Vertu Motors Share Discussion Threads

[davebowler] 09/5/2019 13:36

Zeus;
Compelling foundations
Vertu has delivered a respectable set of FY2019A results, which are 7.3% ahead of our forecasts at the adjusted PBT level. We tweak our headline forecasts at this juncture, to reflect higher levels of revenue, with growth in gross profits despite margin pressure coming through in new and used and continued cost pressure across the business, albeit we expect these are beginning to stabilise. We also note the significant cash beat in 2019A and our net debt forecasts for 2020E and 2021E are lower as a result, with a cash pile building in 2021E. We believe the asset backing in this Group remains compelling (NAV per share 44.9p) and it remains well positioned to deliver strong levels of shareholder value across a number of different fronts.

§ Final results: Vertu has delivered a robust set of results in an uncertain market, which were behind last year but ahead of our forecasts. New vehicle sales and fleet & commercial vehicle sales both saw declines in profitability as volumes fell, which is consistent with the wider market. Both used and aftersales saw growth in profitability YoY, offset by increased operating expenses as cost pressures persisted through the period. Revenues were up 6.7% YoY and 5.1% on a LFL basis. Revenue growth was driven largely by used cars and aftersales growing both departments contribution to the revenue mix and supporting gross margins. Gross profits increased by 2.7% YOY on a LFL basis with margins at 10.8% vs 11.0% last year. Adjusted EBIT was 10.4% ahead of our forecast and down 10.0% YoY as a result of increased operating expenses as cost pressures persisted, albeit operating expenses as a percentage of revenue remained constant YoY at 9.9%. Despite higher interest costs vs. our forecasts, adjusted PBT came in at £23.7m due to the strong cost control, vs. our forecast of £22.1m. Full year dividends are proposed at 1.6p per share, an increase on the prior year compared to our forecast that they would be held at 1.5p.

§ Forecasts: We update our forecasts to reflect higher levels of revenue, with gross margins static and continued cost pressure assumed across the business and higher financing costs assumed. We now expect adj. PBT of £25.7m in 2020E (vs £26.3m previously) going to £27.6m in 2021E (vs 28.0m previously). We also introduce our 2022E forecasts for the first time, assuming a c.£1.0m uplift from 2021E levels implying adj. PBT of £28.5m, with marginal increases in EPS as a result of factoring in the share buyback to date. Based on our revised earnings assumptions net debt for 2020E is £4.0m going to £4.1m of net cash in 2021E.

§ Investment view: We believe the long-term valuation remains compelling, Vertu is trading on a 2020E P/E of 6.4x falling to 6.0x in 2021E and an EV/EBITDA of 3.5x falling to 3.1x with a dividend yield of c.5%, backed up by our average implied intrinsic value per share of 77.4p. The group trades at a discount to peers on an adjusted basis, excluding used car stocking loans from net debt. Management remain committed to driving shareholder value and we note it has acquired £1.0m of the £2.0m allotted share capital investment to date, with £3m now set aside in the updated programme.

[hsduk101] 09/5/2019 10:25

Yep agree, the 0 debt is very good business along with the decent cash flow. So i reckon (not an expert) there will be a small short term gain. But investors will still realistically look at the uk industry picture which will be affected by brexit fall out. Some will sell and others will hesitate from buying. Thats why im hesitant myself here

[zoolook] 09/5/2019 07:20

No one is doubting that there are negatives it is whether that general sentiment has provided a golden opportunity for investors by driving the share price to an illogically low level given the virtues of Vertu - no debt, 44.9p NTAV, end of CapEx programme, increased cash generation, history of good management, good spread of business, alert to changes of customer behaviour, investment in digital as part of a holistic approach to the customer journey yada yada

[hsduk101] 08/5/2019 22:11

The financials are strong. They have a very good strategy in place and in the automobile market which is always tough, theve done very well. However the market uncertainty and brexit will play a part in its future. Thats a major negative here

[f15jcm] 08/5/2019 11:41

The recent property disposals have been done at book value or greater. The value is real!

