REG - Vertu Motors PLC - Interim Results
16/10/2024 07:00
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RNS Number : 2962I Vertu Motors PLC 16 October 2024
16 October 2024
Vertu Motors plc ("Vertu", "Group")
Unaudited interim results for the six months ended 31 August 2024
Resilient H1 performance in line with expectations
Vertu Motors plc, the automotive retailer with a network of 193 sales and
aftersales outlets across the UK and with sector leading brands, announces its
interim results for the six months ended 31 August 2024 ("the Period").
FINANCIAL SUMMARY
H1 FY25 H1 FY24 H2 FY24 FY24
Revenue £2,492.4m £2,422.5m £2,297.1m £4,719.6m
Adjusted(1) profit before tax £23.5m £31.5m £6.3m £37.8m
Basic EPS 4.77p 6.58p 1.02p 7.60p
Dividends per share 0.90p 0.85p 1.50p 2.35p
Net Debt(2) (£83.9m) (£90.7m) (£54.0m) (£54.0m)
HIGHLIGHTS
· Total Group revenue for the Period increased by 2.9% compared to
H1 FY24.
· Group aftersales operations delivered a robust performance,
delivering Core Group gross profit growth of £7.1m.
· Used vehicle like-for-like volume growth of 3.9% and gross margin
increased to 7.3%.
· Group new retail vehicle sales volumes down 5.9% in the Period
with significant market share gains as UK market saw an 11.2% decline.
· BEV new retail sales volumes in UK fell in the Period by 7.0%,
however, Group grew retail BEV sales volumes by 10.9% as the Group focused on
this critical channel.
· Key steps taken to grow the Group's partnerships with Chinese
Manufacturers.
· H1 profits lower than prior year levels as anticipated as costs
increased due to cost inflation and increased headcount to drive activity.
· The Group's balance sheet remains strong with gearing levels
below target, gearing(3) ratio of 23.1%.
· Tangible net asset per share increased to 73.7p (H1 FY24: 70.9p).
· 3.3m shares (representing 1.0% of share capital in issue on 1
March 2024) repurchased at a cost of £2.4m since 1 March 2024: buyback
continues with a further £3m programme in addition to £0.6m remaining of the
existing authority.
· Increased interim dividend of 0.90p per share declared, payable
in January 2025.
CURRENT TRADING AND OUTLOOK
· Group September trading performance in line with prior year
levels. The Board anticipates that full year profits will be in line with
current market expectations.
· Key plate change month of September saw like-for-like new retail
sales volumes up 5.2% with retail market down 1.8% continuing strong market
outperformance.
· Group like-for-like retail BEV sales volumes more than doubled
year-on-year in September against a broadly static UK market.
· Profitability in H2 is expected to improve over prior year levels
due to a stronger used car market and enhanced used vehicle trade values.
· Inflationary cost pressures remain in salaries and wages and the
Group continues to focus on cost and efficiency.
· All UK retail outlets will trade under the Vertu brand by the end
of April 2025. A single UK brand will enhance marketing ROI and deliver cost
savings.
· Significant progress continues to be made in disposing of surplus
properties generating cash and profits.
(1) Adjusted to remove share based payment charge, amortisation of intangible
assets and other non-underlying items
(2) Excludes lease liabilities, includes used vehicle stocking loans
(3) Net debt (excluding lease liabilities) / Shareholders funds
Commenting on the results, Robert Forrester, Chief Executive, said:
"I am pleased with the Group's first half performance against a fast-shifting
market backdrop. Our high margin aftersales business delivered an excellent
H1 performance, aided by higher technician numbers and execution of the
Group's vehicle health check process.
The retail new car market declined as the Government's regulation to
transition to battery electric vehicles ('BEV') introduced market volatility
and negative effects in terms of affordability. We took considerable market
share in the new retail market, and in the BEV market in particular,
reflecting the Group's adaptability and strong operational execution.
The Group's strong balance sheet, excellent portfolio of brands, robust and
scalable systems, and a strong and experienced leadership team with motivated
colleagues puts us in a great position from which to deliver on our strategic
goals. We are actively pursuing value accretive growth opportunities to
enhance our portfolio, applying strict investment return metrics as well as
returning cash to shareholders."
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 Tel: +44 (0) 191 491 2121
Robert Forrester, CEO
Karen Anderson, CFO
Phil Clark, Investor Relations
Stifel (Nominated Adviser and Broker) Tel: +44 (0) 207 710 7688
Matthew Blawat
Nick Harland
Camarco Tel: +44 (0) 203 757 4980
Billy Clegg
Tom Huddart
CHAIRMAN'S STATEMENT
In a dynamic market environment, the Group once again showed its adaptability
and high levels of operational excellence during the period ended 31 August
2024. Adjusted(4) profit before tax of £23.5m was, as anticipated, below
the levels achieved in the prior period due to a rise in costs. The Group
delivered increased market share in the new retail vehicle market (and
particularly the BEV market) and saw strong performances in the used car and
aftersales channels. There is an expectation that a stronger used vehicle
market will drive profitability to above prior year levels in the second half
of the financial year.
There were several noteworthy highlights in the Period:
· The Group's strategic objective to grow as a leading automotive
retail franchise is driven by our belief that the benefits of scale are
maximised within a larger, well-structured Group. The Group is one of the
six super groups that have emerged in the UK from consolidation in recent
years. Strong, enduring partnerships with our Manufacturer partners remain
central to achieving the Group's strategy. I am proud of the robust
relationships we have cultivated with our carefully selected partners; built
on mutual respect, operational excellence, and a shared commitment to
delivering exceptional customer experiences. The Group has delivered on its
growth objective in the Period and this is set to continue.
· The Group's scale supports investment in the in-house development
of systems, enhancing customer and colleague experiences while driving cost
efficiencies. These scalable platforms are rapidly integrated into acquired
dealerships, and efforts continue to optimise group-wide efficiency through
technology. During the Period, the Group enhanced its aftersales customer
journey and profitability with completion of the rollout of an in-house
deferred payment service, 'Pay Later', which has improved sales conversion
rates within service operations. Significant progress has also been made in
leveraging data through the Vertu Insights product, enabling frequent vehicle
pricing adjustments to better respond to used car market conditions and
improve used car stock and sales management.
· The Board is very focused on ensuring that steps are taken to
mitigate the impact of rising costs in areas largely outside of the Group's
control such as the National Minimum Wage, demonstrator vehicle costs and
manufacturer stocking charges. Use of technology to improve productivity is
critical in this area and good progress is being made.
· Having the right resource levels and leadership throughout the
business is critical to deliver operational excellence. Vacancy levels have
reduced in all areas and colleague retention is improving. These trends have a
positive influence on delivering operational excellence.
· The Group currently operates three major brands in the retail
market, Bristol Street Motors, Macklin Motors and Vertu. By the end of April
2025 all UK outlets will operate under the Vertu brand. Following a detailed
review of our Brand strategy, we are confident this transition will be well
received by customers and Manufacturers and yield immediate marketing
efficiencies as well as other operational benefits which will help to mitigate
continued cost pressure in other areas. Upfront costs incurred from this
initiative will be more than offset by savings in the first 12 months of the
rebranding.
· There has been continued application of stringent capital
allocation disciplines:
1. Growth: The Group continues to implement its multi-franchise strategy
to maximise profit potential at select locations, while aligning with
Manufacturer representation plans. This approach is exemplified by the
recent openings of Ducati in Sunderland, Peugeot in Carlisle, and the Group's
new representation of the Chinese brands of BYD and Leap Motors. These
additional franchises have or will be integrated into existing Group
locations, complementing our broader brand portfolio.
2. Reinvestment: As at August 2024, the Group owned freehold and
long-leasehold property with a net book value of £324.3m which is held at
depreciated historic cost. The Group actively manages its property portfolio
to create value and in the Period disposed of surplus property releasing
capital for redeployment within the business or to be returned to
shareholders.
3. Acquisitions: As a leading Group with a strong balance sheet and
reputation for swift integration, we see good flow of acquisition
opportunities, from single sites to groups. We have a disciplined approach
which analyses all opportunities to consider how they can benefit the Group to
deliver on our long-term strategic objectives and enhance returns to
Shareholders.
4. Dividends: Since the Group began paying ordinary dividends in January
2011, over £56.0m has been paid to our shareholders. Our dividend for this
interim period has been increased by 5.9% to 0.90p per share at an anticipated
cost of £3.0m.
5. Share Buybacks: Since the Group began Share Buybacks in October 2018,
over £33.0m has been returned to shareholders, reducing the Company's shares
in issue by 15.9% over the same period. Over £7.7m was returned in 2023, and
in February 2024 the Group announced a £3.0m Share Buybacks for the
forthcoming year, of which £2.4m has been spent to purchase over 3.3m shares
for cancellation to date (£0.6m remains unspent). The Group has announced
an additional £3.0m for the Share Buyback programme today and remains below
target gearing levels.
