-for-like basis, in the Year, representing a growth of
6.6% compared to FY22. As with new cars, fleet and commercial margins
strengthened due to the ongoing supply constraints, pricing mix changes and
the Group adopting strong pricing disciplines. Overall, the Group has a 3.0%
share of the UK fleet car market.
UK van registrations fell 17.2% in the year to 28 February 2023, as production
and supply issues also impacted this channel and the prior year had been
strong, aided by strong pent-up demand for home delivery and construction
coming out of lockdowns. In stark contrast to these national, negative
trends, the Group maintained its like-for-like volumes of new commercial
vehicles sold. This considerable market outperformance by the Group
reflected the strong market position of the Group and the investment in teams
to sell into different market channels. Reflecting this, the Group sold 6.1%
of UK new light commercial vehicles in the Year (FY22: 5.0%).
When compared the year ended 28 February 2022, the following fleet and
commercial trends were seen on a like-for-like basis:
· A £5.0m increase in gross profit.
· Record gross profit per unit of £1,027, a rise of 12.0% from £917.
· Gross margin rising to a record 4.7% from 4.6%.
Aftersales
The Group's aftersales operations are a vital contributor to Group
profitability, generating over 40% of total gross profit. The Group
pleasingly saw growth in revenues and gross profit generation in all channels
of aftersales on a like-for-like basis as set out below.
Service Accident & Smart Repair Fuel Total
Parts Forecourt
£'m £'m £'m £'m £'m
Revenue(7) 159.5 189.2 20.1 13.9 382.7
Revenue(7) change 8.9 17.3 3.8 6.0 36.0
Revenue(7) change (%) 5.9% 10.0% 24.1% 75.7% 10.4%
Gross profit 117.8 42.3 10.7 0.9 171.7
Gross profit change 3.0 3.9 1.8 0.3 9.0
Gross margin(8) FY23 (%) 73.8% 22.4% 53.3% 6.4% 44.9%
Gross margin(8) FY22 (%) 76.2% 22.3% 55.3% 7.5% 46.9%
Margin change (%) (2.4%) 0.1% (2.0%) (1.1%) (2.0%)
(7) includes internal and external revenues
(8) Aftersales margin expressed on internal and external revenues
· Service
The UK has a vehicle parc of approximately 32.0 million cars plus commercial
vehicles requiring access to maintenance and repair services and this is now
ageing due to lack of recent new vehicle activity.
Vehicle service and repair is a key and resilient profit source for the
Group. Through strong execution of retention and aftersales processes and
the active targeting of conquest business, the Group has grown like-for-like
service revenues by 5.9% over the Year. Each retail invoice raised by the
Group's service operations averages £281 (FY22: £259), and over half the
invoices raised in FY23 were in respect of over 3 year old vehicles. The
average age of a retail vehicle seen by the Group is 4.7 years with the
Group's average invoice value for vehicles in the 4-5 year old category at
£306, the highest average value of each age category. The Group therefore
gains a revenue benefit as the parc ages.
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 the retention strategy.
The Group has over 167,000 live service plans, including manufacturer service
plans, which creates significant resilience. Excellence of customer service
is vital to retention with over 62% of service departments over national
average on the Manufacturer customer experience measurements.
Gross margin percentages on vehicle servicing declined to 73.8% (FY22: 76.2%)
in the Core Group reflecting increased remuneration to address technician
resource constraints, particularly in early FY23, which increased cost of
sales in the service department. This pay action aided the stability levels
amongst technicians and reduced the level of vacancies, aiding service
department performance. Higher technician numbers drove the increased
revenues, up 5.9%, and gross profit generation achieved, with like-for-like
gross profit in service up £3m. There remains considerable competition for
skilled technicians in the UK.
· Parts
The Group's substantial parts operations include traditional wholesale
operations, agency distribution and on-line parts retailing. These
operations supply parts to the Group's service and accident repair operations
as well as to other businesses and retail customers in the UK and across the
world. Parts revenues in the Core Group grew £17.3m compared to last year,
as price rises, increased vehicle service and repair activity and an increase
in sales in wholesale parts operations all contributed to growth.
