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VTU Vertu Motors Plc

67.50
0.70 (1.05%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Vertu Motors Plc LSE:VTU London Ordinary Share GB00B1GK4645 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.70 1.05% 67.50 67.20 68.50 68.60 66.90 68.20 583,759 16:35:17
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Motor Veh Dealer (used Only) 4.01B 25.53M 0.0749 9.03 230.37M

Vertu Motors PLC Unaudited Interim Results (2820M)

12/10/2016 7:00am

UK Regulatory


Vertu Motors (LSE:VTU)
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TIDMVTU

RNS Number : 2820M

Vertu Motors PLC

12 October 2016

12 October 2016

Vertu Motors plc ("Vertu", "Group")

Unaudited interim results for the six months ended 31 August 2016

Growth strategy delivers record half year revenues and profits

Full year results anticipated to be in line with market expectations

Vertu Motors plc, the automotive retailer with a network of 129 sales and aftersales outlets across the UK, announces its interim results for the six months ended 31 August 2016.

Financial Highlights

   --     Revenues increased by 17.7% to GBP1,454.6m (2015 H1 : GBP1,236.1m) 
   --     Record profit before tax up 14.0% to GBP18.7m (2015 H1 : GBP16.4m) 
   --     Adjusted(1)   profit before tax up 14.7% to GBP19.5m (2015 H1: GBP17.0m) 
   --     Period end net cash of GBP12.9m (2015 H1 : GBP32.1m) 
   --     Cash generated from operations of GBP26.4m (2015 H1 : GBP37.6m) 
   --     Earnings per share of 3.87p (2015 H1 : 3.82p) 

-- Raised GBP35m in March 2016 to finance further acquisitions, with the majority of funds deployed

-- Interim dividend up 11.1% to 0.50p per share (2015 H1 : 0.45p per share) to be paid in January 2017

Operational Highlights

-- Record Group trading performance driven by improvement in recently acquired businesses, a strong used car performance and growth in higher margin service area

-- Growth strategy progressed with greater premium mix, including additions of Mercedes-Benz and Toyota franchises to Group

   --     Group gross profit margins increased from 10.6% to 11.1% 
   --     Like-for-like service revenues up 6.6%: long-term growth trend continues 
   --     Group service gross profit margins strengthened from 76.9% to 77.9% 

-- Like-for-like used vehicle volumes increased 8.5%: the 10(th) consecutive half year period of growth

   --     Like-for-like used car margins strengthened from 10.0% to 10.7% 
   --     Total car and van volumes sold up 10.7% 
   --     Softening of new private retail market: Group like-for-like new car retail volumes down 4.2% 

-- Strong performance in new commercial van sales with strengthening fleet and commercial margins

Outlook Highlights

   --     Robust September trading performance ahead of last year on a like-for-like basis 
   --     Like-for-like new car retail volumes in line with SMMT data: broadly flat year on year 
   --     Recent acquisitions contributing to profit growth 

6 months ended 31 August 2016

Growth Rates

 
                         Total    Like-for-Like      SMMT UK 
                                                   Registrations 
 Group Revenues           17.7%            4.7% 
 
 Service Revenues         26.6%            6.6% 
 
 Volumes : 
 Used retail vehicles     17.5%            8.5% 
 New retail vehicles       8.3%          (4.2%)           (0.8%) 
 Motability vehicles       1.3%          (3.0%)           (0.9%) 
 Fleet new cars          (4.5%)         (10.6%)             6.1% 
 Commercial new 
  vehicles                13.4%           11.6%             3.9% 
 

Commenting on the results, Robert Forrester, Chief Executive, said:

"In the first six months of trading, our proven growth strategy has delivered a record set of results with increased revenues, gross margins and profits. We have continued to successfully grow the business, through both organic growth and the acquisition and integration of premium franchises, as we seek to build a balanced portfolio. Consistent delivery of an outstanding customer experience continues to be a strong driver of the growth of dealership performances across the Group. This is demonstrated by the growing number of customers retained into the Group's aftersales businesses.

"The outlook for the remainder of the year remains positive, underpinned by low interest rates and record high levels of employment in the UK economy. The Group's trading performance in the key September plate change month was strong. The Board anticipates that the Group's full year results will be in line with market expectations."

For further information please contact:

 
 Vertu Motors plc 
 Robert Forrester, CEO   Tel: 0191 491 2111 
 Michael Sherwin, CFO    Tel: 0191 491 2112 
 Liberum 
 Peter Tracey            Tel: 020 3100 2000 
  Richard Crawley 
  Jamie Richards 
 Zeus Capital Limited 
 Adam Pollock            Tel: 020 7533 7727 
 Camarco 
 Billy Clegg             Tel: 020 3757 4980 
  Georgia Mann 
 

This announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

INTRODUCTION

During the six months ended 31 August 2016 ("the Period") the Group has continued to grow revenues, gross margins and profits. Used vehicle sales and vehicle servicing channels have seen excellent growth and this has underpinned the delivery of record revenues and profits for the Group. Used vehicles and aftersales together represent 71.8% of Group gross profit (2015 H1: 70.8%).

The new car market stands at, or near to, record levels. After four years of sustained growth, the UK private new retail market softened during the Period recording slight declines in registrations from April 2016 onwards. There was a reduction of 0.8%(2) for the Period.

The Group has performed strongly by pursuing the three elements of its strategy to deliver earnings growth:

-- acquiring further businesses, both currently profitable and turnaround opportunities representing both existing manufacturer partners and those which are new to the Group including Mercedes-Benz and Toyota;

-- improving the profit contribution from the significant number of businesses acquired or opened in recent years; and

-- continued review of the Group's portfolio in terms of franchise representation and appropriate allocation of capital to identify future opportunities to make changes to maximise return on investment.

The Group undertook a GBP35m (gross) equity placing in March 2016 to finance further acquisitions and the majority of these funds were deployed during the Period. The Group has a very strong balance sheet with net cash.

The Group has maintained strict disciplines over working capital, resulting in a strong conversion of profits into cash. GBP26.4m of cash generated from operations compared to operating profits of GBP19.9m, leading to GBP12.9m of net cash in the Group's balance sheet as at 31 August 2016. In addition to new acquisitions, the Group has continued to invest heavily in new dealership development projects, expansion of the capacity of existing dealerships and other dealership refurbishment projects to reflect latest manufacturer standards. The Group spent GBP7.3m on these projects during the Period and will continue to invest at a similar rate over the next 18 months. Once this period is over the Board expects a substantial reduction in ongoing capital expenditure and a consequent increase in free cashflow.

An interim dividend of 0.50 pence per share, representing an increase of 11.1%, (2015 : 0.45p) will be paid on 20 January 2017. The ex-dividend date will be 22 December 2016 and the associated record date 23 December 2016.

FINANCIAL REVIEW

Revenues in the Period grew by 17.7% (GBP218.5m) to GBP1,454.6m (2015 H1 : GBP1,236.1m). Acquisitions in the Period accounted for GBP67.3m of growth and those businesses acquired in the previous year contributed further revenue growth of GBP101.0m. Core Group revenues grew by 4.6% (GBP55.2m), reflecting growth in every major vehicle sales and aftersales channel. Closed or sold businesses accounted for a decline in revenue of GBP5.0m. Overall gross margins increased to 11.1% (2015 H1 : 10.6%) driven by stronger margins in vehicle servicing and used vehicle sales. Operating profit grew by 17.8% to GBP19.9m, with adjusted operating margins stable at 1.4% (2015 H1 : 1.4%).