It has been widely reported that the Chancellor is expected to announce
revisions to current Inheritance Tax legislation in the October budget,
including the removal of Business Relief for qualifying companies listed on
AIM. The Board continues to monitor this specific situation closely and
encourages Government to carefully consider the impact of any changes to
legislation which make AIM less attractive for growth companies.
AIM has been a key facilitator in Vertu's growth. Since IPO in 2006, Vertu
has raised capital on a handful of occasions, with the last institutional
equity capital raise taking place over 8 years ago in March 2016. Today
Vertu stands as one of six UK super groups, and the only one listed in the
UK. We employ over 7,500 colleagues across a UK network of over 190
locations representing 33 franchise brands. Our contribution to the nation's
Exchequer in FY24 in corporation tax, national insurance and business rates
alone was over £52m. We consistently invest in people, franchise
relationships, property and systems. Our long-term commitment to operational
excellence has enabled us to grow profits and fund our organic and inorganic
growth. Our cash generation has funded significant dividend payments and
share buybacks.
It's rewarding to see how each colleague has contributed to the success of the
Group, and I would like to thank them for their efforts. The dedication they
continue to demonstrate is both exemplary and humbling.
Andy Goss, Chairman
(4) Adjusted to remove share based payment charge, amortisation of intangible
assets other non-underlying items
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, which have been
recently reviewed and confirmed by the Board, are summarised below:
· To grow as a major scaled franchised dealership group, to develop
our portfolio of Manufacturer partners, while being mindful of industry
development trends and to maximise long-run returns.
· To be at the forefront of digitalisation in the sector,
delivering a cohesive 'bricks and clicks' strategy with cost optimisation and
efficiency:
· Optimise omnichannel development, bringing bricks and clicks
together.
· Digitalise aftersales processes to improve customer service and
efficiency.
· Reduce the cost base of the Group by delivering efficiency using
technology.
· 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.
The Group continues to make progress in all four areas of its strategy.
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 since it is one of the six super
groups that have recently emerged in the UK with revenues in excess of £4bn.
The franchised retail market in the UK remains very fragmented with the
Group representing just 5% of the sector. The following changes to the scale
of the Group have been delivered since 1 March 2024:
· Acquisitions
On 22 July 2024, the Group added a Honda dealership in Exeter to its
portfolio, following the purchase of the trade and assets of the site from
Hendy Group Limited. The acquisition included leasehold dealership
premises and total consideration, funded from the Group's existing cash
resources was £1.1m. This acquisition further solidified the Group's
position as Europe's largest Honda retailer, now representing a total of 17
Honda dealerships across the UK. The outlet augments the Group's existing
Honda dealerships in Plymouth and Truro, further expanding the Group's
significant presence in the South-West of England and creating a complete
market area for the brand in Devon and Cornwall.
· Multi-franchising and new outlets
In July 2024, the Peugeot franchise opened in Carlisle, alongside the Group's
existing Vauxhall, MG, SEAT and Cupra dealerships.
In August 2024, the first of the Group's BYD outlets opened in Worcester,
alongside the Group's existing Ford and Citroen dealerships. A further BYD
outlet is expected to open alongside an existing sales outlet in the coming
months. In addition, in H2 it is anticipated that the Group will open five
Leap Motors outlets alongside fellow Stellantis brands and a further smart
outlet. These developments form part of a focused strategy to increase
exposure to Chinese produced cars. Currently, the UK remains the only major
Western country not to have significant tariffs on such products and market
share of Chinese cars (particularly BEV) is expected to rise significantly in
the next few years.
The Group opened a flagship outlet for Ducati motorbikes in August in
Sunderland bringing the franchise to the Group for the first time.
The Group is continuing to develop businesses across the UK. Plymouth saw the
opening of a Renault Dacia outlet in August and Volvo will also open in the
city in H2.
In September 2024, the newly developed dealership for Toyota in Ayr opened for
business. This completes the West of Scotland market area for the brand
awarded to the Group in FY23. The Group now operates six Toyota outlets in the
UK.
· Active Management
The Board continues to actively manage the Group's portfolio of properties and
businesses. This includes assessing further growth opportunities as well as
the future potential of existing businesses, utilising strict investment
return metrics to ensure discipline in capital allocation.
The Group has continued to generate cash from the sale of surplus properties,
including the sale in the Period of one property held for resale as of 28
February 2024. A surplus dealership in Taunton, acquired through the Helston
acquisition, was sold for £0.8m, matching its book value. Subsequent to 31
August 2024, the Group exchanged contracts for the sale of a former
dealership, the sale, expected to be completed in the second half of FY25,
will generate gross cash proceeds of £2.3m, in excess of the net book value
of the property of £2.0m. In addition, a further surplus property was sold
for £1.6m in October 2024, in excess of the net book value of £0.9m.
The Group currently holds three additional surplus properties for resale which
are expected to be sold in the coming months for gross cash proceeds of
approximately £5.7m, compared to net book value of £4.9m. The largest of
these, located in Glasgow, has faced delays in completion but the Board is
confident realisation will take place.
Digitalisation Developments
The Group's scale enables it to invest in systems and operational development,
enhancing its customer offerings and boosting profitability by maximising
margins and increasing productivity to lower costs. The Group's internally
developed systems provide standardised processes and controls, along with
real-time management information, enabling swift and well-informed
decision-making.
The following provide good examples of the work being done to add value:
· Vertu Insights continues to be developed as a used vehicle pricing
tool, facilitating real-time price updates based on market conditions and
forming the basis for part-exchange valuations for customers. The
technology, which combines proprietary and third-party machine learning,
allows for instant price adjustments across all vehicles at a given location
in response to market supply and demand. During the Period, the Group
repriced over 75% of its advertised stock each day using this system.
Resulting used car pricing strategies have helped to drive a strong used car
performance in the Period and freed up management time in the sales arena.
· The 'Pay Later' deferred payment option in the service area,
developed in-house for service customers, has been fully implemented and is
now a key driver of increased selling of additional work identified in the
Vehicle Health Check process. This has aided the increase of average invoice
values per customer visit and driven aftersales profitability. This solution
allows customers to spread unexpected repair costs, interest-free, over a
period of up to six months. During the Period, 6,800 customers utilised this
option, with an average bill of £826. Compared to the previous outsourced
solution, this option operates at a lower cost to the Group. As of 31 August
2024, £2.7m of working capital was tied up in this facility (29 February
2024: £1.3m), with no significant credit issues reported.
· The Period saw further development of digital self-service check-in
in the Group's service departments. 63% of customers now check in for their
service from home with 57% of these customers going on to use the instore
kiosks to safely deposit their vehicle keys. The functionality of the kiosks
has been further enhanced to allow courtesy vehicle collection, with the
option for customer check out and payment now in pilot for roll out in the
second half of FY25. In addition, opportunities for add-on sales and vehicle
sales have been enhanced, with check-in questions now able to be amended
centrally across multiple locations.
· A new project is significantly advanced investing substantial
development resource to improve the productivity and efficiency of the Group's
financial processing. The following are examples of these developments:
The first development of this project, the 'Vertu Transfer System' (VTS) has
been successfully piloted and is now being rolled out across the Group. This
allows the automated transfer of used car stock vehicles between Group
dealerships, including the transfer of the accounting record, supporting
documentation and payment, immediately on the online approval of the transfer
by the holding dealership. This system also speeds up the ability to sell
cars in any dealership from the stock of another and gives increased customer
benefits as a result.
An update to the Group's customer payment journey is also in the process of
rolling out. This enhancement allows customers to pay by link, Apple Pay or
online banking directly to our dealerships and the system will automatically
post the cash receipt onto Group systems. This improves the efficiency of
the Group's finance functions significantly, removing significant keying and
transaction matching and is expected to reduce bank charges.
Additional efficiency improvements are in development in the finance area.
Recruiting, Retaining and Developing Colleagues
The Group prioritises the development and motivation of its colleagues to
ensure operational excellence and exceptional customer experiences, which
drive long-term, sustainable cash flows. Like many UK businesses, the Group
has faced challenges in recruiting and retaining talent. However, during the
Period, the Group successfully reduced vacancy levels across all areas and
improved colleague retention. Towards the end of the Period, the Group
adjusted remuneration for certain skilled roles where pay was close to the new
National Minimum Wage, ensuring the retention of key positions. This has
however increased the cost base of the Group further and this is likely to
continue given Government wages policy.
The Group has long demonstrated a strong commitment to investing in its
people, offering opportunities for talented, hardworking individuals to
succeed. Development initiatives include degree apprenticeships, technician
apprentice schemes, and progression programmes designed to support the
advancement of colleagues into management roles. These schemes, along with
the Group's broader talent programmes, are built to foster a meritocratic
culture with equal opportunities for all.
Ancillary Businesses
The Group has a strategy to develop ancillary businesses to add revenue and
improve returns that complement the core dealership businesses.
