TIDMVTU
RNS Number : 5768O
Vertu Motors PLC
04 October 2023
4 October 2023
Vertu Motors plc ("Vertu", "Group")
Unaudited interim results for the six months ended 31 August
2023
" Record revenues, year-on-year profit and dividend growth"
Vertu Motors plc, the automotive retailer with a network of 190
sales and aftersales outlets across the UK and with sector leading
brands, announces its interim results for the six months ended 31
August 2023 ("the Period").
Commenting on the results, Robert Forrester, Chief Executive,
said:
"The Group has delivered 11.7% year-on-year profit growth
benefitting from increased scale. The consistent strategies around
digitalisation, cost efficiency, smart capital allocation and the
development of our management and colleagues is providing a firm
grounding to deliver value to our shareholders. The interim
dividend increase of 21.4% shows the Group's financial strength and
the progress being made. Trading in the key month of September was
strong reflecting the plate change in new cars."
FINANCIAL SUMMARY
H1 FY24 H1 FY23 FY23
Revenue GBP2,422.5m GBP1,999.7m GBP4,014.5m
Adjusted(1) profit before
tax GBP31.5m GBP28.2m GBP39.3m
Free Cash Flow (GBP0.4m) GBP23.2m GBP54.3m
Basic Adjusted(1) EPS 6.89p 6.50p 9.16p
Dividends per share 0.85p 0.70p 2.15p
Net (Debt) / Cash(2) (GBP90.7m) GBP17.8m (GBP75.4m)
HIGHLIGHTS
-- Delivery of strategy to grow a scaled franchised dealership
group exhibited with successful integration of the significant
Helston acquisition
-- Revenues grew over 20% to record levels aided by acquisitions and growth in the Core Group
-- Core Group gross profit increased GBP11.9m in the Period
-- Adjusted(1) profit before tax up 11.7% to GBP31.5m (H1 FY23: GBP28.2m)
-- Gross margin of 11.0% (H1 FY23: 11.2%) achieved, with an
increase in used vehicle gross profit per unit compared to H2
FY23
-- Free Cash Flow reflects targeted investment in used vehicle
inventory to drive market share in H2: Capex forecast for full year
reduced by GBP10.2m
-- Net tangible assets per share of 70.9p (28 February 2023: 65.3p) reflecting strong asset base
-- Bristol Street Motors remains the highest-ranking franchised
dealership brand in England for prompted brand awareness
-- 7.7m shares (representing 2.2% of share capital in issue on 1
March 2023) repurchased at a cost of GBP5.0m since 1 March 2023:
buyback continues with 14% of issued shares repurchased over the
last seven years
-- Increased interim dividend of 0.85p per share declared, up
21.4% from 0.70p in H1 FY23, payable in January 2024
-- Low gearing ratio of 25.5% with strong freehold asset base
CURRENT TRADING AND OUTLOOK
-- The Board anticipates that full year profits will be in line with current market expectations
-- Strong performance delivered in the plate change month of
September despite economic headwinds
-- New vehicle supply continues to improve
-- Used vehicle sales volume improving with prices reflecting
more normalised depreciation patterns
-- High margin aftersales demand remains robust and increased
technician resource is being sourced to capture more aftersales
revenues and profits
-- Number of quality bolt-on acquisition opportunities identified
-- The Board is closely monitoring the impact of the Agency model on Group performance
(1) Adjusted to remove share-based payments charge, amortisation
of intangible assets and other non-underlying items
(2) Excludes lease liabilities, includes used vehicle stocking
loans
Webcast details
Vertu management will make a webcast available for analysts and
investors this morning on the Group's website
https://investors.vertumotors.com/results/
For further information please contact:
Vertu Motors plc
Robert Forrester, CEO Tel: 0191 491 2121
Karen Anderson, CFO
Phil Clark, investor relations PClark@vertumotors.com
Zeus Capital Limited
Jamie Peel Tel: 020 3829 5000
Dominic King
Camarco
Billy Clegg Tel: 020 3757 4983
Tom Huddart
Letaba Rimell
CHAIRMAN'S STATEMENT
The Group continued its long run success in delivering high
levels of operational excellence during the period ended 31 August
2023. Adjusted(3) profit before tax of GBP31.5m represents an
increase of 11.7% on the same period last year, despite economic
headwinds and was aided by the significant Helston acquisition
executed in December last year. There were a number of noteworthy
highlights in the Period:
-- Successful integration of the Helston acquisition and the
Board is pleased with progress to date. This acquisition added a
total of 28 sales outlets to the Group and despite the extent of
this acquisition, full integration onto the Group's systems
platforms and processes was completed by the end of March 2023.
-- The Group's strategic objective to grow as a major scaled
franchise automotive retail group is born from the belief that
scale benefits can be maximised in a larger group, which the Group
is demonstrating. Enduring manufacturer partnerships continue to
play a pivotal role in realising these advantages. I take great
pride in the fact that our Group maintains strong relationships
with our carefully chosen manufacturer partners. These
relationships are a direct result of our commitment to operational
excellence and customer experience and the mutual respect that
underpins our collaborations.
-- The Group's scale justifies investment in the in-house
development of systems, delivering both for customers, colleagues,
and enhanced cost efficiency. These scalable platforms were quickly
rolled into the acquired dealerships and work continues to maximise
Group-wide efficiency benefits using technology. During the Period,
the Group has improved its aftersales customer journey with the
roll out of self-service on-line check in capability which not only
provides a great customer experience but also aids efficiency in
the dealerships. The Group has started to roll out its in-house
developed deferred payment service to aftersales customers,
providing enhanced customer choice at a reduced cost to the Group.
Significant progress has been made in the use of data to improve
used car stock and sales management through the rollout of the new
Vertu Insights product.
-- There has been continued application of stringent capital allocation disciplines:
1. The Group has continued to apply a multi-franchising strategy
to maximise the profit opportunity in certain physical locations
and to align with Manufacturer representation plans.
2. Pruning activities have been successfully undertaken in the
Period with the sale of an accident repair centre in Newcastle and
surplus property held for resale, releasing capital to be
redeployed to generate returns in excess of cost of capital. There
is more cash to release from these activities.
3. The interim dividend, a vital element of shareholder return, has been increased by 21.4%.
4. Additionally, the Group has also returned GBP5.0m to
shareholders through the repurchase of over 7.7m shares since 1
March 2023. The Group currently has GBP4m of unutilised buyback
authority, following an additional GBP3m authority.
-- The Group has continued to progress towards the reduction of
its environmental impact and management of energy costs. GBP1.9m
has been invested in the Period in green technologies such as solar
panels and LED, with a remaining GBP3.0m planned for further such
installations in the remainder of FY24. The investment in solar
panels has been made in connection with the Group's energy strategy
which seeks to self-generate 12% of the Group's energy needs via
onsite solar energy and it is pleasing to note that whilst the
project is not yet complete, 9.54% of the Group's energy needs in
August were self-generated.
-- Having the right resource levels and leadership throughout
the business is critical to deliver operational excellence.
Technician and sales team remuneration packages have been enhanced
and restructured in the Period, to increase retention and
recruitment.
-- At board level, John Mewett, CEO of Screwfix, joined as a
Non-executive Director in June 2023. John brings to the Board
substantial retailing experience, including omnichannel experience,
as well as experience in running substantial multi-site operations.
We are confident his perspectives will add value and are already
seeing benefits. The Nominations Committee is currently undergoing
a process to recruit a successor to Ken Lever, Senior Non-executive
director, who will have been on the Board for nine years next year
and will consequently step down, having made an incredible
contribution to the development of the Group.
I am very proud to see how every colleague has contributed to
the success of the Group and I would like to thank them for this.
The commitment that they continue to show is exemplary and
humbling. Performance is critical but the manner in which it is
delivered is of equal importance.
Andy Goss, Chairman
(3) Adjusted to remove share-based payments charge, amortisation
of intangible assets other non-underlying items.
CHIEF EXECUTIVE'S REVIEW
Strategy Summary
The Group's key long-term strategic goal remains: To deliver
growing, sustainable cashflows from operational excellence in the
franchise automotive retail sector. The strategic objectives of the
Group, which have been recently reviewed and confirmed by the
Board, are summarised below:
-- To grow as a major scaled franchised dealership group and to
develop our portfolio of Manufacturer partners, while being mindful
of industry development trends, to maximise long-run returns.
-- To be at the forefront of digitalisation in the sector,
delivering a cohesive 'bricks and clicks' strategy with cost
optimisation and efficiency:
o Optimise omnichannel development, bringing bricks and clicks
together.
o Digitalise aftersales processes to improve customer service
and efficiency.
o Reduce the cost base of the Group by delivering efficiency
using technology.
o Utilise data driven decision making to generate enhanced
returns.
-- To develop and motivate the Group's colleagues to ensure
operational excellence is delivered constantly across the
business.
-- To develop ancillary businesses to add revenue and returns
that complement the automotive retail dealership business.
The Group continues to make progress in all four areas of its
strategy.
There are two very important matters which are and will
influence the Group's development and performance in the coming
years, being electrification and the transition to the agency model
in new sales by a number of the Group's Manufacturer partners.
These are addressed below:
1. Electrification
The UK Government, until recent announcements, intended to ban
the sale of new petrol and diesel cars in the UK from 2030.
However, implementation of a strategy for infrastructure to achieve
this deadline is lagging, meaning the UK is likely to lack the
required charging infrastructure needed by 2030. Given the current
cost of living pressures on consumers and the potential impact on
the wider economy, the Government has taken a pragmatic approach to
row back from an all-out ban until 2035. This aligns to the
strategy adopted by the EU.
Despite this policy announcement, the UK Government have imposed
a mandate for Manufacturers to achieve specific zero emissions
vehicle sales targets (ZEV mandate), starting at 22% of total car
sales and 10% of van sales in 2024. The target rises incrementally
each year to 80% for cars and 70% for vans in 2030, and 100% for
both by 2035. Manufacturers will pay the Government GBP15,000 for
every car that doesn't comply. This policy will drive
electrification, despite the Prime Minister's recent announcement,
but at least now provides certainty.
Increased supply of new electric vehicles from Manufacturers, is
evident whilst retail demand (as opposed to fleet) remains muted.