[this_is_me] 08/5/2019 11:12

The freehold will never be written down to zero. A large dealership freehold property is always going to have significant redevelopment value. In some cases this might even be greater than book value.

[shanklin] 08/5/2019 09:43

The interesting question is whether the tangible assets on the B/S can sensibly be valued at anything close to what is on the B/S or whether big write downs will be required at some point. Its all very well building impressive dealerships but if there are going to be fewer dealers going forward, some of these buildings, not necessarily VTU's, will need to be written down to zero.

[zoolook] 08/5/2019 09:34

hxxps://www.vertumotors.com/pdf/news/6390fbhfcccr/09032016-results-of-placing.pdf

Raising £35million 3 years ago at 62.5p looks like perfect timing now. Fully supportive of share buybacks at the current price!

[zoolook] 08/5/2019 09:05

“Over the last three years, we have invested over £85.0m in our capex programme across our dealership estate. This programme is now coming to an end and we would expect to generate increased levels of cash which, through our disciplined capital allocation framework, we will invest in operations, acquisitions and dividends as well as share buybacks, where appropriate."


Reading between the lines this suggests a prudent period of consolidation now and a focus on mainly organic growth complemented by smaller acquisitions and decreased likelihood of dilutive institutional fund raising for bigger acquisitions which is fine with me as it lowers risk

[mortimer7] 08/5/2019 08:49

Todays results just reinforces how undervalued this is at the moment.

[zoolook] 08/5/2019 07:16

Profit and cash flow ahead of expectations. Asset value 44.9p per share (mainly freehold property)

Insightful write up on the car industry and how things are changing with opportunities as well as threats and how Vertu is responding.

Bought more this morning. 10% of portfolio now

[zoolook] 03/5/2019 11:33

Its amazing considering the development of the business (and asset base) that the share price is back at the levels when I first bought in 2012. I appreciate that there has been dilution to raise money for investment since then too. Also the dividend payout has more than doubled since then. Money where mouth is - I've doubled up on my holding this week. Roll on next weds..

[mortimer7] 03/5/2019 08:26

Totally agree with zoolook.

Results due out 8th May. Last NTAV was 45.9pps per their interims in October, probably state around 48p in results.

Ref MRF point, even if NTAV was 15% lower that's still 41pps.

[my retirement fund] 01/5/2019 20:21

Ntav dubious imo been splashing on acquisition right at the top of the cycle

[zoolook] 01/5/2019 11:47

SP in deep value territory now. Market cap now significantly below NTAV. Good yield with divi currently well covered. No/negligible borrowings. PE of 5.

[mortimer7] 04/4/2019 08:30

SMMT issued the new car registration unit figures this morning for the crucial new plate month of March 2019.

Total number of units registered was 458,054 a small decrease of 3.4% compared to 474,069 units in March 2018.

SMMT citing political uncertainty, ongoing brexit and Diesel issues as reasons for the Y on Y reduction.

[mortimer7] 05/3/2019 09:15

SMMT New car registration figures are out this morning for the month of February 2019.
Total number of units registered was 81,969 a small increase of 1.4% compared to February 2018.

[pugugly] 01/3/2019 08:16

Mr Market ititial take seems to be yes - Marked doen 4%

[red_shed2000] 01/3/2019 08:01

"The Board expects the trading performance for the year ended 28 February 2019 to be in line with current market expectations"

Profit warning?????

[pugugly] 01/3/2019 07:26

Now is this a profit warning? imo If it smells lika a PW, sounds like a PW it may well be a PW -

[mortimer7] 05/2/2019 15:13

New car registration figures are out this morning for the month of January 2019.
Total number of units registered was 161,013 a small reduction of 1.6% compared to the figure of 163,615 in January 2018.
Within those figures the Private Buyer % was actually up 2.9%.

SMMT comments were upbeat..."It’s encouraging to see car registrations in January broadly on par with a year ago as the latest high tech models and deals attracted buyers into showrooms".

Indications are that large listed dealers are increasing their GP %'s with new car short supply problems and greater focus on used vehicles & aftersales.

Also light van regns for January are up 8.6% year on year.