REG - Vertu Motors PLC - Final results for the year ended 28 February 2025
14/05/2025 07:00
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RNS Number : 5390I Vertu Motors PLC 14 May 2025
14 May 2025
Vertu Motors plc ('Vertu', 'Group')
Final results for the year ended 28 February 2025
Operational excellence driving resilient results in challenging market
conditions
Robust cash generation and significant cost reductions delivered
Strong start to new financial year
Vertu Motors plc, the UK automotive retailer with a network of 198 sales and
aftersales outlets, announces its final results for the year ended 28 February
2025 ('Year').
Commenting on the results, Robert Forrester, Chief Executive Officer, said:
'With challenging market conditions during the Year which saw the lowest new
retail car market for 25 years, we have focused on the things we can control
and delivered increased new retail electric vehicle sales ahead of the market
and strong performances in used cars and aftersales. In addition, cash
generation was robust in the second half with net debt levels reduced compared
to market expectations. In anticipation of Government related cost pressures
effective 1 April 2025, the business undertook a significant cost reduction
programme to fully offset the impacts and position the Group for the future.
Trading in March and April has been stronger than the prior year, as the UK
retail new car market improved from its lows and the Group continued to focus
on operational excellence. Our high margin Aftersales business has sustained
its robust performance.'
FINANCIAL SUMMARY
Years ended 28 February 2025 2024
Restated(1)
Revenue £4,763.9m £4,686.3m
Adjusted(1) profit before tax £29.3m £34.7m
Profit before tax £24.8m £34.6m
Basic Adjusted(1) EPS 6.58p 7.60p
Dividends per share 2.05p 2.35p
Free Cash Flow £37.3m £57.0m
Net Debt(2) £66.6m £54.0m
HIGHLIGHTS
· Adjusted(1) profit before tax of £29.3m (FY24: £34.7m), in line
with current market expectations. Profits reduced year-on-year due to a weak
new car retail market in the UK and pressures arising from the Government Zero
Emission Vehicle ('ZEV') mandate. The Group outperformed the UK new retail
market gaining market share including Battery Electric Vehicle ('BEV') retail
sales.
· £10m annualised additional cost from April 2025, arising from
Autumn Budget, fully offset by cost reduction actions completed during the
Year.
· Aftersales delivered a strong performance, with like-for-like
revenue up 5.8% and gross profit up £12.3m in the Core Group compared to
FY24.
· Used gross margin grew to 7.1% (FY24: 6.8%) in the Core Group,
with margin expansion below expectations due to reduced consumer confidence.
· Significant £45.8m cash inflow from working capital delivered in
second half, driving strong year-end cash position.
· Active portfolio management with disposal of £5.6m of non-core
assets at aggregate £1.1m premium to book value and addition of new Chinese
OEM outlets.
· Net debt(2) of £66.6m as at 28 February 2025, lower than market
expectations (FY24: Net debt: £54.0m).
· Final Dividend of 1.15p per share recommended, bringing full year
dividend to 2.05p per share (FY24: 2.35p).
· Net tangible assets per share of 72.9p (FY24: 70.5p).
· £4.8m returned to shareholders via repurchase of 7.5m shares
during the Year.
CURRENT TRADING AND OUTLOOK
· March and April saw a significant increase in the UK new retail
car market as Manufacturers rebalanced fleet and retail mix. The Group
performed well, generating significantly more new car profit in the period
than the prior year.
· Other aspects of the business also performed well with a high
degree of operational delivery. Overall profits in March and April were ahead
of prior year levels and this gives the Board confidence for the year ahead.
· The Group has undertaken a significant number of start-ups and
acquisitions in recent periods which are on track to start to contribute in
FY26.
· There remains considerable economic uncertainty in the UK, and
the automotive sector generally, from the Government's ZEV mandate, the
economic impact of the Budget and the impact on Manufacturer Partners of the
recent US tariffs on US auto imports.
· The Group is well positioned with stable management and a very
strong balance sheet with low gearing to take advantage of opportunities as
they arise.
· A £12m share buyback programme was announced in February 2025
and to 30 April 2025, £2.2m of this programme has been utilised in the
purchase of 4.2m shares, leaving £9.8m to deploy. These purchases will
increase earnings per share and the Board remain committed to an ongoing
buyback programme.
(1) Adjusted to remove non-underlying items (share-based payments charges and
amortisation have been included in underlying items and parts revenues on
vehicle preparation excluded from external revenues in both years).
(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
Stifel (Nominated Advisor and Broker)
Matthew Blawat Tel: 0207 710 7688
Nick Harland
Shore Capital (Joint Broker)
Mark Percy/Sophie Collins (Corporate Advisory) Tel: 0207 408 4090
Isobel Jones (Corporate Broking)
Camarco
Billy Clegg Tel: 020 3757 4980
Tom Huddart
Letaba Rimell
CHAIRMAN'S STATEMENT
The Group once again showed its adaptability and high levels of operational
excellence during the year ended 28 February 2025, in the face of
unprecedented market conditions in the new car market. Adjusted(3) profit
before tax of £29.3m was in line with the reduced market expectations
following the Group's trading update in February. This set out how the UK
new car market for retail sales in 2024 was the lowest for 25 years and the
Government's ZEV mandate, to force the adoption of battery electric vehicles,
had seriously impacted Manufacturer and retailer volumes and profits in the
new car channel. Additionally, consumer and business confidence in the UK
was impacted by the Government's Autumn Budget and consequent proposed tax
rises. The Group reacted to these effects by outselling the market trends in
battery electric vehicles (BEV) and delivering a cost reduction programme to
aid future profitability and cashflow generation. The business focused on
what it could control.
There were several noteworthy highlights:
· The Group has delivered on its growth objective, through both
acquisition and new outlets opening in the Year. This has included the
introduction of new Manufacturer relationships including with Chinese
manufacturer, BYD. Further expansion with new entrant Chinese Manufacturers
is currently under consideration, given the substantial increase in market
share these Manufacturers are likely to take in the coming years. The Board
is focused on what is likely to be a major transition in market share in the
future.
· The Burrows acquisition in October of nine outlets increased the
Group's partnership with Toyota. Burrows has been fully integrated and has
performed well since acquisition.
· The Board has taken steps to fully mitigate the impact of rising
costs announced in the Autumn Budget such as the National Minimum Wage and
Employers' National Insurance. This was a significant project, which
included innovative thinking to reduce costs, such as, the cessation of Sunday
opening in sales, use of technology to increase efficiency, headcount
reductions and dealership closures where required return hurdle rates were not
being met. Efficiency and cost control initiatives remain a core competency
of management and further initiatives are planned.
· All the Group's sales outlets now operate under a single brand,
Vertu, except the Ferrari business. This transition was well received by
Manufacturers and customers and will yield immediate marketing efficiencies as
well as delivering other operational benefits, helping to mitigate continued
cost pressure in other areas.
· 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. Completion of the rollout of an in-house deferred payment
service, 'Pay Later', has improved conversion rates within the Group's service
operations and helped to grow aftersales revenues. The development of an
Internal Auction has aided used vehicle sales through retention of more used
vehicles for sale within the Group. This is essential in a supply
constrained environment for used cars. The launch of Vertu Transfer System,
automating vehicle transfer administration and payment, also produced
substantial efficiency gains. There is a significant pipeline of projects
underway to deliver further efficiency gains.
Capital allocation is critical to the long-term success of the Group and
ensuring appropriate returns to shareholders. It is at the top of the Board's
agenda. Since the Group began Share Buybacks in October 2018 to 30 April 2025,
£37.4m has been returned to shareholders, reducing the Company's shares in
issue by 17.6% over the same period. £4.8m was returned in FY25. In
February 2025, the Group announced a significant £12.0m Share Buyback
programme to be spent over the period to 28 February 2026. In the period to
30 April 2025, £2.2m has been spent to purchase 4.2m shares for cancellation
with £9.8m remaining unspent at 30 April 2025. The Board will not hesitate
to increase this authority as appropriate.
The board welcomed Amanda Cox as a non-executive director in January 2025.
Her substantial retail experience at Dunelm and Asda makes her very beneficial
to the Board and will add considerable value. At the end of May, Pauline Best
will retire after nine years on the Board. Pauline has been an incredible
non-executive director and will be missed. Amanda will take over as head of
the remuneration committee. The Board has an excellent range of skills and
talents to help the Group navigate a period of considerable change in the UK
automotive sector. David Gillard will assume the role of senior independent
director at the end of May 2025.
It is a strength that the three executive directors have been with the Group
since its inception in 2006 providing industry expertise, stability and a
formidable track record.
It's rewarding to see how each of the over 7,500 colleagues in the Group has
contributed to the success and growth of the business, and I would like to
thank them for their efforts. The dedication they continue to demonstrate is
both exemplary and humbling.
Andy Goss, Chairman
(3) Adjusted to remove non-underlying items
CHIEF EXECUTIVE'S REVIEW
In March 2025, the Group reached a significant milestone, marking 18 years of
trading. From its origins as a cash shell, the Group made its first
acquisition in March 2007 with the purchase of Bristol Street Group Limited.
Since then, it has expanded from 35 to 198 sales outlets, while its workforce
has grown from 1,700 to over 7,500 employees. Over the same period, revenues
have increased from £0.6 billion in 2006 to £4.8 billion, establishing the
Group as one of the UK's six automotive retail 'supergroups', each generating
over £4.0 billion in annual turnover.
As one of these 'supergroups', the Group, along with its Manufacturer
Partners, are often perceived as 'capable' of absorbing the rising costs of
excessive regulation and government-imposed financial burdens. However, FY25
brought significant profitability challenges in the new car market. The
principal issue was the impact on the Manufacturers, and the wider market, of
seeking to meet overly ambitious Government targets for Battery Electric
Vehicle (BEV) sales under the ZEV mandate. The threat of fines led to a push
of BEV product at significant discounts, a push of volume into the fleet
channel and curtailment of new petrol and diesel vehicle supply.
Registrations of higher margin new retail vehicles in the UK dropped to the
lowest level for 25 years (below that of the Covid year in 2020). These
challenges significantly reduced the Group's profitability in the new vehicle
channel.
Further compounding these difficulties, the Autumn Budget introduced
substantial cost increases that will impact FY26. Recognising that absorbing
these costs was not tenable, given the pressures described above, the Group
took decisive action to mitigate their effects. A cost reduction programme was
initiated and completed by the end of February 2025 which more than offset the
£10m impact of the Autumn Budget. While a significant proportion of the
headcount reduction was achieved without resorting to redundancies, total
costs of restructuring of £4.2m have been included in the FY25 results and
treated as a non-underlying item. This also includes the costs associated
with the rebranding of the Group and two dealership closures where returns
were not acceptable. Offsetting the cash cost of restructuring was the
release of working capital from two closed sites and the swift freehold
disposal of a dealership closed in Dorchester in November 2024 and disposed of
in March 2025 for £1.25m. This is an excellent example of the recycling of
capital from low return operations for reinvestment elsewhere.
