Vertu Motors Share Discussion Threads

[davebowler] 07/12/2023 09:01

Zeus

Market dynamics drive downgrade

An ongoing correction in used car prices has driven lower gross profit per unit for Vertu in recent months and this is expected to continue in the near term. There has been particular weakness in premium vehicle values. Additionally, higher stocking charges on increased new vehicle supply, has led to lower overall profitability. As a result, we have reduced forecast FY24 adjusted PBT by £8.0m (17%) to £39.3m and FY25 by £3.2m (6.2%) to £48.6m. This downgrade to expectations is indicative of market conditions (increased supply concurrent with weaker macroeconomic conditions) but its impact has been lessened by improved sales volumes and good operational performance from Vertu, including robust aftersales trading. As today’s downgrade is expected to be offset by lower net working capital due to active inventory management, our net debt estimates have not changed materially. We believe Vertu is well placed to navigate short-term challenging market conditions and should be able to continue its track record of through-the-cycle earnings growth and returns to shareholders.

¨ Improved supply weakens used car values: As vehicle supply improves and higher interest rates impact demand, the market has seen a correction in used car values. Cap HPI’s latest valuation report showed a second consecutive month of 4.2% decline in average trade values of 3-year-old, 60k mile cars. These were the largest October and November drops on record. Average trade values have now dropped 8.4% (equivalent to £1,625) in the last two months as price realignment continues. The largest drops have been in the Premium segment, with residuals down up to 7-11% per month. This impacted Vertu’s used car gross profit per unit, despite its pricing algorithm limiting some of the negative impact. Like-for-like used vehicle volumes fell 2% in the three months to 30 November 2023, an improvement on the 5.7% reduction in H1 2024. Nevertheless, gross profit generation was below expectations.

¨ New vehicle margins continue to normalise: The SMMT’s latest data on new car registrations showed a 9.5% increase in November and +18.6% year to date as vehicle supply recovers. However, as in other recent months, Fleet sales are the primary driver of growth, which are typically lower margin. Private/Retail registrations were down 5.9% in November and up only 1.0% YTD (vs. +39.1% for Fleet). Increases in vehicle disposals from fleet operators have also contributed to the fall in used cars prices discussed above. Increased new vehicle availability and higher interest rates have led to higher stocking charges which has contributed to the lower level of overall profitability.

¨ Forecasts: To reflect lower average vehicle prices and gross profit per unit, we have reduced FY24 revenue by 0.9% and underlying PBT by 16.8% to £39.3m. A greater forecast reduction in inventory levels in H2 2024 means that our year end net debt forecast (ex. leases, incl. stocking loans) is broadly unchanged at £87.2m (previously £87.0m). For FY25, we lower revenue by 0.9% and underlying PBT by £3.2m (6.2%) to £48.6m, partly due to a higher than expected increase in the National Living Wage announced in the Autumn Statement, effective from April. FY26 estimates are broadly unchanged. Changes to Zeus forecasts are summarised on page 2.

¨ Investment view: In our view, today’s downgrade has been driven by market conditions in vehicle supply. We believe the impact of the correction will be relatively short-term as falling prices should increase affordability and stimulate demand. Vertu continues to be well positioned to consolidate the UK motor retail market and has a strong track record of earnings growth shareholder distributions through the cycle. Using updated Zeus forecasts, Vertu trades on a P/E of 10.4x FY24 and yields 2.4%. We still believe this is undervalued, particularly given Vertu’s strong asset backing (tangible net assets per share FY24E: 71.5p, FY25E: 80.0p).

[wad collector] 07/12/2023 08:55

You make that posting on any big news on any company , good or bad, don't pretend you hold every share! Prime grade ramper.

Vertu caught most of us out with this news , though in one sense it wasn't news, those reflections on the drop in used car prices were there to be found if anyone knew how to find them.
The strong business model remains though, can't see why the share price won't eventually recover.

[blackhorse23] 07/12/2023 08:10

Out now & money moved to PFC

[currencytrader1] 07/12/2023 07:57

It was 33p pre pandemic, guess that's sort of it's value now...