The Group's finance charges have increased by GBP0.7m to GBP1.2m (2015 H1 : GBP0.5m) due to higher vehicle stocking interest. This reflected higher pipeline stocks during the Period as new vehicle sales slowed, coupled with the increase in the number of premium franchise operations in the Group which operate structurally with higher vehicle stocking costs.

Following the further reduction in the UK Corporation Tax rate to 20%, the Group's effective tax rate for the Period was 20% (2015 H1 : 20.5%).

Earnings per share was 3.87p (2015 H1: 3.82p) taking account of the higher number of shares in issue following the equity raise effective on 31 March 2016.

During the Period, the Group has maintained its focus on the tight control of working capital which has resulted in a working capital inflow of GBP2.1m during the Period, driven mainly by the growth in the sales of service plans and in-house warranty products.

The Group, in common with all sector participants, is in the process of a major programme of capital investment; developing new dealerships, increasing capacity in existing dealerships and responding to Manufacturer Partner led refurbishments of the existing dealership portfolio. In particular, substantial sums are being invested in increasing capacity and enhancing the retail environment of the Jaguar Land Rover dealerships with the implementation of the "Arch" concept.

The spend on this programme during the Period, along with the anticipated spend in future periods, is set out below:

 
                                              Actual                     Estimate 
                                    ----------------------  ------------------------------- 
    Capital Expenditure                    FY           H1         FY         FY         FY 
     Trends                              2016       FY2017       2017       2018       2019 
                                         GBPm         GBPm       GBPm       GBPm       GBPm 
    New dealership development 
     projects 
 
        *    Purchase of property         6.3          0.7        2.1          -          - 
 
        *    New dealership build         1.8          4.5       10.6        7.1        4.5 
    Existing dealership 
     capacity increases                   4.5          1.6        7.6       16.7        5.1 
    Manufacturer-led 
     refurbishment projects               3.2          1.2        3.9        3.2        1.9 
    IT and other recruitment              4.9          2.2        3.8        4.0        4.0 
                                    ---------  -----------  ---------  ---------  --------- 
                                         20.7         10.2       28.0       31.0       15.5 
                                    ---------  -----------  ---------  ---------  --------- 
 

The Board is confident that the significant decline in future capital spend anticipated in FY2019 will drive enhanced free cash flow from the business from that point in time.

The Group operates two defined benefit pension schemes, both of which are closed to new entrants and to future accrual. The reduction in bond yields in the UK over the second quarter of the Period has caused an increase in the assessment of the scheme liabilities and a consequent reduction in the net pension scheme surplus for the two schemes combined to GBP1.4m (February 2016 : GBP6.1m). There is no current expectation that these fluctuations will impact upon the Group's cash contributions to the schemes, which currently amount to GBP0.4m per annum.

CURRENT TRADING AND OUTLOOK

On 23 June 2016, the UK voted to exit the EU. The result of the referendum has not materially impacted consumer confidence and the Group has not experienced any significant change in consumer behaviour. We remain in a low interest rate environment with record high levels of employment, both of which are providing a robust foundation for our market.

The market for aftersales, the Group's highest margin activity, remains strong as the vehicle parc has continued to grow following several years of strong new vehicle markets. This, in conjunction with the Group's successful customer retention strategies, provides the Board with confidence regarding the continuation of a strong aftersales performance.

The used vehicle market remains buoyant, underpinned by stable residual values. The Group continues to perform strongly in used vehicles, and the focus on the continuous development of the Group's used vehicle marketing provides the Board with confidence regarding the sustainability of performance in this channel.

The latest SMMT forecast for 2016 UK new vehicle registrations stands at 2.64 million (2015 : 2.63 million) and the Board sees no reason to disagree with the underlying market stability implied by this forecast. The market is starting to see vehicle price increases reflecting the manufacturers' reaction to declining Sterling exchange rates against all major currencies. Lower margin channels for manufacturers and retailers alike, such as Fleet car supply and Motability, are likely to see more impact than higher margin retail channels. There are diverging economic forecasts with regards to Sterling's currency outlook and this leads to uncertainty over future manufacturer volume strategies and pricing. The Board shares the outlook on the new car market given by the SMMT which anticipates a fall in 2017 registrations of around 6%. This would equate to a historically robust new car market of around 2.5 million units.

September is a key month for the Group's profitability in the second half of the financial year, being a registration plate change month. Profit in the month was ahead of prior year levels on a like-for-like basis and recent acquisitions further bolstered the Group result. The Group's service and used car performance continued to demonstrate strong underlying growth trends in September. Like-for-like new car private volumes for the Group were down 1.7% year on year, in line with the SMMT registration data.

The Board continues to examine further acquisition and development opportunities.

The Board anticipates that the Group's full year results will be in line with market expectations.

OPERATING REVIEW

Colleague and Customer Satisfaction

The Mission Statement of the Group is to deliver an outstanding customer motoring experience through honesty and trust.

The Board believe that in a retail environment, it is vital to have a thriving and engaged workforce to deliver this objective, together with the consequent financial success that goes alongside it. Repeat vehicle sales and successive aftersales visits are a major driver of financial success in operating automotive retail dealerships and these derive from loyal customers. It is the Group's colleagues on the ground who deliver this.

In order to assess the engagement levels of colleagues, in July 2016 the Group undertook its fifth annual colleague satisfaction survey across the Group. 75% of colleagues in the Core Group completed the voluntary survey and the results reflect the strong Group culture that has been developed around the Mission Statement, the Group Vision and Values. 97% of colleagues knew the Group Vision and Values and over 90% believed management acted in accordance with those Values. This strong values-based approach underpins the delivery of outstanding customer experience with 91% of colleagues feeling they could recommend the Group to their friends and 87% were confident the Group serves customers better than its rivals. These are strong scores, despite the Group's fast growth rate since incorporation in 2006, and point to the Group's successful execution of its buy and build strategy.

The Group's customer experience indicators continue to show that the Group delivers above industry average experience. Used car customer experience is measured by JudgeService and in the Period, 95% of customers responded that they would recommend their friends and family to the Group.

Based on the measures of customer experience applied by the Group's manufacturer partners, 65% of sales outlets and 56% of service outlets performed in the Period above national average levels. This area continues to be a major focus of Group strategies, including investment in dealership environments, colleague training and development and ensuring on-line channels are designed to maximise customer experience.

Growth Strategy and Portfolio Development

The Group has continued to grow and strengthen the business, with the addition of nine sales outlets during the Period. The Group now operates 129 sales outlets at 107 locations across the United Kingdom.

The Group has continued to acquire new outlets and to develop both existing and new property assets to enhance and expand the capacity of the ongoing business. The growth has been primarily in Premium franchises as the Group seeks to build a balanced portfolio on the foundation of a scaled volume franchise portfolio.