· Accident and Smart Repair
The Group continues to expand its substantial Smart Repair operations through
adding additional vans to the core cosmetic business as well as introducing
new streams including vans specialising in wheel repairs and glass
replacement. In addition, enhanced smart repair fixed facilities are being
created, such as in Exeter to serve the substantial dealership operations
there. The Group now has a fleet of 106 (2022: 88) vans with plans for
further expansion to maximise the opportunity. This fleet largely serves the
Group's dealerships, but also does carry out some limited sales to external
customers across the UK. There is considerable scope for continued expansion
of this business.
During FY22, 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 accident repair
operations. This management dedication has driven the increase in gross
profit, with specific KPI improvement targets and focus on a consolidation of
work providers, all driving enhanced profit generation.
Collectively, accident and smart repair services saw revenue growth of 24.1%
in the core group with £1.8m more gross profit generated. Margins of 53.3%
(FY22 55.3%), reflected increased pay levels put in place in the Year.
· Fuel Forecourt
The Group's fuel forecourt at Widnes saw increased activity as pricing
strategies led to a considerable increase in market share. Revenues rose 75.7%
to over £13m. A second forecourt has been acquired in Yeovil as part of the
Helston Group, which will be redeveloped in the coming months to enhance the
retail offering.
Operating Expenses
A summary of Group operating expenses is set out below:
FY23 FY22 FY23 Var to FY22
£'m £'m £'m %
Salary costs 214.0 199.9 14.1 7.1%
Vehicle and valeting costs 38.6 35.3 3.3 9.3%
Marketing costs 36.2 36.0 0.2 0.6%
Property costs and rates 39.3 40.7 (1.4) (3.4%)
IT expenditure 11.6 9.1 2.5 27.5%
Energy costs 7.9 4.6 3.3 71.7%
Other 28.7 23.7 5.0 21.1%
Core Group operating expenses before Government support 376.3 349.3 27.0 7.7%
Acquisitions 23.2 2.7 20.5 759.3%
Disposals 0.1 2.3 (2.2) (95.7%)
399.6 354.3 45.3 12.8%
Government support (CVJRS receipts and rates relief) - (6.6) 6.6
-
Group Net Underlying Operating Expenses 399.6 347.7 51.9 14.9%
Reported operating expenses of £399.6m, increased by £51.9m compared to the
year ended 28 February 2022. This increase includes the impact of Government
support of £6.6m (largely business rates relief) in the prior year.
Dealerships acquired or sold in the period since 1 March 2020 generated a net
£18.3m increase. Underlying Core Group operating expenses therefore grew,
by 7.7%, (£27.0m) compared to last year.
The largest operating cost of the Group is salaries, which have increased by
£14.1m in the Core Group, compared to last year. The Group reported high
vacancy levels throughout the second half of FY22 and adjusted salaries to aid
the recruitment and retention of colleagues. This action has delivered a
reduction in vacancy levels, which, together with investment in central
functions, such as in digital development, Concierge and customer retention
accounted for £9.1m of the uplift in salary costs in the Core Group. Pay
awards, including the impact of the rise in National Minimum Wage, generated a
further £9.3m increase. This increase in salaries also includes the Group's
changes to its sales roles. Sales advisors have been introduced to the
dealerships sales teams and these new roles have higher basics but lower
commissions than traditional sales executives. This change, along with the
reduced level of Group profitability generated a £4.3m reduction in
commissions and bonus earnings.
The Group has continued to respond to high inflation levels, increased
National Minimum Wage awards and tight labour markets by ensuring pay levels
are competitive and motivational. A further pay rise largely to colleagues
earning less than £35,000 per annum was made on 1 March 2023 following a
review. This will aid retention of colleagues.
Vehicle costs increased because of rising vehicle prices, which drove up lease
costs and depreciation charges on the higher values. An improving supply
position also meant a return to full demonstrator requirements by many
Manufacturers, which was not the case during and following the lockdown
periods. Rising fuel prices have also had an impact on vehicle running
costs.
The Group maintained its core marketing costs at broadly FY22 levels while
further enhancing the awareness of the Group's brands. Return on investment
is a priority for all marketing spend with a focus on increasing its
effectiveness, especially in the digital space, maximising conversion, and a
renewed focus on retention rather than just conquest activity. This helped
keep spend stable despite inflationary pressures.