The Group has unified its retail brands under a single identity: Vertu. This
decision followed detailed planning and reflected a forward-looking and
strategic approach to brand consolidation. On 2 April 2025, all Bristol
Street Motors dealerships were transitioned to the Vertu name. This followed
a similar move in January 2025, when Macklin Motors outlets in Scotland also
adopted the Vertu brand. The consolidation aligns the Group's retail
presence under one brand, better suited to the future UK automotive landscape.
It enables significant marketing efficiencies, enhances brand visibility
nationwide, and improves return on investment. For example, a recent UK-wide
Vertu TV campaign supported all 198 outlets across the country. The Group
now operates a single car, van, and bike website for the first time, with a
new, in-house developed platform launching over the next 12 months. These
changes are expected to drive stronger market awareness at a lower cost, with
annualised marketing savings of £5.0m projected in the medium term.
Throughout its history, the Group has successfully navigated numerous
challenges, including the global financial crisis, Brexit, a pandemic, a war
and its supply chain disruptions, the shift in automotive powertrains, and
broader economic fluctuations. Despite these hurdles, the business has
demonstrated remarkable resilience and continues to develop significant
competitive advantages; namely
· National network
The Group operates franchised dealerships from a physical network of 154
locations, from as far north as Dunfermline in Fife, Scotland, down to
Orpington in the South East and Truro in the South West of England. The
Group has a unique and wide portfolio of Manufacturers from Dacia to Ferrari
and is a significant player in cars, motorcycles and commercial vehicles.
· Strong Manufacturer relationships
Operational delivery and strong mutual respect have generated good
relationships with the Group's chosen Manufacturer partners. Such
relationships are key to the delivery of future scale and attractive returns.
· In-House systems
The Group has developed in-house bespoke and proprietary systems, including
our showroom sales process system, integrated websites and excellent
management information systems providing data in real time enhancing
commercial decision-making.
· Stable committed management team
The stable senior management team have a wealth of sector expertise and the
Group has a focus on growing its 'Next Generation' of senior leaders to assure
the continued and sustainable delivery of the Group's strategic goals in the
long-term.
· Customer base
The Group's two million strong customer base enables the Group to focus on
retention in sales and service and the further development of ancillary
services such as retail cosmetic repair operations, driving higher returns on
capital.
· Resilient aftersales operations
The Group has a well-established and growing aftersales business. Customer
retention initiatives, such as over 160,000 live service plans, the full roll
out of the Group's Pay Later product in FY25, together with focus on the
delivery of high levels of customer service aid the resilience and growth of
this high margin business.
· Balance sheet
Significant property backing, low levels of net debt and strong cash
generation enable the Group to continue to deliver on its strategic goals and
reward shareholders.
· Values-based Group
Strong values-based culture and commitment to customer service with the
Mission 'to deliver an outstanding customer motoring experience through
honesty and trust'. This culture has resulted in very high levels of
colleague satisfaction.
Strategy Summary
The Group's key long-term strategic goal remains: To deliver growing,
sustainable cashflows from operational excellence in the 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 return.
· To be at the forefront of digitalisation in the sector,
delivering a cohesive 'bricks and clicks' strategy, together with a focus on
cost optimisation and efficiency:
o Optimise our omnichannel retail offering and promote our brand to drive
enquiry levels.
o Digitalise aftersales processes to improve customer service and
productivity.
o Reduce the cost base of the Group by delivering efficiency using
technology including AI.
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.
Execution of Group Strategy
The following section is an update of the Group's delivery towards its
strategic goals:
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
'supergroups' in the UK, each with revenues in excess of £4 billion. 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 29 October 2024 the Group acquired the entire issued share capital of
Burrows Motor Company Limited ('Burrows'), a family-owned dealership group
operating five Toyota dealerships, two Mazda dealerships and one Kia
dealership. Consideration, net of cash acquired, was £11.9m with £1.0m of
this deferred for 12 months. Total consideration included freehold
properties with a valuation of £17.1m and a payment in respect of goodwill of
£4.0m. The acquisition was funded from the Group's existing borrowing
facilities and cash resources. Additionally, the Group assumed £7.1m of
freehold property backed mortgage funding and £3.5m of used vehicle funding,
the latter of which was fully repaid following acquisition, each provided by
Toyota Financial Services. The acquisition significantly increased Vertu's
brand presence in Yorkshire and Nottinghamshire. The business has been fully
integrated on to the Group's systems and processes and has performed well
since acquisition.
On 22 July 2024, the Group purchased the trade and assets of a Honda
dealership in Exeter from Hendy Group Limited. The acquisition, which
included leasehold dealership premises, was completed for total consideration
of £1.0m funded from the Group's existing cash resources. This acquisition
reinforced the Group's position as Europe's largest Honda retailer, now
representing a total of 17 Honda dealerships across the UK. The Exeter
dealership complements the Group's existing Honda dealerships in Plymouth and
Truro, establishing a comprehensive market area for the brand across Devon and
Cornwall.
Following the financial year-end, on 1 March 2025, the Group acquired The
Union Motor Company Limited, an authorised repairer for London Electric
Vehicle Company (LEVC) based in Edinburgh. The estimated consideration for
this acquisition was £0.4m (net of cash acquired), subject to finalisation of
completion accounts, including a £0.5m payment in respect of goodwill. This
acquisition aligns with the Group's strategy to grow its ancillary businesses
reinforcing its Taxi Centre operations. Taxi Centre operates the LEVC sales
franchise in Scotland and this transaction now means the Group provides a
unified sales and aftersales service in Scotland.
Multi-franchising and new outlets
It is important that the Group's Manufacturer portfolio is optimised to ensure
that changes in market shares and success over time of Manufacturers are
addressed by the Group in sensible, long run portfolio changes. The Group
has successfully utilised multi-franchising to drive increased sales and
aftersales activity through a physical location to increase profits and
resilience.
The Group is currently focused on ensuring that it will have the right level
of Chinese Manufacturer exposure as new entrant brands get established and
take market share in the UK. The UK is unique of the major Western economies
in not having substantial tariffs on Chinese built product and, therefore, is
expected to see shifts in future manufacturer market shares as a result, with
significant Chinese growth expected. The Group's actions in this area are
clearly set out below and other opportunities with brands the Group does not
currently represent are ongoing.
The Group has commenced its presence with the Chinese brand BYD during the
Year and early indications of market share growth are excellent. In August
2024, the first BYD outlet opened in Worcester alongside the existing Ford and
Citroën dealerships. A second BYD outlet followed in Gloucester in February
2025, complementing the existing Ford sales site. Further opportunities with
the BYD franchise for the Group are currently under active consideration.
Additionally, in February 2025, the Group opened a second Smart (a joint
venture between Mercedes-Benz and Geely) outlet in Reading, co-located with
the existing Mercedes-Benz business.
Other franchising activities are set out below:
· In August 2024, the Group introduced a flagship Ducati motorbike
outlet in Sunderland, marking the first time the franchise has been part of
the Group's portfolio.
· September 2024 saw the opening of a newly developed Toyota
dealership in Ayr, completing the West of Scotland market area awarded to the
Group in FY23. With this new dealership opening and the acquisition of
Burrows, the Group now operates 11 Toyota outlets across the UK and is now a
very significant partner for the brand.
· Continuing its national expansion, the Group redeveloped two
locations acquired as part of the Rowes Garage Limited acquisition back in
October 2023, introducing new franchises. In March 2025, the Group opened a
Volvo dealership in Plymouth, repurposing a former Honda site. Volvo have not
been represented in the city for over 17 years. The Group now represents the
Volvo brand exclusively from Cornwall through to Somerset.
· Meanwhile, in August 2024, a Renault and Dacia outlet was
established in Plymouth in the former used car sales location. To further
strengthen the Group's Renault presence in Plymouth, a Renault LCV dealership
was launched in February 2025 in newly leased premises. This outlet
complements Group representation for Renault and Dacia in Exeter creating a
market area.
· Further developments in March 2025 saw the opening of a Volvo
dealership in Yeovil within newly leased premises. This allowed the sale of
the previous freehold location for the Volvo brand held by the Group in Yeovil
for £2.35m which was realised in December 2024.
Active Portfolio Management
The Board remains actively engaged in the management of the Group's portfolio
of properties and businesses, continuously assessing growth opportunities and
the long-term potential of existing businesses. Investment decisions are
guided by strict return metrics to ensure disciplined capital allocation.
Following a strategic review of returns, the Group decided to exit two
businesses. In early 2025, the Group closed outlets in Dorchester and
Barnstable, both of which operated approved used vehicle sales and served as
authorised repairers for the BMW and MINI brands. These dealerships operated
from freehold premises, which have been reclassified as surplus properties
held for sale at 28 February 2025. As noted above, the Dorchester property was
sold in March 2025 for £1.25m representing a swift realisation of capital.
The Barnstaple property is also under offer and its disposal is anticipated in
the first half of FY26.
Additionally, the Group agreed to discontinue the Peugeot franchise from its
Edinburgh dealership in May 2025; the location will continue to operate the MG
and Kia brands. This decision is expected to simplify operations and improve
overall site performance.
As previously announced, the Jaguar Re-imagine strategy, which reduced the
number of UK wide Jaguar sales outlets, has concluded during the Year.
Consequently, the Group ceased the sale of new Jaguar vehicles from its
Bolton and Exeter dealerships in November 2024 with these locations continuing
to represent the Land Rover brand. The Group now has one Jaguar sales outlet
in Leeds.
The Group has also maintained its focus on the generation of cash through the
sale of surplus properties. Four of the five properties held for sale on 1
March 2024 have been sold in the financial year generating total proceeds of
£5.6m and a £1.1m profit on disposal. The Group currently holds five
additional surplus properties for resale, with a net book value of £7.9m.
Disposal of these properties is anticipated with the next 18 months, and
indeed one of these five properties was sold on 31 March 2025 for £1.25m.
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 following highlights some of the key digitalisation milestones delivered
in FY25:
· Adapting to evolving consumer behaviour
The modern car buyer seeks to combine online and offline aspects in their car
buying journey. The Group's omni-channel strategy focuses on reducing online
friction while keeping in-person options available. Test drives remain a
critical part of the buying process. Further developments have been made in
the Year, with the Group now operating a single website under the Vertu
brand. This will be re-engineered in-house over the next 12 months to
enhance the customer journey and search engine optimisation, as well as
increasing efficiency in maintenance.
· Customer Data Platform (CDP)
In December 2024, the Group launched a new Customer Data Platform ('CDP')
integrated seamlessly with our cloud data warehouse. The CDP provides
self-serve data to the Group's marketing team, improving offer personalisation
and agility whilst optimising marketing spend. Use cases are being developed
and significant benefits are anticipated to arise in the coming year above
those already delivered.
Initial use cases deployed to date have included enhanced Pay Per Click
('PPC') efficiency by suppressing adverts for customers who had purchased a
vehicle in the last 90 days, resulting in savings of up to 3% on previous
spend levels. Additionally, the CDP has been used to retarget customers who
abandoned online service bookings, driving increased aftersales revenue.
· Group Internal Auction
The UK used vehicle market continues to face supply challenges, with around 2
million fewer new vehicle registrations between 2020 and 2022 causing
shortages of used cars. Higher trade prices, along with increased
competition from digital remarketing platforms have driven a greater focus on
the retention of used vehicle stock bought in part-exchange within the Group's
dealership network rather than sending to auction.