The Government's confusing messaging may further contribute to
this. Manufacturers are therefore seeking to stimulate retail
demand for these vehicles through the offer of discounted prices
and supported finance rates. These market dynamics combined with
the ZEV mandate have the potential to disrupt the recovery of the
new car market in the next few years.
The transition to battery electric vehicles ("BEV") also faces a
further challenge from tightening Rules of Origin requirements
under the post-Brexit Trade and Cooperation Agreement. From January
2024 an electric vehicle shipped between the UK and the EU will
need to have 60% of its battery value and at least 45% of its
overall parts value sourced from within the two regions, or tariffs
will apply between the EU and UK. It is likely, therefore, that
from 2024, some BEVs sold between the EU and UK will face 10%
tariffs, pushing up prices for consumers. The UK Government has
sought to delay the introduction of this levy until 2027. This is
backed by Manufacturers in both the UK and EU, who have warned they
will not be able to comply due to the lack of current battery
manufacturing capacity in Europe. The German government has
recently been reported as adding their support to a three-year
delay to these requirements, fearing European manufacturers will be
left uncompetitive against Chinese BEV Manufacturer entrants. The
latter are starting to commence sales in Europe and appear to have
some cost and potentially technological advantages. They may take
market share to some degree from established players and the Group
has a strategy to ensure there is a continued and increasing
Chinese component to its franchise portfolio.
The SMMT registration statistics show UK BEV registrations in
the calendar year to 31 August 2023 represented 16.4% of all sales,
a growth of 40.5% year-on-year. All this growth has been achieved
in the fleet sales channel which delivered sales growth of 64.8%.
Sales of BEV cars to retail customers in the year to August have
declined 8.5% compared to the prior year. This evidence of a
cooling of demand for BEV from retail customers is driven by a
number of factors. Higher electricity costs have increased running
costs, the removal of the plug-in car grant scheme on 14 June 2022
and inadequate UK public charging infrastructure have all had an
impact on demand and public perception. The media in the UK have
been increasingly negative on the topic of BEV.
Increased electrification of the vehicle parc requires ongoing
investment in infrastructure such as in aftersales capabilities and
charging facilities. The Group invested GBP0.2m in charging
infrastructure in the Period with a further GBP1.3m planned in the
remainder of the financial year. Aftersales revenues from
electrification will undergo changes with reducing servicing
likely, however, there are other opportunities in areas such as
tyres, accident repair and battery repair and replacement. Changes
in the UK vehicle parc will arise very gradually and a slower pace
of electrification would elongate this.
The Board is confident that the Group's Manufacturer partners
have the technological and financial capability to make the
required transitions to BEV. The Group is successfully selling BEV
product profitably across its portfolio.
2. Agency model of distribution
Several Manufacturers in the UK have moved or indicated they
will move to an agency sales distribution model over varying
timescales. Under this model, in respect of new vehicle sales, the
Manufacturer invoices the customer directly, while the retailer
undertakes the sales process and customer contact as an agent, as a
physical touchpoint. The retailer-turned-agent receives a
commission on each new vehicle sale but in many cases, owns no new
car inventory and no longer sets prices or discounts. There are
varying iterations of the agency model proposed and the picture
continues to evolve both legally and in detailed
implementation.
The Group has long operated on an agency basis for a significant
proportion of fleet and parts sales. The first of the Group's
significant Manufacturer partners to operate the agency model for
new retail sales was Mercedes-Benz passenger cars which moved to a
genuine agency model on 1 January 2023. Volvo followed with their
implementation in June 2023. These implementations have been
largely successful from a systems perspective. The Volkswagen Group
brands are likely to be the next in line for agency implementation
over the next 12 months for BEV vehicles only.
Agency models are a change in how the business operates in the
new retail channel, with reduced capital requirements and risk from
inventory and the impact of supply and demand imbalances in new
cars. The implementation is at an early stage across the sector (a
number of Manufacturers have stated they will not make the
transition). The Board believe that on the basis Manufacturers
require, in either an agency or traditional franchised setting, a
visible retail network (including aftersales) making an appropriate
return to investors, we consider that medium-term returns will
remain attractive in either model. We will continue to monitor
business performance by Manufacturer as has always been the
case.
Strategic Execution Highlights
The following represents an update on the Group's execution of
its strategy in the Period:
-- Financial strength
The Group's balance sheet strength is underpinned by an
extensive freehold and long leasehold property portfolio and a
largely unencumbered inventory of used vehicles. This strong asset
base, together with a low gearing level of 25.5%, (including used
vehicle stocking loans) means the Group has a high level of
financial resilience and the firepower to fulfil further growth
ambitions in the future. This conservative approach is reflected in
the Boards stated objective that Net debt/EBITDA should not exceed
1.5 times in the medium-term.
-- Management capacity
The Group has a stable and very experienced senior management
team, with an established track record of execution and performance
delivery. The three founders from 2006 remain Executive Directors.
A 'Next Generation' two-year talent programme, to develop the next
generation of the Group's senior management, was launched at the
start of the Period to augment the Group's existing training and
leadership development initiatives. This is an important
initiative.
On 1 September 2023 one of the members of this programme,
Anthony Masterson, was promoted to the Group's operational board,
the CEO Committee, as BMW/MINI Group Operations Director. Anthony
joined the Group in 2020 and has successfully developed a
substantial new division for the Group in that time.
On 14 August 2023, another Next Generation programme member,
Spencer Clayton-Jones joined the Group as Strategy Director. He
joins after having a long career with Volkswagen and Nissan. He was
latterly Nissan GB Network Development and Customer Quality
Director.
Both of these appointments to the CEO Committee strengthen the
core senior team providing deep expertise and additional
bandwidth.
-- Strong Brands
The Group operates three major customer facing brands in the UK:
Bristol Street Motors, Macklin Motors and Vertu Motors with a
significant marketing strategy in place. Bristol Street Motors is
the leading franchise sector brand in England and Wales in terms of
prompted brand awareness (56.6%: Source: YouGov). Each of the
Group's brands is supported by TV campaigns, sports sponsorships
and partnerships and digital marketing initiatives. Tangible scale
benefits arise from this strategy as additional outlets are
added.
-- In-house developed Technological Platform
The scale of the Group allows it to invest in the development of
systems and operations to further augment the Group's customer
offering and enhance profitability through maximising margins and
increasing productivity to reduce costs. The Group's in-house
developed systems provide uniform processes and control, as well as
live management information and data to allow speedy and
appropriate decision making. The in-house function has 54 software
and robotics developers.
During the Period a comprehensive Group data warehouse has been
developed. This will provide a bedrock of data for the Group and
the opportunity to drive further efficiencies across our finance,
sales, aftersales and marketing functions.
The Group's Customer Data Platform is an example of the use of
the data warehouse to increase the personalisation, targeting and
ROI of the Group's marketing spend. Initial use cases have been
rolled out successively, for example, in the area of post service
follow up of aftersales customers and a significant expansion of
use cases is planned.
An in-house developed deferred payment option for service
customers is currently being rolled out across the Group. The
offering has a powerful impact on converting work from Visual
Health Check activity and drives higher average invoice values
whilst at a reduced cost when compared to the existing third-party
solution.
A new project commenced in the Period investing substantial
development resource to improve the productivity and efficiency of
the Group's financial processing. Initial scoping has highlighted
exciting opportunities to improve efficiency levels in several key
areas.
The Period saw the benefits of the introduction of a third-party
digital self-service check-in system for customers to use in the
Group's service departments. Customers can check-in from home and
use the instore kiosks where they can safely deposit their vehicle
keys. Fifty percent of customers now check-in online and one in
four customers are using the kiosks to drop off their keys. The
Group has also seen increased penetration of add-on sales in
service from customers using this facility. Further developments
are in progress around remote payments and provision of courtesy
cars via the kiosks.
-- Development of Ancillary Businesses
The Group has a strategy to develop ancillary businesses to add
revenue and returns that complement the core dealership businesses.
Opportunities are reviewed to extend these operations further and
one highlight is the growth of the Vertu Cosmetic Repair business
in the Period. It now operates a fleet of 114 vans and by the end
of the financial year, the fleet will have increased further. The
vans are augmented by a number of fixed sites including a
substantial new investment made in Exeter. Dedicated management
oversee the operations of this cosmetic repair business and the
Group's 12 accident repair centres. This focus has driven an
improvement in the profitability of these businesses in the Period.
A new standalone accident repair centre is about to open in
Yeovil.
The Group is actively exploring the development of a separate
retail focused smart repair business to provide cosmetic repair to
the Group's 2 million customers.
-- Colleague resource and development
It is a priority of the Group to develop and motivate the
Group's colleagues to ensure the delivery of operational excellence
and outstanding customer experiences. This drives long-term
sustainable cashflows. Workforce recruitment and retention remains
a challenge for UK business, with the number of UK job vacancies
remaining around 1.0 million (source: ONS), despite recently
falling. The Group was successful in reducing vacancy levels in the
second half of FY23. The Group has reviewed resource levels
particularly in the areas of technicians and the sales team and
believes further recruitment can boost revenues in vehicle sales
and service. Current vacancy levels have therefore increased again
as the Group seeks to expand the productive workforce. In addition,
the Group is recruiting significant numbers of apprentices across
the business. The Group acted on remuneration levels in the areas
of technicians and sales executives over the summer, to improve
recruitment and retention levels.
The Group has long been committed to extensive investment in the
development of all colleagues to provide opportunity to those who
are talented and have a strong work-ethic to succeed. Programmes
include a degree apprentice scheme, technician apprentice schemes
and development programmes to facilitate progression to management
roles in all areas. These schemes and the Group's wider talent
programmes are designed to deliver a meritocracy in the Group with
equal opportunities: Hard-working, talented colleagues with
excellent character are promoted quickly through the
organisation.
-- Responding to energy cost increases
The Group has continued to execute on its energy purchasing
strategy in the Period. This strategy includes an intention to
enter into a 5-year Power Purchase Agreement (PPA) which will
provide the Group with 40% of its electricity needs from off-grid
energy solutions. This proposed contract will manage the Group's
exposure to energy market price volatility risks. In addition, 35
of the Group's dealerships now have solar panels installed and
these panels generated 9.54% of the Group's August electricity
requirement. Solar panel installations at the remaining dealerships
approved in the overall GBP3m investment will be completed by the
end of October.