On 1 March 2016, the Group purchased Greenoaks (Maidenhead) Limited which operates three Mercedes-Benz dealerships, for GBP21.7m (alongside the settlement of GBP9m of shareholder loans). These dealerships in Ascot, Reading and Slough have historically underperformed. The Board is pleased with the progress made to date to integrate and improve the performance of the businesses and they have traded in line with the performance targets the Board put in place at the time of the acquisition. For the year ended 31 December 2015 the business achieved revenues of GBP88m and adjusted(3) profit before tax of GBP1.2m

In the Period the Group has completed three further transactions totalling GBP22.6m which were anticipated when the Group undertook the GBP35m Placing (gross) in March 2016. These transactions represent a swift deployment of a substantial portion of the capital raised.

On 3 May 2016, the Group acquired the business and assets of Leeds Jaguar from Inchcape for a consideration of GBP0.6m, including GBP0.5m of goodwill. For the year ended 31 December 2015, this business was at breakeven. The Jaguar franchise is currently witnessing a significant turnaround in profitability on the back of new products such as the excellent Jaguar F-PACE. This business, together with the existing Leeds Land Rover business, will shortly be relocated to a state-of-the-art freehold dealership in the centre of Leeds. This property has undergone major redevelopment to house these two businesses and to meet the latest manufacturer standards.

On 1 June 2016, the Group acquired the entire issued share capital of Gordon Lamb Group Limited, a group which operated five sales outlets in Derbyshire. This freehold rich acquisition introduced the Toyota franchise to the Group and added a sixth Land Rover dealership, together with two Skoda and a single Nissan sales outlet to the portfolio. Estimated consideration amounted to GBP18.8m, including a GBP8.3m payment for goodwill. For the year ended 31 December 2015, Gordon Lamb Limited had consolidated revenue of GBP85.8m(4) and adjusted(3) profit before tax of GBP2.7m. The integration of these businesses has gone well. Derby Skoda is currently in a short-term leasehold property outside of the city and it is planned to relocate this outlet to an existing Group location in the centre of Derby in the first quarter of 2017. This will significantly enhance the trading potential of the business and reduce ongoing operating costs.

On 23 June 2016, the Group acquired the freehold and long leasehold interests from Honda in two Honda dealerships operated by the Group in Nottingham and Derby. Consideration amounted to GBP3.2m.

In August 2016 the Group opened the Morpeth Honda outlet alongside an existing Ford outlet. This is the Group's 13(th) Honda outlet consolidating the Group's position as Honda's largest partner in Europe, and completing full coverage of the North East market area from Tweed to the Tees.

A further landmark freehold development is nearing completion, the building of a new Nissan dealership in the centre of Glasgow. The Group was awarded the whole of Glasgow as a market area for Nissan from 1 April 2015 and the completion of this dealership will see the relocation of the business from a north Glasgow temporary site. The Group will then have excellent dealership representation both north and south of the Clyde.

The Group's largest franchise partner is Ford with 22 outlets. Investment continues to be made in the "Ford Store" concept which sell the full range of Ford product. The Group is now reaping the rewards of the investment made in its Birmingham Ford Store and Orpington Ford Store operations. The Group's Gloucester Ford dealership is currently undergoing redevelopment into a Ford Store and work will shortly commence on a significant Ford Store development at Bolton. Further investment has been made in expanding the aftersales capacity of the Ford division with new offsite aftersales facilities now in place at West Bromwich, Shirley and Orpington so the Group can maximise the growing higher margin aftersales opportunity.

The Group operates six Volkswagen dealerships and the final investment in new franchise standards is close to completion with the redevelopment of Nottingham North. Furthermore, Hereford Audi has been undergoing substantial redevelopment and the business has been operating from a temporary location throughout the Period. The new facility will commence operations by Christmas and is expected to augment operational.

The Group continues to review the portfolio of businesses operated to ensure that long term returns are maximised and capital allocation disciplines maintained. On 1 October 2016, the Group disposed of its Fiat Group dealership in Newcastle which comprised three sales outlets (Fiat, Jeep and Alfa Romeo). The disposal to Richard Hardie Limited, is part of their creation of a Fiat Group market area in the North East. Additionally, Fiat sales will cease at the Group's sales outlets in Cheltenham and Derby at the end of December 2016. This will leave the Group with a single Fiat and Alfa Romeo sales outlet in Worcester and no Jeep representation.

OPERATIONAL PERFORMANCE

Revenue and Margins

 
 Six Months ended                            Gross     Gross     Gross 
  31 August 2016       Revenue   Revenue    Margin    Margin    Margin 
                         GBP'm     Mix %     GBP'm     Mix %         % 
 Aftersales(5)           113.4       7.8      63.4      39.4      45.7 
 Used Consolidated       525.6      36.1      52.3      32.4       9.9 
 New                     483.9      33.3      35.0      21.7       7.2 
 Fleet & Commercial      331.7      22.8      10.4       6.5       3.1 
                      --------  --------  --------  --------  -------- 
 Total Department      1,454.6     100.0     161.1     100.0      11.1 
                      --------  --------  --------  --------  -------- 
 
 Six Months ended                            Gross     Gross     Gross 
  31 August 2015       Revenue   Revenue    Margin    Margin    Margin 
                         GBP'm     Mix %     GBP'm     Mix %         % 
 Aftersales(5)            93.8       7.6      50.7      38.8      44.4 
 Used Consolidated       426.5      34.5      42.0      32.1       9.8 
 New                     413.1      33.4      30.3      23.1       7.3 
 Fleet & Commercial      302.7      24.5       7.9       6.0       2.6 
                      --------  --------  --------  --------  -------- 
 Total Department      1,236.1     100.0     130.9     100.0      10.6 
                      --------  --------  --------  --------  -------- 
 

Aftersales

The Group's higher margin aftersales operations, which account for an increasing proportion of the Group's revenues (7.8% of revenues (2015 H1 : 7.6%)) earned 39.4% of the Group's gross profit in the Period (2015 H1 : 38.8%).

Total aftersales gross profit grew by 25.0% in the Period, an increase of 6.8% on a like-for-like basis. A growing UK vehicle parc and the Group's retention initiatives and capabilities, particularly the sale of service plans to both new and used car customers, have continued to contribute to these favourable profitability trends. The Group now has 97,427 customers paying monthly for their service and MOT through the Group's own service plan products (2015 H1 : 80,902). In the vital area of vehicle servicing, total service revenues grew by 26.6% and like-for-like service revenues grew by 6.6%. Like-for-like service margins also increased from 77.1% to 78.3% as the Group achieved higher levels of workshop efficiency as volumes increased. This continued progress demonstrates the success of the Group's constant focus on customer retention, loyalty and experience thus improving the performance of this key engine of the Group's profit delivery.