Opportunities are reviewed to extend these operations further and one
highlight is the launch of 'Repair Master' in the Period. This business
provides smart repair services to fleet companies for their returning
vehicles. The business now operates nine vans with six more being fitted out
to further expand the business. There remains unfulfilled demand for these
services and further significant expansion of this new operation is
anticipated.
Sector Trends
· Electrification
The UK's commitment to Net Zero and electrification goals continue to evolve.
These policies represent a significant external change for the automotive
sector which will have implications on the vehicle sales and repair sector in
the years ahead. The previous government delayed the full ban on new petrol
and diesel car sales to 2035, aligning with the EU. However, during the UK
Labour Party's election campaign, Labour pledged to reinstate the ban to 2030.
Despite the continued uncertainty around the timing of this full ban, the Zero
Emission Vehicle (ZEV) mandate remains in place, requiring 22% of new car
sales in 2024 to be BEVs, with this target increasing each year to 80% by
2030.
As of August 2024, BEVs accounted for 17.2% of new car registrations, compared
to 16.4% in the previous year. BEV sales in the retail market reduced 7.0%
in the Period year-on-year. The limited growth has been driven by fleet
purchases, while private BEV demand remains low due to concerns about
affordability and charging infrastructure and costs, particularly among
consumers without access to off-street parking.
In response to weak retail demand (which is being mirrored across Europe),
Manufacturers have introduced discounting of BEV product, supported subsidised
financing, and in some cases rationed petrol and hybrid vehicle supplies to
meet ZEV mandate targets and avoid fines of up to £15,000 per non-BEV car
sold above the limits. The SMMT forecasts that BEVs will make up 18.5% of
the market by the end of 2024, which would fall short of the government's 22%
target (however, there are some flexibilities built into the Mandate providing
some potential relief to Manufacturers). The UK new car market (and van
market in due course) is likely to come under continued pressure if the
current regulations are not amended. As Manufacturers cannot sustain price
cuts indefinitely, government incentives like tax breaks or subsidies will
likely be needed to boost BEV private sales or changes to the Mandate will be
required to take the pressure off the sector and to make the transition to BEV
vehicles more achievable and sustainable.
The Group is very much at the forefront of discussions with Government and the
wider sector on how the regulations impact the whole UK automotive sector. The
outperformance of the Group in increasing sales volumes and market share of
the retail BEV market has been marked.
· Financial Conduct Authority
The Financial Conduct Authority (FCA) investigation into Discretionary
Commission Arrangements (DCAs) within automotive finance continues.
Preliminary findings from the FCA review suggest that motor finance providers,
and motor finance credit brokers (including motor dealers) who have engaged in
motor finance agreements involving DCAs could be impacted. The Group ceased
sales involving DCAs in January 2021. The FCA have now indicated that an
update on this investigation will be given by May 2025. The Board does not
currently consider that provisions are required to be made in respect of any
exposures in this area and will update shareholders as the position becomes
clearer.
· Agency Distribution
Under the agency distribution model, the Manufacturer transacts with the
customer for new vehicle sales while the retailer remains the physical
touchpoint with the customer and undertakes the sales process, customer
contact and vehicle delivery as an agent. The retailer-turned-agent receives
a commission on each new vehicle sale. There are varying versions of the
agency model, and the picture is evolving in terms of such factors as
Manufacturers' appetite to change, the legal structure of the model and the
details of operational implementation. Several of the Group's Manufacturers
partners have implemented or are considering the application of the agency
model in the future. Several Manufacturers that had previously announced a
transition to agency have now announced this will not take place. The model
has certain advantages and disadvantages to both Manufacturers and retailers,
and these vary depending on prevailing market conditions. The Group has
successfully implemented the new models where they have been introduced.
Current Trading and Outlook
The Board anticipates that profits for the financial year ending 28 February
2025 will be in line with current market expectations.
The Group's September performance delivered profits in line with prior year
levels. Like-for-like new retail car sales growth of 5.2% was delivered with
this significantly outperforming the SMMT reported 1.8% fall in UK retail
registrations year-on-year and continuing the Group trend for increased retail
market share delivered in the first half. The Group more than doubled
year-on-year sales volumes of BEV product in the retail channel in the month,
against a largely stable UK market. New vehicle margins remain weaker than
in the prior year.
Fleet and commercial volumes declined, with some advantageous supply to the
Group in the prior period now eroded by the improving overall supply
situation. Margins in this key channel continued to be strong as the Group
does not significantly engage in low margin sales such as to the daily rental
market.
Used car volume trends were stable, but margins considerably strengthened
compared to the comparative period, which marked the start of the used vehicle
pricing correction in second half of FY24.
Aftersales demand remained strong and higher technician resource levels are
helping to drive increased revenues and profits.
Cost control remains a major focus in the light of continued pay pressure
driven by the National Minimum Wage. Recent further action on pay has been
undertaken in some roles paid close to current Minimum Wage levels.
The mid-term outlook for the Group should be enhanced by the combination of
reduced interest rates and the Group's strong operational capability. The
Government imposed ZEV mandate, which increases BEV content targets with
potential penal fines for Manufacturers, has the potential to create volume
and pricing volatility in the months ahead. The Board is therefore cautious on
the outlook for new vehicle profitability.
The Board believes that the Group is very well positioned to deliver on its
stated strategy and to take advantage of the increasing opportunities in the
UK sector. The pipeline of growth opportunities is strong at present and
will allow further expansion of the Group's scale in the period ahead.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The Group's income statement for the Period is summarised below:
H1 FY25 H1 FY24 H1 FY25 Var to H1 FY24
£'m £'m %
Revenue 2,492.4 2,422.5 2.9%
Gross Profit 273.8 267.2 2.5%
Operating Expenses (239.4) (225.8) (6.0%)
Adjusted Operating Profit 34.4 41.4 (16.9%)
Net Finance Charges (10.9) (9.9) (10.1%)
Adjusted Profit Before Tax 23.5 31.5 (25.4%)
Non-Underlying Items(5) (1.4) (1.4) -
Profit Before Tax 22.1 30.1 (26.6%)
Taxation (6.1) (7.7) 20.8%
Profit After Tax 16.0 22.4 (28.6%)
(5) Non-underlying items represent share based payment charges, amortisation
of intangible assets and other non-underlying items.
The Group delivered an adjusted profit before tax of £23.5m in the Period.
This performance was, as anticipated, below that achieved in the prior year
period.
Operating expenses and finance charges, particularly wages and salaries,
demonstrator and courtesy car costs and Manufacturer stocking charges, rose at
a faster rate than gross profit. Wages and salaries rose due to the impact
of National Minimum Wage increases and knock-on effects, as well as higher
productive head count levels to drive revenue in sales and aftersales.
Demonstrator and courtesy car costs rose due to increased BEV mix and higher
depreciation needed on BEV fleets. In recent years, reduced new vehicle supply
constrained such fleets. Manufacturer stocking charges rose with interest
rates and higher new vehicle pipeline inventory levels as increased supply
interacted with muted demand. The Group sought to partially mitigate these
impacts through cost savings in other areas.
Gross profit growth was muted due to declining profit generation in the new
retail vehicle sales channel as volume and margins fell. This was despite
significant outperformance by the Group in the channel with significant market
share gains delivered especially in the BEV segment. All other channels saw
growth in gross profits. Overall, gross margins were consistent at 11.0%.
Operating margins fell to 1.4% (H1 FY24: 1.7%) as a result of increased
operating expenses.
Revenue grew by £69.9m to £2.5bn, with an increase of £49.6m (2.1%)
delivered in the Core Group, aided by an increase in the like-for-like number
of vehicles sold and growth in Core Group aftersales revenues. Dealerships
openings and businesses acquired contributed revenue growth of £45.1m, whilst
the closure of dealership operations reduced revenues by £24.8m compared to
the prior year period.
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
H1 FY25
H1 FY25 H1 FY24 Var to H1
£'m £'m FY24
Revenue
New 771.8 744.0 3.7%
Fleet & Commercial 545.5 525.6 3.8%
Used 950.6 947.8 0.3%
Aftersales 224.5 205.1 9.5%
Total Group Revenue 2,492.4 2,422.5 2.9%
Gross Profit
New 58.4 63.0 (7.3%)
Fleet & Commercial 28.2 26.8 5.2%
Used 68.7 67.4 1.9%
Aftersales 118.5 110.0 7.7%
Total Gross Profit 273.8 267.2 2.5%
Gross Margin
New 7.6% 8.5% (0.9%)
Fleet & Commercial 5.2% 5.1% 0.1%
Used 7.2% 7.1% 0.1%
Aftersales(6) 43.8% 43.8% -
Total Gross Margin 11.0% 11.0% -
(6) 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:
Total units sold Like-for-like units sold
H1 FY25 H1 FY24 % % Variance
Variance H1 FY25 H1 FY24
Used retail vehicles 46,073 43,921 4.9% 44,868 43,204 3.9%
New retail cars(7) 18,847 20,027 (5.9%) 18,441 19,507 (5.5%)
Motability cars 10,688 8,626 23.9% 10,349 8,413 23.0%
Direct fleet cars 10,396 9,688 7.3% 10,345 9,570 8.1%
Agency fleet cars 3,545 3,725 (4.8%) 3,544 3,465 2.3%
Total fleet cars 13,941 13,413 3.9% 13,889 13,035 6.6%
Commercial vehicles 8,077 9,422 (14.3%) 7,989 9,396 (15.0%)
Total New vehicles 51,553 51,488 0.1% 50,668 50,351 0.6%
Total Vehicles 97,626 95,409 2.3% 95,536 93,555 2.1%
( ) Variance(8) UK Market (SMMT)
New Retail Car 5.7% (11.2%)
Motability Car (14.5%) 37.5%
Fleet Car (3.1%) 9.7%
Commercial (17.0%) 2.0%
( )
(7) Including agency volumes
(8) Represents the variance of like-for-like Group volumes to the UK trends
reported by SMMT
New retail cars and Motability sales
Overall, UK car registrations increased 3.9%(9) in the Period, with this
growth driven by the Fleet and Motability channels. UK private
registrations were back 11.2% in the Period as higher finance costs and
vehicle prices weighed on demand for new cars. In part this was linked to
the increasing supply and push of BEV vehicles driven by the ZEV mandate.