The Group enhanced its internal auction functionality in FY25, making it
easier to retain and redistribute vehicles within our dealership network.
This initiative kept over 3,400 vehicles within the Group.
· Efficiency in administrative and financial processing
The Group has continued to invest in finance process improvements to enhance
efficiency. Vertu Transfer System (VTS) was launched in September 2024.
VTS automates used vehicle transfers without requiring manual input from
either the administration, sales or accounting teams. It also enables near
real-time cash movement between Group bank accounts, removing manual payment
processing. From launch to the end of FY25, 6,427 vehicles have been
automatically transferred, with these transactions worth £103m.
In FY25 a full modernisation programme of payment processing across the
Group's sales and aftersales functions commenced. Customer payment choices
have been extended to include Apple Pay, Google Pay, and Amazon Pay, along
with the option of use of Open Banking for direct bank payments, improving
choice and convenience for customers, whilst reducing merchant fees for the
Group. "Pay-by-Link" has also been introduced with full rollout to be
completed across the Group in May 2025. This includes functionality to
automatically process payments received against associated invoices
eradicating administrative processing.
In FY26, this technology will be expanded to automate invoicing for cosmetic
repairs completed by the Group's Vertu Cosmetic Repair operations, a source of
significant manual processing. The Group also plans to apply invoice process
automation and robotic processing to other key areas, including parts
transfers and purchase ledger processing, to aid productivity and further
reduce cost.
Recruiting, Retaining, Engaging and Developing Colleagues
The Group prioritises the recruitment, development and motivation of talented
colleagues to ensure the delivery of operational excellence and outstanding
customer experiences. It focuses heavily on the engagement of colleagues to
ensure that individuals have a voice and can contribute positively towards
decisions that impact their role and the operations and culture of the wider
Group. The Group currently has a great place to work score of 85.4% reflecting
the colleague sentiment in this area and maintaining our year-on-year result
above the Group's Vision of 85%.
In common with other retailers, customer experience and sales productivity has
long been tempered by high turnover of sales teams. Reducing sales colleague
turnover is a key priority, along with increasing sales volumes per sales
executive. Several initiatives have been adopted to achieve this goal:
· New, inexperienced sales recruits have a pay structure with
higher basic pay until they are established in their roles.
· The vast majority of Group dealerships are now closed on Sundays,
so ensuring a more attractive work-life balance and ensuring management cover
is increased when open.
· Extensive training is undertaken to ensure the Group's sales
colleagues are the best trained in the sector as confirmed by the Group's
excellent customer experience and mystery shop scores.
· The 'Elite Sales Guild' was created in 2024 whereby the top 50
sales executives in terms of sales volume and customer experience measures
receive additional training and recognition reflecting their importance to the
Group.
The Group remains committed to extensive investment in the development of all
colleagues to provide opportunity to those who are talented and driven to
succeed. Programmes include substantial Technician Apprentice schemes, our
Evolution internal development programmes for non-managers, our partnership
with Dale Carnegie to deliver leadership training programmes to all managers
and our considerable internally delivered role specific training programmes.
We are well invested in the delivery of online training for colleagues and are
developing a range of AI-led training programmes to amplify the Group's
training capacity and deliver specific training and support to colleagues at
the precise point they need in an effective and cost-efficient manner. These
programmes are critical to delivering a business which is meritocratic and
full of opportunity for colleagues and ensure our workforce is ready to handle
changes in technology and customer requirements.
The Group has successfully partnered with Northumbria University to bring
school leavers into operational roles, with the Group funding a degree
apprenticeship in Business Management. An excellent pipeline of gender
balanced talent is evident from this programme and a further cohort will
commence in late summer.
Sector Trends
The automotive sector, both internationally and in the UK, is undergoing major
structural changes as a result of a number of critical trends. Four key
themes are identified and discussed below:
1. Electrification
Successive UK Governments have implemented an aggressive timetable for the
adoption of BEV vehicles and the phasing out of petrol and diesel vehicles,
compared to the US and the rest of Europe. For example, the ZEV mandate
which sets BEV targets as a percentage of total sales each year ramps up from
22% in 2024 to 80% in 2030. Vans are also subject to a similar targeting
system but at a lower rate of growth.
The industry in the UK did not deliver the 22% BEV target in 2024 and is very
unlikely to hit the higher 28% target in 2025. There are certain complex
flexibilities that Manufacturers can use to reduce fines. However, the regime
led to considerable dislocation in the market in 2024 with the Manufacturers
reportedly discounting BEV product by over £4.5 billion (source: SMMT) and
utilising the lower margin fleet and Motability channels to increase BEV sales
volumes. Retail demand for BEV product remains far below the target levels,
as does the significant daily rental channel. To reduce fine exposure,
profitable non-BEV product has been restricted in the UK market. The UK
retail market in 2024 consequently was the lowest for 25 years, including the
2020 Covid year.
As a result of industry pressure, in late 2024 the Government commenced a
consultation process with the results announced on 7 April 2025. The targets
remain unchanged, however, hybrid vehicles are now able to be sold beyond the
ban on new petrol and diesel sales in 2030. Greater flexibility was
introduced to avoid fines, and the penalties reduced from £15,000 to £12,000
per excess non BEV vehicle sold. Whilst this movement is welcome, the
pressure of the ZEV mandate looks set to continue to weigh on the sector.
2. Chinese Entrants
A key debate in the transition to zero-emission vehicles (ZEVs) is the extent
to which Chinese battery electric vehicle (BEV) manufacturers will be used to
accelerate adoption and help achieve the UK's ZEV mandate targets.
MG, SMART and LEVC have established themselves in the sector for several years
and are represented by the Group. In 2024, two Chinese automakers, BYD and GWM
ORA, entered the UK market. By 2025, new entrants have grown to six, with
Omoda, Jaecoo, Leapmotor, and Xpeng joining the original two, with more
expected to follow later this year. As Chinese vehicle production now
significantly exceeds domestic demand, and the US is protected by huge tariffs
introduced by President Biden, Manufacturers are increasingly focusing on
exports elsewhere. The UK, as the world's third-largest BEV market and one
of the major economies without tariffs on Chinese EV imports, presents a
highly attractive opportunity. The cars are well designed and have excellent
technology, both in terms of connected car capability and battery technology.
In addition, many Chinese Manufacturers are selling both pure BEV and the more
popular hybrid vehicles.
The Chinese brands are quickly gaining market share and appear to be driving a
decline in traditional manufacturer brand loyalty. The Group has responded
to this trend by increasing the number of outlets of Chinese brands in the
Year and this trend will continue. As these brands are immature from an
aftersales perspective, earnings and returns will take several years to
develop to normalised rates as the vehicle parc is built up through sales.
3. Tariffs
The US has recently imposed a 25% global tariff on imports of cars. The impact
of this on the UK market is not entirely clear.
· Manufacturer partners of the Group which have a strong presence
in the US market are vulnerable to the new 25% import tariffs due to the
impact on volumes and margins. This may impact their financial success and
therefore their ability to support UK volumes and retailers. The automotive
industry is already under pressure and the move by the US does not help an
already stretched global sector.
· Global motor Manufacturers may seek to move volumes away from the
US to other markets in the world such as the UK. This may lead to a higher new
car market in the UK going forward, but with pressure on margins.
4. Financial Conduct Authority (FCA) & High Court ruling on
commission disclosure
In April 2025 the Supreme Court heard an appeal against a Court of Appeal
ruling in October 2024 which caused stakeholders considerable unease and
concern around historic finance commissions in the sector. The Court of
Appeal ruled that lenders and credit brokers are liable to customers where the
disclosure of commission was insufficient to obtain the customer's informed
consent and that a fiduciary duty was held to exist between the credit broker
(motor retailer) and the customer. This result was unexpected. The Group
moved to full disclosure of any applicable finance commission to customers
immediately following the Court of Appeal ruling. The Group's finance
penetration and earnings have not been impacted by this disclosure, with no
change in consumer behaviour evident. The Supreme Court is expected to report
its findings in July 2025 and this will be of interest not only to the
automotive sector, but the Treasury and other regulators who have expressed
considerable concern about a negative outcome.
The Financial Conduct Authority (FCA) is investigating Discretionary
Commission Arrangements (DCAs) within automotive finance. Preliminary
findings from the FCA review suggest that motor finance providers, and motor
finance credit brokers (including motor retailers) who have engaged in motor
finance agreements involving DCAs could be impacted. The Group ceased sales
involving DCAs in January 2021. The FCA have indicated that an update on
this investigation will be given following the decision of the Supreme Court.
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.
CURRENT TRADING AND OUTLOOK
· March and April 2025 Trading (the 'Period')
The Board is pleased to report a strong trading performance for the Group
during the important first two months of the new financial year. Trading
profit in March and April 2025 was ahead of prior year levels.
Registrations in the UK new car private market grew by 8.2% in the Period,
driven by a strong March performance which saw 14.5% growth. March is
normally the highest volume new vehicle month due to the plate change. The
strong growth may partly be explained by vehicle excise duty changes which
came into effect on 1 April with customers buying early to avoid the charges
and vehicles being registered in advance of this change. April retail
registrations, in contrast, were more muted being back 7.9% compared to last
year.
Against this backdrop, in March and April the Group's retail new vehicle
volumes grew 9.0% on a like-for-like basis, outperforming the market and
resulting in a share increase of the new retail market to 5.3% (up from 4.9%
in the prior year). This share gain was also aided by acquisitions. The
decline in overall Motability registrations seen in the second half of FY25
continued, with Group like-for-like volumes declining by 22.3%, compared to a
UK market decline of 16.7%. Gross profit per unit for new retail and
Motability vehicles in the Core Group was £2,129, slightly above prior year,
with gross margin of 8.1% (FY24: 8.0%). Margins would be expected to grow
with higher retail versus Motability mix. The Group did see weaker
year-on-year retail margins in certain premium franchises. Core Group profit
from new vehicle retail and Motability sales was £0.4m below prior year
levels in the Period due to the lower Motability volumes.
The Group's Fleet car department delivered increased volumes of vehicle sales,
rising 12.4% in the Period. This volume growth was broadly in line with SMMT
trends which showed a 12.5% growth in UK Fleet car registrations in the
Period. Commercial vehicle sales in the Core Group declined 1.0% whilst the UK
light commercial vehicle market saw a much more significant 6.8% decline in
van registrations in the Period. The Group took market share as a result. Core
Group gross profit in the fleet and commercial department was at £0.1m below
the prior year in the Period.
The UK used vehicle market remained stable in the Period, with consistent
consumer demand and pricing. The Group saw a small 0.5% decline in
like-for-like used car volumes. It is likely some buyers of nearly new
product switched into new car sales due to the enhanced consumer offers from
Manufacturers. Core Group used vehicle gross margin improved slightly, by
0.1 percentage points to 7.8%, despite an increase in average selling prices
of over £500 per unit. The Group was successful in managing inventory
tightly and maximising margin due to high stock turn. As a result, gross
profit from used vehicles was £0.9m ahead of the same period last year.
