TIDMVTU
RNS Number : 6977E
Vertu Motors PLC
20 July 2016
20 July 2016
Vertu Motors plc ("Vertu", the "Company" or the "Group")
AGM Statement
Strong aftersales and used vehicle performance drives
profitability.
Full year results expected to be in line with market
expectations
Highlights:
-- Profitability in the four month period to 30 June 2016 ahead
of prior year and in line with the Board's expectations.
-- Total revenues increased by 21.5% with like-for-like revenues increasing by 8.4%.
-- Group and like-for-like gross margins improved due to higher used car and service margins.
-- Group's aftersales operations continued to grow strongly with
service revenues up 25.6% in the Period, an increase of 6.1% on a
like-for-like basis.
-- Strong used vehicle performance with total used vehicle
volumes up 19.2%, an increase of 10.2% on a like-for-like
basis.
-- Majority of GBP35m raised in the Placing in March deployed in
earnings accretive acquisitions.
-- Given the performance of the Group to date and the ongoing
integration and improvement of businesses acquired in recent
periods, the Board expects the performance for the full year to be
in line with current market expectations.
At today's Annual General Meeting of the Company, the Chairman
Peter Jones will make the following statement:
Trading Update
Profitability in the four month period to 30 June 2016 ("the
Period") was ahead of the prior year and in line with the Board's
expectations.
Group total revenues have increased by 21.5%, aided by higher
revenues from acquired dealerships and continued organic growth
with like-for-like revenues up 8.4%. Total gross profit increased
by 23.6% with like-for-like gross profit increasing by 8.7%. Group
and like-for-like gross margins improved due to higher used car and
service margins.
The Group's aftersales operations continued to grow strongly
with gross profits up 24.9% in the Period, an increase of 7.0% on a
like-for-like basis. Our retention initiatives (such as service
plan sales), our focus on customer service, and increases in the
overall vehicle parc, continue to contribute positively to
aftersales profitability trends. In the key area of vehicle
servicing, the Group increased total service revenues by 25.6% and
like-for-like service revenues by 6.1% whilst improving
like-for-like service margins from 75.8% to 76.6%. By way of
context, this high quality, repeatable aftersales business
accounted for 39.1% of the Group's 2016 gross profit and this
underlying strength continues to underpin Group profitability.
Used vehicle performance also continued to be very strong in the
Period with the Group delivering total volume growth of 19.2% and
like-for-like growth of 10.2%. The Group has seen continuous
like-for-like used car volume growth since 2011 and used cars
represent a key strength of the Group. Performance was aided by
continued investment in marketing and by the timing of sale events
compared to the prior year. The Group's gross profit generated from
used vehicle sales rose 27.4% compared to the prior year, with
growth of 17.6% on a like-for-like basis. Like-for-like gross
margins strengthened from 9.8% to 10.5% reflecting strong price
disciplines and the underlying strength of residual values in the
UK used car wholesale markets. The increase in new car PCP
business, where the Manufacturer guarantees the residual value of
the car, has provided and continues to provide stability in used
car prices. By way of context, used car business accounted for
31.7% of the Group's 2016 gross profit.
During the Period, the UK new retail market has been stable, as
expected, after a period of sustained growth to record levels.
Whilst private registrations saw growth in the key month of March,
the market has softened with small declines in private
registrations in each of the months of April, May and June. The
Group's total new retail vehicle sales volumes grew by 8.9%, and
like-for-like new retail sales volumes reduced by 3.8%, in the
Period with volume franchises seeing small declines in volumes
whereas premium franchises have continued to see growth. In the
Period, the UK remained an attractive and profitable market for the
Manufacturers and supply push of product into the market continued.
Gross margins from the sale of new retail vehicles were stable. By
way of context, new retail sales accounted for 22.5% of the Group's
2016 gross profit.
The Group has seen growth in its car fleet operations during the
Period, with total volumes higher by 7.5% and like-for-like volumes
increasing by 3.1%, compared to an increase in UK fleet
registrations of 6.2%. Group sales of new commercial vehicles
continued to grow at very high levels reflecting the underlying
strength of the UK economy. The Group's total new commercial
vehicle sales volumes grew by 27.5% and like-for-like new
commercial vehicle sales grew by 25.0% for the Period. UK
commercial vehicle registrations grew by 4.3%, showing that the
Group continued to take market share in the van market. The Group
grew like-for-like gross profit from its fleet and commercial
operations by 17.6% with overall profitability in the channel up
significantly.
Portfolio Development
On 1 March 2016, the Group purchased Greenoaks (Maidenhead)
Limited which operates three Mercedes-Benz dealerships, for
GBP21.9m (alongside the settlement of GBP9m of shareholder loans).
These dealerships in Ascot, Reading and Slough have historically
underperformed. The Board is very pleased with the progress made to
date to integrate and improve the performance of the businesses and
they have traded in line with the performance targets the Board put
in place at the time of the acquisition.
In the Period the Group has undertaken three further
transactions which were anticipated when the Group undertook the
GBP35m Placing (gross) in March 2016. These transactions represent
a swift deployment of a substantial portion of the capital
raised.