Vehicle Sales

Vehicle unit sales analysis

 
                           2016           2016     2016        2015         Total   Like-for-Like 
                           Core    Acquired(6)    Total    Total(7)    % Variance      % Variance 
 Used Retail             38,096          3,876   41,972      35,708         17.5%            8.5% 
 New Retail              19,922          2,903   22,825      21,079          8.3%          (4.2%) 
 New Motability           5,786            303    6,089       6,010          1.3%          (3.0%) 
 Total New Retail 
  & Motability           25,708          3,206   28,914      27,089          6.7%          (4.0%) 
                        -------  -------------  -------  ----------  ------------  -------------- 
 Fleet Car                9,145            645    9,790      10,249        (4.5%)         (10.6%) 
 Commercial               8,819            212    9,031       7,961         13.4%           11.6% 
 Fleet and Commercial    17,964            857   18,821      18,210          3.4%          (0.9%) 
                        -------  -------------  -------  ----------  ------------  -------------- 
 Total Fleet 
  & New Retail           43,672          4,063   47,735      45,299          5.4%          (2.7%) 
                        -------  -------------  -------  ----------  ------------  -------------- 
 Total Units 
  Sold                   81,768          7,939   89,707      81,007         10.7%            2.2% 
                        -------  -------------  -------  ----------  ------------  -------------- 
 

Used Vehicles

The Group has continued to grow volumes, market share and profitability in its key used vehicle operations, delivering total volume growth of 17.5% and like-for-like volume growth of 8.5% in the Period. This is the Group's 10th consecutive half year of like-for-like volume growth in used vehicles, demonstrating the consistency of performance in this vital channel, which is considered a core strength of the Group. The used vehicle volume growth was driven in part by the Group's increasing focus on innovative and effective marketing, particularly via the promotion of the Group's Bristolstreet.co.uk and Macklinmotors.co.uk websites, through increasing marketing spend directly on-line and through TV advertising campaigns. Continued innovation in marketing is a particular focus following the appointment of Liz Cope as Chief Marketing Officer in the Period.

In addition to substantial volume growth, the Group delivered further used vehicle margin improvements. Like-for-like gross profit per unit grew by 6.3%, helping drive an increase of 15.1% in like-for-like used vehicle gross profits. Used vehicles are delivering an increasing proportion of Group revenues and gross profits. Like-for-like gross margins strengthened from 10.0% to 10.7% in the Period. This improvement reflected strong pricing disciplines, a structured sales process underpinned by training and underlying balance of supply and demand in the wider used vehicle wholesale markets. Total used vehicle gross margins were up from 9.8% to 9.9% with the lower rate of growth reflecting the lower inherent gross profit margin percentages in Premium franchises. These businesses are an increasingly important component of the Group's portfolio following the last few years of acquisition growth.

New Cars

Total new car revenues grew by 17.1% and new car gross profit grew by 15.8%. This growth was driven by the acquisitions in the Period and last year with like-for-like revenues stable. Strong disciplines ensured that gross margins were stable in the Period. UK private new vehicle registrations during the Period fell by 0.8% and the Group's like-for-like new vehicle volumes declined by 4.2%. Increasingly over the Period it became evident that, as a result of the softening in the new car market, the market was becoming characterised by higher levels of self-registration by retailers with these vehicles registered as "retail" as measured by the SMMT. Retailers are financially motivated to self-register new vehicles in order to either achieve volume targets set by Manufacturers or to take advantage of bulk purchasing deals on offer. These cars are then sold into the retail market as used cars. In such a Period, UK private registrations tend to grow faster than the Group's new retail sales volumes.

Fleet & Commercial

The Group grew like-for-like gross profit from its combined fleet and commercial operations by 13.2% in the Period. Like-for-like gross profit per unit rose from GBP423 to GBP491. Consequently, overall profitability in the Fleet and Commercial channel rose GBP1m in the Period, which is clearly an excellent result.

Overall UK registrations in the Fleet car channel rose 6.1% whilst Group like-for-like registrations fell 10.6%. This market share decline reflected fewer deliveries in the low margin supply of vehicles to daily rental companies. This trend reflected the increasing management of used vehicle residual values by the Group's manufacturer partners through reducing overall supply volumes in this low margin channel including seeking to extend daily rental replacement cycles. These measures aid the balancing of used car supply and demand in the UK market. Overall these trends augmented Group margins in the Fleet car channel.

The Group's total commercial vehicle (light van) sales volumes have grown by 13.4% and by 11.6% on a like-for-like basis. This strength reflects the Group's strong market position in new van supply and the excellent economic conditions in the UK in the Period for business. During the Period, the UK light commercial vehicle registrations grew by 3.9% hence the Group's market share has once again risen. The Group has now seen seven half year periods of like-for-like volume growth in the new van channel.

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

For the six months ended 31 August 2016

 
                                                Six months          Six months 
                                                 ended                   ended                 Year 
                                                                                              ended 
                                                 31 August           31 August          29 February 
                                                  2016                    2015                 2016 
                                       Note              GBP'000       GBP'000              GBP'000 
 Revenue 
 Continuing operations                                 1,387,349     1,236,083            2,423,279 
 Acquisitions                                             67,268             -                    - 
                                             -------------------  ------------  ------------------- 
                                                       1,454,617     1,236,083            2,423,279 
 Cost of sales 
 Continuing operations                               (1,234,812)   (1,105,195)          (2,160,000) 
 Acquisitions                                           (58,713)             -                    - 
                                             -------------------  ------------  ------------------- 
                                                     (1,293,525)   (1,105,195)          (2,160,000) 
 Gross profit 
 Continuing operations                                   152,537       130,888              263,279 
 Acquisitions                                              8,555             -                    - 
                                             -------------------  ------------  ------------------- 
                                                         161,092       130,888              263,279 
 Operating expenses 
 Continuing operations                                 (132,067)     (113,391)            (234,631) 
 Acquisitions                                            (8,347)             -                    - 
                                             -------------------  ------------  ------------------- 
                                                       (140,414)     (113,391)            (234,631) 
 
 Operating profit before 
  amortisation and share 
  based payments charge 
 Continuing operations                                    20,470        17,497               28,648 
 Acquisitions                                                208             -                    - 
                                             -------------------  ------------  ------------------- 
                                                          20,678        17,497               28,648 
 Amortisation of intangible 
  assets                                                   (304)         (273)                (558) 
 Share based payments charge                               (483)         (367)                (911) 
====================================  =====  ===================  ============  =================== 
 Operating profit                                         19,891        16,857               27,179 
 
 Finance income                           4                  141            74                  173 
 Finance costs                            4              (1,304)         (545)              (1,390) 
 
 Profit before tax, amortisation 
  and share based payments 
  charge                                                  19,515        17,026               27,431 
 Amortisation of intangible 
  assets                                                   (304)         (273)                (558) 
 Share based payments charge                               (483)         (367)                (911) 
 Profit before tax                                        18,728        16,386               25,962 
 Taxation                                 5              (3,741)       (3,356)              (5,282) 
                                             -------------------  ------------  ------------------- 
 Profit for the period attributable 
  to equity holders                                       14,987        13,030               20,680 
                                                                                =================== 
 
 Basic earnings per share 
  (p)                                     6                 3.87          3.82                 6.06 
 Diluted earnings per share 
  (p)                                     6                 3.80          3.74                 5.92 
 
 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the six months ended 31 August 2016

 
                                                Six months            Six months 
                                                 ended                     ended                 Year 
                                                                                                ended 
                                                31 August              31 August          29 February 
                                                 2016                       2015                 2016 
                                         Note      GBP'000               GBP'000              GBP'000 
 
 Profit for the period                              14,987                13,030               20,680 
 