Portfolio Development
In the year ended 28 February 2023, the Group completed the
largest single acquisition in its history and increased its number
of sales outlets by a net 31 over the Year. The Helston acquisition
has progressed well, with all Group systems implemented and brands
adopted by the end of March 2023. Recruitment remains critical to
ensure the acquired business has the right resource levels to
increase sales, maximise the market opportunity and deliver
outstanding customer service. The Board envisages expected
synergies to be delivered to the previously announced timescales.
The acquisition has significantly helped the Group grow overall
earnings in the Period.
The Group has several potential bolt-on acquisitions in the
pipeline to continue to deliver on its Growth Strategy and to gain
scale and market share.
-- Multi-franchising and new outlets
On the 24 April 2023, the Group agreed a sub-lease of a former
Cazoo outlet in Tamworth, Staffordshire. The outlet opened in July
2023 as a Bristol Street Motor Nation used car outlet and has
performed successfully since opening. The opening follows the
strategy of the Group being opportunistic as opportunities arise in
strong retail locations for the Group. In the past outlets which
opened as Bristol Street Motor Nation in Doncaster and Glasgow have
been transitioned to Franchise dealerships over time. Indeed, the
Group's Bristol Street Motor Nation outlet in Stockton, which
opened on 1 March 2022 will soon be rebranded to the Nissan
franchise, with new vehicle sales for the brand targeted to
commence on 1 December 2023. This will complete a market area for
the Group representing Nissan across the whole of Teesside.
In July 2023, the Group agreed a sub-lease of a former
Stratstone Jaguar dealership in the west of Newcastle upon Tyne.
This site is being refurbished for the relocation of the Group's
existing Vauxhall franchise from nearby Scotswood Road in the City.
The targeted opening date for Vauxhall in this new location is 1
November 2023. Following the move, the substantial freehold
dealership vacated by Vauxhall will open as a Ford car and
commercial vehicle operation. This follows the award by Ford of
Tyne and Wear as a market area to the Group. This additional
significant Ford operation augments the existing representation of
the brand by the Group in nearby Morpeth, Durham, and
Hartlepool.
On 12 September 2023, the MG franchise opened in Chesterfield,
alongside the Group's existing Vauxhall dealership. This marks the
fourth sales outlet for the MG brand (owned by SAIC of China)
operated by the Group, alongside the existing outlets in
Beaconsfield, Carlisle and Edinburgh. MG has a 4.16% market share
of the UK car market in the 8 months ended 31 August 2023.
-- Active Management
The Board continues to actively manage the Group's portfolio of
properties and businesses. This includes assessing further growth
opportunities as well as the future potential of existing
businesses, utilising strict investment return metrics to ensure
discipline in capital allocation.
Between FY18 and FY23, active management of the portfolio has
generated cash proceeds of GBP6.2m from the sale of surplus
properties, GBP1.2m more than book value. In the Period, the Group
continued to generate cash from surplus properties, selling two of
the properties held of resale as at 28 February 2023. A surplus
dealership in Taunton acquired in the Helston acquisition, was sold
for proceeds of GBP0.8m and the accident repair centre business and
property in Newcastle was disposed for GBP1.6m in the period. These
transactions generated a profit on disposal of GBP0.5m. Additional
surplus properties are held by the Group and are expected to be
disposed in the next nine months. Cash proceeds of GBP7.3m are
anticipated, circa GBP2.5m in excess of book value. The largest
element within this portfolio is a development site in central
Glasgow. Planning has been approved and the four months judicial
review window is now open. Proceeds of GBP5.5m are anticipated to
be received in the first half of the calendar year 2024.
During the Period , the Group closed operations at its BMW/MINI
outlet in Malton, Yorkshire and secured an early exit from the
associated leasehold premises. The Group also exited from a Ford
operation in Stroud, Gloucestershire. Exiting these sub-scale
dealerships has reduced operating expenses and the Group has
retained many of the sales and service customers in its nearby York
BMW and MINI and Gloucester Ford dealerships, so augmenting
revenues and profits at these outlets. The Stroud site is freehold
and has been sold for GBP0.9m subject to residential planning
consent.
Current Trading and Outlook
The Board anticipates that profits for the financial year ending
29 February 2024 will be in line with current market
expectations.
September trading performance saw strong profit generation
reflective of a plate change month. Like-for-like new car, fleet
and commercial volume growth was delivered, aided by the improving
supply situation. New vehicle margins are normalising as supply has
eased.
Used car volume trends improved compared to the reported Period.
UK used vehicle values are starting to see a more normal monthly
declining pattern. The market is seeing some weakness in higher-end
product values and margins, whilst used electric vehicle value
reductions have normalised.
Aftersales demand remained strong and higher technician resource
levels are helping to drive increased revenues. This improved
resource level should underpin aftersales performance for the
remainder of the financial year.
Cost control remains a major focus. The delivery of the Group's
energy buying strategy should minimise the risk of utility cost
fluctuations. Whilst recent action on pay has been undertaken, this
should boost recruitment and retention of key roles such as sales
executives and technicians.
Future consumer confidence levels will be key in determining
future retail vehicle demand and the Board remain cautious in this
regard.
The Board believes that the Group is very well positioned to
deliver on its stated strategy and to take advantage of the
increasing opportunities in the UK sector, with a good pipeline of
bolt-on acquisitions.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The Group's income statement for the Period is summarised
below:
H1 FY24
Var to
H1 FY24 H1 FY23 H1 FY23
GBP'm GBP'm %
Revenue 2,422.5 1,999.7 21.1%
-------- -------------- ---------
Gross Profit 267.2 223.7 19.4%
Operating expenses (225.8) (192.4) (17.4%)
-------- -------------- ---------
Adjusted Operating Profit 41.4 31.3 32.3%
Net Finance Charges (9.9) (3.1) (219.4%)
-------- -------------- ---------
Adjusted Profit Before Tax 31.5 28.2 11.7%
Non-Underlying items(4) (1.4) (1.3) (7.7%)
-------- -------------- ---------
Profit Before Tax 30.1 26.9 11.9%
Taxation (7.7) (5.4)
-------- --------------
Profit After Tax 22.4 21.5
-------- --------------
(4) Non-underlying items represent share-based payment charges,
amortisation of intangible assets and other non-underlying
items.
The Group delivered an adjusted profit before tax of GBP31.5m in
the Period, aided by the contribution from the substantial Helston
acquisition completed in December 2022. Of the GBP11.1m increase in
adjusted operating profit, GBP6.0m related to Helston businesses
with other acquisitions and disposals contributing another GBP0.6m.
Underlying core Group adjusted operating profit therefore also
increased in the Period despite economic pressures and cost
headwinds.
Revenue grew by GBP0.4bn to GBP2.4bn, with an increase of
GBP159.9m (8.1%) delivered in the Core Group, aided by new and used
average vehicle sales prices. The remaining increase in revenues of
GBP262.9m arose from dealerships and businesses acquired.
Net finance charges rose by GBP6.8m to GBP9.9m reflecting higher
new car stocking loans, the impact of higher interest rates and
higher levels of debt year-on-year, reflecting the substantial
purchase of the Helston Group.
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is
set out below:
H1 FY24 H1 FY23 H1 FY24
Var to
GBP'm GBP'm H1 FY23
Revenue %
New 744.0 557.6 33.4%
Fleet & Commercial 525.6 428.7 22.6%
Used 947.8 854.5 10.9%
Aftersales 205.1 158.9 29.1%
-------- -------- ----------
Total Group Revenue 2,422.5 1,999.7 21.1%
Gross Profit
New 63.0 47.4 32.9%
Fleet & Commercial 26.8 20.2 32.7%
Used 67.4 67.1 0.1%
Aftersales 110.0 89.0 23.6%
-------- -------- ----------
Total Gross Profit 267.2 223.7 19.4%
Gross Margin
New 8.5% 8.5% -
Fleet & Commercial 5.1% 4.7% 0.4%
Used 7.1% 7.9% (0.8%)
Aftersales(5) 43.8% 45.4% (1.6%)
-------- -------- ----------
Total Gross Margin 11.0% 11.2% (0.2%)
-------- -------- ----------
(5) Aftersales margin expressed on internal and external
revenues
The total volumes of vehicles sold by the Group and
like-for-like trends against market data are set out below:
Total units sold Like-for-like units sold
H1 FY24 H1 FY23 % Variance H1 FY24 H1 FY23 % Variance
Used retail
vehicles 43,921 43,022 2.1% 40,099 42,501 (5.7%)
New retail cars(5) 20,027 17,673 13.3% 17,608 17,408 1.1%
Motability cars 8,626 4,711 83.1% 8,291 4,659 78.0%
-------------------- ---------- ------- ---------- ------- ----------- ----------
Direct fleet
cars 9,688 9,205 5.2% 8,730 9,008 (3.1%)
Agency fleet
cars 3,725 2,317 60.8% 3,725 2,325 60.2%
-------------------- ---------- ------- ---------- ------- ----------- ----------
Total fleet
cars 13,413 11,522 16.4% 12,455 11,333 9.9%
Commercial vehicles 9,422 8,707 8.2% 9,229 8,692 6.2%
---------- ------- ---------- ------- ----------- ----------
Total New vehicles 51,488 42,613 20.8% 47,583 42,092 13.0%
---------- ------- ---------- ------- ----------- ----------
Total Vehicles 95,409 85,635 11.4% 87,682 84,593 3.7%
---------- ------- ---------- ------- ----------- ----------
UK Market
Variance(6) (SMMT)
New Retail
Car (0.3%) 1.4%
Motability
Car 12.6% 65.4%
Fleet Car (26.4%) 36.3%
Commercial (13.6%) 19.8%
---------- ------- ---------- ------- ----------- ----------
(5) Including agency volumes
(6) Represents the variance of like-for-like Group volumes to
the UK trends reported by SMMT
Used retail vehicles
Three consecutive years of low new vehicle registrations in the
UK have led to an ongoing constrained supply of used vehicles,
which will continue for a further number of years. Autotrader
recently highlighted that these supply trends will drive 27%(7)
fewer sub-5-year-old-cars in the UK parc in 2024 compared to 2019.
These trends have increased the mix of older vehicles on dealership
forecourts. Such vehicles typically require more preparation to
ready them for sale, in terms of both mechanical and cosmetic
repair work and form an increasing proportion of Group stock.
Despite the impact of cost of living and rising interest rates, for
many, used vehicles remain a necessity purchase, so there remains
consistent demand for used vehicles in the UK.