IT expenditure rose by £2.5m compared to the prior year. This cost increase
represents the further investment in digitalisation, the roll out of
self-check-in capability, together with investments in the Group's IT and
telephony network, data and cyber security. The increase also includes costs
of integration of the Helston businesses onto Group networks and systems.
The incremental element of which has been included in the synergy target as a
negative synergy.
The Group benefitted from a below market rate fixed contract on electricity up
to September 2022. The contract expiry has led to a £3.3m increase in
energy cost in the Year, despite the Group delivering a reduction in energy
use. The Group reduced gas consumption by 25.7% and electricity consumption
by 5.8% on a like-for-like basis compared to FY22. Most of this saving was
achieved by the Group's colleagues having a refreshed and disciplined focus on
energy consumption. Weekly league tables are distributed, and dealerships
given on-site support in the form of energy management reviews.
In FY23 the Board approved an investment into LED Lighting and solar panel
installation with costs totalling £4.4m to be incurred across FY23 and FY24
in the core business. LED lighting has replaced older lighting technology
across the majority of the Group's workshops and nine roof solar installations
were complete and producing onsite electricity by the end of the Year. A
further 25 roof solar installations are underway for completion in FY24 in the
Core Group. When these projects are complete at least 10% of the Group's
total electricity requirements will be generated by this onsite clean solar
energy. A review has recently been undertaken of the former Helston
businesses to identify opportunities for further beneficial investment in
solar panels and LED lighting to impact future energy costs. The Board have
approved an additional £1m of capital expenditure in solar panels for these
Group locations over the remainder of FY24.
Other costs have also seen an increase of £5.0m. This includes an increase
in respect of colleague training, as Manufacturers returned to full training
schedules after restrictions curtailed activity. Other costs in the category
also increased due to inflationary pressures.
Non-underlying operating expenses
FY23 FY22 FY23 Var to FY22
£'m £'m £'m
Impairment charges 1.5 0.1 1.4
Share based payments charge 2.1 1.4 0.7
Amortisation 0.5 0.4 0.1
Acquisition fees 2.7 - 2.7
6.8 1.9 4.9
Impairment charges of £1.5m relate to the write-off of intangible assets
attributable to certain of the Group's Jaguar franchise outlets, which will
cease operations in FY25.
The Group's Partnership share option (PSO) scheme was introduced in FY21.
Under the scheme, colleagues receive nil cost options in the Company, pro-rata
to their On Target Earnings. Vesting is determined by the proportion of the
colleagues' annual bonus earned, compared to their on-target bonus, up to a
maximum of 100%. Vested options are capable of exercise at the end of a
three-year holding period. FY23 was the third year that such awards were
made to colleagues, with the increase in the share-based payment charge
reflective of this third grant and an increase in the scale of the Group.
Under the PSO scheme, charges in respect of the grants are spread over the
4-year period from award to the end of the holding period. As such, FY24
should represent the final year of increased charges with the expectation that
annual costs will level off after this.
Acquisition fees represent legal and other due diligence professional fees in
respect of the substantial Helston acquisition, completed in December 2022.
Net Finance Charges
Net finance charges are analysed below:
FY23 FY22 FY23 Var to FY22
£'m £'m £'m
New vehicle Manufacturer stocking interest 3.4 1.7 1.7
Interest on bank borrowings 3.1 1.7 1.4
Used vehicle stock funding interest 0.8 0.1 0.7
Interest on lease liabilities 3.5 3.6 (0.1)
Interest income (1.3) (0.1) (1.2)
Net Finance Charges 9.5 7.0 2.5
The Group saw an increase in interest charged by Manufacturers on funded new
vehicle inventory. This increase was due to increased interest rates being
charged as successive base rate rises took effect, the increased average price
of new vehicles in the pipeline and an easing of supply of new vehicles in
some franchises so extending the pipeline consigned. Total Group new vehicle
stock as at 28 February 2023 was £427m (2022: £275m), up 55.3%.
Interest on bank borrowings increased due to the additional facilities drawn
for the acquisition of Helston Garages in December 2022.