 Other comprehensive 
  (expense)/income 
 Items that will not be reclassified 
  to profit or loss: 
    Actuarial (loss)/gain 
     on retirement benefit 
     obligations                            9      (4,990)                   642                  680 
    Deferred tax relating 
     to actuarial (loss)/gain 
     on retirement benefit 
     obligations                                       849                 (128)                (137) 
 Items that may be reclassified subsequently 
  to profit or loss: 
    Cash flow hedges                                     -                    19                   23 
    Deferred tax relating 
     to cash flow hedges                                 -                   (4)                  (6) 
                                               -----------  -------------------- 
 Other comprehensive (expense)/income 
  for the period, net of 
  tax                                              (4,141)                   529                  560 
                                               -----------  --------------------  ------------------- 
 Total comprehensive 
  income for the period 
  attributable to equity 
  holders                                           10,846                13,559               21,240 
                                               ===========  ====================  =================== 
 
 
 

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

As at 31 August 2016

 
 
                                          31 August   31 August   29 February 
                                               2016        2015          2016 
                                   Note     GBP'000     GBP'000       GBP'000 
 Non-current assets 
 Goodwill and other indefinite 
  life assets                     8, 11      94,680      59,392        69,209 
 Other intangible assets                      1,699       1,797         1,672 
 Retirement benefit asset             9       1,375       3,771         6,097 
 Property, plant and 
  equipment                                 187,855     138,037       150,361 
                                            285,609     202,997       227,339 
                                         ----------  ----------  ------------ 
 
 Current assets 
 Inventories                                512,076     395,519       530,406 
 Trade and other receivables                 49,223      51,005        63,416 
 Property assets held 
  for sale                                        -       1,144           537 
 Cash and cash equivalents                   32,120      39,012        43,915 
                                         ----------  ----------  ------------ 
 Total current assets                       593,419     486,680       638,274 
                                         ----------  ----------  ------------ 
 Total assets                               879,028     689,677       865,613 
                                         ==========  ==========  ============ 
 
 Current liabilities 
 Trade and other payables                 (598,264)   (473,178)     (630,912) 
 Deferred consideration                     (3,651)     (1,809)         (241) 
 Current tax liabilities                    (5,022)     (7,194)       (3,647) 
 Derivative financial                                                       - 
  instruments                                     -         (5) 
 Borrowings                                (19,048)     (6,759)       (6,756) 
                                         ----------  ----------  ------------ 
 Total current liabilities                (625,985)   (488,945)     (641,556) 
                                         ----------  ----------  ------------ 
 
 Non-current liabilities 
 Borrowings                                   (166)       (166)      (14,011) 
 Deferred consideration                     (1,680)       (291)       (1,659) 
 Deferred income tax 
  liabilities                               (5,636)     (3,446)       (4,450) 
 Deferred income                            (7,122)     (5,610)       (6,078) 
                                         ----------  ----------  ------------ 
                                           (14,604)     (9,513)      (26,198) 
                                         ----------  ----------  ------------ 
 Total liabilities                        (640,589)   (498,458)     (667,754) 
                                         ==========  ==========  ============ 
 
 Net assets                                 238,439     191,219       197,859 
                                         ==========  ==========  ============ 
 
 Capital and reserves 
  attributable to equity 
  holders of the Group 
 Ordinary shares                             39,727      34,109        34,127 
 Share premium                              124,932      96,848        96,901 
 Other reserve                               10,645      10,645        10,645 
 Hedging reserve                                  -         (2)             - 
 Treasury share reserve                     (1,000)           -             - 
 Retained earnings                           64,135      49,619        56,186 
                                         ----------  ----------  ------------ 
 Shareholders' equity                       238,439     191,219       197,859 
                                         ==========  ==========  ============ 
 
 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

For the six months ended 31 August 2016

 
                                           Six months   Six months 
                                                ended        ended      Year ended 
                                            31 August    31 August     29 February 
                                                 2016         2015            2016 
                                    Note      GBP'000      GBP'000         GBP'000 
 
 Operating profit                              19,891       16,857          27,179 
 Profit on sale of property, 
  plant and equipment                           (394)         (29)            (26) 
 Amortisation of intangible 
  assets                                          304          273             558 
 Depreciation of property, 
  plant and equipment                           4,079        3,166           6,803 
 Movement in working capital          10        2,082       16,994          30,515 
 Share based payments charge                      483          357             781 
                                                                    -------------- 
 Cash generated from operations                26,445       37,618          65,810 
 Tax received                                     226            3               4 
 Tax paid                                     (2,826)      (2,680)         (7,704) 
 Finance income received                           29           29              36 
 Finance costs paid                           (1,292)        (678)         (1,451) 
                                                                    -------------- 
 Net cash generated from 
  operating activities                         22,582       34,292          56,695 
                                          -----------  -----------  -------------- 
 
 Cash flows from investing 
  activities 
 Acquisition of businesses, 
  net of cash, overdrafts 
  and borrowings acquired                    (46,208)      (8,837)        (24,565) 
 Acquisition of freehold 
  land and buildings                          (4,106)        (150)         (6,475) 
 Proceeds from disposal 
  of business (net of cash, 
  overdrafts and borrowings)                        -          782           2,137 
 Purchases of intangible 
  assets                                        (299)        (164)           (325) 
 Purchases of property, 
  plant and equipment                        (11,346)      (7,308)        (13,977) 
 Proceeds from disposal 
  of property, plant and 
  equipment                                       950            -           1,120 
                                                                    -------------- 
 Net cash outflow from investing 
  activities                                 (61,009)     (15,677)        (42,085) 
                                          -----------  -----------  -------------- 
 
 Cash flows from financing 
  activities 
 Proceeds from issuance 
  of ordinary shares                           33,631           56             127 
 Proceeds from borrowings              7       13,846        4,474          18,288 
 Repayment of borrowings               7     (16,468)      (1,000)         (4,441) 
 Purchase of treasury shares                  (1,000)            -               - 
 Dividends paid to equity 
  shareholders                                (3,377)      (2,387)         (3,923) 
                                                                    -------------- 
 Net cash inflow/(outflow) 
  from financing activities                    26,632        1,143          10,051 
                                          -----------  -----------  -------------- 
 
   Net (decrease)/increase 
   in cash and cash equivalents        7     (11,795)       19,758          24,661 
 Cash and cash equivalents 
  at beginning of period                       43,915       19,254          19,254 
                                          -----------  -----------  -------------- 
 Cash and cash equivalents 
  at end of period                             32,120       39,012          43,915 
                                          ===========  ===========  ============== 
 

CONDENSED CONSOLIDATED CHANGES IN EQUITY (UNAUDITED)

For the six months ended 31 August 2016

 
                                                             Treasury 
                          Ordinary       Share       Other      share     Retained     Total 
                     share capital     premium     reserve    reserve     earnings    Equity 
                           GBP'000     GBP'000     GBP'000    GBP'000      GBP'000   GBP'000 
 
 As at 1 March 2016         34,127      96,901      10,645          -       56,186   197,859 
 Profit for the 
  period                         -           -           -          -       14,987    14,987 
 Actuarial loss 
  on retirement benefit 
  obligations                    -           -           -          -      (4,990)   (4,990) 
 Tax on items taken 
  directly to equity             -           -           -          -          849       849 
 Total comprehensive 
  income for the 
  period                         -           -           -          -       10,846    10,846 
 New ordinary shares 
  issued                     5,600      29,400           -          -            -    35,000 
 Costs on issuance 
  of shares                      -     (1,369)           -          -            -   (1,369) 
 Purchase of treasury 
  shares                         -           -           -    (1,000)            -   (1,000) 
 Dividend paid                   -           -           -          -      (3,377)   (3,377) 
 Share based payments 
  charge                         -           -           -          -          480       480 
                                                ---------- 
 As at 31 August 
  2016                      39,727     124,932      10,645    (1,000)       64,135   238,439 
                          ========  ==========  ==========  =========  ===========  ======== 
 

The purchase of treasury shares in the period relates to the acquisition of 2,635,687 shares by Estera Trust (Jersey) Limited, the Trustee of Vertu Motors plc's Employee Benefit Trust. The shares were purchased by the Trustee to be held for the purposes of the Employee Benefit Trust, and may be used to transfer shares to individuals when options are exercised. This could include the Company's Long Term Incentive Plan, under which each of the executive directors of the Company and the Company's other PDMRs is a potential participant, and is therefore regarded as having a notional interest in these shares.

