Vertu Motors Share Discussion Threads

[kenmitch] 08/12/2022 16:55

No need to waste money on buybacks microscope. Far better to invest spare cash wisely …as market reaction to the news today suggest that’s what they have just done! Far better imo than trying to boost the share price artificially.

[clive7878] 08/12/2022 16:18

Price appears steady - at least at present - of 54.644p,
after the earlier spike.
Looks like cash does make further cash, so we can expect
a revision of forecasts to come.
Less hope the froth does not coming off the share price tomorrow.
Long term the share price has to be very promising.

[microscope] 08/12/2022 15:54

It does seem nowadays that any company which shows a bit of boldness gets its share of, largely, undue, criticism. A sad reflection of the times.It'll be fascinating to see if they do now start the buyback. Obviously still well below TNAV. Even if it's only a matter of weeks, once the acquisition is complete Heston might well add a million to EPS for this financial year, so brokers may have to scramble to upgrade numbers.I've mentioned my suspicion of American interest as persistently overall the shareprice has tended to see volume and price increases in the afternoon, so it was noteworthy that the big spike happened at 2.30. If there is a potential bidder, of course, it might mean the buyback will have to wait.

[essentialinvestor] 08/12/2022 14:50

That's me out, luck to holders.

[microscope] 08/12/2022 13:06

The very fact that this thread is focusing on one of 28 dealerships shows that there is a different sort of value in the Ferrari branch, even if it doesn't deliver a meaningful profit. It'll probably be valued partly as goodwill in the accounts and rightly so. They'll presumably be able to use the logo throughout their branch network as well.10p (minimum) EPS predicted for the first full 12 months from Heston, plus say 7p for the existing VTU business, would be 17p. With the current shareprice of around 50p, it's easy to see the value. Hopefully the mainstream media will pick up on this in the next few days and we should start the higher rerating.

[tomtrudgian] 08/12/2022 10:56

Ferrari dealerships make excellent profits, but Ferrari Exeter did not do well under Helston garages. Is there affordable further finance to pay for the whole of the Helston reorganisation and capital expenditure stated as being required?
The jury is out until the audited results are known. Vertu has great management and superb systems, but my worry is that Vertu considered this large complicated Helston Purchase just too rare an opportunity to give up.

[mortimer7] 08/12/2022 10:02

Are potential Ferrari buyers affected by a recession? May be BMW, Peugeot.

[tomtrudgian] 08/12/2022 09:38

It is an easy trap, having unnecessarily said that the Helston negotiations were ‘advanced̵7;, and having spent endless time and money on advisors, banks, lawyers, Gov FCA approval etc, to focus only on completing the best shareholder deal available. Was it possible for Vertu management to walk away from this deal once the financing costs were realised?
Bankers rarely rate dealership freeholds highly as loan security because dealership numbers are falling, and alternative building use is limited. Barclays, Vertu’s existing bankers, would not lend the whole amount, so Vertu are paying to a new banking consortium an AVERAGE of 8.5%! Hardly a ‘mortgage̵7;rate, and it expires in 2025. Full loan details are not yet available at Companies House today.
Two brand new dealerships acquired, but can Vertu really make money from FIVE Volvo dealerships all only in the South West? The other new dealership is Ferrari Exeter. Is that logical in a recession? A look on their website today shows not one used or new Ferrari in stock.

[davebowler] 08/12/2022 09:02

Zeus-

Vertu has announced the acquisition of Helston, subject to completion, which we anticipate will enhance our FY24 and FY25 EPS forecasts by 18.7% and 24.7%, respectively. This transaction is debt-financed via securing new funding and extending long term facilities, with FY23 net debt to pro-forma adjusted EBITDA below 1.4x (incl. stocking loans). We expect net debt/EBITDA will revert back towards 1.0x by the end of FY25. Zeus forecasts and valuation estimates will be updated post-completion – we believe the acquisition of Helston will enhance Group value.

¨ Acquisition overview: Vertu has confirmed the share purchase of Helston Garages Group “Helston”;, subject to completion, following its announcement of a potential transaction on 9 November. Vertu is acquiring 28 of the 38 outlets operated by Helston across 8 brands, 21 locations, with 770 employees and freehold assets with a value of £66.7m (valued this year). The remaining outlets and assets were acquired by Yeomans Limited pre-completion.

¨ Key strategic rationale: Helston has been known to us for some time as a well-respected business with strong presence in the South West of England. In the year to 31 December 2021, the acquired businesses delivered revenues of £489m and adjusted PBT of £17.9m, selling 13,300 vehicles and 225,000 labour hours. Vertu will operate 188 franchised outlets post-completion. This will also strengthen relationships with key premium brands such as BMW, Mini and Jaguar Land Rover, and add new relationships with Volvo and Ferrari.

¨ Financials: Total consideration of £117m (net of cash and cash equivalents) includes the significant £66.7m freehold property portfolio and a maximum of £28.6m of goodwill. The transaction will be funded out of existing cash, new mortgage facilities and a refinanced RCF. Synergies of £3.2m per annum are expected in FY25. Vertu has paid 6.8x EBITDA based on an acquisition EV of £120m (net assets, plus goodwill, less acquired cash, including additional capex, proceeds from sale of surplus properties and working capital improvements) against the average adjusted EBITDA of £17.7m delivered by the businesses acquired between 2019 and 2022.

¨ Forecasts: We intend to update our formal forecasts following the completion of the deal. Forecasts for Vertu’s underlying business will be unchanged. With Helston only being part of the Group for c. three months in FY23, the impact on our P&L forecasts will be minimal in that year (+2.7% revenue, +1.6% PBT). For FY24 and FY25, revenue forecasts will increase 12.1% to £4.4bn and 12.2% to £4.6bn, respectively, driven by higher unit sales, higher average selling prices, and aftersales revenues. FY24 underlying PBT will increase 18.7% to £43.3m, whilst FY25 increases 24.7% as the full impact of synergies are realised. We estimate this transaction will be 18.7% enhancing to our FY24 EPS forecast, rising to 24.7% in FY25. The estimated acquisition ROCE (incremental EBIT / consideration) of 11.9% in FY24 and 14.9% in FY25 is in excess of the Group WACC of 8.5%. We also expect this deal to be FCFF accretive (CFO, less net capex, less lease payments, plus after-tax interest costs) from FY24. Post-completion, we will forecast net debt of c. £105m in FY23 (including stocking loans), falling to c. £90m by FY25 (c. 1.0x EBITDA).

¨ Valuation: Based on current forecasts, Vertu trades on only 5.7x FY23 P/E. The forecast EPS accretion in FY24 and FY25, post-completion, will reduce Vertu’s P/E multiples in these years (all else being equal FY24 P/E of 5.5x falling to 4.7x). We think this is materially undervalued. Our 104.7p valuation estimate from our 5 October note will be updated post completion, but we anticipate the Helston acquisition will drive further creation of shareholder value.

[microscope] 08/12/2022 08:56

Most impressive of all, not a single new share in sight. So every penny of profit for the first full year will add to EPS. How often do you see that nowadays in the market, just shows the strength of VTU's balance sheet, something the vast majority of posters here have understood for a long time.A double digit EPS to Feb 24 for Heston would put this company on a pe of about 3 at the current shareprice, adding in the existing businesses of course.The new financing is estimated at 1.4x, falling to 1 the year after, incredibly low, improved as it is by Heston's own substantial property portfolio.The price paid looks like it will make VTU one of the biggest players in the UK stock market in this sector.And even more attractive to potential suitors of course.... Well done to our management.

[wad collector] 08/12/2022 08:30

Well the market seems to like the price. £120 Million it points out is a ratio of 6.8x earnings.
But that was for 2021 , which earned Helston £24M compared with the prepandemic £10.9M and £9.7 M of 2019 and 2018.
Nevertheless, the statement points out they expect double digit earnings growth from the acquisition. And lots of buildings and lots of cars...

[microscope] 07/12/2022 17:36

Marking time here ahead of acquisition, hopefully.Thing that caught my eye about Yeoman was that they basically said 'at the price how could we not!'Thinking if VTU can send similar message, rerating could take a few by surprise. And be both swift and impressive.

[clive7878] 05/12/2022 20:15

Good one !

[microscope] 05/12/2022 17:02

Thanks Mortimer. And here was me fretting about how house price falls during The Wars of the Roses might impact the figure ;)

[mortimer7] 05/12/2022 09:53

Today SMMT released figures for the total of UK new car registrations for the month of November. 142,889 being a 23.5% uplift on November 2021 total of 115,706.

[clive7878] 01/12/2022 19:03

Good news - Things are progressing.

[microscope] 01/12/2022 13:25

Thanks buffalo. Hopefully live now

[clive7878] 30/11/2022 21:55

Arnold Clarke is also one of the highest priced dealers of cars on Autotrader when one reads low price to high price when I was looking for my last car. Sometimes £2,500 above other dealers, on a £21k car, while others had prices under £21k for the same car, year and model. If VTU cant get in on Heston maybe they will be looking for a better deal elsewhere - not to over pay.Glad to hear that they wont expand at any cost.

[alter ego] 30/11/2022 16:33

buffalobillNuts, well spotted and thanks for posting

your link is unclickable as ADVFN corrupt it after you post. To avoid this insert TT in place of the tt at the start of the link.

[buffalobillnuts] 30/11/2022 15:58

I was talking about Arnold Clarke looking at tsking out the competition with other purchases. Their pockets are bulging and are currently the number one dealer group in the UK.

[grahamburn] 30/11/2022 15:19

Knowing Forrester's style, if Arnold couldn't agree a deal with Cars2, then it's unlikely Forrester would.

However, turning your hypothesis round, maybe Forrester will now have more competition in doing a deal for some (or all) of the rest of Helstons.