Supply constraints have, helped to drive stability in overall
used vehicle prices, despite average prices generally remaining
high, current prices are around 25% higher than January 2021. One
exception to this overall benign pricing picture, however, has been
electric vehicles. Used EV supply grew rapidly in the last 12
months, albeit from a very low base, and it is anticipated that,
one in seven 1-3-year-old cars in the UK parc will be electric by
the end of 2023. Consequently, used EV supply outstripped retail
demand partly due to their high prices in the early part of the
year. Prices fell significantly as a result, with a 44%(8)
correction in the last year. However, the latest monthly price fall
was the smallest movement applied to EVs this year and was broadly
in line with other fuel-types of vehicles. Used EV pricing appears
to have bottomed out and a new, more affordable base price has been
established for used electric vehicles. Demand and supply are
therefore much more aligned. In the Period, EV sales in used cars
represented 4.7% of Group used vehicle volumes.
The Group monitors the pricing demand and supply environment and
has continued to develop its used vehicle pricing and analytical
tools to optimise gross profit generation, stock turn and control
inventory. The Period started with reduced levels of used vehicle
inventory as the Group reduced inventory with a view to maximising
margin, return on investment and to reduce exposure to any consumer
downturn impacts. Group target inventory levels were increased from
the end of June 2023 to take account of the increased time to
prepare vehicles for sale and to ensure that the Group optimises
sales. The Group has been successful in securing additional used
vehicle inventory, despite the supply constraints, growing the
like-for-like number of used retail units in inventory by 12.7%
compared to the position at 28 February 2023 and the overall level
of used inventory grew by GBP33.3m. The Group continues to buy used
electric vehicles since they represent a market opportunity at
lower prices.
Rising interest rates have increased cost to change for
customers and in addition, the Group has been unable to run its
popular 0% finance offers on used vehicles during event periods as
it did in the prior year. This change in approach and general stock
constraints, contributed to a reduction in the number of
like-for-like used vehicles sold by 5.7%. Gross profits per unit
remain significantly better than the pre-pandemic norm and were
broadly stable with the comparative period last year, evidencing
the Group's robust inventory pricing disciplines. Indeed, gross
profit per unit rose in H1 2024 to GBP1,535 versus H2 2023
(GBP1,468).
Core Group gross profit from the sale of used vehicles totalled
GBP60.2m for the Period. This represented a GBP5.9m decrease in
Core Group gross profit generated from used vehicle sales with the
reduction due to the volume decline. Gross margin in the Core Group
reduced to 7.4% (H1 FY23: 7.9%) reflecting higher average sales
prices.
The Group continues to measure customer experience on used cars
in the majority of the Group via the Judge Service third party
platform. The Net Promoter Scores throughout the Year have been
very strong at c.84%, which is sector leading amongst major market
players. Great service goes hand-in-hand with profitability and
future retention, which is so vital in creating a sustainable
business.
(7) Source: Autotrader
(8) Source: CAPHI: September 2023 Car market overview
New retail cars and Motability sales
Overall, UK car registrations increased 20.2% in the Period,
reflecting an improving supply situation, however, this is still
below pre-pandemic levels by 7.5%(9) . It is the fleet market that
is largely driving the increase, as private registrations remain
muted, up just 1.4% in the Period. This is reflective of the fact
that new car market in the UK is ordinarily correlated to exchange
rate movements and consumer confidence(10) (and indicators, such as
the housing market) which has come under pressure. Recent increased
supply of new electric vehicles appeared to be exceeding retail
demand as the Period progressed. Manufacturers reacted to this
trend through the offer of discounted prices and supported finance
rates to stimulate retail demand.
Against this backdrop, the Group's like-for-like new retail
vehicle volumes grew by 1.1% in the Period. Overall, the Group
increased UK retail market share to 4.6% (H1 FY23: 4.1%) aided by
its increased dealership footprint. The Group's order bank levels
for new retail vehicles have reduced over the Period, as would be
expected as production issues slowly unwind. New retail vehicles
ordered but remaining undelivered as at 31 August 2023 totalled
approximately 9,500 units (28 February 2023: 12,900). Fleet and
Motability order banks also remain very robust.
UK Motability registrations benefitted from pent up demand, as
already extended contracts came to an end and supply came through
from Manufacturers, rising a significant 65.4% over the Period. The
Group's Motability volumes significantly outperformed the market,
growing 78.0% on a like-for-like basis and representing an
increasing UK market share of 6.2% (H1 FY23: 5.6%). The Group is
Motability's largest partner in the UK with over 36,500 vehicles on
the fleet. These vehicles require an annual service funded by
Motability in the Group's service departments and Motability is a
vital customer in the Group's higher margin service business.
As supply has eased and the mix of lower margin Motability sales
has grown, the Group has seen a slight weakening of gross profit
retention in new car sales with gross profit per unit still at
healthy levels of GBP2,016 (H1 FY23 GBP2,102) despite this mix
change. Gross margin percentages saw a dilution from 8.5% to 8.2%
due to a 3% increase in average sales prices and the slight
weakening in gross profit per unit. Nevertheless, the Group
successfully grew retained gross profits from the sale of new
vehicles in the period on a like-for-like basis by GBP6.2m.
In new vehicles, sales customer experience is measured by the
Group's Manufacturer partners. Approximately 55% of the Group's
Core sales outlets delivered experience levels above national
average levels.
(9) Source: SMMT
(10) Source: Autotrader
Fleet & Commercial vehicle sales
As set out above, the UK car fleet market has been the main
driver of the increase in vehicle registrations in the UK over the
Period. This performance was aided by a robust demand for electric
vehicles through the fleet channel and adoption of such vehicles in
the corporate market is critical to the electrification of the
vehicle parc. Registration volumes in the UK car fleet market have
grown 36.3% in the Period compared to the six months ended 31
August 2022. A proportion of this growth has arisen from the return
of increased registrations in the low margin daily rental space.
CAPHPI recently reported a 188% increase in such registrations in
the month of July alone, however, sales through this channel remain
well below pre-COVID levels. Like-for-like, the Group delivered
13,413 fleet cars in the Period, representing an increase of 9.9%
compared to H1 FY23. The Group's performance was below the market
trends as the Group kept pricing disciplines to maintain margin and
did not undertake significant volumes of daily rental sales.
The Group saw a 6.2% increase in the like-for-like volume of new
commercial vehicles sold, with the market up 19.8% over the Period
compared to the six months to 31 August 2022. The Group's
performance against the market reflects strong outperformance in
the comparative period and the Group's franchise mix in van sales,
which lost some share in the Period.
Reflecting the focus on higher margin fleet sales, gross profit
per unit strengthened by 14.3% to record levels of GBP1,126. Gross
margin % rose from 4.7% to 5.1% in the Period. Overall,
like-for-like gross profit in the fleet and commercial channels
rose by GBP4.9m as a result of the positive trends.
Aftersales
The Group's high margin aftersales operations are a vital
contributor to Group profitability, generating over 40% of total
gross profit. Overall, compared to the six-month period ended 31
August 2022, the following like-for-like trends in aftersales
performance were witnessed:
Accident
Parts & Smart Forecourt
Service Repair Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue(11) 85.5 106.4 11.9 6.0 209.8
Revenue(11) change 4.6 11.3 2.3 (0.8) 17.4
Revenue(11) change
(%) 5.7% 11.8% 23.5% (11.3%) 9.0%
Gross profit change 2.1 2.7 1.8 0.1 6.7
Gross margin(12)
H1 FY24 (%) 73.3% 22.6% 58.5% 8.2% 44.9%
Gross margin(12)
H1 FY23 (%) 74.8% 22.4% 53.3% 5.9% 45.4%
Margin change
(%) (1.5%) 0.2% 5.2% 2.3% (0.5%)
(11) includes internal and external revenues
(12) Aftersales margin expressed on internal and external
revenues
-- Service
At the end of March 2023, there were 40.8 million(13) licensed
vehicles in the UK, including commercial vehicles. Of this total,
just 770,000 (1.8%) were battery electric vehicles, which is a
significant increase of over 50% on the prior year but still
represents a very small proportion of the overall parc. These cars,
motorbikes and commercial vehicles require access to maintenance
and repair services and demand increased as the vehicle parc has
aged in the last four years.
Vehicle service and repair is a key and resilient profit source
for the Group. The Group saw strong demand, for its service and
repair operations during the Period, driving like-for-like service
revenue growth of GBP4.6m (5.7%). Technician resource levels have
been a constraining factor in meeting both retail demand for work
and in the preparation of used vehicles for sale, with older
vehicles in stock requiring significantly more preparation. To
improve the recruitment and retention of Technicians, the Group has
taken further pay action in July. At the end of August 2023, there
were 126 technician vacancies in the Group, however, since the end
of July there has been a doubling of the number of applications the
Group has received for each technician vacancy. The like-for-like
number of technicians employed by the Group rose 6.4% in the Period
to 897 (February 2023: 843) Each technician generates an average
GBP115,000 of service and parts gross profit for the Group, so the
reduction of technician vacancy levels is a key focus of
management, in order to maximise the opportunity to the Group.
Gross margin percentages on vehicle servicing were 73.3% (H1
FY23: 74.8%) in the Core Group reflecting increased remuneration to
address technician resource constraints. However, positively gross
profit generation rose on a like-for like basis by GBP2.1m in
service.
(13) Source:
https://www.gov.uk/government/statistics/vehicle-licensing-statistics-january-to-march-2023/vehicle-licensing-statistics-january-to-march-2023
-- Parts
The Group's substantial parts operations include traditional
wholesale operations, agency distribution centres, on-line parts
retailing and accessory sales to dealership customers. These
operations supply parts to the Group's service and accident repair
operations as well as to other businesses and retail customers in
the UK and across the world. Parts revenues in the Core Group grew
GBP11.3m compared to last year due to price rises, increased
vehicle service and repair activity and an increase in sales in
wholesale parts operations.
-- Accident and Smart Repair
The Group continues to expand its substantial Smart Repair
operations through adding additional vans to the core cosmetic
business as well as introducing new streams including vans
specialising in wheel repairs and glass replacement. In addition,
enhanced smart repair fixed facilities are being created, such as
in Exeter to serve the Group's substantial dealership operations
there. This fleet largely serves the Group's dealerships and has
seen increased demand, as a result of the increase in the age of
used vehicles held for sale, which therefore require more
preparation. The fleet also carries out some limited sales to
external customers across the UK. There remains considerable scope
for the expansion of this retail element of the business and this
is a future focus area.