Retail demand for electric vehicles remains weak compared to other
powertrains, because of high vehicle prices and lack of charging
infrastructure.
New vehicle supply in the UK has been strong in the Period, particularly for
BEVs, as Manufacturers aim to meet Government mix targets. This supply,
coupled with weak retail demand, has led to significant discounting and
attractive financing offers for electric models. Retailer margins have been
put under pressure as retailers sought to hit BEV mix targets and increasing
numbers of previous customers encountered negative equity due to the declining
value of their current car in the period of ownership.
Against this backdrop, the Group delivered an excellent volume performance
taking increased new retail market share. The Group's like-for-like new retail
vehicle volumes fell by 5.5% in the Period, significantly outperforming the
overall retail market trend. Overall, the Group increased UK retail market
share to 4.8% (H1 FY24: 4.6%). The Group was also very successful in
increasing its BEV retail sales volumes which grew 10.9% in the Period on a
like-for-like basis compared to a 7.0% decline in UK BEV retail registrations
(according to the SMMT).
UK Motability registrations rose a significant 37.5% over the Period. The
Group's Motability volumes grew 23.0% on a like-for-like basis. This
represented a reduced UK market share of 5.6% (H1 FY24: 6.2%). Motability
volumes are highly dependent on Manufacturer offers and consequently will be
impacted by the mix of the Group's brands and the stance of each Manufacturer
on supplying into this low margin channel. The Group remains Motability's
largest partner in the UK with over 43,000 vehicles on the fleet. These
vehicles return to the Group's service departments for an annual service
funded by Motability and Motability is therefore a vital customer in the
Group's higher margin aftersales business.
The Group is seeing a dampening effect on new vehicle margins reflecting an
increasing supply push market and significant increased mix of Motability
sales. Core Group gross profit margins on new retail and Motability vehicle
sales were 7.6% (H1 FY24: 8.5%). Like-for-like gross profits from the sale
of new retail and Motability vehicles consequently declined by £4.9m.
(9) Source: SMMT
Fleet & Commercial vehicle sales
The UK car fleet market has been the main driver of the increase in car
registrations in the UK. This was aided by robust demand for BEV through the
fleet channel driven by corporate tax incentives, and the push towards
sustainability in corporate fleets. Registration volumes in the UK car fleet
market have grown 9.7%(10) in the Period compared to the six months ended 31
August 2023. Weakening retail demand and increased supply have led to
increased registrations in the low margin daily rental space, which account
for much of the growth seen in overall UK fleet registrations.
Like-for-like, the Group delivered 13,889 fleet cars in the Period,
representing an increase of 6.6% compared to H1 FY24. The Group's
performance was below the market trends as the Group kept pricing disciplines
to maintain margin and did not undertake significant volumes of daily rental
supply.
The Group saw a 15.0% decrease in the like-for-like volume of new commercial
vehicles sold, with the market up 2.0%(8) over the Period compared to the six
months to 31 August 2023. The Group's performance against the market
reflects strong performance in the comparative period. In recent periods,
when the van market was severely supply constrained, the Group enjoyed much
better supply and took market share with some significant large deals
undertaken. A more normalised supply position in the van market has led this
to this outperformance reversing. The Group had 4.6% of the UK van market in
the Period. Like the car market, the daily rental sector has also grown
substantially due to increased supply and the Group does not have a large
share of this low margin supply channel. Despite the move in mix from
Commercial to fleet car, an 8.1% increase arose in the average selling price
of like-for-like fleet and commercial vehicles sold by the Group in the
Period. This reflected an increase in higher value premium and BEV cars sold.
Pricing disciplines were maintained in the Period with, like-for-like gross
profit per unit up to £1,271 (H1 FY24: £1,165) and gross margin remained
stable at 5.2% despite higher average selling prices. Overall, like-for-like
gross profit in the fleet and commercial channels pleasingly rose by £1.6m.
(10) Source: SMMT
Used retail vehicles
A lower new retail market since 2020 has led to reduced numbers of three- to
five-year-old used vehicles coming back in the market as part exchanges.
This reduced supply of prime used car stock is exacerbated due to the
weakness in the general private retail new car market in the Period. In
contrast, increasing supply of nearly new vehicles from the demonstrator and
pre-registration channels is also evident in the market, as expected in a
period of new car supply exceeding demand.
Reduced overall used vehicle supply has helped to drive stability in overall
used vehicle prices, with a 3-year, 60k mile car falling just 3.6% over the
Period. This is low by historic standards. It is expected that reduced
supply will continue to underpin strong residual values and therefore
wholesale price stability in the months ahead, supporting used car margins.
Indeed, there is recent evidence retail prices have started to rise. This
contrasts with the position last year. The market has seen higher levels of
depreciation in nearly new vehicles, especially of BEV product, reflecting the
very strong offers in place from Manufacturers in the new car arena.
Despite the impact of cost of living and rising interest rates, for many, used
vehicles remain a necessity purchase, so there remains consistent demand for
used vehicles in the UK. In addition, there is evidence that higher new car
prices and some reduced supply of non-BEV new cars, is leading some consumers
to enter the used car market instead of the new car market so underpinning
used car demand.
The Group monitors the pricing demand and supply environment and effectively
applies its Vertu Insights real time pricing algorithm to optimise gross
profit generation, stock turn and control inventory. The Period started with
low levels of used vehicle inventory as the Group had reduced inventory at the
end of FY24, following the significant wholesale pricing correction
experienced in the second half of last year. Used vehicle inventory levels
have increased over the Period from the low levels at 29 February 2024. The
Group did not reduce used vehicle inventory ahead of the plate change month in
September 2024 to ensure the Group had the appropriate stock levels for the
resilient September market. Price stability also aided the judgement not to
reduce stock levels. Used vehicle inventory levels were £21.4m below the
level held at 31 August 2023.
Group like-for-like used vehicle volumes grew 3.9% in the Period.
Like-for-like gross profit per unit of £1,509 was achieved which is broadly
similar to the prior year (H1 FY24: £1,551) and up compared to H2 FY24
(£1,313). The slight moderation reflected the need to keep nearly new
product (including ex-demonstrators) competitive against very strong new cars
offers particularly in the Premium franchise space. A decline in average
selling prices, following the price correction seen in H2 FY24 resulted in a
slight strengthening of Core Group margin on the sale of used vehicles to 7.3%
(H1 FY24: 7.2%). Core Group gross profit from the sale of used vehicles
totalled £67.1m for the Period, this represented a £0.7m increase in Core
Group gross profit generated from used vehicle sales year-on-year.
(11) Source: CAPHI: September 2024 Car market overview
Aftersales
The Group's high margin aftersales operations are a vital contributor to Group
profitability, generating over 43% of total gross profit. Overall, compared
to the six-month period ended 31 August 2023, the following like-for-like
trends in aftersales performance were witnessed and the Core operations
generated £7.1m more gross profit.
Accident & Smart Repair Total
Service Parts Forecourt
£'m £'m £'m £'m £'m
Revenue(12) 105.9 135.6 14.1 9.1 264.7
Revenue(12) change 7.2 9.2 0.7 - 17.1
Revenue(12) change (%) 7.4% 7.3% 5.0% 0.1% 6.9%
Gross profit change 5.5 0.8 0.7 0.1 7.1
Gross margin(13) H1 FY25 (%) 73.0% 21.5% 61.1% 8.3% 43.8%
Gross margin(13) H1 FY24 (%) 72.8% 22.4% 59.0% 7.5% 43.9%
Margin change (%) 0.2% (0.9%) 2.0% 0.8% (0.1%)
(12) includes internal and external revenues
(13) Aftersales margin expressed on internal and external revenues
· Service
Vehicle service and repair remains a crucial and resilient profit driver for
the Group, with like-for-like service revenue increasing by £7.2m (7.4%)
during the Period. This growth was achieved across retail labour sales,
service add-ons such as tyre sales and warranty labour sales.