[sunshine today] 07/12/2023 07:50

Those buying dealerships have been caught on the hop, (they like investors here,) noted how well the market held up over the last two plus years, and thought it was game on.

All corporate action will grind to holt, as it becomes clear CHEAP , was at the end of the day, very expensive.

[sunshine today] 07/12/2023 07:41

“reports that the largest drops of 7% -11% per month arose in the premium brand segment.“


22% off in 9 weeks will have destroyed profit and left way over valued stock on the forecourt.

Car dealers will go bust and in quick order because they cant adjust anywhere near fast enough.

[c_k] 07/12/2023 07:35

This will get interesting. Share price will be dropping but how much will the drop be supported by the recent companies who have been buying shares and may take this as a buying opportunity at a lower sp? I had a fear VTU would issue a profits warning due to recent sector news but was re-assured somewhat by the stake building that has been going on.

[sunshine today] 07/12/2023 07:27

sunshine Today - 20 Oct 2022 - 05:59:27 - 2350 of 2846

(AIM:VTU) - VTU

When your stock falls rapidly and your buyers dry up, your in trouble .!

///////////////////////////////////////////////////////////////////////////


Today, a year on , the company has had to come clean, with a shocking ( to some ) profit warning.


Now for stage Two , the real killer.

1/ Electric cars are the kiss of death both new and second hand. ( 20% of the car market )

2/ Huge numbers of hand backs from PCP owners, swamping the market

3/ Glut of new cars hitting the market as covid effects wear off.

4/ The uk consumer is crushed and does not want to borrow.


5/ Competition will force prices down as dealers switch to survival mode.

[eeza] 07/12/2023 07:11

Back to 70p.

[purplepelmets] 07/12/2023 07:07

Profit warning. Too bad. Party is well and truly over here, oh well was fun while it lasted

[mortimer7] 06/12/2023 16:15

Number of new registrations in the UK for the month of November was 156,525.
An increase of 9.5% on last years figure of 142,889 & within a whisker of the pre covid November 2019 total.
However, the uplift is entirely down to increased Fleet market registrations, suggesting an ongoing catch up with the order backlog.

[extrader] 04/12/2023 11:44

Doh!
Of course...
;->

[daneswooddynamo] 04/12/2023 11:43

Yes they were the other side of the trade

[extrader] 04/12/2023 11:42

Actually, it looks as though they've sold down.

11. Additional Information

On the 30th November 2023, Close Brothers Asset Management sold 3,447,269 shares in VERTU MOTORS PLC ORD 10P. This brought our shareholding to 3.98% of the shares in issue. This is based on the shares in issue figure of 340,752,756 as at 30th November 2023.

This is the required notification that the holding has crossed 5% of the shares in issue.

AFAICS

[riverman77] 04/12/2023 11:37

And now Close building a position - seems everyone wants a bit of VTU right now.

[woodwards26] 01/12/2023 23:52

A true motor trader from a similar mould as Tony Bramhall

[buffalobillnuts] 01/12/2023 09:56

Gavin Hydes became CEO and since then the Joe Duffy Group has grown the Group from one to 23 dealerships. The Group is now one of Ireland's largest and most successful Retail Motor Groups. Either looking for a quick profit or something else?

[buffalobillnuts] 01/12/2023 09:42

I've done a quick search, they have something to do with selling motorcycles..... and motor trade related. Irish company.

[jaf111] 01/12/2023 09:37

Who are Nivag???

[buffalobillnuts] 01/12/2023 09:32

Nivag Holdings Limited bought those shares yesterday then. Wow, its hotting up.

[buffalobillnuts] 30/11/2023 15:43

Good Spot
So 2 x £3 Million trades then.
We'll find out tomorrow. Probably TDR Capital.

[grahamburn] 30/11/2023 15:28

Don't get too excited......122 and 135 trades were probably a roll over as identical trade size and minimal difference in price

[buffalobillnuts] 30/11/2023 14:59

3x £3Million trades!!!

[cb7] 30/11/2023 07:28

Cinch has been in a poor financial state, being propped up by owners. Better chance of turning a profit by owning shares than selling cars!