The Group's accident repair centres are managed separately from
the dealership businesses in a standalone division, concentrating
solely on the management of accident repair operations. The Group
has delivered a 23.5% increase in revenues generated from the
Group's accident and smart repair operations and a GBP1.8m increase
in gross profit. Specific KPI improvement targets, introduction of
uniform operating systems and focus on higher margin work
providers, have all driven this excellent improvement over the
Period.
-- Fuel Forecourt
In the Core Group one fuel forecourt is operated by the Group in
Widnes. As a result of the tempering of fuel prices from the peaks
in FY23, this forecourt saw slightly reduced revenues but a return
to more normal gross margins of 8.2% in the Period. Active pricing
strategies ensure that the forecourt has maintained market share. A
second forecourt was acquired in Yeovil as part of the Helston
Group, this is currently being redeveloped to enhance the retail
offering.
Acquisitions, Disposals and Closures
Dealerships acquired or closed since 1 March 2022 have
contributed an additional GBP6.6m of operating profit in the Period
compared to prior year, as summarised below:
Helston Other Acquisitions Closures Total
GBP'm GBP'm GBP'm GBP'm
H1 FY24
Revenue 248.6 43.0 8.0 299.6
Gross Profit 29.4 4.6 0.9 34.9
Operating profit 6.0 (0.2) (0.1) 5.7
H1 FY23
Revenue - 10.0 26.7 36.7
Gross Profit - 0.8 2.6 3.4
Operating profit - (0.6) (0.3) (0.9)
H1 FY24 variance
to H1 FY23
Revenue 248.6 33.0 (18.7) 262.9
Gross Profit 29.4 3.8 (1.7) 31.5
Operating profit 6.0 0.4 0.2 6.6
The contribution from the Helston businesses is in line with the
levels envisaged at the time of purchase. This scaled acquisition
of 28 sales outlets has been fully integrated into Group systems
and processes and the expected synergies are on track for
delivery.
Other Acquisitions include the new dealership openings for the
Toyota brand in Scotland, the Bristol Street Motor Nation outlets
in Stockton and Tamworth and the BMW Motorrad acquired dealerships
in Shipley and Rotherham. The results from these operations were
satisfactory for the Period and the operating losses were
anticipated given the start-up nature of the Toyota and used
vehicle outlets.
Closed sites include Stroud Ford, Malton BMW and MINI and the
accident repair centre in Newcastle, described in the Portfolio
Development section above.
Operating Expenses
A summary of Core Group operating expenses is set out below:
H1 FY24
Var to H1
H1 FY24 H1 FY23 FY23
GBP'm GBP'm GBP'm
Salary costs 110.6 109.2 1.4
Vehicle and valeting costs 21.4 18.6 2.8
Property costs and rates 24.6 22.8 1.8
Marketing costs 18.0 18.7 (0.7)
Energy costs 4.4 2.1 2.3
Other 17.5 16.7 0.8
Core Group operating expenses 196.5 188.1 8.4
Acquisitions 28.3 1.4 26.9
Disposals 1.0 2.9 (1.9)
-------- -------- -----------
Group Net Underlying Operating
Expenses 225.8 192.4 33.4
-------- -------- -----------
Core Group operating expenses totalled GBP196.5m in the Period
representing an increase of GBP8.4m (4.5%) compared to H1 FY23.
Dealerships acquired in the period since 1 March 2022,
significantly the Helston dealerships acquired, contributed a
further GBP26.9m of operating expenses in the Period.
The most significant cost increases in the core Group arise in
vehicle and valet costs and energy. Vehicle and valet costs rose
due to the impact of National Minimum Wage rises in valeting and
increases in vehicle prices which pushed up the cost of the Group's
demonstration and courtesy vehicle fleets.
The Group benefited from below market rate electricity costs
under a fixed contract which covered the majority of the Group's
dealerships until the end of September 2022, the Group has
previously highlighted that energy costs would increase
significantly as this contract ended. The Group has been executing
its energy purchase strategy to mitigate energy cost increases.
Salary costs represent the biggest single cost to the Group. The
salary costs included in operating expenses exclude the productive
cost of the Group's aftersales technicians, which are included in
cost of sales. Salary costs in operating expenses rose by just
GBP1.4m with the impact of pay reviews and the application of the
national minimum wage being partially offset by savings in variable
pay such as commissions as used vehicle volumes declined in the
Period. Salary costs were also lower than anticipated due to the
level of vacancies in the Period.
The Group delivered savings in Marketing costs. These savings
have been delivered whilst Bristol Street Motors has remained the
highest-ranking franchised dealership brand in England for prompted
brand awareness, 56.6%(14) (28 February 2023: 54%)
(14) Source: YouGov.
Net Finance Charges
The movement in net finance charges is analysed below:
H1 FY24
Var to
H1 FY24 H1 FY23 H1 FY23
GBP'm GBP'm GBP'000
Interest on bank borrowings 4.9 0.8 4.1
New vehicle Manufacturer stocking
interest 3.3 0.9 2.4
Used vehicle stock funding interest 0.8 0.2 0.6
Interest on lease liabilities 1.7 1.7 -
Interest on bank deposits (0.7) (0.4) (0.3)
Net finance income relating to
defined benefit pension scheme (0.1) (0.1) -
-------- -------- ---------
Net Finance Charges 9.9 3.1 6.8
-------- -------- ---------
Interest on bank borrowings increased as the Group drew a new
20-year mortgage facility from BMW Financial Services for GBP74.8m
in December 2022, to partially fund the acquisition of Helston
Garages Group limited. This mortgage is secured against a portfolio
of 22 of the Group's freehold and long leasehold properties and is
repayable in equal instalments over the 20-year term. Interest is
charged on this facility rate of 2.8% above BMW Base Rate. To
minimise the risk of interest rate fluctuations on this facility,
the Group entered into an interest rate cap contract in the Period,
in respect of GBP50 million of this facility. This limits the
variable element of the applicable interest rate to a maximum of
4.5%.
Interest on the Group's revolving credit facility has increased
because of rate rises. Existing swap arrangements over GBP22m of
borrowing at the favourable rate of 1.28% expired on 27 February
2023. A new interest rate swap over GBP30m of borrowing was secured
in the Period, this fixes the underlying SONIA rate charged at
4.42% until March 2025.
A significant increase in manufacturer new vehicle stocking
interest has been seen in the Period. Increased pipelines of new
vehicle inventory, as supply constraints have eased and prices have
risen, higher rates of interest being charged and reduced free
funding periods have all contributed to these increased charges in
the Period.
Non-underlying items
H1 FY24 H1 FY23
GBP'm GBP'm
Share based payments charge 1.0 1.1
Amortisation 0.4 0.2
Redundancy costs 0.8 -
Lease surrender premium (0.8) -
1.4 1.3
-------- --------
The Group undertook a strategic review of aftersales collection
and delivery service at the start of the Period. Customer charges
for this service were increased, to match the cost of provision
more closely. The number of employed drivers was also significantly
reduced in order to match likely demand levels given the increase
in cost to customers. This led to a one-off redundancy cost in the
Period of GBP0.8m.
The Group purchased the freehold interest in it's Derby
multi-site operation in FY23. A premium was received in the Period
in respect of the remaining lease obligation between a tenant of
the freeholder and the Group as sub-lessee. The premium received
has been included in non-underlying items due to its one-off nature
and size.
Pensions
The Group has a closed defined benefit scheme which remains
fully funded and requires no ongoing cash contribution from the
Company.
The Scheme invests in an LDI portfolio which aims to fully hedge
the Scheme's interest rate and inflation risk to maintain this
fully funded position.
The accounting surplus on the scheme at 31 August 2023 was
GBP3.1m (28 February 2023: GBP3.2m)
Tax
The Group's underlying effective rate of tax for the Period was
25.5% (H1 FY23: 19.8%). The overall effective tax rate follows the
change in the headline rate of corporation tax in the UK from 19%
to 25% on 1 April 2023. The total tax charge for the Period was
GBP7.7m (H1 FY23: GBP5.4m). The Group continues to be classified as
"low risk" by HMRC and takes a pro-active approach to minimising
tax liabilities whilst ensuring it pays the appropriate level of
tax to the UK Government.
Dividend
An interim dividend of 0.85p per share (H2 FY23: 0.70p) in
respect of FY24 will be paid on 19 January 2024. The ex-dividend
date will be 14 December 2023 and the associated record date 15
December 2023.
Cash Flows
The decision to increase the level of used vehicle inventory
held by the Group to drive market share has absorbed cash in the
Period. Compared to the low level of inventory held on 28 February
2023, the movement in used vehicle stock is the main reason for a
net cash outflow in respect of working capital in the Period of
GBP30.0m. This investment in inventory led to a Free Cash Outflow
in the Period of GBP0.4m (H1 FY23: Free Cash Inflow of
GBP23.2m).
The Group has successfully disposed of two of the properties
held for resale at 28 February 2023 delivering a cash inflow of
GBP2.2m in the Period. These sales proceeds have been deducted in
arriving at net capital expenditure of GBP11.7m incurred in the
Period. GBP5.1m of this total was incurred in respect of projects
which add additional capacity to the Group or were one-off in
nature, such as the solar panel installation. This GBP5.1m has
therefore been excluded from the calculation of Free Cash Flow in
the period.
Capital expenditure for the full year FY24 was previously
forecast at GBP38.0m. This forecast has been revised down to
GBP27.8m, a reduction of GBP10.2m (26.8%). GBP2.2m of this
reduction relates to the property disposals in the Period
highlighted above. Further proceeds from the sale of surplus
properties are expected but not included in the revised forecast.
GBP6.0m of previously forecast spend will now be deferred until
FY25. Finally, a change in scope in one planned project has
resulted in a GBP2.0m reduction in expected spend.
In the financial year to date, the Group has continued to buy
back shares, repurchasing approximately 7.7m shares, representing
2.2% of opening shares in issue, for a total cost of GBP5.0m. The
Board believes that this is an appropriate use of capital and will
continue a programme of Buybacks as a relevant element of returns
to shareholders, alongside dividend payments. The Board has agreed
a further GBP3m buyback programme for deployment once the current
remaining authority of GBP1m is utilised. GBP4.9m was spent on
dividends in the Period as a result of the final dividend in
respect of the year ended 28 February 2023.
Karen Anderson, CFO
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the six months ended 31 August 2023
Six months ended 31 Six months ended 31 Year ended 28 February
August 2023 August 2022 2023
Note Underlying Non-underlying Total Underlying Non-underlying Total Underlying Non- Total
items items items items items underlying
(note (note items
4) 4) (note
4)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2,422,454 - 2,422,454 1,999,712 - 1,999,712 4,014,544 - 4,014,544
Cost of
sales (2,155,239) - (2,155,239) (1,775,991) - (1,775,991) (3,566,134) - (3,566,134)
----------- -------------- ----------- ----------- -------------- ----------- ----------- ---------- -----------
Gross
profit 267,215 - 267,215 26 223,721 - 223,721 448,410 - 448,410
Operating
expenses (225,787) (1,354) (227,141) (192,417) (1,278) (193,695) 5) (399,590) (6,828) (406,418)
----------- -------------- ----------- ----------- -------------- ----------- ----------- ---------- -----------
Operating
profit /
(loss) 41,428 (1,354) 40,074 31,304 (1,278) 30,026 48,820 (6,828) 41,992
Finance
income 5 749 - 749 479 - 479 1,300 - 1,300
Finance
costs 5 (10,672) - (10,672) (3,566) - (3,566) (10,842) - (10,842)
----------- -------------- ----------- ----------- -------------- ----------- ----------- ---------- -----------
Profit
before
tax 31,505 (1,354) 30,151 28,217 (1,278) 26,939 39,278 (6,828) 32,450
Taxation 6 (8,029) 298 (7,731) (5,598) 182 (5,416) (7,663) 746 (6,917)
----------- -------------- ----------- ----------- -------------- ----------- ----------- ---------- -----------
Profit for
the period
attributed
to equity
holders 23,476 (1,056) 22,420 22,619 (1,096) 21,523 31,615 (6,082) 25,533
=========== ============== =========== =========== ============== =========== =========== ========== ===========
Basic
earnings
per share
(p) 7 6.58 6.19 7.40
Diluted
earnings
per share
(p) 7 6.16 5.85 7.02
----------- ----------- -----------
For the six months ended 31 August 2023
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2023 2022 2023
Note GBP'000 GBP'000 GBP'000
Profit for the period 22,420 21,523 25,533
Other comprehensive (expense) /
income
Items that will not be reclassified
to profit or loss:
Actuarial loss on retirement benefit
obligations 9 (51) (4,048) (5,973)
Deferred tax relating to actuarial
loss on retirement benefit obligations 13 1,012 1,493
Items that may be reclassified subsequently
to profit or loss:
Cash flow hedges 941 185 172
Deferred tax relating to cash flow
hedges (215) (35) (43)
Other comprehensive income / (expense)
for the period, net of tax 688 (2,886) (4,351)
---------- ---------- ------------
Total comprehensive income for the
period attributable to equity holders 23,108 18,637 21,182
========== ========== ============
As at 31 August 2023
31 August 31 August 28 February
2023 2022 2023
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill and other indefinite
life assets 11 127,462 105,077 127,590
Other intangible assets 2,105 2,397 2,286
Retirement benefit asset 9 3,129 5,073 3,188
Property, plant and equipment 331,085 261,712 328,405
Right of use assets 74,600 74,608 73,078
Derivative financial instruments 1,365 - 507
539,746 448,867 535,054
------------ ---------- ------------
Current assets
Inventories 694,493 496,739 674,380
Trade and other receivables 89,740 72,117 86,317
Current tax assets - - 1,654
Derivative financial instruments - 190 -
Cash and cash equivalents 47,885 85,860 78,984
------------ ---------- ------------
832,118 654,906 841,335
Property assets held for sale 4,984 - 6,077
------------ ----------
Total current assets 837,102 654,906 847,412
------------ ---------- ------------
Total assets 1,376,848 1,103,773 1,382,466
============ ========== ============
Current liabilities
Trade and other payables (750,743) (569,717) (758,594)
Current tax liabilities (978) (3,039) -
Contract liabilities (13,528) (12,526) (13,477)
Borrowings (16,033) (12,954) (29,821)
Lease liabilities (9,706) (14,415) (14,498)
------------ ---------- ------------
Total current liabilities (790,988) (612,651) (816,390)
------------ ---------- ------------
Non-current liabilities
Borrowings (122,536) (55,063) (124,519)
Lease liabilities (75,092) (70,691) (68,959)
Deferred income tax liabilities (20,701) (13,448) (19,117)
Contract liabilities (11,963) (11,897) (12,104)
------------ ---------- ------------
Total non-current liabilities (230,292) (151,099) (224,699)
------------ ---------- ------------
Total liabilities (1,021,280) (763,750) (1,041,089)
------------ ---------- ------------
Net assets 355,568 340,023 341,377
============ ========== ============
Capital and reserves attributable
to equity holders of the Group
Ordinary share capital 34,157 34,894 34,894
Share premium 124,939 124,939 124,939
Other reserve 10,645 10,645 10,645
Hedging reserve 859 154 133
Treasury share reserve (2,143) (3,134) (2,653)
Capital redemption reserve 5,570 4,833 4,833
Retained earnings 181,541 167,692 168,586
------------ ---------- ------------
Total equity 355,568 340,023 341,377
============ ========== ============
For the six months ended 31 August 2023
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2023 2022 2023
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Operating profit 40,074 30,026 41,992
(Profit) / loss on sale of property,
plant and equipment (468) 6 102
Profit on lease modification (547) (2) (449)
Amortisation of intangible assets 408 214 509
Depreciation of property, plant
and equipment 8,515 6,900 14,510
Depreciation of right of use assets 8,895 7,775 16,225
Impairment charges - - 1,500
Movement in working capital 10 (29,973) 904 23,737
Share based payments charge 777 857 1,651
----------- ----------- -------------
Cash inflow from operations 27,681 46,680 99,777
Tax received 7 - 100
Tax paid (3,724) (4,801) (9,118)
Finance income received 475 356 1,053
Finance costs paid (9,803) (3,394) (10,983)
Net cash inflow from operating
activities 14,636 38,841 80,829
----------- ----------- -------------
Cash flows from investing activities
Acquisition of businesses, net
of cash, overdrafts and borrowings
acquired - (2,626) (122,066)
Acquisition of freehold and long leasehold
land and buildings (2,084) (7,468) (7,468)
Disposal of businesses 204 - -
Purchases of intangible assets (100) (1) (186)
Purchases of other property, plant
and equipment (11,864) (7,835) (13,785)
Proceeds from disposal of property,
plant and equipment 2,239 - 179
----------- ----------- -------------
Net cash (outflow) / inflow from
investing activities (11,605) (17,930) (143,326)
----------- ----------- -------------
Cash flows from financing activities
Proceeds from borrowings 8 - 671 110,570
Repayment of borrowings 8 (15,976) (319) (23,358)
Principal elements of lease repayments (8,461) (7,827) (16,187)
Sale of treasury shares 91 304 744
Purchase of treasury shares - (2,000) (2,000)
Cash settled share options (109) (169) (180)
Repurchase of own shares (4,762) (5,898) (5,898)
Dividends paid to equity holders (4,913) (3,606) (6,003)
Net cash (outflow)/inflow from
financing activities (34,130) (18,844) 57,688
----------- ----------- -------------
Net (decrease) /increase in cash
and cash equivalents 8 (31,099) 2,067 (4,809)
Cash and cash equivalents at beginning
of period 78,984 83,793 83,793
----------- ----------- -------------
Cash and cash equivalents at
end of period 47,885 85,860 78,984
=========== =========== =============
For the six months ended 31 August 2023
Treasury Capital
Ordinary Share Other Hedging share redemption Retained Total
share capital premium reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 March 2023 34,894 124,939 10,645 133 (2,653) 4,833 168,586 341,377
Profit for the period - - - - - - 22,420 22,420
Actuarial losses
on retirement benefit
obligations - - - - - - (51) (51)
Tax on items taken
directly to equity - - - (215) - - 13 (202)
Fair value gains - - - 941 - - - 941
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Total comprehensive
income for the period - - - 726 - - 22,382 23,108
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Sale of treasury
shares - - - - 510 - (419) 91
Cancellation of
repurchased shares (737) - - - - 737 - -
Repurchase of own
shares - - - - - - (4,762) (4,762)
Dividends paid - - - - - - (4,913) (4,913)
Share based payments
charge - - - - - - 667 667
----------
As at 31 August
2023 34,157 124,939 10,645 859 (2,143) 5,570 181,541 355,568
======== ========== ========== ========== ========= ============ =========== =========
The repurchase of own shares in the period was made pursuant to
the share buyback programmes announced on 5 October 2022 and 10 May
2023.
7,372,160 ordinary shares to the value of GBP4,762,000 had been
repurchased in the six months ended 31 August 2023. These shares
were cancelled immediately and accordingly, the nominal value of
these shares has been transferred to the capital redemption
reserve.
The 'Other reserve' is a merger reserve, arising from shares
issued as consideration to the former shareholders of acquired
companies.