To minimise the interest rate risk to the Group, derivative contracts have
been entered into. The Group has secured an interest rate cap contract over
£50m of mortgage borrowing capping the underlying rate to a maximum of
4.50%. In addition, in respect of the RCF, an interest rate swap over £30m
of borrowing has been entered into, fixing the underlying SONIA rate charged
at 4.42% until March 2025. This replaced an existing Swap agreement over
£22m of borrowings, which expired 27 February 2023.
Pension Costs
The Group has a closed defined benefit scheme which remains fully funded and
requires no ongoing cash contribution from the Company.
The Scheme invests in an LDI portfolio which aims to fully hedge the Scheme's
interest rate and inflation risk to maintain this fully funded position.
On the accounting valuation basis the scheme is in surplus. Different
valuation assumptions apply to the accounting and actuarial valuations such as
the use of corporate bond yields rather than gilt yields to discount
liabilities. The impact of the Scheme's hedge being related to the actuarial
position rather than accounting value generated a reduction in the accounting
surplus of approximately £4m over the Year. A further reduction in surplus
arose relating to movements in the applicable inflation assumptions.
Overall, a net actuarial loss of £6.0m was recognised in the Statement of
Comprehensive Income for the Year. The accounting surplus on the scheme
decreased to £3.2m as at 28 February 2023 (2022: £9.1m).
Tax Payments
The Group's underlying effective rate of tax for the Period was 19.5% (FY22:
19.9%). The overall effective tax rate, decreased to 21.3% (FY22: 23.8%)as a
result of FY22 being impacted by the revaluation of deferred tax obligations.
The total tax charge for the Year fell to £6.9m from £18.8m. 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 £54.3m (FY22: £44.4m) was generated in the Year. The
Year saw a £23.7m reduction in working capital.
A reduction in the Group's used vehicle inventory, led to an £11.9m cash
inflow. Improving new vehicle supply saw a significant increase 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 inflow because of the VAT cash flow advantage on such funded vehicles
of £21.0m.
Improved new vehicle supply resulted in an £20.8m cash outflow from an
increase in the level of fully paid new vehicle inventory held by the Group.
The Group continues to have a strong forward order bank and the increase in
fleet activity year on year has led to a £12.4m increase in the value of
vehicle deposits and advance payments held against outstanding orders, a cash
inflow in the Year.
Financing and Capital Structure
The Group has a balance sheet with shareholders' funds of £341.4m (2022:
£331.9m) underpinned by a freehold and long leasehold portfolio of £306.6m
(2022: £236.4m) and net debt (excluding lease liabilities) of £75.3m as at
28 February 2023. The Group's conservative financing and capital structure
resulted in a strong tangible net assets position of £224.1m as at 28
February 2023, representing 65.3p per share.
The Group has a committed acquisition debt facility of £93m. This facility
was re-financed during the year with the Group's two existing lending banks
plus a third lending bank added at re-financing. This refinanced facility
matures in December 2025, with the potential to extend for a further two years
to December 2027. £44m of this committed facility was drawn as at 28
February 2023. The Group operated comfortably within all covenants during
the Year.
The Group also has long term debt funding in the form of a 20-year mortgages
totalling £85.5m provided by BMW Financial Services ('BMW FS').
The Group 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 2023, amounts utilised on such facilities
totalled £25.4m. These balances are included as debt in the calculation of
Net Debt/Cash. The Group has a £70m facility under these arrangements and
held £173m of used vehicle inventory at 28 February 2023 resulting in used
vehicle stock being largely unencumbered.
Capital Allocation
Consideration of capital allocation is central to the Board's decision
making. The Board 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.
The Group spent £122.1m on acquisitions during the year, in line with its
strategy to drive consolidation where acquisitions meet hurdle rates. The
Group continues to monitor post- acquisition returns and remains confident
hurdle rates are being achieved.
The Helston acquisition on 17 December 2022 utilised £115.2m of cash and
debt. This net consideration paid reflected the net asset position at 31
August 2022 of the acquired businesses. Cash of £6.9m from profits of the
business acquired generated after this date to completion accrued to the
Group. This offset the headline goodwill number paid of £28.6m. Finalised
goodwill and other intangibles relating to this transaction, after other
adjustments, totalled £23.4m.