The other reserve is a merger reserve, arising from shares issued for shares as consideration, to the former shareholders of acquired companies.

For the six months ended 31 August 2015

 
 
                          Ordinary       Share       Other     Hedging     Retained       Total 
                     share capital     premium     reserve     reserve     earnings      Equity 
                           GBP'000     GBP'000     GBP'000     GBP'000      GBP'000     GBP'000 
 
 As at 1 March 2015         34,091      96,810      10,645        (17)       38,105     179,634 
 Profit for the period           -           -           -           -       13,030      13,030 
 Actuarial losses 
  on retirement benefit 
  obligations                    -           -           -           -          642         642 
 Tax on items taken 
  directly to equity             -       -               -         (4)        (128)     (132) 
 Fair value gains                -           -           -          19            -          19 
                          --------  ----------  ----------  ----------  -----------  ---------- 
 Total comprehensive 
  income for the period          -           -           -          15       13,544      13,559 
 New ordinary shares 
  issued                        18          38           -           -            -          56 
 Dividend paid                   -           -           -           -      (2,387)   (2,387) 
 Share based payments 
  charge                         -           -           -           -          357         357 
                                                ---------- 
 As at 31 August 
  2015                      34,109      96,848      10,645         (2)       49,619     191,219 
                          ========  ==========  ==========  ==========  ===========  ========== 
 

For the year ended 29 February 2016

 
 
                          Ordinary       Share       Other     Hedging     Retained     Total 
                     share capital     premium     reserve     reserve     earnings    Equity 
                           GBP'000     GBP'000     GBP'000     GBP'000      GBP'000   GBP'000 
 
 As at 1 March 2015         34,091      96,810      10,645        (17)       38,105   179,634 
 Profit for the 
  period                         -           -           -           -       20,680    20,680 
 Actuarial gains 
  on retirement benefit 
  obligations                    -           -           -           -          680       680 
 Tax on items taken 
  directly to equity             -           -           -         (6)        (137)     (143) 
 Fair value gains                -           -           -          23            -        23 
                          --------  ----------  ----------  ----------  -----------  -------- 
 Total comprehensive 
  income for the 
  year                           -           -           -          17       21,223    21,240 
 New ordinary shares 
  issued                        36          91           -           -            -       127 
 Dividend paid                   -           -           -           -      (3,923)   (3,923) 
 Share based payments 
  charge                         -           -           -           -          781       781 
                                                ---------- 
 As at 29 February 
  2016                      34,127      96,901      10,645           -       56,186   197,859 
                          ========  ==========  ==========  ==========  ===========  ======== 
 

NOTES

For the six months ended 31 August 2016

   1.   Basis of Preparation 

Vertu Motors plc is a Public Limited Company which is quoted on the AiM Market and is incorporated and domiciled in the United Kingdom. The address of the registered office is Vertu House, Fifth Avenue Business Park, Team Valley, Gateshead, Tyne and Wear, NE11 0XA. The registered number of the Company is 05984855.

The financial information for the period ended 31 August 2016 and similarly the period ended 31 August 2015 has neither been audited nor reviewed by the auditors. The financial information for the year ended 29 February 2016 has been based on information in the audited financial statements for that period.

The information for the year ended 29 February 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain an emphasis of matter statement under section 498 of the Companies Act 2006.

   2.   Accounting policies 

The annual consolidated financial statements of Vertu Motors plc are prepared in accordance with IFRSs as adopted by the European Union. The annual report has been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, share based payments and financial assets and liabilities (including derivative financial instruments) at fair value through profit or loss.

The accounting policies adopted in this interim financial report are consistent with those of the Group's financial statements for the year ended 29 February 2016 and can be found on the Group's website, www.vertumotors.com.

In addition, this unaudited interim financial report does not comply with IAS 34 Interim Financial Reporting, which is not required to be applied under the AiM Rules.

   3.   Segmental information 

The Group complies with 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. As such, the Group has only one reportable business segment, since the Group is operated and is managed on a dealership by dealership basis. Dealerships operate a number of different business streams such as new vehicle sales, used vehicle sales and aftersales operations. Management is organised based on the dealership operations as a whole rather than the specific business streams.

These dealerships are considered to have similar economic characteristics and offer similar products and services which appeal to a similar customer base. As such, the results of each dealership have been aggregated to form one reportable business segment.

The CODM assesses the performance of the operating segment based on a measure of both revenue and gross profit. Therefore, to increase transparency, the Group has decided to include additional voluntary disclosure analysing revenue and gross profit within the reportable segment.

 
 Six Months ended                            Gross     Gross     Gross 
  31 August 2016       Revenue   Revenue    Margin    Margin    Margin 
                         GBP'm     Mix %     GBP'm     Mix %         % 
 Aftersales(5)           113.4       7.8      63.4      39.4      45.7 
 Used Consolidated       525.6      36.1      52.3      32.4       9.9 
 New                     483.9      33.3      35.0      21.7       7.2 
 Fleet & Commercial      331.7      22.8      10.4       6.5       3.1 
                      --------  --------  --------  --------  -------- 
 Total Department      1,454.6     100.0     161.1     100.0      11.1 
                      ========  ========  ========  ========  ======== 
 
 Six Months ended                            Gross     Gross     Gross 
  31 August 2015       Revenue   Revenue    Margin    Margin    Margin 
                         GBP'm     Mix %     GBP'm     Mix %         % 
 Aftersales(5)            93.8       7.6      50.7      38.8      44.4 
 Used Consolidated       426.5      34.5      42.0      32.1       9.8 
 New                     413.1      33.4      30.3      23.1       7.3 
 Fleet & Commercial      302.7      24.5       7.9       6.0       2.6 
                      --------  --------  --------  --------  -------- 
 Total Department      1,236.1     100.0     130.9     100.0      10.6 
                      ========  ========  ========  ========  ======== 
 
 Year ended 29                               Gross     Gross     Gross 
  February 2016        Revenue   Revenue    Margin    Margin    Margin 
                         GBP'm     Mix %     GBP'm     Mix %         % 
 Aftersales(5)           189.0       7.8     102.9      39.1      44.8 
 Used Consolidated       850.2      35.1      83.5      31.7       9.8 
 New                     796.5      32.9      59.3      22.5       7.4 
 Fleet & Commercial      587.6      24.2      17.6       6.7       3.0 
                      --------  --------  --------  --------  -------- 
 Total Department      2,423.3     100.0     263.3     100.0      10.9 
                      ========  ========  ========  ========  ======== 
 

(5) margin in aftersales expressed on internal and external turnover

   4.   Finance income and costs 
 
                                Six months   Six months 
                                     ended        ended     Year ended 
                                 31 August    31 August     29 February 
                                      2016         2015            2016 
                                   GBP'000      GBP'000         GBP'000 
 Interest on short term 
  bank deposits                         29           23              36 
 Net finance income relating 
  to Group pension scheme              112           51             137 
                               -----------  -----------  -------------- 
 Finance income                        141           74             173 
                               ===========  ===========  ============== 
 
 Bank loans and overdrafts           (393)        (290)           (619) 
 Other finance costs                  (28)         (44)           (199) 
 Vehicle stocking interest           (883)        (211)           (572) 
                               -----------  -----------  -------------- 
 Finance costs                     (1,304)        (545)         (1,390) 
                               ===========  ===========  ============== 
 
   5.   Taxation 

The tax charge for the six months ended 31 August 2016 has been provided at the effective rate of 20% (Six months ended 31 August 2015: 20.5%).

   6.   Earnings per share 

Basic and diluted earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of ordinary shares during the period or the diluted weighted average number of ordinary shares in issue in the period.

The Group only has one category of potentially dilutive ordinary shares, which are share options. A calculation has been undertaken to determine the number of shares that could have been acquired at fair value (determined as the average annual market price of the Group's shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

Adjusted earnings per share is calculated by dividing the adjusted earnings attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period.

 
                                   Six months   Six months             Year 
                                        ended        ended            ended 
                                    31 August    31 August      28 February 
                                         2016         2015             2016 
                                      GBP'000      GBP'000          GBP'000 
 Profit attributable to equity 
  shareholders                         14,987       13,030           20,680 
 Amortisation of intangible 
  assets                                  304          273              558 
 Share based payments charge              483          367              911 
 Tax effect of adjustments               (61)         (55)            (112) 
                                  -----------  -----------  --------------- 
 Adjusted earnings attributable 
  to equity shareholders               15,713       13,615           22,037 
                                  ===========  ===========  =============== 
 
 Weighted average number of 
  shares in issue ('000s)             387,047      340,968          341,080 
 Potentially dilutive shares 
  ('000s)                               7,783        7,107            8,388 
                                  -----------  -----------  --------------- 
 Diluted weighted average 
  number of shares in issue 
  ('000s)                             394,830      348,075          349,468 
                                  ===========  ===========  =============== 
 
 Basic earnings per share               3.87p        3.82p          6.06p 
                                  ===========  ===========  ============= 
 Diluted earnings per share             3.80p        3.74p          5.92p 
                                  ===========  ===========  ============= 
 Adjusted earnings per share            4.06p        3.99p          6.46p 
                                  ===========  ===========  ============= 
 Diluted adjusted earnings 
  per share                             3.98p        3.91p          6.31p 
                                  ===========  ===========  ============= 
 
 
   7.   Reconciliation of net cash flow to movement in net cash 
 
                                  31 August   31 August   29 February 
                                       2016        2015          2016 
                                    GBP'000     GBP'000       GBP'000 
 
 Net (decrease) / increase 
  in cash and cash equivalents     (11,795)      19,758        24,661 
 Cash inflow from increase 
  in borrowings                    (13,846)     (4,474)      (18,288) 
 Cash outflow from repayment 
  of borrowings                      16,468       1,000         4,441 
                                 ----------  ----------  ------------ 
 Cash movement in net 
  cash                              (9,173)      16,284        10,814 
 
 Borrowing acquired                 (1,085)           -       (3,409) 
 Capitalisation of loan 
  arrangement fees                      107         201           201 
 Amortisation of loan 
  arrangement fee                      (91)        (68)         (128) 
                                 ----------  ----------  ------------ 
 Non cash movement in 
  net cash                          (1,069)         133       (3,336) 
 
 Movement in net cash              (10,242)      16,417         7,478 
 Opening net cash                    23,148      15,670        15,670 
                                 ----------  ----------  ------------ 
 Closing net cash                    12,906      32,087        23,148 
                                 ==========  ==========  ============ 
 
   8.   Acquisitions 

On 1 March 2016, the Group acquired the entire issued share capital of Sigma Holdings Limited and its subsidiary Greenoaks (Maidenhead) Limited (together "Greenoaks") which operates three Mercedes-Benz outlets in Reading, Ascot and Slough. Total consideration amounted to GBP21,743,000 including initial consideration of approximately GBP8,243,000 settled from the Group's existing cash resources and a GBP10,000,000 bank facility repayable in November 2016, with a further GBP3,500,000 deferred over 12 months. In addition, vendor shareholders loans of GBP9,000,000 were settled in cash on completion. The excess of consideration over the provisional fair value of the net assets acquired was GBP15,740,000 of which GBP3,771,000 has been allocated to franchise relationships. The financial statements for Greenoaks for the year ended 31 December 2015 showed revenues of GBP87,998,000 and adjusted(3) profit before taxation of GBP1,200,000.

On 2 May 2016, the Group acquired the business and certain assets of Leeds Jaguar from a subsidiary of Inchcape Plc. The estimated consideration for this leasehold acquisition was GBP592,000 and was settled in cash from the Group's existing resources. The excess of consideration over the provisional fair value of the net assets acquired was GBP500,000.

On 1 June 2016, the Group acquired the entire issued share capital of Gordon Lamb Group Limited and its subsidiaries, including Gordon Lamb Limited (together "Gordon Lamb") which operates the Toyota, Land Rover, Skoda, and Nissan outlets in Chesterfield and the Skoda outlet in Derby. The estimated consideration amounted to GBP18,819,000 including retention payable of GBP500,000. The remaining balance was settled in cash from the Group's existing resources. The excess of consideration over the provisional fair value of net assets acquired was GBP8,959,000 of which GBP3,207,000 has been allocated to franchise relationships. The financial statements of Gordon Lamb for the year ended 31 December 2015 showed revenues of GBP85,800,000(4) and adjusted(3) profit before taxation of GBP2,700,000.

(3) adjusted for non-recurring and non-corporate items.

(4) adjusted to restate revenue to the same basis as that adopted in the Group's financial reporting.

   9.   Retirement benefits 

The retirement benefit asset at 31 August 2016 reflects both the Bristol Street Pension Scheme and the SHG Pension Scheme, which was acquired as part of the acquisition of SHG Holdings Limited in the year ended 29 February 2016.

 
                                         31 August   31 August   29 February 
                                              2016        2015          2016 
                                           GBP'000     GBP'000       GBP'000 
 Bristol Street Pension 
  Scheme surplus                             2,673       3,771         4,424 
 SHG Pension Scheme (deficit)/surplus      (1,298)           -         1,673 
                                        ----------  ----------  ------------ 
 Net retirement benefit 
  asset                                      1,375       3,771         6,097 
                                        ==========  ==========  ============ 
 

The trustees of the Bristol Street Pension Scheme and the SHG Pension Scheme have agreed to merge the two schemes, and the merger is expected to be completed by the end of the financial year ending 28 February 2017. As a result of this, the schemes surplus and deficit shown above have been presented on the balance sheet based on the net position at 31 August 2016.

