Vertu Motors Share Discussion Threads

[woodwards26] 09/4/2018 17:44

A bit more in my fave subject !Think of car dealerships like a slot machineFirst a car is registered that creates the volume reported .These registered cars go about half to retail and half to fleets.within fleet will be rental and cars returned at around and under a year.The whole of these become used cars so forming a huge used car market. After being registered and with the end user the aftersales department get a spend of conservatively around £ 500 plus over the next 3 yrsThe rental/ short term use cars return to manufactures and then into dealer stocks creating nearly new stock for dealers to offer big savings against new. And of course they replace the fleet with more new so another coin in the slot machine and more service work for aftersales for 2 to 3 yrs.After 2 to 3 yrs the new retail customers change their cars usually for another new one . So another coin in the top of the machine and a great used car for the used car dept.The used car dept is the place all cars end up in at the end of the process and could easily pass through it at 1 yr, 3yr , 5yr old and possibly 7 yr old though most dealers have a policy to auction/ trade these.So to me any dealer selling under 3 to 1 used to new just isn't selling enough used. Of course manufactures want this at 2 to 1 or less

[woodwards26] 09/4/2018 16:37

On financing yes most retail cars are bought on a finance agreement usually a personal contract purchase (pcp)In these agreements the customer has the option at the end of the agreement 1 to return the car, 2 pay the guaranteed future value ( gfv) and keep the car. 3 enter into a new agreement using the difference between part exchange value and gfv to pay a deposit on a new contract.The manufacturer or its finance company take the risk that the market value of the car will be above the gfv.At present hardly anyone hands the car back because the gfv is set fairly low so it would need a big drop in used values for this to happen. Most of the press reports on this bubble don't know how a pcp works so the scaremongering.To my mind the biggest criteria to measure any company by is the management everything else can be overcome . Do read John Timpson I'm sure it will fascinate you

[woodwards26] 09/4/2018 16:14

My whole point is it's pretty easy to increase volumes in any used car market. The majority of dealers are so poor that just reaching a good standard of customer service with better stocks will easily increase profits by huge amounts.Vertu have just become another dealer which was not their aim when first formed.In any other retail business being good would probably see you go bust .

[lullabite] 07/4/2018 14:32

But they also depende on the market aswell , if. The new car sales or uses car volume is going down is gonna be pretty hard for them to grow My biggest concern is the crédito bubble in car fianancing , and a big drop in used Cars residual values

[woodwards26] 07/4/2018 08:52

Hi LAs you may have noticed I believe to get a great result in the car business it's a must to have a superbly run used car department. This department is entirely within your own hands even in a market downturn .Vertu I had thought for many years was really good at this but in the last couple of years something has changed. Used displays and marketing not as good as previously .And then in the last year used volumes going down its as if they have lost the recipe to used car success.I no longer hold any shares but at one time motor trade shares were my whole portfolio because it's the only business I understand . I was once thought a fool for having all my savings and a bit more in Ryland during 99 and 2000. When I retired in 2010 I bought as many Lookers and Vertu as I could afford as they impressed me . I occasionally help struggling dealers with my first bit of advice being read Dear James by John Timpson and a few visits later I will get management to visit a couple of great retailers and then ask them if this retailer was running a used car dept how do you think they would set it out ? If you are in the North I use a garden centre Bents as my example and a coffee shop The Hollies . Vertu just haven't got a picture in their head any more it's a shame that the only thing they can think to do is buy back shares rather than aim to be the place everyone goes to for a used car.I waffle sorry

[lullabite] 06/4/2018 23:00

What do you mean with Lost their way?

[woodwards26] 06/4/2018 06:41

But last year was a surge due to taxation . But the new car market is not what it's all aboutA typical dealer turning over 15 million is likely to make 100 to 150k an exceptional one around 300 k due mainly to better used car management.That typical dealer will make100k on new200k on used175 k on service50 k on partsSo 525kThen have overheads not expensed within the dept of 375k to 425kSo 100k to 150k dealer profit.The exceptional dealer will be over 300k in used by having another 30 to 50 used in stock ensuring the display is as good as a major retailer like say next would have it . A great sales manager that is paid on profit who focuses on customers as well as stock turn and profit per unit.This will add over 100k to used and around 50k to service and parts from both internal and external sales.Going forward it will add to the customer base to help through any downturn in the market.New car sales are mostly driven by the market and manufactures offers and status with less input from the dealer.New cars have to be maximised with highest possible PCP sales and CSI scores but that's about all the dealer can do . The manufacturer and economic climate is in control.But to make real profit long term higher used stocks and customer focused management makes it a lot easier . Hence my view that they have lost their way in the last couple of years .

[r ball] 05/4/2018 08:43

But the main take away is the 1st fall in 6 years.