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 dividends being
covered three to four times by adjusted diluted earnings per share. An
interim dividend of 0.70p per share was paid in January 2023. The Board
recommends a final dividend in respect of the year ended 28 February 2023 of
1.45p per share to be approved at the Annual General Meeting on 28 June
2023. This dividend will be paid, subject to shareholder approval, on 28
July 2023. The ex-dividend date will be 29 June 2023 and the associated
record date 30 June 2023. This final dividend brings the total dividend in
respect of FY23 to 2.15p per share (FY22: 1.70p), an increase of 26.5%.
Against adjusted, fully diluted EPS of 8.69p this dividend is covered 4.0
times in line with the Group's stated policy.
During the Year, the Group purchased 10,477,450 shares for cancellation,
representing 2.9% of opening total issued share capital, for £5.9m. The
Board believes that this is an appropriate use of capital and will continue a
programme of Buybacks as a relevant element of returns to shareholders,
alongside dividend payments. Authority is held for a further £3m buyback
programme to be appropriately deployed. A further £2m was spent in the Year
on the acquisition of shares into the Group's Employee Benefit Trust ("EBT")
to be used for the satisfaction of colleague share incentive programmes.
£6.0m was spent on dividends paid representing the final dividend in respect
of the year ended 28 February 2022 and interim dividend in respect of the
Year.
The Group also deploys capital on its extensive franchised dealership network,
with fixed asset additions totalling £23.8m in FY23. This included £12.0m
on freehold purchases or projects which increased the Group's brand
representation or augmented productive capacity (''Expansion capex''). The
balance of £11.8m is considered replacement capital expenditure. For FY24,
replacement capital expenditure is anticipated to be approximately £16.0m,
which includes large scale redevelopment projects to meet revised Manufacturer
standards which do not necessarily increase Group capacity. In addition,
£5.0m of investments in FY24 of green technology such as solar, EV charging
points and LED lighting will be undertaken. A further £17.0m of expenditure
is anticipated in respect of Expansion capex. This high level of activity
includes the land purchase and build cost of the Ayr Toyota dealership, the
redevelopment and expansion of Exeter BMW/Mini, the expansion of the Group's
Toyota dealership in Chesterfield as well as the continued investment in
multi-franchising by the Group. The Group has surplus property assets which
are expected to be disposed over the next 12 months for anticipated proceeds
of c.£9.5m.
Karen Anderson, CFO
CONSOLIDATED INCOME STATEMENT (AUDITED)
For the year ended 28 February 2023
Underlying items 2023 Non-underlying items 2023 Total 2023 Underlying items 2022 Non-underlying items 2022 Total 2022
(Note 2) (Note 2)
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 4,014,544 - 4,014,544 3,615,052 - 3,615,052
Cost of sales (3,566,134) - (3,566,134) (3,179,632) - (3,179,632)
Gross profit 448,410 - 448,410 435,420 - 435,420
Operating expenses (399,590) (6,828) (406,418) (347,753) (1,934) (349,687)
Operating profit / (loss) 48,820 (6,828) 41,992 87,667 (1,934) 85,733
Finance income 3 1,300 - 1,300 163 - 163
Finance costs 3 (10,842) - (10,842) (7,126) - (7,126)
Profit / (loss) before tax 39,278 (6,828) 32,450 80,704 (1,934) 78,770
Taxation 4 (7,663) 746 (6,917) (16,062) (2,708) (18,770)
Profit / (loss) for the year attributable to equity holders 31,615 (6,082) 25,533 64,642 (4,642) 60,000
Basic earnings per share (p) 5 7.40 16.64
Diluted earnings per share (p) 5 7.02 15.96
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (AUDITED)
For the year ended 28 February 2023
2023 2022
£'000 £'000
Profit for the year 25,533 60,000
Other comprehensive (expenses) / income
Items that will not be reclassified to profit or loss:
Actuarial (losses) / gains on retirement benefit obligations (5,973) 2,801
Deferred tax relating to actuarial losses / (gains) on retirement benefit 1,493 (700)
obligations
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges 172 503
Deferred tax relating to cash flow hedges (43) (96)
Other comprehensive (expense) / income for the year, net of tax (4,351) 2,508
Total comprehensive income for the year
attributable to equity holders 21,182 62,508