All aftersales channels saw like-for-like gross profit improvement
year-on-year. Core Group service revenues rose 6.1%, with enhanced margins,
reflecting enhanced customer retention, good technician availability and
operational execution. Core Group gross profit from aftersales consequently
increased by £2.1m on prior year levels.
Core Group operating expenses were broadly level with the prior period, with
the cost savings delivered by the restructuring programme in FY25 offsetting
the headwinds of increased company NIC and minimum wage (which both commenced
in April).
· Outlook
The Board is encouraged by the Group's strong start to FY26, which supports
confidence in delivering market expectations for the financial year.
The SMMT has recently increased its 2025 UK registration forecast to 1.964
million units with anticipated BEV share at 23.5% (Target 28%). Year-to-date
BEV market share through April 2025 stands at 20.7%. Weak retail demand for
BEVs continues to present a challenge to Manufacturers and the UK new car
market is expected to remain volatile as a result. There is expected to be a
rebalancing of volume towards retail channels as opposed to fleet and
Motability volumes. Despite this, fleet channels are expected to remain
robust, supported by fiscal incentives and the need to grow BEV penetration
outside the more resistant retail sector. Supply levels of BEV product are
likely to exceed natural demand.
Group aftersales performance remains well-positioned, driven by continued
focus on customer retention, conversion of identified work and improved
technician availability.
The used vehicle market is expected to remain broadly resilient, with supply
constrained and consistent demand levels anticipated. As BEV supply into the
used car market increases, there is the potential for residual value weakness,
albeit BEVs remain a small part of the overall used car market.
The Group anticipates newly started businesses and acquisitions in FY25 to
generate an improved financial performance in FY26.
The Group remains focused on operational excellence, with particular emphasis
on cost management (with a pipeline of projects underway to deliver further
savings), sales conversion efficiency and delivering high levels of customer
experience.
The Board remains committed to delivering shareholder value through organic
growth, acquisitions and its share buyback programme.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The Group's income statement for the Year is summarised below:
FY25 FY24 Variance
(restated)(4)
£'m £'m %
Revenue 4,763.9 4,686.3 1.7%
Gross profit 532.9 516.1 3.3%
Operating expenses(4) (480.5) (459.8) (4.5%)
Adjusted Operating profit 52.4 56.3 (6.9%)
Net Finance Charges (23.1) (21.5) (7.4%)
Adjusted Profit Before Tax 29.3 34.8 (15.8%)
Non-Underlying items(5) (4.5) (0.2)
Profit Before Tax 24.8 34.6 (28.3%)
Taxation (6.6) (8.9) 25.8%
Profit After Tax 18.2 25.7 (29.2%)
(4) Operating expenses include share-based payments and amortisation charges
previously categorised as non-underlying,
revenue excludes parts revenue on vehicle preparation previously included as
external revenue.
(5) Non-underlying items represent impairment charges, reorganisation costs
and other non-underlying items
The Group generated an adjusted profit before tax of £29.3m (FY24:
£34.8m). Underlying operating profitability declined due to the impact of
the Zero Emission Vehicle (ZEV) mandate on new vehicle volumes and margins,
together with losses arising from acquisitions and new dealership start-ups.
The UK retail new car market in 2024 was the lowest for 25 years.
Revenue was £4.8 billion, growing modestly compared to the prior year.
Acquisitions completed after 1 March 2023 contributed additional revenue of
£123.9m, whilst dealerships disposed of or closed in the Year resulted in a
£40.6m reduction in revenue. Revenue in the Core Group decreased by £5.7m
(0.1%) driven by a reduction in new retail vehicle volumes. The decline in
new car profitability was partially offset by growth in the used car and
aftersales areas.
Approximately half of the acquisition revenue growth is driven by new sales
outlets opened since March 2023. During this period, the Group has launched
nine outlets, including for franchises such as BYD, Ducati, and Toyota. In
their first year, these outlets typically face high marketing costs, a lack of
an established customer base, and low aftersales absorption, resulting in
trading losses. In the second year, the aftersales parc begins to grow, but
marketing expenses remain high, and absorption rates are still insufficient to
offset fixed costs. By the third year, repeat vehicle sales help lower
marketing costs and improve aftersales absorption, gradually leading to
enhanced profitability. While trading losses are common in the first two to
three years, co-locating new outlets with existing franchises helps mitigate
early-stage financial pressures. Losses of £1.9m were incurred from an
increased number of new dealership start-ups in FY25 and are included in
underlying operating profit. Such losses are expected to be substantially
reduced going forward.
A third of the acquisition revenue growth is attributed to the acquisition of
Burrows Motor Company Limited, completed on 29 October 2024. Given the
timing of the acquisition, after the key trading months of September and
March, the business, as anticipated, saw a loss totalling £0.7m in the
four-month period to 28 February 2025 included within adjusted profit before
tax. With full integration into the Group's systems completed by the end of
2024, the Burrows dealerships are anticipated to contribute positively to
trading in FY26 in line with our expectations.
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
TOTAL GROUP CORE GROUP
FY25 FY24 Variance FY25 FY24 Variance
£'m £'m £'m £'m £'m £'m
Revenue
New 1,439.9 1,452.5 (12.6) 1,389.1 1,435.8 (46.7)
Fleet & Commercial 1,054.8 1,037.4 17.4 1,044.2 1,032.4 11.8
Used 1,851.4 1,816.2 35.2 1,768.2 1,768.6 (0.4)
Aftersales(7) 417.8 380.2 37.6 397.8 368.2 29.6
Total Group Revenue 4,763.9 4,686.3 77.6 4,599.3 4,605.0 (5.7)
Gross Profit
New 110.2 119.6 (9.4) 107.5 118.4 (10.9)
Fleet & Commercial 55.7 55.6 0.1 54.9 55.0 (0.1)
Used 130.9 122.5 8.4 126.1 120.4 5.7
Aftersales 236.1 218.4 17.7 226.5 214.2 12.3
Total Gross Profit 532.9 516.1 16.8 515.0 508.0 7.0
Gross Margin
New 7.7% 8.2% (0.5%) 7.7% 8.2% (0.5%)
Fleet & Commercial 5.3% 5.4% (0.1%) 5.3% 5.3% -
Used 7.1% 6.7% 0.4% 7.1% 6.8% 0.3%
Aftersales(6) 43.7% 43.5% 0.2% 43.9% 43.9% -
Total Gross Margin 11.2% 11.0% 0.2% 11.2% 11.0% 0.2%
( )
(6) Aftersales margin expressed on internal and external revenues
(7) Parts revenue on vehicle preparation previously included as external
revenue has been removed from revenue and cost of
sales.
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 %
FY25 FY24 Variance FY25 FY24 Variance
Used retail vehicles 88,851 86,437 2.8% 85,769 85,176 0.7%
Direct new retail cars 32,938 35,228 (6.5%) 31,351 33,994 (7.8%)
Agency new retail cars 2,846 1,585 79.6% 2,819 1,579 78.5%
Total new retail cars 35,784 36,813 (2.8%) 34,170 35,573 (3.9%)
Motability cars 19,693 19,706 (0.1%) 19,040 19,056 (0.1%)
Direct fleet cars 19,460 18,848 3.2% 19,351 18,717 3.4%
Agency fleet cars 9,075 8,952 1.4% 8,625 8,427 2.3%
Total fleet cars 28,535 27,800 2.6% 27,976 27,144 3.1%
Commercial vehicles 16,652 17,569 (5.2%) 16,416 17,517 (6.3%)
Total New vehicles 100,664 101,888 (1.2%) 97,602 99,290 (1.7%)
Total vehicles 189,515 188,325 0.6% 183,371 184,466 (0.6%)
( )
( ) UK Market year-on-year change(8) Group year-on-year change v UK market(9)
New Retail Car (7.4%) 3.5%
Motability Car 11.0% (11.1%)
Fleet Car 6.7% 3.6%
Commercial (0.1%) (6.2%)
(8) Source SMMT
(9) Represents the year-on-year variance of like-for-like Group volumes
compared to the UK trends reported by SMMT
New retail cars and Motability sales
2024 marked the first year of UK Government mandated targets for new Zero
Emission Vehicles (ZEV Mandate). In response, Manufacturers took significant
commercial steps to meet these targets and avoid significant potential fines,
offering discounts to stimulate consumer demand for battery electric vehicles
(BEV) and restricting supply of new petrol and diesel cars. The SMMT has
estimated the cost to Manufacturers of such discounting to have exceeded £4.5
billion in 2024. Consequently, a record number of zero emission vehicles
entered the UK market, however, BEV registrations accounted for 19.6% of total
sales, short of the 22% target set by the Government's ZEV Mandate. BEV
registrations were heavily weighted to the fleet sector driven by fiscal
incentives, whilst BEV market share in the retail market was less than 11% in
the year.
UK car registrations grew 1.2% in the year to 28 February 2025. This overall
growth was driven entirely by fleet sales (including Motability sales), which
represented almost 60% of all new vehicle registrations. These sales
represent lower margin channels for Manufacturers and retailers. The higher
margin UK private market channel declined by 7.4%, with retail registrations
lower than during the pandemic, or the preceding 25 years. This reduction
reflects consumer hesitation toward BEVs, affordability issues, and more
limited availability of petrol and diesel vehicles as Manufacturers sought
compliance with the ZEV Mandate percentage targets over driving volume. The
Group saw like-for-like new retail vehicle volumes decline by 3.9% when
compared to the prior year, which was significantly better than the retail
market decline in registrations over the same period of 7.4%.
Within the overall new retail volumes, Group like-for-like BEV sales increased
83.2% compared to FY24. This compares to a 12.9% increase in UK private BEV
registrations over the same period. This performance delivered an increased
Group market share of the BEV retail market.
The Motability scheme plays a significant role in the UK car market, helping
individuals with mobility and independence constraints access personal
transport. The scheme has seen a record number of customers, with annual UK
Motability registrations growing by 11.0% in the year to February 2025. This
growth arose in the first half of the financial year as UK registrations grew
37.5% in H1. UK Motability volumes declined in H2 by 9.2%. The Group is
Motability's largest partner in the UK, with over 48,000 vehicles on the
fleet. These vehicles require an annual service, funded by Motability, in
the Group's service departments over the three-year lease period, making the
channel important to aftersales revenues. The Group's volumes in the
Motability channel were broadly level with prior year as a number of the
Group's major Manufacturers lost significant market share due to product
line-up changes and their changed strategic appetite for this high-cost
channel. This trend is likely to continue in forthcoming periods.
The declining retail volume and discounting of BEV vehicles impacted the
profitability of the Group's Manufacturer partners. Similarly, retailer
profitability in the new car channel came under increasing pressure in Q4 as
the end date for the 2024 ZEV Mandate target measurement loomed. Despite
outperforming market trends in terms of BEV sales and like-for-like retail
volumes, from October 2024 the Group experienced a significant deterioration
in profitability from the new vehicle sales channel. Lower new retail
volumes and pressure on Manufacturer earnings led to reduced support for the
retailer network and reduced gross profit generation year-on-year. These
trends were particularly apparent in December, a traditionally strong month
for new vehicle profitability when quarterly, half yearly and annual new car
bonuses from Manufacturers are recognised.