During the six month period ended 31 August 2016, there was a gain on assets of GBP7,642,000 in the Bristol Street Pension Scheme and GBP468,000 in the SHG Pension Scheme. There have also been changes in the financial assumptions underlying the calculation of the liabilities in the same period. In particular, the discount rate has decreased in line with a fall in corporate bond yields over the six month period. The effect of these changes in financial assumptions was an increase in liabilities of GBP9,629,000 in the Bristol Street Pension Scheme and GBP3,471,000 in the SHG Pension Scheme. In total, there was an actuarial loss of GBP4,990,000 recognised in the Consolidated Statement of Comprehensive Income in the period, GBP1,987,000 in respect of the Bristol Street Pension Scheme and GBP3,003,000 in respect of the SHG Pension Scheme, before deferred taxation.

10. Cash flow from movement in working capital

The following adjustments have been made to reconcile from the movement in working capital balance sheet headings to the amount presented in the cash flow from the movement in working capital. This is in order to more appropriately reflect the cash impact of the underlying transactions.

 
 For the six months 
  ended 31 August 2016 
                                                    Trade        Trade   Total working 
                                                      and    and other         capital 
                               Inventories          other     payables        movement 
                                              receivables 
                                   GBP'000        GBP'000      GBP'000         GBP'000 
 Trade and other payables                                    (598,264) 
 Deferred consideration                                        (5,331) 
 Deferred income                                               (7,122) 
                                                           ----------- 
 At 31 August 2016                 512,076         49,223    (610,717) 
 At 29 February 2016               530,406         63,416    (638,890) 
 Balance sheet movement             18,330         14,193     (28,173) 
 Acquisitions                       17,342          4,678     (22,403) 
 Disposals                               -              -      (3,500) 
                            --------------  -------------  ----------- 
 Movement excluding 
  business combinations             35,672         18,871     (54,076)             467 
                            ==============  =============  =========== 
 Pension related balances                                                        (156) 
 Decrease in capital 
  creditor                                                                       1,800 
 Increase in interest 
  accrual                                                                         (29) 
 Movement in working 
  capital                                                                        2,082 
                                                                        ============== 
 
 
 For the six months 
  ended 31 August 2015 
                                                    Trade        Trade   Total working 
                                                      and    and other         capital 
                               Inventories          other     payables        movement 
                                              receivables 
                                   GBP'000        GBP'000      GBP'000         GBP'000 
 Trade and other payables                                    (473,178) 
 Deferred consideration                                        (2,100) 
 Deferred income                                               (5,610) 
                                                           ----------- 
 At 31 August 2015                 395,519         51,005    (480,888) 
 At 28 February 2015               394,287         53,500    (466,865) 
 Balance sheet movement            (1,232)          2,495       14,023 
 Acquisitions                        1,080             99      (1,223) 
 Disposals                           (116)           (23)           88 
                            --------------  -------------  ----------- 
 Movement excluding 
  business combinations              (268)          2,571       12,888          15,191 
                            ==============  =============  =========== 
 Pension related balances                                                         (75) 
 Decrease in capital 
  creditor                                                                         828 
 Increase in fixed asset 
  disposal debtor                                                                1,057 
 Increase in interest 
  accrual                                                                          (7) 
 Movement in working 
  capital                                                                       16,994 
                                                                        ============== 
 
 
 For the year ended 
  29 February 2016 
                                                    Trade        Trade       Total 
                                                and other    and other     working 
                               Inventories    receivables     payables     capital 
                                                                          movement 
                                   GBP'000        GBP'000      GBP'000       GBP'000 
 Trade and other payables                                    (630,912) 
 Deferred consideration                                        (1,900) 
 Deferred income                                               (6,078) 
                                                           ----------- 
 At 29 February 2016               530,406         63,416    (638,890) 
 At 28 February 2015               394,287         53,500    (466,865) 
                            --------------  -------------  ----------- 
 Balance sheet movement          (136,119)        (9,916)      172,025 
 Acquisitions                       16,030          2,739     (11,433) 
 Disposals                           (164)           (15)           88 
 Deferred consideration 
  for acquisition                        -              -      (1,500) 
                            --------------  -------------  ----------- 
 Movement excluding 
  business combinations          (120,253)        (7,192)      159,180        31,735 
                            ==============  =============  =========== 
 Pension related balances                                                      (756) 
 Increase in capital 
  creditor                                                                     (447) 
 Increase in interest 
  accrual                                                                       (17) 
 Movement in working 
  capital                                                                     30,515 
                                                                        ============ 
 

11. Goodwill and other indefinite life assets

 
                                 31 August   31 August   29 February 
                                      2016        2015          2016 
                                   GBP'000     GBP'000       GBP'000 
 Goodwill                           74,488      47,675        55,995 
 Other indefinite life assets 
  - Franchise relationships         20,192      11,717        13,214 
 At end of period                   94,680      59,392        69,209 
                                ==========  ==========  ============ 
 

12. Risks and uncertainties

There are certain risk factors which could result in the actual results of the Group differing materially from expected results. These factors include: failure to deliver on the strategic goal of the Group to acquire and consolidate UK motor retail businesses, failure to meet competitive challenges to our business model or sector, inability to maintain current high quality relationships with manufacturer partners, economic conditions impacting trading, market driven fluctuations in used vehicle values, litigation and regulatory risk, failure to comply with health and safety policy, failure to attract, develop and retain talent, failure of Group information and telecommunication systems, malicious cyber-attack, availability of credit and vehicle financing, use of estimates, currency risk and the potential impact of the UK having voted to leave the EU. The Board believes that the main risks associated with the decision to leave the EU are significant changes in consumer behaviour and the impact of exchange rates on manufacturer volume strategies and vehicle pricing. All other principal risks are consistent with those detailed in the Annual Report for the year ended 29 February 2016.

The Board continually review the risk factors which could impact on the Group achieving its expected results and confirm that the above principal factors will remain relevant for the final six months of the financial year ending 28 February 2017.

13. Post balance sheet events

On 1 October 2016, the Group disposed of the Fiat Group dealership in Newcastle which comprised three sales outlets (Fiat, Jeep and Alfa Romeo). The disposal to Richard Hardie Limited is part of their creation of a Fiat Group market area in the North East. In addition, Fiat sales will cease at the Group's sales outlets in Cheltenham and Derby at the end of December 2016. This will leave the Group with a single Fiat and Alfa Romeo sales outlet in Worcester and no Jeep representation.

(1) adjusted for amortisation of intangible assets and share based payments charge

(2) source-SMMT

(3) adjusted for non-recurring and non-corporate items.

(4) adjusted to restate revenue to the same basis as that adopted in the Group's financial reporting.

(5) margin aftersales expressed on internal and external turnover

(6) Relates to businesses acquired or developed subsequent to 1 March 2015 with businesses migrating into core once they have been in the Group for over 12 months

(7) 2015 volumes include businesses acquired in the year ended 28 February 2015

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR UAARRNSARAUA

(END) Dow Jones Newswires

October 12, 2016 02:00 ET (06:00 GMT)

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