CONSOLIDATED BALANCE SHEET (AUDITED)
As at 28 February 2023
2023 2022
£'000 £'000
Non-current assets
Goodwill and other indefinite life assets 127,590 103,470
Other intangible assets 2,286 1,797
Retirement benefit asset 3,188 9,055
Property, plant and equipment 328,405 254,133
Right-of-use assets 73,078 78,278
Derivative financial instruments 507 -
Total non-current assets 535,054 446,733
Current assets
Inventories 674,380 475,027
Trade and other receivables 86,317 51,839
Current tax assets 1,654 -
Cash and cash equivalents 78,984 83,793
841,335 610,659
Property assets held for sale 6,077 -
Total current assets 847,412 610,659
Total assets 1,382,466 1,057,392
Current liabilities
Trade and other payables (758,594) (529,086)
Current tax liabilities - (3,734)
Derivative financial instruments - (13)
Contract liabilities (13,477) (11,752)
Borrowings (29,821) (12,283)
Lease liabilities (14,498) (14,132)
Total current liabilities (816,390) (571,000)
Non-current liabilities
Borrowings (124,519) (55,343)
Lease liabilities (68,959) (74,698)
Deferred income tax liabilities (19,117) (13,023)
Contract liabilities (12,104) (11,447)
Total non-current liabilities (224,699) (154,511)
Total liabilities (1,041,089) (725,511)
Net assets 341,377 331,881
Capital and reserves attributable to equity holders of the Group
Ordinary share capital 34,894 35,942
Share premium 124,939 124,939
Other reserve 10,645 10,645
Hedging reserve 133 4
Treasury share reserve (2,653) (1,586)
Capital redemption reserve 4,833 3,785
Retained earnings 168,586 158,152
Total equity 341,377 331,881
CONSOLIDATED CASH FLOW STATEMENT (AUDITED)
For the year ended 28 February 2023
2023 2022
Note £'000 £'000
Cash flows from operating activities
Operating profit 41,992 85,733
Loss / (profit) on sale of property, plant and equipment 102 (9)
Profit on lease modification (449) (269)
Amortisation of other intangible assets 509 407
Depreciation of property, plant and equipment 14,510 14,365
Depreciation of right of use asset 16,225 16,658
Impairment charges 1,500 131
Movement in working capital 23,737 (27,973)
Share based payments charge 1,651 1,061
Cash inflow from operations 99,777 90,104
Tax received 100 135
Tax paid (9,118) (14,479)
Finance income received 1,053 39
Finance costs paid (10,983) (6,798)
Net cash inflow from operating activities 80,829 69,001
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and borrowings acquired (122,066) (9,508)
Acquisition of freehold and long leasehold land and buildings (7,468) -
Purchases of intangible assets (186) (44)
Purchases of other property, plant and equipment (13,785) (16,571)
Proceeds from disposal of property, plant and equipment 179 1,605
Net cash outflow from investing activities (143,326) (24,518)
Cash flows from financing activities
Proceeds from borrowings 7 110,570 5,699
Repayment of borrowings 7 (23,358) (10,638)
Principal elements of lease repayments (16,187) (15,786)
Purchase of treasury shares (2,000) -
Sale of treasury shares 744 951
Cash settled share options (180) (403)
Repurchase of own shares (5,898) (6,014)
Dividends paid to equity holders (6,003) (2,327)
Net cash inflow / (outflow) from financing activities 57,688 (28,518)
7 (4,809) 15,965
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year 83,793 67,828
Cash and cash equivalents at end of year 78,984 83,793
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (AUDITED)
For the year ended 28 February 2023
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 2022 35,942 124,939 10,645 4 (1,586) 3,785 158,152 331,881
Profit for the year - - - - - - 25,533 25,533
Actuarial losses on retirement benefit obligations - - - - - - (5,973) (5,973)
Tax on items taken directly to equity - - - (43) - - 1,493 1,450
Fair value gains - - - 172 - - - 172
Total comprehensive income for the year - - - 129 - - 21,053 21,182
Purchase of treasury shares - - - - (2,000) - - (2,000)
Sale of treasury shares - - - - 933 - (189) 744
Repurchase of own shares - - - - - - (5,898) (5,898)
Cancellation of repurchased shares (1,048) - - - - 1,048 - -
Dividends paid - - - - - - (6,003) (6,003)
Share based payments charge - - - - - - 1,471 1,471
As at 28 February 2023 34,894 124,939 10,645 133 (2,653) 4,833 168,586 341,377
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 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, a further
3,960,331 shares were purchased for £2,000,000.