Average selling prices in the new retail and Motability channel rose 2% to
£26,179 reflecting increased BEV sales which tend to be higher value than
internal combustion engine product (ICE). Margins were under pressure with
gross profit per unit of £1,993 down from £2,100. This reflected higher
discounting in a supply push market and reduced Manufacturer support. Core
Group gross margin percentages consequently fell from 8.2% to 7.7%.
The Group has consequently seen a £10.9m reduction in the Core Group new
vehicle gross profits in the Year compared to FY24.
Fleet & Commercial vehicle sales
Registration volumes in the UK car fleet market (excluding Motability) have
grown 6.7% year-on-year compared to FY24. Robust demand for BEV through the
corporate fleet channel was driven by tax incentives (including salary
sacrifice schemes) for business users. Like-for-like, the Group delivered
almost 28,000 fleet cars in the Year, representing an increase of 3.1%
compared to FY24. The Group does not engage in significant supply to the low
margin daily rental market which grew substantially within the UK fleet
figures, reflecting the push market conditions that exist. The Group was
highly successful in growing the supply of BEV vehicles into the public and
private sectors, particularly in its major premium franchises.
As with the passenger vehicle market, the light commercial vehicle market also
faced challenges with BEV van adoption and the ZEV mandate. UK BEV van
market share remained at 6.3%, below the 10% mandated target for 2024. Over
half of all new van models are now BEV, however, there is a major reticence
from most of the van market to adopt BEV product at this stage. Overall, UK
van registrations remained largely stable in the year to 28 February 2025. The
Group's like-for-like sales of new commercial vehicles declined by 6.3% during
this period. During the post-Pandemic period, the Group had better access to
volume supply than the competition, partly due to a proactive approach of
keeping fleet capacity in place. This situation has now normalised with
share now also regularising.
Overall, the Group saw stable profit generation from its combined fleet and
commercial operations. Like-for-like fleet and commercial volumes decreased
0.6% and a total of 45,187 vehicles were sold by the Group in this channel.
An average selling price of £29,790 (FY24: £28,102) reflected increased
premium franchise sales in the overall mix. Gross margin static at 5.3%
overall.
Used retail vehicles
Wholesale prices within the UK's used vehicle market have remained stable
throughout the year, providing a welcome contrast to the significant price
correction which occurred in late FY24 when wholesale used vehicle prices
dropped by over 10% between October and December 2023. Limited supply of
used vehicles arising from post-Pandemic new car supply shortages, combined
with a sluggish new retail market, has contributed to the resilience of
wholesale prices throughout FY25. While this supply shortage initially
raised expectations for improved margin retention in used vehicle sales,
subdued consumer confidence, particularly following the change of Government,
has dampened this impact. Retail prices did not increase in line with trade
values, constraining anticipated margin growth. This trend was particularly
evident in nearly new used cars (under one year old), which faced competition
from new vehicles being discounted by Manufacturers or offered with lower
finance rates to stimulate new retail sales in a weaker market (particularly
in relation to BEV sales).
The Group continually monitors the used vehicle pricing, demand and supply
environment. Monitoring is significantly aided by the in-house developed
'Vertu Insights' system. This includes a pricing algorithm to ensure that
prices are adjusted frequently to optimise stock turn, volume and margin
mix. Around 75% of the Group's used car inventory retail prices are changed
daily via the Insights model.
The Year started with low levels of used vehicle stock as the Group reduced
inventory in response to the price correction in the latter part of FY24.
Used vehicle inventory at 28 February 2025 totalled £166.3m, being a 2.1%
increase on the opening position. Tight stock control has been maintained
despite more stock from dealerships acquired in the year, and higher vehicle
prices. Core Group gross profit from the sale of used vehicles totalled
£126.1m for the Year, representing a £5.7m increase year-on-year.
Group like-for-like used vehicle volumes grew 0.7% over the Year, reflecting
weaker consumer confidence. A higher like-for-like gross profit per unit of
£1,496 per unit (FY24: £1,436) was achieved. The Group adopted a self-help
measure at the beginning of H2 FY25 of using AI to monitor discounts given
versus the advertised retail price of used vehicles and using real time email
alerts to senior management when cars were sold at discounts above a certain
level. The increase in focus in this area has driven a 50% decline in the
number of used cars sold with a discount between H1 and H2, bolstering used
car margins as a result.
Gross margin achieved in the Core Group used vehicle department was 7.1% which
was up from last year's level of 6.8%, with a stronger improvement
year-on-year in H2.
Aftersales
The Group's aftersales operations are a major contributor to Group
profitability, generating over 44% of total gross profit. The Group is
delighted to report that it saw growth in gross profit generation in all major
channels of aftersales on a like-for-like basis as set out below:
Service Accident & Smart Repair Total
Fuel
Parts Forecourt
£'m £'m £'m £'m £'m
Revenue(10) 208.7 268.8 27.5 11.0 516.0
Revenue(10) change 12.3 15.6 1.0 (0.8) 28.1
Revenue(10) change (%) 6.3% 6.2% 3.8% (6.8%) 5.8%
Gross profit 151.5 57.4 16.7 0.9 226.5
Gross profit change 9.3 2.1 1.0 (0.1) 12.3
Gross margin(11) FY25 (%) 72.6% 21.3% 60.8% 8.2% 43.9%
Gross margin(11) FY24 (%) 72.4% 21.8% 59.5% 7.8% 43.9%
Margin change (%) 0.2% (0.5%) 1.3% 0.4% -
(10) includes internal and external revenues
(11) Aftersales margin expressed on internal and external revenues
· Service
Vehicle servicing and repair remains a key revenue stream for the Group,
driven by strong demand and supported by effective customer retention and
acquisition strategies. Service plans, through which customers pay monthly
or upfront for their annual service, are a vital part of the Group's retention
strategy. The Group has approximately 160,000 live service plans (including
Manufacturer service plans) and over 48,000 Motability customers in live
contracts, which creates significant resilience to future revenue streams.
The Group's Pay Later solution, which allows service customers to defer
payments interest-free for up to five months on repair work identified, has
resulted in higher average invoice values in FY25, and higher sales conversion
of work identified. This flexible payment option encourages more customers
to approve essential repairs identified through the Group's Vehicle Health
Check (VHC) process. The VHC process involves a thorough inspection of every
vehicle in the workshop to identify immediate safety concerns and potential
issues that may require attention in the coming months. Customers receive a
video from the vehicle technician highlighting any identified issues, together
with a priced quote for the work. This can be authorised remotely by the
customer or via the telephone. As a result of this process, customers spent
an additional £105 per visit on average, reflecting an annual increase of
£12 per customer. This improvement has contributed to record-high average
invoice values, exceeding £335 during the Year. The bad debt experience on
this product has, to date, been negligible.
Reflecting the trends set out above, like-for-like service revenue growth of
£12.3m (6.3%) was delivered in the Year. Gross margin percentages on
vehicle servicing were up to 72.6% (FY24: 72.4%) in the Core Group despite
rising labour costs. Gross profit generation rose on a like-for-like basis
by £9.3m in service.
· Parts
The Group's substantial parts operations include traditional wholesale
operations, agency distribution hubs operated on behalf of Manufacturers,
on-line parts retailing and accessory sales to dealership customers. These
operations also supply parts to the Group's service and accident repair
operations. The Group successfully grew like-for-like revenue by £15.6m
(6.2%) from the sale of parts in the Year compared to FY24. Improvements in
the Group's Vehicle Health Check process, and use of Pay Later to improve
conversion described above, helped to drive an 8.7% increase in parts revenues
per labour hour sold through the Group's workshops, together with an increase
in total hours sold.
Like-for-like gross profits generated from the sale of parts increased by
£2.1m over the Year. Parts margins reduced slightly to 21.3% in the Year
reflecting an increased mix of lower margin warranty and online parts sales.
· Accident and Smart Repair
The Group's Accident Repair Centres are managed separately from the dealership
businesses in a standalone division. The Group operates 15 Accident Repair
Centres, from Sunderland in the Northeast to Truro in the Southwest of
England. Two operations in Doncaster and Sheffield were acquired with the
Burrows acquisition on 29 October 2024 and were immediately integrated into
the Division and Group platforms and systems. Accident repair demand has
been falling in recent years, as vehicle technology has improved, with
advanced driver assistance systems (ADAS) resulting in fewer and less severe
accidents. Additionally, there has been an increase in total loss accidents
because of rising parts and labour costs, which means cars are written off,
rather than repaired. Reflecting these national trends, the Group's Core
accident repair operations saw a 4.6% decline in revenues in FY25.
Also reported within this segment is Vertu Cosmetic Repair, which serves the
Group's demand for repairs to used vehicles and this channel exhibited strong
growth. The Group's Smart Repair operations have 18 static operations in
addition to 106 vans, 85 of which are smart repair vans, and the remainder
specialise in alloy wheel repair. The Group has delivered a 3.8% increase in
revenues generated from the Group's accident and smart repair operations. A
£1.0m increase in related gross profit arose due to growth in the high margin
smart repair channel.
A new retail focused smart repair operation ('Vertu Repair Master') was
created at the start of FY25 to provide on-site cosmetic repair services to
corporate clients. This operation, which is excluded from the Group's Core
operations for FY25, now operates 12 vans, with a further five currently in
build ready to deploy in early FY26. Demand for this new operation has been
strong and growing, with plans to extend operations to 25 vans by the end of
FY26. The new business generated almost £1m of revenues in FY25, retaining
strong margins.
· Fuel Forecourt
One fuel forecourt was operated by the Core Group in FY25, in Widnes,
Cheshire. As a result of the tempering of fuel prices, this forecourt saw
reduced revenues but improved margins of 8.2% in the Year. Overall, gross
profit declined £0.1m in the Year compared to the previous year.
Operating Expenses
A summary of Group operating expenses is set out below:
FY25 FY24 FY25 variance to FY24
£'m £'m £'m %
Salary costs 260.0 248.4 11.6 4.7%
Vehicle and valeting costs 56.4 52.6 3.8 7.2%
Property costs and depreciation 55.4 55.4 - -
Other (including IT) 50.1 49.8 0.3 0.6%
Marketing costs 34.3 39.7 (5.4) (13.6%)
Share based payments and amortisation 2.7 3.0 (0.3) (10.0%)
Core Group operating expenses 458.9 448.9 10.0 2.2%
Core Group operating expenses as a % of Core Group revenues 10.0% 9.8%
0.2%
Acquisitions and start-up operations 20.1 4.7 15.4
Disposals 1.5 6.2 (4.7)
Group net underlying operating expenses 480.5 459.8 20.7 4.5%
Operating expenses as a % of revenue 10.1% 9.8% 0.3%
Reported underlying operating expenses of £480.5m increased by £20.7m
compared to the year ended 29 February 2024. Dealerships acquired, started
up, or sold in the period since 1 March 2023 generated a net £10.7m of this
increase. Underlying Core Group operating expenses grew by just 2.2%
compared to last year, despite inflationary pressures in the UK economy.
This reflected a major focus on costs that could be controlled by the Group.
