Vertu Motors Share Discussion Threads

[cockerhoop] 05/10/2017 11:05

MRF,

You stated they had poor cash flow, they haven't.
You're asking about banking facilities when they've net cash.
You're suggesting they book revenue from service plans up front - they don't.

Accounts for Dummies sounds a great gift for you :-)

[eggbaconandbubble] 05/10/2017 10:59

Just wait till all those East European builders in the home counties feel the need to flash their apparent wealth and success by getting a flash car on the never never.

It's only a matter of time before they catch the English habit!

[my retirement fund] 05/10/2017 10:55

That's pretty simple though for a franchised dealer, after paying the manufacturers inventory flooring it's up to the dealer to manage short term cash flow from sales. Do you know much about the franchise motor trade then?

[cockerhoop] 05/10/2017 09:49

Operational cash flow has been running ahead of profits for the last 4 years.

MRF, you really need to pop a book on understanding accounts on your Christmas list!

[my retirement fund] 05/10/2017 09:38

I almost put a short on but decided i dont have spare risk capital gonna probably be kicking myself.Anyone know when their banking facilities need renewing?

[mortimer7] 05/10/2017 09:07

They won't have forward booked profit. As far as I'm aware the revenue from the increasing number of customers who take out service plans for their vehicles is booked as the vehicles are serviced.

Agree that cash flow could be improved, but very difficult in the motor sector with high cash values required for working capital & low profit margins, plus the seasonal spikes in cash requirements.

Should be interesting to read their interims reported next week.

[my retirement fund] 05/10/2017 08:42

Indeed but aint VTU forward booked all that profit?Is this not the reason they are showing excellent earnings but poor cash flow?I ×as thinking future bookings.

[mortimer7] 05/10/2017 08:39

Exactly the point - aftersales is linked to new car sales and also on a time delayed basis. Those vehicles registered in 2015 or 2016 when the new car market was achieving all time highs are all due for servicing.

[my retirement fund] 05/10/2017 08:30

Except aftersales is proportionally linked to new sales!You've gotta get your dealer book stamped for the 3 or 5 or 7 year warranty.Also when you order a new car people often get accessories.Second hand cars can be serviced anywhere.

[mortimer7] 05/10/2017 08:26

No doubt the headline writers will be focusing on the new car sales fall. But the reality for Vertu is they are far more reliant on profit from Used vehicles & Aftersales.

Gross Profit, margin mix by percentage for Year ended 28 February 2017:
32.1% Used Vehicles
39.4% Aftersales
28.5% New Vehicles

Interims due out 11th October.

[mortimer7] 05/10/2017 08:06

The UK new car market declined in September, with 426,170 new units registered, according to figures released today by the SMMT. Registrations fell by 9.3% vs September 2016.

Looks like the Motor retailers will be reliant on the Aftersales & Used car revenue for the forthcoming months.

[gargleblaster] 07/9/2017 20:08

Valuation exceptionally low, the are buying back their shares, now possibly some confidence returning - let's hope for a decent "melt-up"!

[eggbaconandbubble] 07/9/2017 17:49

Well, let's hope you are right!

[rimmy2000] 07/9/2017 15:15

looking to rise.

[mortimer7] 05/9/2017 08:14

Figures are out from SMMT this morning for new car registrations in August.
Total 76,433, which is a decrease of 6.4% compared to August 2016.
SMMT commented:-
"August is typically a quiet month for the new car market as consumers and businesses delay purchases until the arrival of the new number plate in September. With the new 67-plate now available and a range of new models in showrooms, we anticipate the continuation of what are historically high levels of demand".

[eggbaconandbubble] 01/9/2017 13:26

Liberum keep putting a TP on these of £0.90. Can anyone post their brokers note or BB posting number if already do so.
Ta!

[tonybaloni] 01/9/2017 08:22

If Brexit hadn't raised its head these would be over a £1 now

[mortimer7] 01/9/2017 08:19

The Group's Chief Executive Officer, Robert Forrester, commented as follows:

"Our trading continues as expected. The sale and leaseback transaction realises a significant gain on a flagship dealership property and releases additional funds for investment in growth opportunities. We continue to ensure efficient allocation of capital through the share buy-back programme and strategic management of our property portfolio, which was stated at GBP182m in the Group balance sheet at 28 February 2017, realising value where it is appropriate to do so".

[my retirement fund] 01/9/2017 07:59

Selling the family silver now must be desperate

[mortimer7] 01/9/2017 07:57

Pre-close trade update out this morning.
Taken a £4 million book property profit on a sale & leaseback of their Leeds dealership. For this 6 month trading period last year that would represent around 20% of the PBT, so this is a significant piece of business.

[danieldruff2] 22/8/2017 14:17

Looks like the buyback is supporting the 42-43p level

[gargleblaster] 22/8/2017 12:00

Also - no consideration taken for Vertu's balance sheet strength/net cash position, and the fact that it is trading at a considerable discount to NAV.

[karadas09] 22/8/2017 11:35

Grahamburn - I agree with you. In my opinion the real assets for car dealers are repeat customers. The after sales business is the highest margin, far higher than new car sales margins. It is a logical conclusion that less new car sales = higher after sales business as long as Vertu have loyal customers.

[grahamburn] 18/8/2017 19:54

Just a couple of minor queries on your projections.

First, your projections revolve solely around new car sales and do not make any projections on volumes in the second hand market. OK, volumes there could also dive or they could hold up better as consumers downgrade their expectations. There isn't any concrete evidence on this one way or the other at the moment.

Second, you also seem to have ignored totally the after sales income which is generated by Vertu through their service packages and ordinary maintenance demand. This aspect of their business has been growing strongly over the past couple of year and is, IMO, likely to be even more pronounced should there be a downturn in sales in both new and used cars.

[walbrock82] 18/8/2017 11:06

Car dealership market
To understand the car dealership market, you need to know what driving the sector. The last recession caused oversupply on the manufacturing side, so car subsidy schemes have helped stimulate demand.
The biggest change to car financing is the PCP financing model, where owners no longer own cars but lease it for two to three years. They pay for the depreciation of the car rather than the full price. Afterwards, the owners could pay the remaining balance or sign another PCP financing for another car.
This is called the PCP finance model.

The problem is the shift from oversupply in manufacturing to over supplying the retail side. As long as demand keeps rising there are buyers to be found.
Now, SMMT is forecasting the UK new car sales to fall for the first time in four years by 5% in 2017. In 2018, this will decline by 3%. Within two years, the demand for cars would have fallen by 10% in total.

Forecast
That will hit car dealers like Vertu and Lookers because they rely on volume and price. So, my analysis for Vertu Motors is it will trade around 35 pence in the next 12 months.
For the breakdown of calculation and detail analysis on my share price prediction, click here: