TIDMVTU
RNS Number : 8628O
Vertu Motors PLC
13 October 2021
13 October 2021
Vertu Motors plc ("Vertu", "Group")
Unaudited interim results for the six months ended 31 August
2021
"Record results delivered above market expectations, dividends
resumed"
Vertu Motors plc, the automotive retailer with a network of 154
sales and aftersales outlets across the UK and a sector leading
online presence, announces its interim results for the six months
ended 31 August 2021 ("the Period").
HIGHLIGHTS
-- Record trading results delivered with Adjusted(1) profit
before tax of GBP51.8m (H1 FY21: GBP4.7m, H1 FY20: GBP16.9m), on
revenues of GBP1.9bn
-- Vehicle sales volumes ahead of market trends in all areas and
on a like-for-like basis compared to H1 FY20 (6 months ended 31
August 2019)
-- Gross margin of 11.6% reflects strong pricing disciplines in all areas
-- Acquisitions successfully integrated and performing well
-- Very strong cash flow performance - Free Cash Flow of
GBP63.6m in the Period and Net cash(2) of GBP57.3m (H1 FY21:
GBP36.5m)
-- Net tangible assets per share of 61.5p (28 February 2021:
50.2p) reflecting strong asset base, Net cash position and cashflow
generation
-- 2.0m shares repurchased at a cost of GBP1.1m since 20 August
2021, buyback programme recommences today following publication of
this statement
-- Dividends re-established with interim dividend of 0.65p per
share declared, payable in January
OUTLOOK
-- Record trading performance delivered in key month of
September with a trading profit of GBP20.0m
-- New and used vehicle supply constraints continue and cost
pressures evident, particularly in employment costs
-- Colleague reward packages and development programmes being
enhanced to ensure fully resourced, stable teams are in place to
deliver improvements in customer experience, retention and gross
profit generation. Annualised investment of GBP12m expected
-- Continuing cautious view of balance of the year
-- The Board now anticipates that the Group's adjusted profit
before tax for FY22 will be at least GBP65m, previously GBP50m to
GBP55m
-- Increasingly visible acquisition pipeline
(1) Adjusted to remove share-based payments charge and
amortisation of intangible assets
(2) Excludes IFRS 16 liabilities, includes used vehicle stocking
loans (no utilisation of used vehicle stocking loans at 31 August
2021)
As a result of the significant disruption to trading due to the
UK wide lockdown in early FY21, the figures below include
comparisons to both the six-month period ended 31 August 2019 (H1
FY20), and the six month period ended 31 August 2020 (H1 FY21):
H1 FY22 % Var to H1 H1 FY22 % Var to H1
FY21 FY20
SMMT UK SMMT UK
Total Like-for-like registrations Total Like-for-like registrations
Group Revenues 71.9% 59.6% 16.8% 4.5%
Service Revenues(3) 43.3% 34.2% 12.2% -
Volumes:
Used Retail Vehicles 67.3% 58.7% 10.3% 0.5%
New Retail Vehicles 44.8% 33.3% 31.4% (1.4%) (15.2%) (21.4%)
Motability Vehicles 30.8% 29.0% 27.8% (6.4%) (12.5%) (15.2%)
New Fleet Cars(4) 80.7% 63.0% 48.0% (2.6%) (21.6%) (26.8%)
New Commercial
Vehicles 57.9% 58.5% 64.4% (3.3%) (3.3%) (6.9%)
(3) Includes internal and external revenues
(4) Includes agency volumes
Commenting on the results, Robert Forrester, Chief Executive,
said:
"The record profitability delivered in the period has
undoubtedly been aided by very favourable used vehicle market
conditions, however, this is a remarkable performance outperforming
market trends. I am proud of the entire Vertu team for their
adaptability and effort.
The Group has continued to evolve during the period, with
further enhancement of its strategy in achieving enhanced online
sales capability via the Group's Click2Drive technology platform
and the introduction of a 'concierge' service for sales customers
under the Click2Drive banner. The number of sales outlets has again
grown as a result of the execution of the Group's multi-franchise
strategy. Efficiency and productivity gains continue to be
delivered through the enhanced use of technology.
We have again generated significant free cash flow and have a
very strong balance sheet making the Group very well placed to
benefit from the changes and significant opportunities which are
ahead of it . The resumption of paying dividends to shareholders
shows the Board's optimism in our strategy and its execution."
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
Zeus Capital Limited
Jamie Peel Tel: 020 3829 5000
Andrew Jones
Dominic King
Camarco
Billy Clegg Tel: 020 3757 4983
Tom Huddart
Emily Shea-Simonds
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
CHAIRMAN'S STATEMENT
I am delighted with the performance delivered in the first half
of our financial year and I would like to personally express my
appreciation and thanks to the whole Vertu team for the delivery of
such a remarkable and record result for the Group, a profit before
tax of GBP51.1m (H1 FY21: GBP4.0m; H1 FY20: GBP16.1m) for the
Period.
Changes the Group executed in response to the Pandemic have
meant it has emerged in many ways stronger for the experience. The
Group has now established a very strong platform from which to
deliver on its strategic imperatives and drive its future
success:
-- The Group has an established track record of execution and a
stable and experienced management team. This team, together with
the Board, have a clear vision and strategy.
-- Vertu has always had one of the strongest balance sheets in
the sector and has further augmented this in the Period. The Group
has once again generated significant positive Free Cash Flow and is
reporting an improved net cash position. This means there is
significant cash and debt capacity available for growth.
-- The Group's technological capabilities have given it a
strategic advantage with its scalable in-house developed systems
both driving efficiency and flexibility in meeting customer needs.
The adaptation of systems in response to restrictions has led to
increased customer choice and an integrated online/omnichannel
sales process. The launch of the 'Click2Drive' brand will further
augment the Group's online sales offering, supported by the new
customer 'concierge' service and backed up by our nationwide
dealership network from Fife to Exeter and Kent.
-- The strength and long (over 100 year) history of the Bristol
Street Motors brand has been highlighted by the Group's recent TV
advertising campaigns. This brand has in more recent times been
joined by the Group's Scottish brand Macklin Motors and by the
premium Vertu Motors brand. Increased awareness of all three of the
Group's brands has been delivered, with further growth targeted in
the coming months and years. The Group aims to retain a top three
prompted awareness position for Bristol Street Motors in the
franchised sector and to substantially grow the prompted awareness
of the Macklin and Vertu brands.
-- Whilst vehicle sales tend to grab the headlines, the Group's
high margin aftersales business is a major contributor to overall
profitability. Aftersales includes vehicle service and repair,
accident and cosmetic repairs and parts sales and these functions
provide resilience, fuelled by high levels of customer retention.
This retention reflects one of the advantages of being franchised
retailers and is also as a result of the execution of retention
strategies, such as the use of service plans and delivery of high
levels of customer service. The Group continues to innovate its
aftersales operations, adding new services to augment profitability
and grow its customer base.
The Board remains focused on the disciplines of capital
allocation. The payment of a dividend, suspended during the
uncertainty of the Pandemic, has today been re-established with the
announcement of an interim dividend payable in January 2022. The
Board considers the payment of dividends an important element of
capital allocation and total shareholder returns, so I am delighted
that this has been re-established.
The Board has also supported the repurchase of the Company's
shares where they are trading at prices well below levels the Board
considers their intrinsic value. The most recent share buyback
programme was announced on 20 August 2021 and to date 2.0m shares
have been repurchased under this latest scheme, with purchasing to
recommence now that the Group is out of close period. The Group
has, since 2017, bought back and cancelled over 30 million of its
shares, representing approximately 7.5% of the shares in issue.
The repurchase of shares and payment of dividends is only a part
of the Group's capital allocation approach. The Group has a
strategic objective to grow its scale of operations and therefore,
allocation of capital to acquisitions and organic growth
opportunities is vital. The Group has a consistent approach to
acquisition valuations, with these based on targeted EV/EBITDA
ratios to ensure the delivery of appropriate returns on a
sustainable basis. The Group has an excellent track record in
driving performance enhancements of acquired businesses.
The Board is optimistic that the Group's significant strengths
will allow a new period of expansion to commence, to deliver a
business of greater scale, profitability and cash flow to pay
growing dividends whilst remaining disciplined in the allocation of
capital.
Andy Goss, Chairman
CHIEF EXECUTIVE'S REVIEW
Update on Strategy Execution and Associated Risks
The Group's key long-term strategic objectives were summarised
in the Annual Report issued in May 2021. Subsequent to this, the
Board has reviewed the Group's strategy post the Pandemic and has
revised the key long-term strategic objectives. The core goal
remains the same: To deliver growing, sustainable cashflows from
operational excellence in the franchise automotive retail sector.
The strategic objectives of the Group are set out below:
-- To grow as a major scaled franchised dealership group and to
develop our portfolio of Manufacturer partners, whilst 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:
o Optimise our omnichannel retail offering through leveraging
the 'Click2Drive' technology and utilising this important sub-brand
to promote its usage
o Digitalise aftersales processes to improve customer
service
o Reduce the cost base of the Group by delivering efficiency
through the use of 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 core business.
An update on progress in executing the Group's strategy is set
out below:
Developing the Scale of the Group
The Group has an excellent platform allowing it to capitalise on
sector opportunities:
-- Financial capacity
The Group's balance sheet strength is underpinned by a
significant freehold and long leasehold property portfolio. This
strong asset base, together with the net cash position at 31 August
2021, (with no used car stocking loans utilised) means that there
is significant firepower available to facilitate the Group's future
growth ambitions. The Board estimates that based on a conservative
debt multiple and normalised EBITDA assumptions, the acquisition
firepower of the Group as at 31 August 2021 is at least GBP90m. The
Group's capital allocation disciplines include a rigorous
assessment of potential acquisitions to ensure appropriate return
hurdle rates are met. Current high sector earnings levels may
result in some acquisition opportunities being presented to the
Group in the short to medium term being too expensive. The Group
will continue to apply its very disciplined approach to acquisitive
growth ensuring we execute only the right opportunities to drive
long term success and shareholder value.
-- Management capacity
The Group has a stable and experienced senior management team,
with an established track record of execution and performance
delivery. This team has very much an "owner" mentality and sets the
"tone from the top" to ensure that the Group's culture is
appropriate and consistent across all its operations. This ensures
the delivery of the Group's Mission Statement ("To deliver an
outstanding customer motoring experience through honesty and
trust") through application of the Group's Values
("Professionalism, Passion, Recognition, Integrity, Respect,
Opportunity and Commitment"). These matters are not considered just
words but are vital to the Group's success.
-- Operational Systems Platform
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. Acquired businesses
are quickly migrated onto this scalable technology and process
platform to ensure control is quickly established and performance
improvement opportunities are highlighted. The scale of the Group
has also allowed it to establish efficient, scalable
Gateshead-based Customer Experience Centres in aftersales (which
handle inbound contacts, service bookings) and increasingly in
sales to facilitate lead handling, concierge services, customer
follow-up and prospecting.
-- Brand Strength
The Group operates three major customer facing brands in the UK:
Bristol Street Motors, Macklin Motors and Vertu Motors. Bristol
Street Motors remains one of the largest sector brands, with a
prompted brand awareness of 45.4%, currently the second highest
ranking franchised automotive retail brand in the UK. The brand has
84 outlets in England. In Scotland, the Group operates 12 outlets
under the Macklin Motors brand, which has a strong 36.8% and
growing brand awareness in this very different market. Vertu Motors
is the newest of the Group's brands but has grown rapidly in terms
of outlet numbers. The Group now operates 58 Vertu branded outlets
including 9 outlets rebranded from Farnell on 1 July 2021. This
premium focused Vertu brand, currently has a prompted awareness of
4.9% and the Group will continue to invest to drive awareness
targeting a 7.5% prompted awareness by the end of 2023. Each of the
Group's brands are supported by extensive TV campaigns, sports
sponsorships, partnerships and digital marketing initiatives.
-- Execution of growth strategy in the Period
The Group has the brand strength and financial, operational, and
management capabilities to continue to add additional franchised
outlets to the business. We are ambitious to so do. The Group also
continues to evaluate and execute multi-franchising actions in its
locations to maximise the long-term profitability of each location
as previously explained to shareholders.
The Period saw the Group execute on this strategy for growth as
set out below:
-- In June 2021 a new franchise outlet for Citroen was added
alongside the Group's existing Vauxhall outlet in Northampton. This
is the third Citroen outlet added in the last 12 months.
-- The Vauxhall franchise was added in July to the Group's
existing Ford dealership premises in Dunfermline, Fife. Further
additional franchises are planned at this location in the coming
months with Ford sales operations having ceased on 30 September
2021.
-- The Honda Bikes franchise was added to the Group's existing
Honda dealership in Stockton bringing the total number of outlets
in the Group's Vertu Motorcycles Division to four. Further
expansion is envisaged.
-- The Group opened new standalone Renault and Dacia franchise
outlets in Leicester and York.
-- The Group gained the MG franchise for the first time, adding
two outlets. One in its Carlisle dealership, already representing
SEAT, Cupra and Vauxhall and the second in Beaconsfield as part of
the multi-franchising strategy.
-- The Hyundai franchise was added to the Group's existing Honda
dealership in Sunderland.
-- The Group now has 28 (24%) of its 118 physical locations
representing more than one manufacturer brand under its
multi-franchising strategy.
Pruning activities were undertaken in the Period. The Group's
single Mitsubishi sales outlet has ceased operation, as Mitsubishi
pulled out of the European market, though aftersales operations
remain for the brand in the Group's Edinburgh, Banbury and
Huddersfield operations which remain Authorised Repairers.
Leicester Citroen was disposed of in March 2021 with the premises
retained to allow refranchising to Renault and Dacia.
On 31 May 2021, the Group also executed on its strategy to add
complementary ancillary businesses with the purchase of Powerbulbs
Online Limited for GBP480,000. This business complements the
Group's existing Sittingbourne based AceParts online parts sales
operation, which currently sells to consumers via Marketplaces.
Powerbulbs represents an established ecommerce website, with good
reach and rankings, historically selling to customers both in the
UK and substantially overseas. The business has been integrated
into AceParts and has strong growth prospects.
Digitalisation Developments
-- Omnichannel Retail Sales Developments
The Group recently commissioned an independent research study of
its customers by Mediacom, (with a sample size of over 4,000). This
has shown that more than four in five people want to visit a
dealership to buy a car, since solely using virtual viewings
neglected some of the most critical elements of buying a car such
as trusting the salesperson, browsing the showroom, and
experiencing the car first-hand before deciding which vehicle
suited them best. The growth of electric vehicle sales is
reinforcing the need for dealership visits as customers are
unfamiliar with the product. This is not to say that the internet
and technology is not important. Customers are certainly using the
internet to research a vehicle prior to visiting a retailer.
Bristolstreet.co.uk remains one of the most visited motor retail
websites in the UK with the vast majority of the Group's customers
commencing their buying journey on the web. This increasing use of
the internet was most apparent amongst the younger people included
in the survey, with nearly 40 percent of 18-34 year-olds happy to
embrace a combination of online and offline methods when purchasing
a car. They believe the convenience of using
multiple platforms and the speed at which cars could be browsed
all added to their buying experience.
The Group was the first UK retailer in 2017 to offer full online
retailing of used cars in the UK and continues to be at the
forefront of developments to provide customers with innovative ways
to purchase and interact online. To ensure that the Group's
customers today have the requisite flexibility, a new sub-brand
'Click2Drive' has been established to capitalise on online and
omnichannel sales opportunities. This new brand will be supported
by TV advertising campaigns under the Bristol Street Motors brand
umbrella. The Group's online retailing capability is being further
enhanced by the launch of a 'concierge' service, aiding customers
who may need help with their online vehicle purchase. The Group has
established a new Customer Experience Contact centre for sales in
Gateshead, which will incorporate this new concierge team alongside
a central sales prospecting function and other existing central
lead handling functions. For those customers who choose to use the
concierge service, they will be guided through their online
purchase by one of the Group's colleagues, through a telephone or
video call, to ensure that all of the customers questions are
answered. The concierge will act as a personal shopper,
co-ordinating all interaction with the customer, including liaison
with the Group's 154 sales outlets. The objective is to provide
excellent experience and flexibility for all of the Group's
customers, however they choose to interact with us.
It is important to deliver transparency and consistency between
the Group's physical and digital sales processes. The dealership
sales process has been reviewed in the Period and is being
redesigned to deliver this consistency. One enhancement will be to
apply a single valuation of a customer's part exchange vehicle,
whether the customer visits a dealership or chooses to value their
part exchange on one of the Group's websites. This valuation will
be controlled centrally, utilising both third party vehicle
valuation metrics and the Group's own data. Once a valuation has
been obtained, this price will be guaranteed, dependent only on
confirmation of the vehicles condition, for up to seven days. The
system valuation metrics are dynamic and can be quickly amended to
reflect any change in market conditions and the level of inventory
in the Group. This valuation system also powers the Group's
internet based "Sell My Car" offering which is increasingly
allowing the Group to purchase cars directly from the public.
The Group is currently in the final stage of developing a
Customer Data Platform (CDP) to enhance digital re-marketing
prowess, inform our Customer Relationship Management processes and
help target digital advertising activity. This is a crucial
development in our view.
-- Digitalisation of Aftersales
The Group's aftersales functions, which include vehicle service
and mechanical repair, accident repair and parts supply, represent
a significant and important proportion of overall profitability. As
seen in the digitalisation of sales processes, there is also an
increasingly important role for digital within aftersales
operations. The Group's customers have long been able to book their
vehicle service appointment fully online, and use 'chatbot'
technology to help with their booking if required. Over 36,000
service bookings were made online in the Period, a growth of 172%
compared to H1 FY20. Bookings made via this route are rising each
month and now represent over 12% of all bookings. Details of online
bookings are transferred to workshop loading systems through
in-house developed robotic process automation, improving efficiency
for the Group's long established aftersales Customer Experience
Centre.
The Group also seeks to capture new customers as they are
looking for vehicle repairs or service on-line through its digital
conquest strategy. This has been a successful strategy, capturing
an average of 1,700 additional service bookings per month in the
Period. The majority of these customers have never utilised the
Group's aftersales services before.
There remains significant opportunity for further digitalisation
of the customer aftersales journeys and the Group is working on a
number of developments in this regard to ensure that customers are
delighted and retained.
-- Digitalisation to improve efficiency and reduce cost
The Group has always been very focused on the detailed
management of its cost base and has been successful in the
digitalisation of processes to drive efficiency and therefore
reduce costs per transaction. The increased digitalisation of the
Group's vehicle administration processes, for example, contributed
significantly to the GBP10m annualised cost savings delivered in
FY21. There remains significant opportunity to drive further
efficiency from the digitalisation of processes and use of robotics
and to increase the use of data to aid decision making. In
addition, projects are underway to reduce reliance on a number of
third-party technology platforms by replacing with in-house
developed technology. This will achieve further cost savings in due
course.
-- Digitalisation of used car procurement
Used vehicle inventory is currently in high demand due to
reduced supply in the UK. Enhanced digitalisation has also been
deployed to assist in the area of vehicle procurement such as the
launch of 'Sell My Car' functionality on the Group's websites. This
allows customers to value their vehicle online and if they are
happy with the value, arrange an appointment to drop their car off
at their local dealership and receive payment. It is aimed that
vehicle procurement in the future will be further aided by the use
of robotics in purchasing cars at auction and machine learning to
maximise on the Group's return on investment in vehicle inventory
around stocking and pricing decisions.
Recruiting, Retaining and Developing Colleagues
It is a priority of the Group to develop and motivate the
Group's colleagues to ensure the delivery of operational
excellence. One of the most significant current challenges in the
business at present is workforce recruitment and retention. The
number of UK job vacancies reached over 1 million in August 2021
for the first time since records began, with the inevitable impact
that pay levels are rising. This should, of course, bolster
consumer confidence and demand for the Group's services going
forwards. The Group is not immune to these effects and currently
has approximately 500 vacancies, with Group colleague turnover now
disappointingly back to pre-pandemic levels.
A key objective for the Group in the remainder of FY22 is to
significantly reduce the number of outstanding vacancies and
colleague turnover. A number of initiatives have been undertaken to
ensure that the Group remains an employer of choice in the sector
and to achieve the target of over 90% of colleagues ranking the
Group as a great place to work. For example, the Group recently
enhanced its benefits by a significant improvement in maternity pay
provisions, increasing these from the statutory minimum to 90% of
pay for up to six months. In addition, the Group is currently
undertaking pay reviews for all colleagues which will be actioned
by 1 January 2022. The aim of this is to aid in the recruitment and
retention of colleagues.
The Group has also launched dealership colleague forums, a
formalised way in which colleagues of all levels can provide their
feedback on work matters. Forums will also have the opportunity to
access the non-executive director for colleague engagement, Pauline
Best.
The Group has long been committed to extensive investment in the
development of all colleagues to provide opportunity to those who
are talented and driven to succeed. Current programmes include a
degree apprentice scheme, technician apprentice schemes and
development programmes to facilitate progression to management
roles. The Group will launch, in the coming months, two further
initiatives:
-- A new modern apprentice programme for service advisors with
over 120 additional apprentices to be recruited by 1 March 2022:
and
-- A deepening of the partnership with the Dale Carnegie
Institute to increase the scope of on-line and off-line personal
and leadership development training across the Group. All
colleagues will have access to on-line personal development
programmes based on the principles of Dale Carnegie's book, "How to
Win Friends
and Influence People".
The Board anticipates that the above investment to aid the
sustainability of the Group's operations will have an annualised
impact of approximately GBP12m going forward. Increased resource
levels and colleague stability should ensure higher and more
consistent revenue generation to offset these costs, at least
partially.
Strategic Summary
Our experienced management team, strong brands, digital prowess
and financial strength, ensure the Group is well positioned to take
advantage of the opportunities arising and as a team, we are
ambitious to do so. We will continue to innovate and execute to
ensure that the Group excels in meeting customer needs and
overcomes the current vehicle supply and cost headwinds faced by
the sector. We will ensure that capital is allocated to those
activities, locations and franchises that are best placed to meet
the competitive challenges arising and to provide the best growth
opportunities and maximise long-term return on invested capital. We
will leverage our proven strengths and execute on our business
ideas such as cost saving initiatives, continued development of our
colleagues, accelerating brand growth and pursuing new business
opportunities. In essence, we have a plan and the energy to execute
it.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The lockdown restrictions throughout parts of FY21 and, to a
lesser extent, the start of FY22 disrupted the Group's operations
significantly. The tables below include comparatives to both the
six-month periods ended 31 August 2020 (H1 FY21) and 31 August 2019
(H1 FY20) in order to help better understanding the Group's
performance.
The Group's income statement for the Period is summarised
below:
H1 FY22 H1 FY22
Var to Var to
H1 FY22 H1 FY21 H1 FY21 H1 FY20 H1 FY20
GBP'000 GBP'000 % GBP'000 %
Revenue 1,924,134 1,119,332 71.9% 1,647,108 16.8%
---------- ---------- --------- ---------- ----------
Gross profit 223,121 129,548 72.2% 172,697 29.2%
------------------------------ ---------- ---------- --------- ---------- ----------
Operating expenses excluding
Government support (173,261) (146,404) (18.3%) (151,569) (14.3%)
Government support(5) 5,611 27,125 (79.3%) - -
------------------------------ ---------- ---------- --------- ---------- ----------
Operating expenses reported (167,650) (119,279) (40.6%) (151,569) (10.6%)
---------- ---------- --------- ---------- ----------
Adjusted Operating profit 55,471 10,269 440.2% 21,128 162.5%
Net Finance Charges (3,638) (5,583) 34.8% (4,247) 14.3%
---------- ---------- --------- ---------- ----------
Adjusted Profit Before
Tax 51,833 4,686 1,006.1% 16,881 207.0%
Non-Underlying items(6) (731) (712) (2.7%) (782) 6.5%
---------- ---------- --------- ---------- ----------
Profit Before Tax 51,102 3,974 1,185.9% 16,099 217.4%
Taxation (13,597) (1,426) (853.5%) (3,100) (338.6%)
---------- ---------- ----------
Profit After Tax 37,505 2,548 1,371.9% 12,999 188.5%
---------- ---------- ---------- ----------
(5) includes receipts under the Coronavirus Job Retention Scheme
and business rates relief
(6) Non-underlying items represent share-based payment charge
and amortisation of intangible assets
The Group delivered a record result in the Period, generating an
adjusted profit before tax of GBP51.8m. (H1 FY21: GBP4.7m, H1 FY20:
GBP16.9m). Revenue grew to GBP1.9bn, a growth of 16.8% compared to
the pre-pandemic six month period to 31 August 2019 (H1 FY20),
fuelled by both the impact of acquisitions and rising vehicle
prices. Despite these price rises, market tailwinds helped to keep
gross margins at the levels delivered in the post lockdown H1 FY21
period, of 11.6% (H1 FY20: 10.5%).
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is
set out below:
H1 FY22 H1 FY21 H1 FY22 H1 FY20 H1 FY22
% Var % Var
to H1 to H1
GBP'000 GBP'000 FY21 GBP'000 FY20
Revenue
New 530,766 346,885 53.0% 472,102 12.4%
Fleet & Commercial 445,189 224,565 98.2% 390,480 14.0%
Used 804,792 449,873 78.9% 653,787 23.1%
Aftersales 143,387 98,009 46.3% 130,739 9.7%
---------- ---------- -------- ---------- --------
Total Group Revenue 1,924,134 1,119,332 71.9% 1,647,108 16.8%
Gross Profit
New 38,853 23,345 66.4% 33,654 15.4%
Fleet & Commercial 18,757 8,602 118.1% 13,137 42.8%
Used 82,361 41,171 100.0% 52,793 56.0%
Aftersales 83,150 56,430 47.4% 73,113 13.7%
---------- ---------- -------- ---------- --------
Total Gross Profit 223,121 129,548 72.2% 172,697 29.2%
Gross Margin
New 7.3% 6.7% 0.6% 7.1% 0.2%
Fleet & Commercial 4.2% 3.8% 0.4% 3.4% 0.8%
Used 10.2% 9.2% 1.0% 8.1% 2.1%
Aftersales(7) 47.5% 49.7% (2.2%) 47.1% 0.4%
---------- ---------- -------- ---------- --------
Total Gross Margin 11.6% 11.6% - 10.5% 1.1%
---------- ---------- -------- ---------- --------
(7) 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:
Like-for-like Like-for-like
H1 FY22 H1 FY21 H1 FY22 H1 FY20 H1 FY22
% Var to % Var to
Units Units H1 FY21 Units H1 FY20
Used retail vehicles 49,697 29,713 58.7% 45,036 0.5%
New retail cars 18,086 12,489 33.3% 18,343 (15.2%)
Motability cars 4,865 3,719 29.0% 5,196 (12.5%)
--------------------- ---------- ----------- ------------- ----------- -------------
Direct fleet cars 8,713 4,096 86.2% 9,024 (17.1%)
Agency fleet cars 2,700 2,219 20.2% 2,692 (36.5%)
--------------------- ---------- ----------- ------------- ----------- -------------
Total fleet cars 11,413 6,315 63.0% 11,716 (21.6%)
Commercial vehicles 9,917 6,282 58.5% 10,259 (3.3%)
---------- ----------- ------------- ----------- -------------
Total New vehicles 44,281 28,805 44.8% 45,514 (13.8%)
---------- ----------- ------------- ----------- -------------
Total vehicles 93,978 58,518 51.8% 90,550 (6.7%)
---------- ----------- ------------- ----------- -------------
UK Market UK Market
Variance(8) (SMMT) Variance(8) (SMMT)
New Retail
Car 1.9% 31.4% 6.2% (21.4%)
Motability
Car 1.2% 27.8% 2.7% (15.2%)
Fleet Car 15.0% 48.0% 5.2% (26.8%)
Commercial (5.9%) 64.4% 3.6% (6.9%)
---------- ----------- ------------- ----------- -------------
(8) Represents the variance of like-for-like Group volumes to
the UK trends reported by SMMT
Used retail vehicles
Throughout H1 FY22, the used vehicle market in the UK, has
experienced unprecedented market dynamics resulting in record
vehicle pricing levels. The reduced new and used vehicle market in
lockdown together with new vehicle production disruption due to
COVID-19 and parts supply disruption (particularly semi-conductor
shortages) has caused used vehicles to be in increasingly short
supply. This tightness in supply has coincided with a period of
strong customer demand for used vehicles. The reasons for this
include increased savings levels by consumers during lockdown and
the absence of alternative spending options (such as holidays), and
also consumers wishing to avoid public transport. The benefits of
the private motor car have been firmly re-established in the
consumer's minds which is much to the long-term benefit of the
Group.
The Group recognised the pricing and supply environment ensuring
appropriate high margins were obtained on the more limited stock.
Price disciplines were therefore very strong across the business.
The Group utilised a mix of strategies to secure used vehicle
inventory despite the shortages of supply, including direct
purchases from consumers. Email campaigns to the Group's extensive
database were very successful in this regard. The Group
successfully utilised both central purchasing capabilities and its
extensive local dealership management to secure supplies. The
success of these strategies is seen in that the Group limited the
reduction in the number of used retail vehicles held in stock at 31
August 2021 compared to 28 February to less than 10%. Rising prices
caused overall used vehicle inventory levels in the Core Group to
increase by GBP13.1m compared to 28 February 2021 levels. Ensuring
a good supply of used vehicle inventory has meant the Group has
been well placed to capitalise on the favourable market conditions,
resulting in a record profit performance both in used cars and for
the Group as a whole.
Group gross profit from the sale of used vehicles totalled
GBP82.4m for the Period (H1 FY21: GBP41.2m ; H1 FY20: GBP52.8m).
When comparing to the more stable period of the six months ended 31
August 2019 (H1 FY20), the following like-for-like variances
arose:
-- GBP22.3m increase in gross profit generated from used vehicle sales
-- 0.5% increase in the number of used retail units sold
-- Gross profit per unit of GBP1,679, a rise of 42.4% from GBP1,179
-- Average selling price of GBP15,819 per unit, a 9.0% increase
-- Gross margin rising substantially to 10.6% from 8.1%
New retail cars and Motability sales
UK retail registrations have obviously significantly improved
over the H1 FY21 comparative 'lockdown' period. Compared to the
pre-pandemic six months ended 31 August 2019 (H1 FY20), UK new
vehicle retail registrations actually fell by 21.4%, reflecting
reduced supply of new cars and March 2021 being a month of
effective lockdown, with showrooms closed to customer visits. March
is traditionally the peak trading month in the sector calendar.
Well documented component shortages (including semi-conductors) and
the so-called "pingdemic" at factories and within the global supply
chain have all adversely affected availability. In light of these
supply constraints, the SMMT full-year outlook was revised in July
2021, to a forecast of 1.82 million units for calendar 2021 (2020:
1.6m, 2019: 2.3m). Whilst this is a modest 2% reduction from the
previous outlook, if this revised forecast were achieved, it would
represent a 21.8% reduction compared to average UK new vehicle
registration volumes over the past decade. Against this backdrop,
the Group's like-for-like new retail vehicle volumes declined by
15.2% in the Period when compared to the six months ended 31 August
2019. With the SMMT private registrations declining by 21.4%, the
Group outperformed the market by some margin.
UK Motability registrations were also impacted by supply
constraints and declined by 15.2% in the Period, compared to the
six months ended 31 August 2019. The Group's Motability volumes
compared to the same period, declined by 12.5% on a like-for-like
basis, slightly ahead of the market and representing a UK market
share of 4.7%. Order bank levels in this channel are at a record
high.
In light of the issues in the supply chain, volume targets in
the Period were either reduced or removed by Manufacturers. Similar
to the trends seen in used vehicles, reduced supply in a period of
robust demand and reduced pressure to achieve volume targets, has
led to improved gross profit retention through the application of
effective pricing disciplines. Consumers are increasingly accepting
of long lead times, with order bank levels very high and pricing
benefits to margin for Manufacturers and retailers alike. Compared
to the six months ended 31 August 2019, the following trends were
apparent on a like-for-like basis for the New Retail and Motability
sales channel:
-- A GBP0.7m increase in gross profit generated, despite a 15.2%
reduction in the number of new retail units sold
-- Gross profit per unit of GBP1,694, a rise of 20.2% from GBP1,409
-- An average selling price of GBP21,319 per unit, a 16.6% increase
-- Gross margin rising to 7.4% from 7.1% despite the significant
rise in average selling price increases
Fleet & Commercial vehicle sales
The UK car fleet market has been the hardest hit by the
restrictions in the supply of new vehicles as Manufacturers divert
limited capacity to higher margin, retail channels. Retailers also
benefit from this protection of their higher margin channels.
Registration volumes in the UK car fleet market have declined 26.8%
in the Period compared to the six months ended 31 August 2019.
Like-for-like, the Group delivered 9,179 fleet cars in the Period,
representing a decline of 21.6% compared to H1 FY20, which was
significantly ahead of the market trends. Margins strengthened due
to supply constraints, pricing mix changes and the Group adopting
strong pricing disciplines.
The Pandemic has fuelled significant demand for vans in the UK.