For the six months ended 31 August 2022
Treasury Capital
Ordinary Share Other Hedging share redemption Retained Total
share capital premium reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 March 2022 35,942 124,939 10,645 4 (1,586) 3,785 158,152 331,881
Profit for the period - - - - - - 21,523 21,523
Actuarial losses on
retirement benefit
obligations - - - - - - (4,048) (4,048)
Tax on items taken
directly to equity - - - (35) - - 1,012 977
Fair value gains - - - 185 - - - 185
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Total comprehensive
income for the period - - - 150 - - 18,487 18,637
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Sale of treasury
shares - - - - 452 - (131) 321
Purchase of treasury
shares - - - - (2,000) - - (2,000)
Cancellation of
repurchased
shares (1,048) - - - - 1,048 - -
Repurchase of own
shares - - - - - - (5,898) (5,898)
Dividends paid - - - - - - (3,606) (3,606)
Share based payments
charge - - - - - - 688 688
----------
As at 31 August 2022 34,894 124,939 10,645 154 (3,134) 4,833 167,692 340,023
======== ========== ========== ========== ========= ============ =========== =========
For the year ended 28 February 2023
Ordinary Treasury Capital
share Share Other Hedging share redemption Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 March 2022 35,942 124,939 10,645 4 (1,586) 3,785 158,152 331,881
Profit for the year - - - - - - 25,533 25,533
Actuarial losses on
retirement benefit
obligations - - - - - - (5,973) (5,973)
Tax on items taken
directly to equity - - - (43) - - 1,493 1,450
Fair value gains - - - 172 - - - 172
-------- -------- -------- -------- -------- ----------- --------- -------
Total comprehensive
income for the year - - - 129 - - 21,053 21,182
-------- -------- -------- -------- -------- ----------- --------- -------
Sale of treasury shares - - - - (2,000) - - (2,000)
Issuance of treasury
shares - - - - 933 - (189) 744
Repurchase of own
shares - - - - - - (5,898) (5,898)
Cancellation of repurchased
shares (1,048) - - - - 1,048 - -
Dividends paid - - - - - - (6,003) (6,003)
Share based payments
charge - - - - - - 1,471 1,471
-------- -------- -------- -------- -------- ----------- --------- -------
As at 28 February
2023 34,894 124,939 10,645 133 (2,653) 4,833 168,586 341,377
======== ======== ======== ======== ======== =========== ========= =======
For the six months ended 31 August 2023
1. Basis of preparation
Vertu Motors plc is a Public Limited Company which is quoted on
the AiM Market and is incorporated and domiciled in the United
Kingdom. The address of the registered office is Vertu House, Fifth
Avenue Business Park, Team Valley, Gateshead, Tyne and Wear, NE11
0XA. The registered number of the Company is 05984855.
The financial information for the period ended 31 August 2023
and similarly the period ended 31 August 2022 has neither been
audited nor reviewed by the auditors. The financial information for
the year ended 28 February 2023 has been based on information
contained in the audited financial statements for that year.
The information for the year ended 28 February 2023 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The Auditors'
Report on those accounts was not qualified under section 498 of the
Companies Act 2006.
2. Accounting policies
In line with International Accounting Standard 34 and the
Disclosure and Transparency Rules of the Financial Conduct
Authority, these condensed interim financial statements have been
prepared applying the accounting policies and presentation that
were applied in the preparation of the Company's published
consolidated financial statements for the year ended 28 February
202
3. Segmental information
The Group adopts IFRS 8 "Operating Segments", which determines
and presents operating segments based on information provided to
the Group's Chief Operating Decision Maker ("CODM"), Robert
Forrester, Chief Executive Officer. The CODM receives information
about the Group overall and therefore there is one operating
segment.
The CODM assesses the performance of the operating segment based
on a measure of both revenue and gross margin. However, to increase
transparency, the Group has included below an additional voluntary
disclosure analysing revenue and gross margin within the reportable
segment .
Six months ended 31 Gross Gross Gross
August 2023 Revenue Revenue Profit Profit Margin
GBP'm Mix % GBP'm Mix % %
Aftersales(15) 205.1 8.5 110.0 41.2 43.8
Used vehicles 947.8 39.1 67.4 25.2 7.1
New retail and Motability 744.0 30.7 63.0 23.6 8.5
New fleet & commercial 525.6 21.7 26.8 10.0 5.1
-------- -------- -------- -------- --------
Total 2,422.5 100.0 267.2 100.0 11.0
======== ======== ======== ======== ========
Six months ended 31 Gross Gross Gross
August 2022 Revenue Revenue Profit Profit Margin
GBP'm Mix % GBP'm Mix % %
Aftersales(15) 158.9 8.0 89.0 39.8 45.4
Used vehicles 854.5 42.7 67.1 30.0 7.9
New retail and Motability 557.6 27.9 47.4 21.2 8.5
New fleet & commercial 428.7 21.4 20.2 9.0 4.7
-------- -------- -------- -------- --------
Total 1,999.7 100.0 223.7 100.0 11.2
======== ======== ======== ======== ========
Year ended 28 February Gross Gross Gross
2023 Revenue Revenue Profit Profit Margin
GBP'm Mix % GBP'm Mix % %
Aftersales(15) 336.8 8.4 182.5 40.7 44.5
Used vehicles 1,658.2 41.3 125.2 27.9 7.5
New retail and Motability 1,121.9 27.9 98.4 22.0 8.8
New fleet & commercial 897.6 22.4 42.3 9.4 4.7
-------- -------- -------- -------- --------
Total 4,014.5 100.0 448.4 100.0 11.2
======== ======== ======== ======== ========
15 Aftersales margin expressed on internal
and external revenue
4. Non-underlying items
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2023 2022 2023
GBP'000 GBP'000 GBP'000
Impairment charges - - (1,500)
Acquisition costs - - (2,753)
Redundancy costs (778) - -
Lease surrender premium 845 - -
Share based payment charge (1,013) (1,064) (2,066)
Amortisation (408) (214) (509)
----------- ----------- -------------
Non-underlying loss before tax (1,354) (1,278) (6,828)
Non-underlying taxation charge 298 182 746
----------- ----------- -------------
Non-underlying loss after tax (1,056) (1,096) (6,082)
=========== =========== =============
5. Finance income and costs
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2023 2022 2023
GBP'000 GBP'000 GBP'000
Interest on short-term bank deposits 672 356 1,053
Net finance income relating to
Group pension scheme 77 123 247
----------- ----------- -------------
Finance income 749 479 1,300
=========== =========== =============
Bank loans and overdrafts (4,885) (802) (3,112)
Vehicle stocking interest (4,054) (1,119) (4,242)
Lease liability interest (1,733) (1,645) (3,488)
----------- ----------- -------------
Finance costs (10,672) (3,566) (10,842)
=========== =========== =============
6. Taxation
The Group's underlying effective rate of tax is 25.5%, (H1 2023:
19.8%), which is higher than the standard rate of corporation tax
in the UK as a result of the impact of non-qualifying depreciation
and non-deductible expenses. The overall effective tax rate of
25.7% includes tax on non-underlying items. The Group continues to
be classified as "low risk" by HMRC and takes a pro-active approach
to minimising tax liabilities whilst ensuring it pays the
appropriate level of tax to the UK Government.
7. Earnings per share
Basic and diluted earnings per share are calculated by dividing
the earnings attributable to equity shareholders by the weighted
average number of ordinary shares during the period or the diluted
weighted average number of ordinary shares in issue in the
period.
The Group only has one category of potentially dilutive ordinary
shares, which are share options. A calculation has been undertaken
to determine the number of shares that could have been acquired at
fair value (determined as the average annual market price of the
Group's shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of
shares calculated as above is compared with the number of shares
that would have been issued assuming the exercise of the share
options.
Adjusted earnings per share is calculated by dividing the
adjusted earnings attributable to equity shareholders by the
weighted average number of ordinary shares in issue during the
period.
7. Earnings per share (continued)
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2023 2022 2023
GBP'000 GBP'000 GBP'000
Profit attributable to equity shareholders 22,420 21,523 25,533
Non-underlying items (note 4) 1,056 1,096 6,082
Adjusted earnings attributable to
equity shareholders 23,476 22,619 31,615
=========== =========== =============
Weighted average number of shares
in issue ('000s) 340,685 347,939 345,239
Potentially dilutive shares ('000s) 23,253 20,072 18,703
----------- ----------- -------------
Diluted weighted average number
of shares in issue ('000s) 363,938 368,011 363,942
=========== =========== =============
Basic earnings per share 6.58p 6.19p 7.40p
=========== =========== =============
Diluted earnings per share 6.16p 5.85p 7.02p
=========== =========== =============
Underlying earnings per share 6.89p 6.50p 9.16p
=========== =========== =============
Diluted underlying earnings per
share 6.45p 6.15p 8.69p
=========== =========== =============
At 31 August 2023, there were 341,282,768 shares in issue
(including 4,575,452 held by the Group's employee benefit
trust).
8. Reconciliation of net cash flow to movement in net cash
31 August 31 August 28 February
2023 2022 2023
GBP'000 GBP'000 GBP'000
Net (decrease) / increase in cash
and cash equivalents (31,099) 2,067 (4,809)
Cash inflow from proceeds of borrowings - (671) (110,570)
Cash outflow from repayment of borrowings 15,976 319 23,358
Cash movement in net cash (15,123) 1,715 (92,021)
Capitalisation of loan arrangement
fees - - 1,037
Amortisation of loan arrangement
fees (85) (39) (131)
Increase in accrued loan interest (121) - (408)
---------- ---------- ------------
Non-cash movement in net cash (206) (39) 498
Movement in net (debt)/cash (excluding
lease liabilities) (15,329) 1,676 (91,523)
Opening net (debt)/cash (excluding
lease liabilities) (75,356) 16,167 16,167
---------- ---------- ------------
Closing net (debt)/cash (excluding
lease liabilities) (90,685) 17,843 (75,356)
Opening lease liabilities (83,457) (88,830) (88,830)
Capitalisation of new leases (11,953) (4,196) (13,307)
Disposal of lease liabilities 2,152 93 2,493
Interest element of lease repayments (1,732) (1,645) (3,488)
Cash outflow from lease repayments 10,193 9,472 19,675
---------- ---------- ------------
Closing lease liabilities (84,797) (85,106) (83,457)
Closing net debt (including lease
liabilities) (175,482) (67,263) (158,813)
========== ========== ============
9. Retirement benefit asset
The Group operates a trust based defined benefit pension scheme,
"Bristol Street Pension Scheme", which has three defined benefit
sections which were closed to new entrants and future accrual on 31
May 2003, with another section closed to new entrants in July 2003
and future accrual in October 2013. The Group has applied IAS 19
(revised) to the scheme. The scheme remains fully funded and in
surplus on the accounting basis.
During the six month period ended 31 August 2023, there have
been changes in the financial and demographic assumptions
underlying the calculation of the liabilities. In particular, the
discount rate has increased due to a rise in corporate bond yields
and life expectancy assumptions have been modified. The effect of
these changes in assumptions was a decrease in liabilities of
GBP1,417,000. The hedging strategy in place within the scheme
investment portfolio meant that the period also saw a decline in
the market value of scheme assets of GBP1,476,000, offsetting the
decrease in liabilities. In total, an actuarial loss of GBP51,000
was recognised in the Consolidated Statement of Comprehensive
Income.