On 3 May 2016, the Group acquired the business and assets of
Leeds Jaguar for a consideration of GBP0.7m including GBP0.5m of
goodwill. For the year ended 31 December 2015, the accounts of this
business showed that it broke even.
On 1 June 2016, the Group acquired the entire issued share
capital of Gordon Lamb Group Limited, a group which operates five
sales outlets in Derbyshire. This freehold rich acquisition
introduced the Toyota franchise to the Group and added a sixth Land
Rover dealership, together with two Skoda and a single Nissan sales
outlet to the Vertu portfolio. Total consideration amounted to
GBP18.7m, including a GBP8.3m payment for goodwill. For the year
ended 31 December 2015, the accounts of Gordon Lamb Limited showed
consolidated revenue of GBP85.8m and adjusted PBT of GBP2.7m.
On 23 June 2016, the Group acquired the freehold and long
leasehold interests from Honda in two Honda dealerships operated by
the Group in Nottingham and Derby. Consideration amounted to
GBP3.2m.
Outlook
On 23 June 2016, the UK voted to exit the European Union (EU).
This has led to some uncertainty for the economy and the motor
retail industry in a number of areas.
Regulations surrounding Manufacturer Franchise contracts are
currently determined on an EU basis by Manufacturers and reflect EU
competition policy. The Board, at this stage, does not anticipate
any major changes to the franchise contract position under which
the Group transacts with our Manufacturer partners resulting from
the UK leaving the EU.
The UK represents the second biggest market for new vehicles in
the current EU and thousands of continental European jobs are
reliant on a continuation of this trade with the UK. Consequently,
the Board believes that Manufacturer partners are likely to be keen
to support UK retailers through any period of uncertainty. The
majority of the Group's new vehicle sales are imported to the UK
from the EU. Our Manufacturer partners clearly have a vital
interest in ensuring continued free trade access to the key UK
market and the Board will be monitoring the negotiations of the
trade relations between the EU and UK. The GBP:EUR exchange rate is
important to Manufacturer profitability on the UK sales and is a
factor in determining the level of supply push of vehicles into the
UK market. Whilst sterling has declined against the Euro following
the referendum result, it remains at levels above the lows seen in
2008/9, and more recently throughout much of 2013, and at levels
which the Board believes remain attractive for European
Manufacturers to export vehicles to the UK. This should help to
underpin the UK new car market which is currently at record
levels.
It is possible business and consumer confidence in the UK may
also come under some pressure as a consequence of the uncertainty
in the next few months. In line with trends in recent months, since
the referendum new retail vehicle sales volumes have been behind
last year. However, the important revenue streams of used cars and
aftersales have not seen any negative impact to date. The Board
will update shareholders further in the pre-close statement in
early September 2016.
Given the performance of the Group to date and the ongoing
integration and improvement of businesses acquired in recent
periods, the Board expects the performance for the full year to be
in line with current market expectations.
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulations.
For further information please contact:
Vertu Motors plc
Robert Forrester, CEO Tel: 0191 491
2111
Michael Sherwin, FD Tel: 0191 491
2114
Liberum
Peter Tracey Tel: 020 3100 2000
Richard Crawley
Jamie Richards
Zeus Capital Limited
Adam Pollock Tel: 020 7533 7727
Camarco
Billy Clegg Tel: 020 3757 4983
Georgia Mann
Tom Huddart
Notes to Editors
Vertu, the UK automotive retailer with a proven growth strategy,
is the fifth largest automotive retailer in the UK with a network
of 132 sales outlets across the UK. Its dealerships operate
predominantly under the Bristol Street Motors, Vertu, Farnell,
South Hereford Garages, and Macklin Motors brand names.
Vertu was established in November 2006 with the strategy to
consolidate the UK automotive retail sector. It is intended that
the Group will continue to acquire automotive retail operations to
grow a scaled dealership group. The Group's acquisition strategy is
supplemented by a focused organic growth strategy to drive
operational efficiencies through its national dealership network.
The Group currently operates 129 franchised sales outlets and 3
non-franchised sales operations from 109 locations across the
UK.
Vertu Group websites - www.vertumotors.com /
www.vertucareers.com
Vertu brand websites - www.bristolstreet.co.uk /
www.vertuhonda.com / www.macklinmotors.co.uk /
www.farnelllandrover.com / www.farnelljaguar.com /
www.vertuvolkswagen.com / www.southherefordgarages.co.uk /
www.vertumercedes-benz.com
Forward-looking statements
This document may contain certain 'forward-looking' statements.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Actual outcomes and results may differ materially from any outcomes
or results expressed or implied by such forward-looking
statements.
Any forward-looking statements made by, or on behalf of, Vertu
Motors plc speak only as of the date they are made and no
representation or warranty is given in relation to them, including
as to their completeness or accuracy or the basis on which they
were prepared. Vertu Motors plc does not undertake to update
forward-looking statements to reflect any changes in its
expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is
based.
This information is provided by RNS
The company news service from the London Stock Exchange
END
AGMEASXEASAKEEF
(END) Dow Jones Newswires
July 20, 2016 02:00 ET (06:00 GMT)