During the year, 2,436,251 shares were transferred from the EBT on exercise of
vested CSOP, LTIP and PSO awards. 5,665,352 shares remain in the EBT at 28
February 2023.
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 35,917 124,939 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
NOTES
For the year ended 28 February 2023
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. The Group audited
consolidated financial statements that comply with IFRS 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 29 February 2024 as well as the known financial performance of
the Group in the period subsequent to 28 February 2023, 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 from consumers as well as further cost increases. 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 2023 and
28 February 2022 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 2023 and 2022 financial
statements were unqualified. A copy of the statutory accounts for 2022 has
been delivered to the Registrar of Companies. Those for 2023 will be
delivered following the Company's annual general meeting, which will be
convened on 28 June 2023.
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 2022.
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 2023
Gross
Revenue Gross Profit Gross Margin
Revenue Mix Profit Mix
£'m % £'m % %
Aftersales (*) 336.8 8.4 182.5 40.7 44.5
Used cars 1,658.2 41.3 125.2 27.9 7.5
New car retail and Motability 1,121.9 27.9 98.4 22.0 8.8
New fleet and commercial 897.6 22.4 42.3 9.4 4.7
4,014.5 100.0 448.4 100.0 11.2
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
* 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
2023 2022
£'000 £'000
Acquisition costs (2,753) -
Share based payments charge (2,066) (1,396)
Amortisation (509) (407)
Impairment charges (1,500) (131)
Non-underlying loss before tax (6,828) (1,934)
Acquisition costs relating to the acquisition of Helston Garages Group Limited
have been included in non-underlying items in the year ended 28 February 2023
due to the one-off nature and material value of the individual acquisition.
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
2023 2022
£'000 £'000
Interest on short-term bank deposits 1,053 39
Net finance income relating to defined benefit pension scheme 247 124
Finance income 1,300 163
Bank loans and overdrafts (3,112) (1,701)
Vehicle stocking interest (4,242) (1,844)
Lease liability interest (3,488) (3,581)
Finance costs (10,842) (7,126)
4. Taxation
2023 2022
£'000 £'000
Current tax
Current tax charge 6,444 16,350
Adjustment in respect of prior years (1,836) 14
Total current tax 4,608 16,364
Deferred tax
Origination and reversal of temporary differences 409 (245)
Adjustment in respect of prior years 1,684 (147)
Rate differences 216 2,798
Total deferred tax 2,309 2,406
Income tax expense 6,917 18,770
Profit before taxation 32,450 78,770
Profit before taxation multiplied by the rate of corporation tax in the UK of 6,166 14,966
19% (2021: 19%)
Non-qualifying depreciation 658 638
Non-deductible expenses 658 432
Effect on deferred tax balances due to rate change 216 2,798
IFRS 16 (65) 77
Property adjustment 10 41
Permanent benefits (574) (49)
Adjustments in respect of prior years (152) (133)
Total tax expense included in the income statement 6,917 18,770
A summary of the Group's tax expense in respect of underlying and
non-underlying items is as follows:
Non-underlying items 2023 Non-underlying items 2022
Underlying items 2023 Total Underlying items 2022 Total 2022
2023
£'000 £'000 £'000 £'000 £'000 £'000
Profit / (loss) before tax 39,278 (6,828) 32,450 80,704 (1,934) 78,770
Taxation (7,663) 746 (6,917) (16,062) (2,708) (18,770)
Profit / (loss) after tax 31,615 (6,082) 25,533 64,642 (4,642) 60,000
Effective tax rate 19.51% 21.32% 19.90% 23.83%
The Group's underlying effective rate of tax is 19.51% (2022: 19.90%) 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 2023.