Several key factors contributed to this strong performance. The Group's
retention and reward strategies significantly reduced technician vacancies,
which had previously limited our service capacity. Enhanced execution of the
Group's vehicle health check process also led to greater identification of
necessary repairs during customer visits. Additionally, the rollout of the
Group's 'Pay Later' option, allowing customers to spread repair costs over 3-6
months interest-free, helped drive both the conversion of identified work and
tyre sales to service customers. Together, these initiatives resulted in an
increased average invoice value for the Group's service department compared to
the same period last year.
Gross margin percentages on vehicle servicing were 73.0% (H1 FY24: 72.8%) in
the Core Group reflecting the above impacts. This is impressive in light of
the additional pay given to technicians to enhance recruitment and retention
and shows the Group has been successful in improving technicians' efficiency
and recovery rates. Gross profit generation in the Group's service departments
rose on a like-for-like basis by £5.5m.
· Parts
The Group's extensive parts operations encompass traditional wholesale
activities, agency distribution centres, online parts retailing, and accessory
sales to dealership customers. These operations support not only the Group's
service and accident repair businesses but also supply parts to external
businesses and retail customers. Parts revenue, which exceeds that of the
Service department, grew by £9.2m in the Core Group compared to last year,
driven by increased vehicle service and repair activity and a growth in
wholesale parts sales.
Gross margin percentages on parts declined to 21.5% (H1 FY24: 22.4%) in the
Core Group, reflecting a shift towards a higher proportion of warranty parts
sales which are billed to Manufacturers at lower margin. Gross profit
generation in the Group's parts departments rose on a like-for-like basis by
£0.8m.
· Accident and Smart Repair
The Group's accident repair centres and smart repair operations are managed
separately from the dealership businesses in a standalone division. The Group
has delivered a like-for-like 5.0% increase in revenues generated from the
Group's accident and smart repair operations and a £0.7m increase in gross
profit.
The Group's substantial smart repair operations have predominantly focused on
the provision of services to the Group's extensive dealership network.
During the Period, the Group expanded its Smart Repair operations into retail
work, with the addition of nine vans from March 2024. These vans branded
'Repair Master', provide work to large fleet centres handling corporate hire
return vehicles. Early trading has been very positive and further growth of
this business is planned.
Acquisitions and Closures
Dealerships acquired or closed since 1 March 2023 have contributed an
additional £0.3m operating loss in the Period compared to prior year, as
summarised below:
Acquisitions Closures Total
£'m £'m £'m
H1 FY25
Revenue 51.6 - 51.6
Gross Profit 5.3 - 5.3
Operating Loss (0.8) - (0.8)
H1 FY24
Revenue 6.5 24.8 31.3
Gross Profit 0.6 2.6 3.2
Operating Loss (0.3) (0.2) (0.5)
H1 FY25 variance to H1 FY24
Revenue 45.1 (24.8) 20.3
Gross Profit 4.7 (2.6) 2.1
Operating (Loss)/Profit (0.5) 0.2 (0.3)
Acquisitions include a significant number of new start-up operations opened in
the last 12 months by the Group. These have incurred start-up losses. These
operations are anticipated to see reduce losses in the next 12 months and move
to profitability. In the Period these operations lost £0.8m reflecting their
immature nature.
Outlets closed in the last 12 months led to a year-on-year improvement of
profit of £0.2m.
Operating Expenses
A summary of Core Group operating expenses is set out below:
H1 FY25 H1 FY24 H1 FY25 Var to H1 FY24
£'m £'m £'m %
Salary costs 132.0 124.1 7.9 6.4%
Vehicle and valeting costs 28.7 24.3 4.4 18.1%
Property costs and rates 27.7 27.9 (0.2) (0.7%)
Marketing costs 17.9 20.0 (2.1) (10.5%)
Energy costs 3.6 4.9 (1.3) (26.5%)
Other 23.4 20.9 2.5 12.0%
Core Group operating expenses 233.3 222.1 11.2 5.0%
Acquisitions 6.1 0.9 5.2
Disposals - 2.8 (2.8)
Total Group underlying operating expenses 239.4 225.8 13.6 6.0%
Core Group operating expenses totalled £233.3m in the Period representing an
increase of £11.2m (5.0%) compared to H1 FY24. Dealerships acquired in the
period since 1 March 2023, contributed a further £5.3m of operating expenses
in the Period.
Salary costs represent 57% of Core Group operating expenses and are the
biggest single cost to the Group. The salary costs included in operating
expenses exclude the productive cost of the Group's aftersales technicians,
which are reflected in cost of sales. Salary costs in operating expenses
rose by £7.9m in the Period. The Group has been successful in increasing
headcount of front-line colleagues in the business in part through reduced
vacancies. Additional sales executive levels have helped to drive
outperformance in the retail new car market. Considerable investment has
further been made in service technicians and service apprentices to feed
further aftersales growth. Cosmetic repair operations were also expanded. The
operational impact of this investment in headcount will improve over time, as
colleagues mature in their roles. Total salary costs due to these actions rose
£4.8m in the Core Group. The impact of the rise in National Minimum Wage,
together with consequent salary actions to aid recruitment and retention added
£3.1m to salary costs in the Period. 24.3% of the Group's colleagues are
now paid at or within 5% of National Minimum Wage and this (and its knock-on
effects) are expected to continue in the coming periods.
The most significant year-on-year percentage cost increase in the Core Group
arose in vehicle and valet costs. Vehicle costs include the cost of the
Group's demonstration and courtesy car fleet. Manufacturers extended model
ranges, including more expensive BEV vehicles, have added cost to the Group's
demonstrator fleet compared to the prior year period. This has been
exacerbated by the impact of having to depreciate BEV cars on the fleet by
enhanced monthly writedown rates reflecting market depreciation. Valet costs
increased by 10.4% as a consequence of the increase in National Minimum Wage.
The Group delivered significant savings in Marketing costs which reduced by
10.5% and £2.1m. These saving arose due to a focus on return on investment,
reducing costs per sale in a number of areas. This also reflected the
decline in the new retail car market as advertising was right sized to reflect
this and yet aided the delivery of a gain in market share. The Board
believes that further marketing savings and efficiencies will arise following
the rebrand of all outlets under the Vertu brand and the consequent reduction
in websites and complexity.
Net Finance Charges
The movement in net finance charges is analysed below:
H1 FY25 H1 FY24 H1 FY25 Var to H1 FY24
£'m £'m £'000
Interest on bank borrowings 4.8 4.9 (0.1)
New vehicle Manufacturer stocking interest 4.5 3.3 1.2
Interest on lease liabilities 1.8 1.7 0.1
Used vehicle stock funding interest 0.3 0.7 (0.4)
Interest on bank deposits (0.4) (0.6) 0.2
Net finance income relating to defined benefit pension scheme (0.1) (0.1) -
Net Finance Charges 10.9 9.9 1.0
The increase in overall net finance charges was largely driven by manufacturer
new vehicle stocking interest, which increased £1.2m in the Period.
Increased pipelines of new vehicle inventory, as retail sales have slowed and
supply constraints have eased along with high rates of interest being charged
and an increase in average new vehicle cost, have contributed to these
increased charges in the Period. The trends started to reverse as H1 ended.
Interest on bank borrowings includes the cost of the 20-year mortgage
facilities from BMW Financial Services, where £79.1m remains outstanding at
31 August 2024 (29 February 2024: £81.2m), as well as interest on the £44m
drawn on the Group's revolving credit facility. Lower interest income on bank
deposits reflected reduced cash on deposit levels.
Interest rate risk on the Group's borrowings is managed by interest rate cap
contracts on £50m of mortgage borrowing and an interest rate swap over £30m
of the revolving credit facility. On 9 September 2024 this swap was extended
out to December 2026 reducing the underlying SONIA rate to 3.82% (previously
4.42%) which will reduce future interest costs.
Non-underlying items
H1 FY25 H1 FY24
£'m £'m
Share-based payments charge 1.1 1.0
Amortisation 0.3 0.4
Redundancy costs - 0.8
Lease surrender premium - (0.8)
1.4 1.4
FY25 will be the first financial year where the share based payment charge in
both the reporting and comparative period includes four years' worth of
partnership share awards. Consequently, it is intended to reclassify the
share based payment charge in the full year report and accounts to 28 February
2025 into underlying items, restating the FY24 comparative on the same
basis. This is to reflect the expected stability in future share based
payment charges. Given the immaterial nature of amortisation costs, these will
also be treated as underlying in the full year accounts.
Pensions
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.
The accounting surplus on the scheme at 31 August 2024 increased to £3.1m (29
February 2024: £2.5m).
Tax
The Group's underlying effective rate of tax for the Period was 25.9% (H1
FY24: 25.5%). The total tax charge for the Period was £6.1m (H1 FY24:
£7.7m). Following a review by HMRC in the Period, the Group continues to be
classified as "low risk" and takes a pro-active approach to minimising tax
liabilities whilst ensuring it pays the appropriate level of tax to the UK
Government.