Despite this strong focus, operating expenses as a percentage of revenue grew
to 10.1% (FY24: 9.8%), driven by the reduction in revenue from the sale of new
vehicles and the impact of acquisitions and new start-up outlets in the
period. The latter had a 13.3% ratio of operating expenses to revenues
reflecting the seasonality and timing of acquisitions, coupled with the
immediate start-up nature of new outlets opened. These ratios are
anticipated to normalise over a three-to-four-year period.
The largest operating cost of the Group is salary costs, which have increased
by £11.6m (4.7%) in the Core Group, compared to last year. Salary costs
shown in operating expenses exclude the productive cost of the Group's
aftersales technicians, which are included in cost of sales. The £11.6m
year-on-year increase in Core Group salary costs was driven by a range of
factors, with £8.0m of this increase arising in the first half of the
financial year. This rate of growth moderated to £3.7m in the second half,
reflecting the early impact of cost-saving initiatives initiated considering
the Autumn Budget.
£6.1m of the annual increase is attributable to the rise in the National
Minimum Wage (NMW) in April 2024 and its knock-on effects across the Group's
salary structures. This included a direct NMW impact of £2.7m, £1.4m
invested to maintain wage differentials for skilled colleagues such as parts
advisors and vehicle administrators, and £2.0m resulting from increases to
sales executive basic salaries. A further £3.8m of the increase, all arising
in H1, related to additional headcount, predominantly as the Group
successfully reduced outstanding vacancies carried over from FY24. Further
cost increases included £0.5m due to higher apprenticeship headcount and pay,
and £1.2m associated with increased non-productive time in the aftersales
function, driven by both pay enhancements for technicians and improved
tracking of lost and idle time, as well as enhanced benefits such as
additional holidays for long-serving colleagues.
The cost of the Core Group's demonstrator and courtesy vehicle fleet, included
within vehicle and valeting costs, increased by £3.8m in the Year.
Expanding product ranges including more expensive BEV vehicles increased
demonstrator requirements mandated by Manufacturers. Depreciation rates were
increased part way through FY24, to ensure that vehicle carrying values on
de-fleet were appropriate. The higher depreciation rates, especially on BEV
product, have been critical to the increase.
Property costs were level year-on-year. The Group has been successful in
challenging certain of the rateable value uplifts which were applied across
the portfolio in FY24. Business rates remain a significant cost to the
Group, with costs in the Core Group of £15.8m in FY25, including rates
refunds received because of the appeals, compared to £16.7m in FY24. This
cost is expected to rise in FY26 due to lower refunds.
Other costs (including IT) were tightly controlled increasing just £0.3m
(0.6%) in the Core Group compared to prior year.
The Group significantly reduced its core marketing costs principally as a
result of decisive action to reduce new car marketing in light of the falling
retail market. In addition, the focus on the use of algorithmic used car
values reduced the used of sale events to drive volume with consequent savings
in marketing. Return on investment is a priority for all marketing spend
with a focus on increasing its effectiveness. For example, the Group has
significantly reduced cost per leads on pay per click activities.
Non-Underlying Operating Expenses
FY25 FY24 FY25 Var to FY24
(restated)(12)
£'m £'m £'m
Redundancy costs 2.8 0.9 1.9
Rebrand costs 0.8 - 0.8
Lease surrender premium - (0.8) 0.8
Impairment charges 0.6 0.1 0.5
Acquisition fees 0.3 - 0.3
4.5 0.2 4.3
( )
(12) Share based payments and amortisation were reclassified to underlying
expenses during the year. Prior year comparatives
have been restated to aid compatibility.
The changes to the minimum wage and National Insurance contributions announced
in the Autumn Budget in October 2024 will add c.£10m to the Group's labour
costs in FY26. To offset these significant cost increases, the Group acted
to reduce headcount and undertake other cost actions on a proactive basis.
This was achieved through various measures, including a targeted headcount
reduction programme and the closure of two dealerships. This led to a
headcount reduction of approximately 290 colleagues representing 3.8% of the
workforce. Moreover, outstanding vacancies of around 250 jobs were not
actioned immediately after the Autumn statement. The associated termination
costs of £2.8m have been included in non-underlying costs due to the scale
and one-off nature of this initiative.
Part of this cost reduction exercise was the consolidation of the Group's
dealerships under the single 'Vertu' brand. The re-brand costs, largely the
cost of new signage at each of the Group's volume dealerships, of £0.8m have
been included in non-underlying costs. Ongoing annual marketing savings are
anticipated going forward of c.£5.0m once rebranding activities (including a
short-term rise in spend in the immediate period after rebranding) have
ceased. The simplicity of one brand and one website for the operations of
the business is significant.
Impairment charges relate to the carrying values of the two properties closed
as part of the above initiative, with the decision made to seek speedy
realisations into cash. One of the properties located in Dorchester, closed
in November 2024, was sold, for cash, on 31 March 2025 for £1.25m, being
£0.4m below the pre-impairment book value for this property. The second now
vacant property, closed in March 2025, located in Barnstaple, is currently
under offer for sale. A prudent view of the likely sale proceeds has been
taken and consequently an impairment provision of £0.2m has been included in
non-underlying costs in FY25.
Finally, the acquisition costs relating to the purchase of Burrows Motor
Company Limited, completed in October 2024, have also been included in
non-underlying costs.
Net Finance Charges
Net finance charges are analysed below:
FY25 FY24 FY25 Var to FY24
£'m £'m £'m
New vehicle Manufacturer stocking interest 9.1 8.2 0.9
Mortgage interest 6.2 6.2 -
Interest on bank borrowings 4.1 3.8 0.3
Used vehicle stock funding interest 0.7 1.1 (0.4)
Interest on lease liabilities 4.1 3.5 0.6
Interest income (1.1) (1.3) 0.2
Net Finance Charges 23.1 21.5 1.6
The Group saw an increase in interest charged by Manufacturers on funded new
vehicle inventory. This increase was due to increased average prices of new
vehicles in the pipeline and increased fleet activity in the year. Total
Group new vehicle stock as at 28 February 2025 was £577m (2024: £516m), up
11.8%, including the impact of acquisitions. Reduced interest rates are
providing favourable year-on-year variances with H2 costs in line with the
prior year.
Interest on bank borrowings and mortgages increased due to the additional
facilities drawn for the acquisition of Burrows in October 2024. These were
a £12.0m drawing on the Group's Revolving Credit Facility (RCF) together with
the assumption and refinancing of a £7.5m mortgage provided by Toyota
Financial Services.
To minimise the interest rate risk to the Group, derivative contracts have
been entered into. The term of the Group's Revolving Credit Facility was
extended out to December 2027 in FY25. Consequently, the associated interest
rate swap over £30m of the borrowing was also extended, fixing the underlying
SONIA rate charged at 3.82% from September 2024 (previously 4.42%). The swap
now expires in December 2026 (previously March 2025). An interest rate cap
contract in respect of £50m of the Group's variable rate mortgage with BMW
Financial Services (BMWFS) expired in March 2025. This mortgage, previously
attracting interest 2.8% above BMWFS base rate, was moved to a 3 year fixed
all in rate of 7.03% with effect from 1 February 2025, reducing the interest
rate applicable at that date.
Interest on lease liabilities increased year-on-year, primarily due to new
leases entered into and the acquisition of leasehold dealerships. These new
leases were all subject to higher interest rates than those applied to
historic right of use liabilities, reflecting the rise in applicable base
rates in the intervening period.
Pension Costs
The Group has a closed defined benefit scheme. The latest actuarial valuation
of the scheme was performed as at 5 April 2024. This valuation showed the
scheme had a funding surplus of £2.0m, with no contributions required from
the Company to meet the cost of accrued benefits. Expenses are also met by
the scheme. No contribution payments are expected for the accounting period
beginning 1 March 2025.
The scheme invests in an asset 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 remains in surplus. An
increase in the surplus arose over the Year relating to more favourable actual
experience than previously assumed. Overall, a net actuarial gain of £1.5m
was recognised in the Statement of Comprehensive Income for the Year. The
accounting surplus on the scheme increased to £3.9m as at 28 February 2025
(2024: £2.5m).
Tax Payments
The Group's underlying effective rate of tax for the Year was 25.8% (FY24:
26.0%). The overall effective tax rate, increased to 26.9% (FY24: 25.6%) as
a result of an increase in non-qualifying depreciation. The total tax charge
for the Year reduced to £6.6m (FY24: £8.9m). The Group continues to be
classified as 'low risk' in a recent review 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 £37.3m (FY24: £57.0m) was generated in the Year:
FY25 FY24
£'m £'m
Operating profit 47.8 56.0
Depreciation, amortisation, share based payments & other 40.2 37.5
Movement in working capital 7.0 16.7
Interest and tax payments (28.4) (26.2)
Net Cash Inflow from operating activities 66.6 84.0
Sustaining capital expenditure (14.9) (12.4)
Proceeds from sale of property, plant and equipment 5.6 3.6
Lease principal repayments (20.0) (18.2)
Free Cash Flow 37.3 57.0
Net cash inflow from operating activities benefited from a cash inflow of
£7.0m from a reduction in working capital (FY24: £16.7m). This movement in
working capital was predominantly due to a £6.2m reduction in used vehicle
inventory, all of which was delivered in H2. The Group also generated a
£2.1m reduction in fully paid new vehicle inventory and other net cash
inflows of £1.5m. These inflows were partially offset by a £2.8m increase
in debtors, arising from the Group's Pay Later product.
In addition to the above movements in working capital, the Year saw a
significant increase in new vehicle inventory, matched by an equivalent
increase in Manufacturer funding shown within creditors, thus having no impact
on cash flow overall. This £47.0m movement comprised an increase of new
vehicle inventory in the pipeline of approximately £60.0m, partially offset
by a £13.0m reduction in demonstrator vehicles.
Financing and Capital Structure
The Group has a balance sheet with shareholders' funds of £357.6m (2024:
£353.4m) underpinned by a freehold and long leasehold portfolio of £330.9m
(2024: £311.8m) and net debt (excluding lease liabilities) of £66.6m as at
28 February 2025. The Group's conservative financing and capital structure
resulted in a strong tangible net assets position of £234.8m as at 28
February 2025, representing 72.9p per share.
The Group has a committed acquisition debt facility of £93m taken out in
December 2022 for three years with the option to extend for a further two
years. During the Year, this facility was extended for the second of the two
additional years out to December 2027. £56m of this committed facility was
drawn as at 28 February 2025 with £37m therefore available undrawn. The
Group operated comfortably within all applicable covenants during the Year.
The Group also has long term debt funding in the form of 20-year mortgages
totalling £77.1m (FY24: £81.3m) provided by BMW Financial Services ('BMW
FS'). In addition, a further £7.1m mortgage from Toyota Financial Services
(TFS) was assumed on the acquisition of Burrows Motor Company Limited in
October 2024. This was re-financed to a 10-year mortgage of £7.5m from 1
January 2025 with a floating rate of 2.3% over Bank of England base rate.
The mortgages are amortising facilities with annual repayments of capital of
£5.0m.