10. Cash flow from movement in working capital
The following table reconciles the movement in balance sheet
headings to the movement in working capital as presented in the
Consolidated Cash Flow Statement.
For the six months ended
31 August 2023
Trade and Trade Total working
other receivables and other capital
Inventories GBP'000 payables movement
GBP'000 GBP'000 GBP'000
Trade and other payables (750,743)
Contract liabilities (25,491)
-----------
At 31 August 2023 694,493 89,740 (776,234)
At 28 February 2023 674,380 86,316 (784,175)
Balance sheet movement (20,113) (3,424) (7,941)
Disposals (104) (27) 9
-------------- ------------------- -----------
Movement excluding business
combinations (20,217) (3,451) (7,932) (31,600)
============== =================== ===========
Pension related balances 85
Decrease in capital creditor 1,925
Increase in interest accrual (383)
Movement in working capital (29,973)
==============
For the six months ended
31 August 2022
Trade Trade Total working
and other and other capital movement
Inventories receivables payables GBP'000
GBP'000 GBP'000 GBP'000
Trade and other payables (569,717)
Contract liabilities (24,423)
-----------
At 31 August 2022 496,739 72,117 (594,140)
At 28 February 2022 475,027 51,839 (552,285)
Balance sheet movement (21,712) (20,278) 41,855
Acquisitions 123 16 156
-------------- ------------- -----------
Movement excluding business
combinations (21,589) (20,262) 42,011 160
============== ============= ===========
Pension related balances 57
Decrease in capital creditor 823
Increase in interest accrual (136)
Movement in working capital 904
==================
10. Cash flow from movement in working capital (continued)
For the year ended 28 February
2023
Trade Trade Total working
and other and other capital movement
Inventories receivables payables GBP'000
GBP'000 GBP'000 GBP'000
Trade and other payables (758,594)
Contract liabilities (25,581)
----------
At 28 February 2023 674,380 86,317 (784,175)
At 28 February 2022 475,027 51,839 (552,285)
------------- ------------ ----------
Balance sheet movement (199,353) (34,478) 231,890
Acquisitions 62,730 19,545 (54,098)
Previous year acquisitions - - 333
Movement excluding business
combinations (136,623) (14,933) 178,125 26,569
============= ============ ==========
Pension related balances 141
Increase in capital creditor (2,268)
Increase in interest accrual (705)
Movement in working capital (23,737)
=================
10. Goodwill and other indefinite life assets
31 August 31 August 28 February
2023 2022 2023
GBP'000 GBP'000 GBP'000
Goodwill 83,559 76,182 83,687
Other indefinite life assets - Franchise
relationships 43,903 28,895 43,903
At end of period 127,462 105,077 127,590
========== ========== ============
11. Risks and uncertainties
There are certain risk factors which could result in the actual
results of the Group differing materially from expected results.
These factors include: failure to deliver on the strategic goal of
the Group to acquire and consolidate UK motor retail businesses,
failure to meet competitive challenges to our business model or
sector, advances in vehicle technology providing customers with
mobility solutions which bypass the dealer network, inability to
maintain current high quality relationships with Manufacturer
partners, economic conditions impacting trading, market driven
fluctuations in used vehicle values, litigation and regulatory
risk, failure to comply with health and safety policy, failure to
attract, develop and retain talent, failure of Group information
and telecommunication systems, malicious cyber-attack, availability
of credit and vehicle financing, use of estimates and currency
risk.
All of the above principal risks are consistent with those
detailed in the Annual Report for the year ended 28 February
2023.
The Board continually review the risk factors which could impact
on the Group achieving its expected results and confirm that the
above principal factors will remain relevant for the final six
months of the financial year ending 29 February 2024. A review of
risks pursuant to Task Force on Climate-Related Financial
Disclosures is underway and an update will be provided in the
annual financial statements.
Set out below are the definitions and sources of various
alternative performance measures which are referred to throughout
the Interim Financial Report. All financial information provided is
in respect of the Vertu Motors plc Group.
Definitions
Like-for-like Dealerships that have comparable trading periods
in two consecutive financial years, only the comparable period is
measured as "Like-for-like".
H1 FY23 The six month period ended 31 August 2023
H1 FY22 The six month period ended 31 August 2022
Adjusted Adjusted for amortisation of intangible assets, share
based payment charges and other non-underlying items as these are
unconnected with the ordinary business of the Group.
Aftersales gross margin Aftersales gross margin compares the
gross profit earned from aftersales activities to total aftersales
revenues, including internal revenue relating to service and
vehicle preparation work performed on the Group's own vehicles.
This is to properly reflect the real activity of the Group's
aftersales departments.
Alternative Performance Measures
Adjusted Operating Profit Six months Six months
ended ended
31 August 31 August
2023 2022
GBP'000 GBP'000
Operating profit 40,074 30,026
Share based payment charge 1,013 1,064
Amortisation 408 214
Redundancy costs 778 -
Lease surrender premium (845) -
Adjusted Operating Profit 41,428 31,304
=========== ===========
Adjusted Profit Before Tax (PBT) Six months Six months
ended ended
31 August 31 August
2023 2022
GBP'000 GBP'000
Profit before tax 30,151 26,939
Share based payment charge 1,013 1,064
Amortisation 408 214
Redundancy costs 778 -
Lease surrender premium (845) -
Adjusted PBT 31,505 28,217
=========== ===========
Free Cash Flow
Six months Six months
ended ended
31 August 31 August
2023 2022
GBP'000 GBP'000
Net cash inflow from operating activities 14,636 38,841
Purchase of other property, plant
and equipment (11,864) (7,835)
Enhancement capital expenditure included 3,121 -
in above
Purchase of intangible assets (100) (1)
Proceeds from disposal of property, 2,239 -
plant and equipment
Principal elements of lease repayments (8,461) (7,827)
----------- -----------
Free Cash Flow (429) 23,178
=========== ===========
Tangible net assets per share 31 August 28 February
2023 2023
GBP'000 GBP'000
Net assets 355,568 341,377
Less:
Goodwill and other indefinite life
assets (127,462) (127,590)
Other intangible assets (2,105) (2,286)
Add:
Deferred tax on above adjustments 12,604 12,621
---------- ------------
Tangible net assets 238,605 224,122
========== ============
Tangible net assets per share 70.9p 65.3p
========== ============
At 31 August 2023, there were 341,282,768 shares in issue (28
February 2023: 348,945,522), of which 4,575,452 were held by the
Group's employee benefit trust (28 February 2023: 5,665,352).
Rights to dividends on shares held in the Group's employee benefit
trust have been waived and therefore such shares are not included
in the tangible net asset per share calculation.
Gearing ratio 31 August 28 February
2023 2023
GBP'000 GBP'000
Net debt (excluding lease liabilities) 90,685 75,356
Shareholders' equity 355,568 341,377
---------- ------------
Gearing ratio (Net debt/Shareholders'
equity) 25.5% 22.1%
========== ============
Like-for-like reconciliations:
Revenue by department
H1 FY24 H1 FY24
Group revenue Acquisitions Disposals Like-for-like
GBP'm revenue revenue revenue
GBP'm GBP'm GBP'm
New retail and Motability 744.0 (96.2) (1.2) 646.6
New fleet and commercial 525.6 (31.0) (1.4) 493.2
Used vehicles 947.8 (130.0) (4.5) 813.3
Aftersales 205.1 (34.4) (0.9) 169.8
--------------- --------------- ------------ ---------------
Total revenue 2,422.5 (291.6) (8.0) 2,122.9
=============== =============== ============ ===============
H1 FY23 H1 FY23
Group revenue Acquisitions Disposals Like-for-like
GBP'm revenue revenue revenue
GBP'm GBP'm GBP'm
New retail and Motability 557.6 (1.1) (4.1) 552.4
New fleet and commercial 428.7 (0.1) (6.9) 421.7
Used vehicles 854.5 (8.2) (13.5) 832.8
Aftersales 158.9 (0.6) (2.2) 156.1
--------------- --------------- ------------ ---------------
Total revenue 1,999.7 (10.0) (26.7) 1,963.0
=============== =============== ============ ===============
Gross profit by department
H1 FY24 H1 FY24
Group gross Acquisitions Disposals Like-for-like
profit gross profit gross profit gross profit
GBP'm GBP'm GBP'm GBP'm
New retail and Motability 63.0 (9.6) (0.2) 53.2
New fleet and commercial 26.8 (1.9) (0.2) 24.7
Used vehicles 67.4 (7.1) (0.1) 60.2
Aftersales 110.0 (15.4) (0.5) 94.1
------------- --------------- --------------- ---------------
Total gross profit 267.2 (34.0) (1.0) 232.2
============= =============== =============== ===============
H1 FY23 H1 FY23
Group gross Acquisitions Disposals Like-for-like
profit gross profit gross profit gross profit
GBP'm GBP'm GBP'm GBP'm
New retail and Motability 47.5 (0.1) (0.4) 47.0
New fleet and commercial 20.1 - (0.3) 19.8
Used vehicles 67.1 (0.4) (0.6) 66.1
Aftersales 89.0 (0.3) (1.3) 87.4
------------- --------------- --------------- ---------------
Total gross profit 223.7 (0.8) (2.6) 220.3
============= =============== =============== ===============
Like-for-like reconciliations (continued):
Number of vehicles sold by department
H1 FY24 H1 FY24
Total Group Acquisitions Disposals Core Group
New retail 20,027 (2,367) (42) 17,618
New Motability 8,626 (240) - 8,386
New fleet 13,413 (927) (31) 12,455
New commercial 9,422 (192) (7) 9,223
Used vehicles 43,921 (4,432) (253) 39,236
------------- --------------- ------------ ------------
Total 95,409 (8,158) (333) 86,918
============= =============== ============ ============
H1 FY23 H1 FY23
Total Group Acquisitions Disposals Core Group
New retail 17,673 (58) (118) 17,497
New Motability 4,711 (5) (9) 4,697
New fleet 11,522 (12) (201) 11,309
New commercial 8,707 (2) (45) 8,660
Used vehicles 43,022 (488) (655) 41,879
------------- --------------- ------------ ------------
Total 85,635 (565) (1,028) 84,042
============= =============== ============ ============
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END
IR UOVVROKURRAA
(END) Dow Jones Newswires
October 04, 2023 02:00 ET (06:00 GMT)
Vertu Motors (LSE:VTU)
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Vertu Motors (LSE:VTU)
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