[mortimer7] 05/4/2018 08:10

SMMT issued their figures for new car registrations for the month of March this morning. Total regns were 474,069 compared to 562,337 in March last year.
SMMT CEO commented:
"March’s decline is not unexpected given the huge surge in registrations in the same month last year. Despite this, the market itself is relatively high with the underlying factors in terms of consumer choice, finance availability and cost of ownership all highly competitive"

[r ball] 05/4/2018 08:04

Value destruction. I've always favoured a special dividend rather than buy backs which pander to managements vanity and their eps linked bonus.

[my retirement fund] 05/4/2018 07:33

The share price is totaly artificial. Without share buy backs it would probably be 20 pence.One would have thought they would have been hanging onto spare cash for a rainy day or prehaps they think they can raise more of it later?

[r ball] 05/4/2018 07:29

New car sales down for 1st time in 6 years by 5.7%. I suspect that the average age of cars on our roads might increase from 7.7. It's 9.3 in Germany, 11.4 in Spain and 9.0 in France. A rebalance would in effect be over a year of lost sales. Expect further market decline.

[r ball] 28/3/2018 19:35

Really quite desperate here. I reckon that vertu is one of the better run dealers but the market is weak:-Used car values underlining pcp under pressureGovt anti diesel, anti petrol, anti car?Average car ages 2-3 years better than European averageGreater reliability and less technological change means less Reason to change.Avoid. Value trap.

[woodwards26] 27/3/2018 19:12

The more I think about this the more I think this buyback of shares is crazy. The money should be invested within the company .But then again what would the share price be if it wasn't being supported by buy backs.I've followed for years since retiring from the motortrade in 2010 everything tells me this is more likely to hit high 20s rather than low 50s unless they expand their used car operation before the buybacks end.

[woodwards26] 17/3/2018 21:32

Personally I think they have massively under performed on used cars during the last 12 months .I noticed around 12 months ago they were not showing up in Auto Trader searches for used cars . So the traffic will have dropped off a lot.Autotrader is expensive but it does deliver customers if cars are listed correctly with photos , videos and a great description. Same as Right move for houses.I think someone thought we can do better and the result was a drop in used volume . In the last month I see they are using autotrader again but not as professionally as many others .

[effortless cool] 16/3/2018 19:33

Many thanks. I didn't expect it to top the used charts.

[mortimer7] 16/3/2018 19:30

E C, I've edited the post above to include Cambria as requested.

[effortless cool] 16/3/2018 12:30

M7,

Can I be cheeky and ask you to add CAMB to your analysis above?

[mortimer7] 16/3/2018 11:08

Comparing Revenue & GP data from Vertu most recent results to those issued over the last few days by Lookers & Marshalls it's easy to see Vertu matching them in terms of used cars. However Vertu have a higher proportion of Revenue/GP from New vehicles & lower from Aftersales.

Revenue mix %:......... VTU LOOK MMH CAMB
New .................. 54.2 52.7 51.2 47.9
Used ................. 37.8 36.3 38.2 43.0
Aftersales............. 8.0 11.0 10.6 9.1

With the new market dropping off, there'll be less cash requirement for stock.
VTU are performing at the required level for used cars - no point over stocking in a competitive market.
Aftersales will improve with the vehicle parc for the last 3 years record new sales & obviously is an area which has the lowest cash requirement. Therefore the "spare" cash is being allocated to buy back shares.

(The data above is for 2017 year for LOOK & MMH, 6 months to Aug 2017 for VTU & year to Aug 2017 for CAMB).

[lullabite] 16/3/2018 10:44

Imo they are buying Back stock when prices are really low their stock is so cheap And they have shown that they know how to manage capital , im holding

[alter ego] 16/3/2018 10:35

Buying more stock when demand is falling doesn't sound like a good use of spare capital to me.

[woodwards26] 16/3/2018 09:58

It demonstrates to me that they aren't concentrating on their business - car dealing .If a car dealer can't get a better return on its cash by simply dealing in cars then something has gone wrong with its core business.If I was still invested I'd be out

[mortimer7] 12/3/2018 10:02

Last friday saw the 2nd anniversary of Vertu's placing of 56 million shares at 62.5p.

Over recent months their own share buyback program has seen them acquire around 14 million shares, recently paying as low as 42 / 43p.

Not sure what this demonstrates, apart from they ain't daft!

[mortimer7] 05/3/2018 09:08

The UK new car market dipped in February, according to figures released today by the (SMMT). 80,805 new cars were registered, a 2.8% drop compared with February 2017 (83,115), in what is traditionally one of the quietest months of the year ahead of the March number plate change.
That said, it was still the 3rd highest February figure in the last 10 years behind 2016 & 2017.

[woodwards26] 20/2/2018 17:00

Why they continue to buyback shares is beyond me surely put the money into used car stock. Even at say 10 k per car and a miserable 6 stock turn and a low gross per unit of say 600 every 10k would produce 3600 and even more importantly 6 extra after sales customer that would likely spend another 3000 over the next 3 yrs . Oh and then likely come back and buy another car sometime between 2 and 4 yrs.I have not been invested for a few years but I still follow . I used to think well of their used car abilities but doubt them now.In my opinion the used car side running well is the foundation of a great return on capital employed.