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. While, during the Year, there was some utilisation of the
facility, as at 28 February 2025, no amounts were drawn. The Group has a
£70.0m facility under these arrangements and held £166.3m of unencumbered
used vehicle inventory at 28 February 2025. Stocking loans on used vehicles
by third party banks are classified as debt by the Group.
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.
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. As noted in the interim announcement, adjusted diluted EPS is
now stated after deduction of share-based payment charges and amortisation
(non-cash items). Consequently, the Group's dividend policy has been amended
to 2.5-3.5 times (previously 3-4 times) cover to negate the impact of this
accounting reclassification.
An interim dividend of 0.90p per share was paid in January 2025. The Board
recommends a final dividend in respect of the year ended 28 February 2025 of
1.15p per share to be approved at the Annual General Meeting on 25 June
2025. This dividend will be paid, subject to shareholder approval, on 25
July 2025. The ex-dividend date will be 26 June 2025 and the associated
record date 27 June 2025. This final dividend brings the total dividend in
respect of FY25 to 2.05p per share (FY24: 2.35p). Against adjusted, fully
diluted EPS of 6.13p this dividend is covered 3.0 times in line with the
Group's stated policy of 2.5-3.5 times.
During the Year, the Group purchased 7,500,387 shares for cancellation,
representing 2.2% of opening total issued share capital, for £4.8m. As set
out in our trading update on 6 February 2025 the Board considers that Vertu
Motors plc shares are mispriced and trading at a material discount to our own
assessment of intrinsic and indeed tangible net asset per share values. When
purchases are made at prices below intrinsic value, share buybacks deliver
significant long-term benefits to all remaining shareholders who increase
their interest in our Group as our share count reduces. Since the Group
began share buybacks in October 2018, to 30 April 2025 our share count has
reduced by 17.6%. The Board announced an allocation of £12m to a new share
buyback programme from 6 February 2025 running to 28 February 2026. This
compares to £7.5m spent on share buybacks in FY24, and £4.8m in FY25. The
Board will not hesitate to increase this allocation if it considers it
appropriate to do so.
At 28 February 2025, the Group held 7.8m shares in its Employee Benefit Trust
('EBT') (treated as treasury shares) for the purpose of satisfying exercises
of shares under the Group's share ownership plans, such as Partnership Share
Options. 6.0m shares were purchased into the EBT during the Year for £4.0m.
The Group spent £11.0m on acquisitions during the Year, invested £7.7m in
new build locations or land and building purchases, and incurred £4.4m on
multi-franchising or the expansion of capacity at existing dealerships,
collectively 'expansion capital expenditure'. These cash outflows are
excluded from sustaining capital expenditure utilised in the calculation of
Free Cash Flow.
The Group also deploys capital on its extensive franchised dealership network,
expending £27.0m (FY24: £24.0m) on asset additions in FY25. This included
the £12.1m of non-sustaining 'expansion capital expenditure' referenced
above. The balance of £14.9m is considered sustaining capital expenditure.
For FY26, sustaining capital expenditure is anticipated to be approximately
£15.0m, which includes some redevelopment projects to meet revised
Manufacturer standards which do not necessarily increase Group capacity. A
further £2.3m of expenditure is anticipated in respect of expansion capital
expenditure. The Group has surplus property assets with disposals in FY26
expected to generate cash proceeds of approximately £8.0m, £1.25m of which
has already been received after 28 February 2025.
Karen Anderson, CFO
CONSOLIDATED INCOME STATEMENT (AUDITED)
For the year ended 28 February 2025
Underlying items 2025 Non-underlying items 2025 Total 2025 Underlying items 2024 Non-underlying items 2024 Total 2024
(Note 2) (as restated - Note 1) (as restated - Note 1) (as restated - Note 1)
Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue 4,763,926 - 4,763,926 4,686,280 - 4,686,280
Cost of sales (4,230,992) - (4,230,992) (4,170,200) - (4,170,200)
Gross profit 532,934 - 532,934 516,080 - 516,080
Operating expenses (480,528) (4,569) (485,097) (459,879) (160) (460,039)
Operating profit / (loss) 52,406 (4,569) 47,837 56,201 (160) 56,041
Finance income 3 1,103 - 1,103 1,254 - 1,254
Finance costs 3 (24,190) - (24,190) (22,728) - (22,728)
Profit / (loss) before tax 29,319 (4,569) 24,750 34,727 (160) 34,567
Taxation 4 (7,576) 929 (6,647) (9,012) 158 (8,854)
Profit / (loss) for the year attributable to equity holders 21,743 (3,640) 18,103 25,715 (2) 25,713
Basic earnings per share (p) 5 5.48 7.60
Diluted earnings per share (p) 5 5.10 7.11
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (AUDITED)
For the year ended 28 February 2025
2025 2024
£'000 £'000
Profit for the year 18,103 25,713
Other comprehensive income / (expense)
Items that will not be reclassified to profit or loss:
Actuarial gains / (losses) on retirement benefit obligations 1,471 (737)
Deferred tax relating to actuarial (gains) / losses on retirement benefit (368) 184
obligations
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges (187) 116
Deferred tax relating to cash flow hedges 47 (29)
Other comprehensive income / (expense) for the year, net of tax 963 (466)
Total comprehensive income for the year
attributable to equity holders 19,066 25,247
CONSOLIDATED BALANCE SHEET (AUDITED)
As at 28 February 2025
2025 2024
£'000 £'000
Non-current assets
Goodwill and other indefinite life assets 135,506 129,092
Other intangible assets 1,557 1,971
Retirement benefit asset 3,895 2,477
Property, plant and equipment 357,453 335,295
Right-of-use assets 83,734 72,886
Derivative financial instruments 147 203
Total non-current assets 582,292 541,924
Current assets
Inventories 816,939 761,996
Trade and other receivables 98,951 93,702
Current tax assets - 203
Cash and cash equivalents 72,647 70,599
988,537 926,500
Property assets held for sale 7,921 7,881
Total current assets 996,458 934,381
Total assets 1,578,750 1,476,305
Current liabilities
Trade and other payables (940,541) (869,931)
Current tax liabilities (148) -
Deferred consideration (1,000) -
Contract liabilities (11,753) (13,400)
Borrowings (5,081) (4,395)
Lease liabilities (19,182) (17,710)
Total current liabilities (977,705) (905,436)
Non-current liabilities
Deferred income tax liabilities (26,097) (22,024)
Contract liabilities (8,435) (10,075)
Borrowings (134,133) (120,183)
Lease liabilities (74,829) (65,214)
Total non-current liabilities (243,494) (217,496)
Total liabilities (1,221,199) (1,122,932)
Net assets 357,551 353,373
Capital and reserves attributable to equity holders of the Group
Ordinary share capital 33,010 33,760
Share premium 124,939 124,939
Other reserve 10,645 10,645
Hedging reserve 80 220
Treasury share reserve (4,812) (2,056)
Capital redemption reserve 6,717 5,967
Retained earnings 186,972 179,898
Total equity 357,551 353,373
CONSOLIDATED CASH FLOW STATEMENT (AUDITED)
For the year ended 28 February 2025
2025 2024
Note £'000 £'000
Cash flows from operating activities
Operating profit 47,837 56,041
Profit on sale of property, plant and equipment (1,168) (516)
Profit on lease modification (47) (411)
Amortisation of other intangible assets 558 568
Depreciation of property, plant and equipment 18,201 17,449
Depreciation of right-of-use asset 20,239 18,254
Impairment of freehold land and buildings 524 -
Impairment of goodwill - 128
Movement in working capital 6,986 16,708
Share based payments charge 1,890 1,965
Cash inflow from operations 95,020 110,186
Tax received 1,328 552
Tax paid (6,462) (5,296)
Finance income received 984 1,099
Finance costs paid (24,233) (22,576)
Net cash inflow from operating activities 66,637 83,965
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and borrowings acquired (10,961) (5,966)
Acquisition of freehold and long leasehold land and buildings (2,230) (3,003)
Purchases of intangible assets (145) (253)
Purchases of other property, plant and equipment (24,611) (23,686)
Proceeds from disposal of businesses - 204
Proceeds from disposal of property, plant and equipment 5,575 3,589
Net cash outflow from investing activities (32,372) (29,115)
Cash flows from financing activities
Proceeds from borrowings 7 12,526 -
Repayment of borrowings 7 (8,097) (29,836)
Principal elements of lease repayments (19,954) (18,183)
Purchase of treasury shares (4,000) -
Sale of treasury shares 46 115
Cash settled share options - (109)
Repurchase of own shares (4,784) (7,463)
Dividends paid to equity holders (7,954) (7,759)
Net cash outflow from financing activities (32,217) (63,235)
7 2,048 (8,385)
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year 70,599 78,984
Cash and cash equivalents at end of year 72,647 70,599
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (AUDITED)
For the year ended 28 February 2025
Ordinary Share Other Hedging Treasury share Capital redemption reserve Retained Total
share capital premium reserve reserve 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 year - - - - - - 18,103 18,103
Actuarial gains on retirement benefit obligations - - - - - - 1,471 1,471
Tax on items taken directly to equity - - - 47 - - (368) (321)
Fair value losses - - - (187) - - - (187)
Total comprehensive income for the year - - - (140) - - 19,206 19,066
Sale of treasury shares - - - - 1,244 - (1,198) 46
Purchase of treasury shares - - - - (4,000) - - (4,000)
Repurchase of own shares - - - - - - (4,870) (4,870)
Cancellation of repurchased shares (750) - - - - 750 - -
Dividends paid - - - - - - (7,954) (7,954)
Share based payments charge - - - - - - 1,890 1,890
As at 28 February 2025 33,010 124,939 10,645 80 (4,812) 6,717 186,972 357,551
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, 2,631,017 shares were transferred from the EBT on exercise of
vested CSOP and PSO awards and a further 6,032,573 shares were transferred
into the EBT in anticipation of future share award exercises. 7,793,005 shares
remain in the EBT at 28 February 2025.
All issued shares are fully paid.
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
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
NOTES
For the year ended 28 February 2025
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 financial information presented for the years ended 28 February 2025 and
29 February 2024 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 2025 and 2024 financial
statements were unqualified. A copy of the statutory accounts for 2024 has
been delivered to the Registrar of Companies. Those for 2025 will be
delivered following the Company's annual general meeting, which will be
convened on 25 June 2025.
Going concern
The consolidated financial statements have been prepared on the going concern
basis under the historical cost convention, as modified by the revaluation of
financial assets and liabilities (including derivative financial instruments)
at fair value.
In order to prepare the financial statements on the going concern basis, the
Directors have considered detailed financial projections for a period of 12
months from the date of signing the financial statements ('Review Period').
These projections are based on the Group's detailed annual business plan for
the year ending 28 February 2026 as well as the known financial performance of
the Group in the period subsequent to 28 February 2025, 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 reduced volume of new and used car sales, reduced
demand from aftersales customers and further increases in the Group's
operating cost base. 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
these financial statements on the going concern basis.
Accounting policies
The annual consolidated financial statements of Vertu Motors plc are prepared
in accordance with UK IFRS.
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 29 February 2024,
with the exception of the changes to accounting policies and classification of
expenses outlined below.