Dividend
An interim dividend of 0.90p per share (H2 FY24: 0.85p) in respect of FY25
will be paid on 17 January 2025. The ex-dividend date will be 12 December
2024 and the associated record date 13 December 2024.
Cash Flows
The Period started with low levels of used vehicle inventory as the Group had
reduced inventory at the end of FY24, following the significant wholesale
pricing correction experienced in the second half of last year. The Group
did not reduce used vehicle inventory ahead of the plate change month in
September 2024 to ensure the Group had the appropriate stock levels for the
resilient September market. This decision, aided by price stability of used
vehicles, absorbed £21.5m of cash over the Period. Used vehicle inventory
levels were, however, £21.4m lower than those at 31 August 2023.
In addition, a reduction in new vehicle lead times, as supply improved and
order-banks reduced, saw a £14.9m reduction in retail customer vehicle
deposits and fleet customer advance payments in respect of forward orders.
These movements were the main drivers of a net cash outflow in respect of
working capital in the Period of £38.8m. This led to a Free Cash Outflow in
the Period of £14.3m (H1 FY24: Free Cash Outflow of £0.4m).
In the Period, the Group successfully disposed of one of the properties held
for resale at 29 February 2024, delivering a cash inflow of £0.8m with
proceeds equivalent to net book value. These sales proceeds have been
deducted in arriving at net capital expenditure of £11.2m incurred in the
Period. £7.2m of this total was incurred in respect of projects which add
additional capacity to the Group. This included £3.0m of expenditure in
building the Group's new Toyota dealership in Ayr, an investment in additional
capacity in Exeter and Sunderland BMW and MINI and the addition of franchises
into existing dealership sites. This £7.2m has therefore been excluded from
the calculation of Free Cash Flow in the Period.
Gross capital expenditure for the full year FY25 is expected to be below the
previous guidance of £31.8m, with net capital expenditure lower at £25.7m as
a result of the property disposals completed or exchanged in the financial
year to date. Further proceeds of £5.7m from the sale of surplus properties
are expected but not included in the forecast.
In the financial year to date, the Group has continued to buy back shares,
repurchasing approximately 3.3m shares, representing 1.0% of opening shares in
issue, for a total cost of £2.4m. 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.
The Board has agreed a further £3m buyback programme for deployment once the
current remaining authority of £0.6m is utilised. The Group has now
purchased 15.9% of its share capital because of buyback programmes which have
operated from FY18. £5.0m was spent on dividends in the Period due to the
final dividend paid in respect of the year ended 29 February 2024.
Karen Anderson, CFO
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the six months ended 31 August 2024
Six months ended 31 August 2024 Six months ended 31 August 2023 Year ended 29 February 2024
Note Underlying items Non-underlying items Total Underlying items Non-underlying items Total Underlying items Non- Total
(note 4) (note 4) underlying items
(note 4)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2,492,432 - 2,492,432 2,422,454 - 2,422,454 4,719,587 - 4,719,587
Cost of sales (2,218,606) - (2,218,606) (2,155,239) - (2,155,239) ( (4,203,507) - (4,203,507)
Gross profit 273,826 - 273,826 26 267,215 - 267,215 51 516,080 - 516,080
Operating expenses (239,491) (1,394) (240,885) (225,787) (1,354) (227,141) 5) (456,845) (3,194) (460,039)
Operating profit / (loss) 34,335 (1,394) 32,941 41,428 (1,354) 40,074 59,235 (3,194) 56,041
Finance income 5 555 - 555 749 - 749 1,254 - 1,254
Finance costs 5 (11,429) - (11,429) (10,672) - (10,672) (22,728) - (22,728)
Profit before tax 23,461 (1,394) 22,067 31,505 (1,354) 30,151 37,761 (3,194) 34,567
Taxation 6 (6,067) (45) (6,112) (8,029) 298 (7,731) (9,430) 576 (8,854)
Profit for the period attributed to equity holders 17,394 (1,439) 15,955 23,476 (1,056) 22,420 28,331 (2,618) 25,713
Basic earnings per share (p) 7 4.77 6.58 7.60
Diluted earnings per share (p) 7 4.44 6.16 7.11
For the six months ended 31 August 2024
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2024 2023 2024
Note £'000 £'000 £'000
Profit for the period 15,955 22,420 25,713
Other comprehensive income / (expense)
Items that will not be reclassified to profit or loss:
Actuarial gain / (loss) on retirement benefit obligations 10 608 (51) (737)
Deferred tax relating to actuarial (gain)/loss on retirement benefit (152) 13 184
obligations
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges (248) 941 116
Deferred tax relating to cash flow hedges 45 (215) (29)
Other comprehensive income / (expense) for the period, net of tax 253 688 (466)
Total comprehensive income for the period attributable to equity holders 16,208 23,108
25,247
As at 31 August 2024
31 August 31 August 29 February
2024 2023 2024
Note £'000 £'000 £'000
Non-current assets
Goodwill and other indefinite life assets 12 129,332 127,462 129,092
Other intangible assets 1,705 2,105 1,971
Retirement benefit asset 10 3,060 3,129 2,477
Property, plant and equipment 339,024 331,085 335,295
Right of use assets 81,527 74,600 72,886
Derivative financial instruments - 1,365 203
554,648 539,746 541,924
Current assets
Inventories 785,718 694,493 761,996
Trade and other receivables 86,897 89,740 93,702
Current tax assets - - 203
Cash and cash equivalents 38,649 47,885 70,599
911,264 832,118 926,500
Property assets held for sale 7,780 4,984 7,881
Total current assets 919,044 837,102 934,381
Total assets 1,473,692 1,376,848 1,476,305
Current liabilities
Trade and other payables (850,196) (750,743) (869,931)
Current tax liabilities (1,547) (978) -
Contract liabilities (11,662) (13,528) (13,400)
Borrowings (4,395) (16,033) (4,395)
Lease liabilities (19,272) (9,706) (17,710)
Total current liabilities (887,072) (790,988) (905,436)
Non-current liabilities
Borrowings (118,129) (122,536) (120,183)
Lease liabilities (72,250) (75,092) (65,214)
Deferred income tax liabilities (23,036) (20,701) (22,024)
Contract liabilities (9,956) (11,963) (10,075)
Total non-current liabilities (223,371) (230,292) (217,496)
Total liabilities (1,110,443) (1,021,280) (1,122,932)
Net assets 363,249 355,568 353,373
Capital and reserves attributable to equity holders of the Group
Ordinary share capital 33,452 34,157 33,760
Share premium 124,939 124,939 124,939
Other reserve 10,645 10,645 10,645
Hedging reserve 17 859 220
Treasury share reserve (3,175) (2,143) (2,056)
Capital redemption reserve 6,275 5,570 5,967
Retained earnings 191,096 181,541 179,898
Total equity 363,249 355,568 353,373
For the six months ended 31 August 2024
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2024 2023 2024
Note £'000 £'000 £'000
Cash flows from operating activities
Operating profit 32,941 40,074 56,041
Profit on sale of property, plant and equipment (58) (468) (516)
Loss / (profit) on lease modification 67 (547) (411)
Amortisation of intangible assets 284 408 568
Depreciation of property, plant and equipment 8,590 8,515 17,449
Depreciation of right of use assets 10,597 8,895 18,254
Impairment charges - - 128
Movement in working capital 11 (38,849) (29,973) 16,708
Share based payments charge 900 777 1,965
Cash inflow from operations 14,472 27,681 110,186
Tax received 1,291 7 552
Tax paid (4,748) (3,724) (5,296)
Finance income received 495 475 1,099
Finance costs paid (11,198) (9,803) (22,576)
Net cash inflow from operating activities 312 14,636 83,965
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and borrowings acquired 9 (1,030) - (5,966)
Acquisition of freehold and long leasehold land and buildings - (2,084) (3,003)
Disposal of businesses - 204 204
Purchases of intangible assets (19) (100) (253)
Purchases of other property, plant and equipment (11,953) (11,864) (23,686)
Proceeds from disposal of property, plant and equipment 800 2,239 3,589
Net cash outflow from investing activities (12,202) (11,605) (29,115)
Cash flows from financing activities
Repayment of borrowings 8 (2,188) (15,976) (29,836)
Principal elements of lease repayments (10,640) (8,461) (18,183)
Sale of treasury shares 34 91 -
Purchase of treasury shares - - 115
Cash settled share options - (109) (109)
Repurchase of own shares (2,234) (4,762) (7,463)
Dividends paid to equity holders (5,032) (4,913) (7,759)
Net cash outflow from financing activities (20,060) (34,130) (63,235)
8 (31,950) (31,099) (8,385)
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period 70,599 78,984 78,984
Cash and cash equivalents at end of period 38,649 47,885 70,599
For the six months ended 31 August 2024
Treasury share Capital redemption reserve
Ordinary Share Other Hedging reserve reserve Retained Total
share capital premium reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 March 2024 33,760 124,939 10,645 220 (2,056) 5,967 179,898 353,373
Profit for the period - - - - - - 15,955 15,955
Actuarial gains on retirement benefit obligations - - - - - - 608 608
Tax on items taken directly to equity - - - 45 - - (152) (107)
Fair value losses - - - (248) - - - (248)
Total comprehensive income for the period - - - (203) - - 16,411 16,208
Sale of treasury shares - - - - (1,119) - 1,153 34
Cancellation of repurchased shares (308) - - - - 308 - -
Repurchase of own shares - - - - - (2,234) (2,234)
Dividends paid - - - - - - (5,032) (5,032)
Share based payments charge - - - - - - 900 900
As at 31 August 2024 33,452 124,939 10,645 17 (3,175) 6,275 191,096 363,249
The repurchase of own shares in the period was made pursuant to the share
buyback programmes announced on 13 June 2023 and 9 October 2023.
3,082,017 ordinary shares to the value of £2,234,000 had been repurchased in
the six months ended 31 August 2024. These shares were cancelled immediately
and accordingly, the nominal value of these shares has been transferred to the
capital redemption reserve.
The 'Other reserve' is a merger reserve, arising from shares issued as
consideration to the former shareholders of acquired companies.
For the six months ended 31 August 2023
Treasury share Capital redemption reserve
Ordinary Share Other Hedging reserve reserve Retained Total
share capital premium reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 March 2023 34,894 124,939 10,645 133 (2,653) 4,833 168,586 341,377
Profit for the period - - - - - - 22,420 22,420
Actuarial losses on retirement benefit obligations - - - - - - (51) (51)
Tax on items taken directly to equity - - - (215) - - 13 (202)
Fair value gains - - - 941 - - - 941
Total comprehensive income for the period - - - 726 - - 22,382 23,108
Sale of treasury shares - - - - 510 - (419) 91
Purchase of treasury shares - - - - - - - -
Cancellation of repurchased shares (737) - - - - 737 - -
Repurchase of own shares - - - - - - (4,762) (4,762)
Dividends paid - - - - - - (4,913) (4,913)
Share based payments charge - - - - - - 667 667
As at 31 August 2023 34,157 124,939 10,645 859 (2,143) 5,570 181,541 355,568
For the year ended 29 February 2024
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 2023 34,894 124,939 10,645 133 (2,653) 4,833 168,586 341,377
Profit for the year - - - - - - 25,713 25,713
Actuarial losses on retirement benefit obligations - - - - - - (737) (737)
Tax on items taken directly to equity - - - (29) - - 184 155
Fair value gains - - - 116 - - - 116
Total comprehensive income for the year - - - 87 - - 25,160 25,247
Sale of treasury shares - - - - 597 - (482) 115
Purchase of treasury shares - - - - - - - -
Issuance of treasury shares - - - - - - - -
Repurchase of own shares - - - - - - (7,463) (7,463)
Cancellation of repurchased shares (1,134) - - - - 1,134 - -
Dividends paid - - - - - - (7,759) (7,759)
Share based payments charge - - - - - - 1,856 1,856
As at 29 February 2024 33,760 124,939 10,645 220 (2,056) 5,967 179,898 353,373
For the six months ended 31 August 2024
1. Basis of preparation
Vertu Motors plc is a Public Limited Company which is quoted on the AiM Market
and is incorporated and domiciled in the United Kingdom. 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.
The financial information for the period ended 31 August 2024 and similarly
the period ended 31 August 2023 has neither been audited nor reviewed by the
auditors. The financial information for the year ended 29 February 2024 has
been based on information contained in the audited financial statements for
that year.
The information for the year ended 29 February 2024 does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The Auditors' Report on those accounts was not qualified under
section 498 of the Companies Act 2006.
2. Accounting policies
In line with International Accounting Standard 34 and the Disclosure and
Transparency Rules of the Financial Conduct Authority, these condensed interim
financial statements have been prepared applying the accounting policies and
presentation that were applied in the preparation of the Company's published
consolidated financial statements for the year ended 29 February 2024.
3. 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.
Six months ended 31 August 2024 Revenue £'m Revenue Mix % Gross Profit £'m Gross Profit Mix % Gross Margin %
Aftersales(14) 224.5 9.0 118.5 43.3 43.8
Used vehicles 950.6 38.1 68.7 25.1 7.2
New retail and Motability 771.8 31.0 58.4 21.3 7.6
New fleet & commercial 545.5 21.9 28.2 10.3 5.2
Total 2,492.4 100.0 273.8 100.0 11.0
Six months ended 31 August 2023 Revenue £'m Revenue Mix % Gross Profit £'m Gross Profit Mix % Gross Margin %
Aftersales(14) 205.1 8.5 110.0 41.2 43.8
Used vehicles 947.8 39.1 67.4 25.2 7.1
New retail and Motability 744.0 30.7 63.0 23.6 8.5
New fleet & commercial 525.6 21.7 26.8 10.0 5.1
Total 2,422.5 100.0 267.2 100.0 11.0
Year ended 29 February 2024 Revenue £'m Revenue Mix % Gross Profit £'m Gross Profit Mix % Gross Margin %
Aftersales(14) 413.5 8.7 218.4 42.3 43.5
Used vehicles 1,816.2 38.5 122.5 23.7 6.7
New retail and Motability 1,452.5 30.8 119.6 23.2 8.2
New fleet & commercial 1,037.4 22.0 55.6 10.8 5.4
Total 4,719.6 100.0 516.1 100.0 10.9
(14) Aftersales margin expressed on internal and external revenue
4. Non-underlying items
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2024 2023 2024
£'000 £'000 £'000
Impairment charges - - (128)
Redundancy costs - (778) (872)
Lease surrender premium - 845 840
Share based payment charge (1,110) (1,013) (2,466)
Amortisation (284) (408) (568)
Non-underlying loss before tax (1,394) (1,354) (3,194)
Non-underlying taxation charge (45) 298 576
Non-underlying loss after tax (1,439) (1,056) (2,618)
5. Finance income and costs
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2024 2023 2024
£'000 £'000 £'000
Interest on short-term bank deposits 413 672 1,099
Net finance income relating to Group pension scheme 60 77 155
Other interest 82 - -
Finance income 555 749 1,254
Bank loans and overdrafts (4,897) (4,885) (9,924)
Vehicle stocking interest (4,693) (4,054) (9,347)
Lease liability interest (1,839) (1,733) (3,457)
Finance costs (11,429) (10,672) (22,728)
6. Taxation
The Group's underlying effective rate of tax is 25.9% (H1 FY24: 25.5%), 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. The
overall effective tax rate of 27.7% (H1 FY24: 25.7%) includes tax on
non-underlying items. 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.
7. 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 period or the diluted weighted average number of ordinary
shares in issue in the period.
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 as 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 above is compared with the number of shares
that would have been issued assuming the exercise of the share options.
Adjusted earnings per share is calculated by dividing the adjusted earnings
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the period.
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2024 2023 2024
£'000 £'000 £'000
Profit attributable to equity shareholders 15,955 22,420 25,713
Non-underlying loss after tax items 1,439 1,056 2,618
Underlying earnings attributable to equity shareholders 17,394 23,476 28,331
Weighted average number of shares in issue ('000s) 334,324 340,685 338,355
Potentially dilutive shares ('000s) 25,137 23,253 23,376
Diluted weighted average number of shares in issue ('000s) 359,461 363,938 361,731
Basic earnings per share 4.77p 6.58p 7.60p
Diluted earnings per share 4.44p 6.16p 7.11p
Underlying earnings per share 5.20p 6.89p 8.37p
Diluted underlying earnings per share 4.84p 6.45p 7.83p
At 31 August 2024, there were 334,520,133 shares in issue (including 2,001,184
held by the Group's employee benefit trust).
8. Reconciliation of net cash flow to movement in net debt
31 August 31 August 29 February
2024 2023 2024
£'000 £'000 £'000
Net decrease in cash and cash equivalents (31,950) (31,099) (8,385)
Cash outflow from repayment of borrowings 2,188 15,976 29,836
Cash movement in net debt (29,762) (15,123) 21,451
Capitalisation of loan arrangement fees - - 186
Amortisation of loan arrangement fees (117) (85) (184)
Increase in accrued loan interest (17) (121) (76)
Non-cash movement in net debt (134) (206) (74)
Movement in net debt (excluding lease liabilities) (29,896) (15,329) 21,377
Opening net debt (excluding lease liabilities) (53,979) (75,356) (75,356)
Closing net debt (excluding lease liabilities) (83,875) (90,685) (53,979)
Opening lease liabilities (82,924) (83,457) (83,457)
Capitalisation of new leases (20,063) (11,953) (20,586)
Disposal of lease liabilities 825 2,152 2,936
Interest element of lease repayments (1,839) (1,732) (3,457)
Cash outflow from lease repayments 12,479 10,193 21,640
Closing lease liabilities (91,522) (84,797) (82,924)
Closing net debt (including lease liabilities) (175,397) (175,482) (136,903)
9. Acquisitions
On 22 July 2024, the Group acquired the trade and assets of a Honda car
dealership in Exeter from Hendy Group Limited. Total consideration of
£1,030,000 was settled from the Group's cash resources.