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. As a result the Group's
deferred tax obligations at 28 February 2023 and 28 February 2022 have been
measured at 25%.
The overall effective tax rate of 21.32% includes tax on non-underlying items
(2022: 23.83%).
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.
2023 2022
£'000 £'000
Profit attributable to equity shareholders 25,533 60,000
Non-underlying loss after tax (note 4) 6,082 4,642
Underlying earnings attributable to equity shareholders 31,615 64,642
Weighted average number of shares in issue ('000s) 345,239 360,651
Potentially dilutive shares ('000s) 18,703 15,222
Diluted weighted average number of shares in issue ('000s) 363,942 375,873
Basic earnings per share 7.40p 16.64p
Diluted earnings per share 7.02p 15.96p
Basic underlying earnings per share 9.16p 17.92p
Diluted underlying earnings per share 8.69p 17.20p
6. Dividends per share
Dividends of £6,003,000 (1.75p per share) were paid in the year ended 28
February 2023.
A final dividend of 1.45p per share is to be proposed at the Annual General
Meeting on 28 June 2023. The ex-dividend date will be 29 June 2023 and the
associated record date 30 June 2023. The dividend will be paid, subject to
shareholder approval, on 28 July 2023 and these financial statements do not
reflect this final dividend payable.
7. Reconciliation of net cash flow to movement in net debt
2023 2022
£'000 £'000
Net (decrease)/increase in cash and cash equivalents (4,809) 15,965
Cash inflow from proceeds of borrowings (110,570) (5,699)
Cash outflow from repayment of borrowings 23,358 10,638
Cash movement in net debt (92,021) 20,904
Capitalisation of loan arrangement fees 1,037 -
Amortisation of loan arrangement fees (131) (206)
Increase in accrued loan interest (408) -
Non-cash movement in net debt 498 (206)
Movement in net debt (excluding lease liabilities) (91,523) 20,698
Opening net cash/(debt) (excluding lease liabilities) 16,167 (4,531)
Closing net (debt)/cash (excluding lease liabilities) (75,356) 16,167
Lease liabilities at 1 March (88,830) (91,101)
Capitalisation of new leases (13,307) (14,132)
Disposal of lease liabilities 2,493 617
Interest element of lease repayments (note 3) (3,488) (3,581)
Cash outflow from lease repayments 19,675 19,367
Lease liabilities at 28 February (83,457) (88,830)
Closing net debt (including lease liabilities) (158,813) (72,663)
8. Business combinations
On 1 July 2022, the Group acquired the entire issued share capital of Wiper
Blades Limited which operates as an e-commerce specialist. Total consideration
of £3,513,000 was settled from the Group's existing cash resources.
On 31 October 2022, the Group acquired the business and assets of two BMW
Motorrad outlets in Shipley and Rotherham, Yorkshire. Total consideration of
£4,150,000 was settled from the Group's existing cash resources.
On 17 December 2022, the Group acquired the entire issued share capital of
Helston Garages Group Limited ("Helston"). Helston is a predominantly premium
manufacturer automotive retail group in the South West of England representing
28 franchised outlets.
Total consideration of £181,914,000 was met from a combination of a new
£74,757,000 mortgage facility secured against a portfolio of 22 freehold and
long leasehold properties including a combination of acquired properties and
existing Group properties, renegotiated banking facilities and existing cash
resources. £22,000,000 of the renegotiated banking facility was drawn down
for the initial acquisition payment, however, was subsequently repaid in
February 2023.
9. Post balance sheet events
On 30 April 2023, the Group sold the trade and assets of its standalone
accident repair operation in Newburn, Newcastle upon Tyne at above net book
value. The sale included the leasing of the long-leasehold property to the
buyer.
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://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 (https://www.lseg.com/privacy-and-cookie-policy)
. END FR QKLFBXELEBBKRecent news on Vertu Motors
See all newsREG - Vertu Motors PLC - Notification of major holdings
AnnouncementREG - Vertu Motors PLC - Notification of Directors’ and PDMRs’ interests
AnnouncementREG - Vertu Motors PLC - Notification of PDMR interests
AnnouncementREG - Vertu Motors PLC - Notification of PDMR interests
AnnouncementREG - Vertu Motors PLC - Trading Update
Announcement