Changes to accounting policies and classification of expenses
During the year ended 28 February 2025, the Group has changed its accounting
policy in relation to income recognition in respect of warranty products.
Previously, income was initially recognised as a contract liability at the
fair value allocated to the warranty product at the point of sale and was
released to the income statement on a straight-line basis over the life of
each warranty policy. This accounting policy has been changed to recognise
income in line with when the associated costs of the policy are incurred,
which more accurately reflects the timing of the service provided. There was
no significant difference in the year ended 29 February 2024 as a result of
this change in accounting policy and therefore there is no restatement of the
prior year comparatives.
The year ended 28 February 2025 was the first financial year where the Group's
share-based payment charge in both the reporting and comparative period
includes four years' worth of partnership share awards. Consequently, and as
previously set out in the interim results announcement, the Group's
share-based payment charge has been reclassified from non-underlying items
into underlying items, restating the prior year comparative on the same
basis. This change reflects the expected stability in future share-based
payment charges. Additionally, given the immaterial nature of amortisation
costs, these have also been reclassified from non-underlying and into
underlying in the same way. As a result of these changes underlying
operating expenses for the year ended 29 February 2024 have increased by
£3,034,000 compared to the previously reported figures and non-underlying
operating expenses have decreased by £3,034,000.
Finally, during the year ended 28 February 2025, the Group reclassified its
revenue in relation to parts used in the preparation of vehicles for sale due
to certain intercompany transactions not eliminating on consolidation.
Consequently, such income is no longer presented within external revenue. As
a result, turnover and cost of sales have both decreased by £33,307,000 for
the year ended 29 February 2024. The equivalent value for the year ended 28
February 2025 was £33,711,000. There is no impact on gross profit and no
significant impact on reported gross margins as a result of this change.
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 2025
Gross
Revenue Gross Profit Gross Margin
Revenue Mix Profit Mix
£'000 % £'000 % %
Aftersales (*) 417,799 8.8 236,145 44.3 43.7
Used cars 1,851,429 38.9 130,886 24.6 7.1
New car retail and Motability 1,439,922 30.2 110,174 20.7 7.7
New fleet and commercial 1,054,776 22.1 55,729 10.4 5.3
4,763,926 100.0 532,934 100.0 11.2
Year ended 29 February 2024
(as restated - Note 1) Gross
Revenue Gross Profit Gross Margin
Revenue Mix Profit Mix
£'000 % £'000 % %
Aftersales (*) 380,180 8.1 218,437 42.3 43.5
Used cars 1,816,230 38.8 122,504 23.7 6.7
New car retail and Motability 1,452,508 31.0 119,547 23.2 8.2
New fleet and commercial 1,037,362 22.1 55,592 10.8 5.4
4,686,280 100.0 516,080 100.0 11.0
(*) 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 internal revenue is considered to be an
important element of margin for the purpose of monitoring departmental
performance
2. Non-underlying items
2024
(as restated - Note 1)
2025
£'000 £'000
Redundancy costs (2,817) (872)
Rebrand costs (794) -
Impairment of freehold land and buildings (524) -
Impairment of goodwill - (128)
Other site closure costs (106) -
Acquisition costs (328) -
Lease surrender premium - 840
Non-underlying loss before tax (4,569) (160)
Tax on non-underlying items 929 158
Non-underlying loss for the year attributable to equity holders
(3,640) (2)
Non-underlying items for the year ended 28 February 2025 included the
following items:
The changes to the minimum wage and National Insurance contributions announced
in the Autumn Budget in October 2024 will add c. £10,000,000 to the Group's
labour costs in the year ending 28 February 2026. To offset these
significant cost increases, the Group acted to reduce headcount and undertake
other cost actions on a proactive basis. This was achieved through various
measures, including a targeted headcount reduction programme and the closure
of two dealerships. This led to the headcount reduction of approximately 290
colleagues representing 3.8% of the workforce. Moreover, outstanding vacancies
of around 250 jobs were not actioned immediately after the Autumn statement.
The associated termination costs of £2,817,000 have been included in
non-underlying costs due to the scale and one-off nature of this initiative.
Part of this cost reduction exercise was the consolidation of the Group's
dealerships under the single 'Vertu' brand. The re-brand costs, largely the
cost of new signage at each of the Group's volume dealerships, of £794,000
have been included in non-underlying costs. Ongoing annual marketing savings
are anticipated going forward of c. £5,000,000 once rebranding activities
(including a short-term rise in spend in the immediate period after
rebranding) have ceased. The simplicity of one brand and one website for the
operations of the business is significant.
Impairment charges relate to the carrying values of the two properties closed
as part of the above initiative, with the decision made to seek speedy
realisations into cash. One of the properties located in Dorchester, closed
in December 2024, was sold, for cash, on 31 March 2025 generating cash
proceeds of £1,250,000. This resulted in an impairment charge of £289,000 in
respect of this property. The second now vacant property, closed in March
2025, located in Barnstaple, is currently under offer for sale. A prudent view
of the likely sales proceeds has been taken and consequently an impairment
provision of £235,000 has been included in non-underlying items.
Finally, the acquisition costs relating to the purchase of Burrows Motor
Company Limited, completed in October 2024, have also been included in
non-underlying costs.
Non-underlying items are presented separately in the Consolidated Income
Statement to enhance comparability of trading performance between periods.
3. Finance income and costs
2025 2024
£'000 £'000
Interest on short-term bank deposits 983 1,099
Net finance income relating to defined benefit pension scheme 120 155
Finance income 1,103 1,254
Bank loans and overdrafts (10,277) (9,924)
Vehicle stocking interest (9,853) (9,347)
Lease liability interest (4,060) (3,457)
Finance costs (24,190) (22,728)
4. Taxation
2025 2024
£'000 £'000
Current tax
Current tax charge 5,896 6,437
Adjustment in respect of prior years (943) (440)
Total current tax 4,953 5,997
Deferred tax
Origination and reversal of temporary differences 1,409 2,393
Adjustment in respect of prior years 285 411
Rate differences - 53
Total deferred tax 1,694 2,857
Income tax expense 6,647 8,854
2025 2024
£'000 £'000
Profit before taxation 24,750 34,567
Profit before taxation multiplied by the rate of corporation tax in the UK of 6,188 8,469
25% (2024: 24.5%)
Non-qualifying depreciation 939 768
Non-deductible expenses 513 471
Effect on deferred tax balances due to rate change - 53
Lease accounting timing differences 59 (88)
Property adjustment (323) (201)
Permanent benefits (71) (589)
Adjustments in respect of prior years (658) (29)
Total tax expense included in the income statement 6,647 8,854
A summary of the Group's tax expense in respect of underlying and
non-underlying items is as follows:
Non-underlying items 2024 (as restated - note 1)
Underlying items 2024 (as restated - note 1)
Non-underlying items 2025
Underlying items 2025 Total Total 2024
2025
£'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) before tax 29,319 (4,569) 24,750 34,727 (160) 34,567
Taxation (7,576) 929 (6,647) (9,012) 158 (8,854)
Profit/(loss) after tax 21,743 (3,640) 18,103 25,715 (2) 25,713
Effective tax rate 25.84% 26.86% 25.95% 25.61%
The Group's underlying effective rate of tax is 25.84% (2024 (restated):
25.95%) which is broadly in line with the standard rate of corporation tax in
the UK.
The overall effective tax rate of 26.86% includes tax on non-underlying items
(2024: 25.61%).
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 during 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.
2024 (as restated - Note 1)
2025
£'000 £'000
Profit attributable to equity shareholders 18,103 25,713
Non-underlying loss after tax (note 4) 3,640 2
Underlying earnings attributable to equity shareholders 21,743 25,715
Weighted average number of shares in issue ('000s) 330,599 338,355
Potentially dilutive shares ('000s) 24,117 23,376
Diluted weighted average number of shares in issue ('000s) 354,716 361,731
Basic earnings per share 5.48p 7.60p
Diluted earnings per share 5.10p 7.11p
Basic underlying earnings per share 6.58p 7.60p
Diluted underlying earnings per share 6.13p 7.11p
6. Dividends per share
Dividends of £7,954,000 were paid in the year ended 28 February 2025 (2024:
£7,759,000), 2.40p per share (2024: 2.30p).
A final dividend of 1.15p per share is to be proposed at the Annual General
Meeting on 25 June 2025. The ex-dividend date will be 26 June 2025 and the
associated record date 27 June 2025. The dividend will be paid, subject to
shareholder approval, on 25 July 2025 and these financial statements do not
reflect this final dividend payable.
7. Reconciliation of net cash flow to movement in net debt
2025 2024
£'000 £'000
Net increase / (decrease) in cash and cash equivalents 2,048 (8,385)
Cash inflow from proceeds of borrowings (12,526) -
Cash outflow from repayment of borrowings 8,097 29,836
Cash movement in net debt (2,381) 21,451
Borrowings acquired (10,569) -
Capitalisation of loan arrangement fees 520 186
Amortisation of loan arrangement fees (246) (184)
Decrease / (increase) in accrued loan interest 88 (76)
Non-cash movement in net debt (10,207) (74)
Movement in net debt (excluding lease liabilities) (12,588) 21,377
Opening net debt (excluding lease liabilities) (53,979) (75,356)
Closing net debt (excluding lease liabilities) (66,567) (53,979)
Lease liabilities at 1 March (82,924) (83,457)
Capitalisation of new leases (32,277) (20,586)
Disposal of lease liabilities 1,236 2,936
Interest element of lease repayments (note 3) (4,060) (3,457)
Cash outflow from lease repayments 24,014 21,640
Lease liabilities at 28 February (94,011) (82,924)
Closing net debt (including lease liabilities) (160,578) (136,903)
8. Business combinations
On 22 July 2024, the Group acquired the trade and assets of a Honda dealership
in Exeter from Hendy Group Limited. Total consideration of £1,030,000 was
settled from the Group's existing cash resources.
On 29 October 2024, the Group acquired the entire issued share capital of
Burrows Motor Company Limited which operates five Toyota outlets, 2 Mazda
outlets and a Kia outlet in Yorkshire and Nottinghamshire. Total consideration
of £13,414,000 was funded by a £12,000,000 drawing on the Group's Revolving
Credit Facility.
9. Post balance sheet events
On 1 March 2025, the Group acquired The Union Motor Company Limited, an
authorised repairer for London Electric Vehicle Company (LEVC) based in
Edinburgh. Estimated consideration of £370,000 (net of cash acquired) subject
to finalisation of completion accounts, including a £500,000 payment in
respect of goodwill, was settled from existing cash resources.
On 31 March 2025, the Group disposed of a surplus property held for sale
located in Dorchester. The disposal generated cash proceeds of £1,250,000, in
line with the asset's carrying value.
On 2 April 2025, the Group completed the rebranding of its dealerships
operating under the Bristol Street Motors trading name, which now operate
under the Vertu Motors trading name. This follows the rebrand of the Group's
Macklin Motors dealerships in Scotland, during the year ended 28 February
2025. All Group dealerships now operate under the Vertu Motors trading name.
There are no intangible assets associated with either the Macklin Motors or
Bristol Street Motors trading names.
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