10. Retirement benefit asset
The Group operates a trust based defined benefit pension scheme, "Bristol
Street Pension Scheme", which has three defined benefit sections which were
closed to new entrants and future accrual on 31 May 2003, with another section
closed to new entrants in July 2003 and future accrual in October 2013. The
Group has applied IAS 19 (revised) to the scheme. The scheme remains fully
funded and in surplus on the accounting basis.
During the six month period ended 31 August 2024, there have been changes in
the financial and demographic assumptions underlying the calculation of the
liabilities. In particular, inflation assumptions are lower and life
expectancy assumptions have been modified. The effect of these changes in
assumptions was a decrease in liabilities of £439,000. The performance of the
growth assets within the scheme investment portfolio meant that the period
also saw an increase in the market value of scheme assets of £144,000. In
total, an actuarial gain of £608,000 was recognised in the Consolidated
Statement of Comprehensive Income.
11. Cash flow from movement in working capital
The following table reconciles the movement in balance sheet headings to the
movement in working capital as presented in the Consolidated Cash Flow
Statement.
For the six months ended 31 August 2024
Trade and other receivables Trade and other payables Total working capital movement
£'000 £'000 £'000
Inventories
£'000
Trade and other payables (850,196)
Contract liabilities (21,618)
At 31 August 2024 785,718 86,897 (871,814)
At 29 February 2024 761,996 93,702 (893,407)
Balance sheet movement (23,722) 6,805 (21,593)
Acquisitions 734 48 (24)
Movement excluding business combinations (22,988) 6,853 (21,617) (37,752)
Pension related balances 85
Increase in capital creditor (1,039)
Increase in interest accrual (16)
Derivative financial instruments (127)
Movement in working capital (38,849)
For the six months ended 31 August 2023
Trade and other receivables Trade and other payables Total working capital movement
£'000 £'000 £'000
Inventories
£'000
Trade and other payables (750,743)
Contract liabilities (25,491)
At 31 August 2023 694,493 89,740 (776,234)
At 28 February 2023 674,380 86,316 (784,175)
Balance sheet movement (20,113) (3,424) (7,941)
Acquisitions (104) (27) 9
Movement excluding business combinations (20,217) (3,451) (7,932) (31,600)
Pension related balances 85
Decrease in capital creditor 1,925
Increase in interest accrual (383)
Movement in working capital (29,973)
For the year ended 29 February 2024
Trade and other receivables Trade and other payables Total working capital movement
£'000 £'000 £'000
Inventories
£'000
Trade and other payables (869,931)
Contract liabilities (23,475)
At 29 February 2024 761,996 93,702 (893,406)
At 28 February 2023 674,380 85,827 (784,175)
Balance sheet movement (87,616) (7,875) 109,231
Acquisitions 4,199 281 (2,661)
Deferred consideration - - (250)
Disposals (104) (27) 9
Movement excluding business combinations (83,521) (7,621) 106,329 15,187
Pension related balances 129
Decrease in capital creditor 1,049
Decrease in interest accrual 61
Derivative financial instruments 282
Movement in working capital 16,708
12. Goodwill and other indefinite life assets
31 August 31 August 29 February
2024 2023 2024
£'000 £'000 £'000
Goodwill 85,429 83,559 85,189
Other indefinite life assets - Franchise relationships 43,903 43,903 43,903
At end of period 129,332 127,462 129,092
13. Risks and uncertainties
There are certain risk factors which could result in the actual results of the
Group differing materially from expected results. These factors include:
failure to deliver on the strategic goal of the Group to acquire and
consolidate UK motor retail businesses, failure to meet competitive challenges
to our business model or sector, advances in vehicle technology providing
customers with mobility solutions which bypass the dealer network, inability
to maintain current high quality relationships with Manufacturer partners,
economic conditions impacting trading, market driven fluctuations in used
vehicle values, litigation and regulatory risk, failure to comply with health
and safety policy, failure to attract, develop and retain talent, failure of
Group information and telecommunication systems, malicious cyber-attack,
availability of credit and vehicle financing, use of estimates, currency risk,
impact of the transition to lower emission alternatives, changes in cost base
driven by climate goals and other climate related physical risks.
All of the above principal risks are consistent with those detailed in the
Annual Report for the year ended 29 February 2024.
The Board continually review the risk factors which could impact on the Group
achieving its expected results and confirm that the above principal factors
will remain relevant for the final six months of the financial year ending 28
February 2025.
Set out below are the definitions and sources of various alternative
performance measures which are referred to throughout the Interim Financial
Report. All financial information provided is in respect of the Vertu Motors
plc Group.
Definitions
Like-for-like
Dealerships that have comparable trading periods in two consecutive financial
years, only the comparable period is measured as "like-for-like".
H1
FY25
The six month period ended 31 August 2024.
H1
FY24
The six month period ended 31 August 2023.
Adjusted
Adjusted for amortisation of intangible assets, share based payment charges
and other non-underlying items as these are unconnected with the ordinary
business of the Group.
Aftersales gross margin Aftersales gross margin compares the gross
profit earned from aftersales activities to total aftersales revenues,
including internal revenue relating to service and vehicle preparation work
performed on the Group's own vehicles. This is to properly reflect the real
activity of the Group's aftersales departments.
Alternative Performance Measures
Adjusted Profit Before Tax (PBT) Six months Six months
ended ended
31 August 31 August
2024 2023
£'000 £'000
Profit before tax 22,067 30,151
Share based payment charge 1,110 1,013
Amortisation 284 408
Redundancy costs - 778
Lease surrender premium - (845)
Adjusted PBT 23,461 31,505
Free Cash Flow
Six months Six months
ended ended
31 August 2024 31 August 2023
£'000 £'000
Net cash inflow from operating activities 312 14,636
Purchase of other property, plant and equipment (11,953) (11,864)
Enhancement capital expenditure included in above 7,174 3,121
Purchase of intangible assets (19) (100)
Proceeds from disposal of property, plant and equipment 800 2,239
Principal elements of lease repayments (10,640) (8,461)
Free Cash Flow (14,326) (429)
Tangible net assets per share 31 August 29 February
2024 2024
£'000 £'000
Net assets 363,249 353,373
Less:
Goodwill and other indefinite life assets (129,332) (129,092)
Other intangible assets (1,705) (1,971)
Add:
Deferred tax on above adjustments 12,774 12,668
Tangible net assets 244,986 234,978
Tangible net assets per share 73.7p 70.5p
At 31 August 2024, there were 334,520,133 shares in issue (29 February 2024:
337,602,150), of which 2,001,184 were held by the Group's employee benefit
trust (29 February 2024: 4,391,449). Rights to dividends on shares held in the
Group's employee benefit trust have been waived and therefore such shares are
not included in the tangible net asset per share calculation.
Like-for-like reconciliations:
Revenue by department
H1 FY25 H1 FY25
Group revenue Acquisitions Disposals revenue Like-for-like revenue £'m
£'m revenue £'m
£'m
New retail and Motability 771.8 (17.7) - 754.1
New fleet and commercial 545.5 (3.8) - 541.7
Used vehicles 950.6 (25.7) - 924.9
Aftersales 224.5 (4.4) - 220.1
Total revenue 2,492.4 (51.6) - 2,440.8
H1 FY24 H1 FY24
Group revenue Acquisitions Disposals revenue Like-for-like revenue £'m
£'m revenue £'m
£'m
New retail and Motability 744.0 - (6.1) 737.9
New fleet and commercial 525.6 - (3.7) 521.9
Used vehicles 947.8 (6.3) (13.1) 928.4
Aftersales 205.1 (0.2) (1.9) 203.0
Total revenue 2,422.5 (6.5) (24.8) 2,391.2
Gross profit by department
H1 FY25 H1 FY25
Group gross profit Acquisitions gross profit Disposals Like-for-like gross profit
£'m £'m gross profit £'m
£'m
New retail and Motability 58.4 (0.9) - 57.5
New fleet and commercial 28.2 (0.1) - 28.1
Used vehicles 68.6 (1.5) - 67.1
Aftersales 118.6 (2.8) - 115.8
Total gross profit 273.8 (5.3) - 268.5
H1 FY24 H1 FY24
Group gross profit Acquisitions gross profit Disposals Like-for-like gross profit
£'m £'m gross profit £'m
£'m
New retail and Motability 63.0 - (0.6) 62.4
New fleet and commercial 26.8 - (0.3) 26.5
Used vehicles 67.4 (0.4) (0.6) 66.4
Aftersales 110.0 (0.2) (1.1) 108.7
Total gross profit 267.2 (0.6) (2.6) 264.0
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