'Lockdown savers' have led to van demand from tradespeople
satisfying increased spending on home improvements. In addition,
the growth in online retail purchases has fuelled demand from
delivery drivers. This demand has come at a time of limited supply,
driving up prices and margins. The Group saw a 3.3% fall in the
like-for-like volume of new commercial vehicles sold, ahead of the
market trends, which showed a 6.9% decline over the Period compared
to the six months to 31 August 2019 (H1 FY20). This market
outperformance by the Group was aided by a strong performance from
the Group's Vansdirect business.
When compared to the six-month period ended 31 August 2019, the
following fleet and commercial trends were seen on a like-for-like
basis:
-- A GBP4.2m increase in gross profit, despite a reduction in the number of units sold
-- Record gross profit per unit of GBP907, a rise of 52.2% from GBP596
-- Gross margin rising to 4.2% from 3.4% resulting in record margins for the Group.
Aftersales
The Group's aftersales operations are a vital contributor to
Group profitability, generating over 35% of total gross profit.
This is actually a reduced relative contribution compared to recent
years, primarily due to very high margin growth in the vehicle
sales channels in the Period.
Overall, compared to the six-month period ended 31 August 2019
(H1 FY20) the following like-for-like trends in aftersales
performance were witnessed:
Accident
Service Parts & Smart Repair Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue(9) 67,099 75,148 10,701 152,948
Revenue(9) change (15) (108) 1,428 1,305
Revenue(9) change
(%) - (0.1%) 15.4% 0.9%
Gross profit change 233 324 631 1,188
Gross margin(10)
H1 FY22 (%) 77.1% 22.3% 39.1% 47.5%
Gross margin(10)
H1 FY20 (%) 76.7% 21.8% 38.3% 47.1%
(9) includes internal and external revenues
(10) margins in aftersales expressed on internal and external
revenues
-- Service
Those customers whose vehicles reached service intervals in the
2020 lockdown, deferred the work on their vehicles until the UK
economy reopened after 1 June 2020. This generated a lack of
service anniversaries in April and May of 2021, exacerbated by the
lack of vehicle sales in the first lockdown. The Group then saw a
spike in demand from June onwards. Capacity in the Group's
aftersales operations at the time of peak demand in the current
Period was limited in some cases by Covid related absence and
increasing technician capacity constraints in general. Overall,
these trends led to a 5.6% decline in service hours sold in the
core Group in the Period compared to H1 FY20. The level of warranty
work undertaken, in particular, saw a significant decline compared
to recent years.
The Group executed well on its retention and aftersales
processes, improving sales of additional work and products. The
Group's customer retention strategies focus on ensuring vehicle
sales customers return to the Group for their service, whether they
have purchased a new or used vehicle. Service plans, through which
customers pay monthly for their annual service are a vital part of
retention, with approx. 145,000 of the Group's customers currently
holding live service plan either with the Group or its
manufacturers. Excellence of customer service is also vital to
retention, with over 90% of all vehicles seen by the service
departments receiving a vehicle health check ("VHC"), with the
technician providing a video of the items requiring attention
direct to the customer for their approval for any works required.
The success of this VHC process is one of the reasons for a rise in
the average invoice value to GBP278 (like-for-like increase of
13.9% compared to H1 FY20) for service and repair work.
This strong execution resulted in like-for-like service revenues
being stable compared to H1 FY20 despite the reduction in hours
sold. Gross margin percentages on vehicle servicing rose to 77.1%
(H1 FY20: 76.7%) reflecting technician resource constraints and the
decline in less efficient warranty volumes, compared to more
efficient retail work.
-- Parts
Parts revenues in the Core Group were stable compared to H1
FY20, with growth as the Group gained market share offset by the
move to an agency distribution model in certain franchises as
previously reported. As a new development in the Group's aftersales
Customer Experience Centre, inbound parts phone enquiries are now
being centralised with orders taken in Gateshead for non-trade hub
dealerships. This has contributed to increased higher margin parts
retail sales and enhanced customer experiences. 70 dealerships now
operate on this centralised model. Gross margins in parts rose from
21.8% to 22.3% as the Group benefitted from competitors exiting the
sector during the Pandemic, delivery of excellent customer
experiences and from agency parts operations being a higher
proportion of the Group activities. In agency operations, the Group
records no revenues or cost of sales, except a handling fee
representing 100% gross margin.
-- Accident and Smart Repair
The Group has significantly expanded its Smart Repair
operations, which now has a fleet of 75 cosmetic and alloy wheel
repair vans serving both the Group's dealerships and external
customers across the UK. This expansion of the Smart Repair
operation is the main reason for the increase in revenues in this
channel. Further expansion of these operations is envisaged.
The Group's accident repair centres showed little growth as the
2021 lockdown reduced the number of journeys being undertaken and
therefore the number of accidents in the UK. This took a number of
months to work through. The Group has now moved responsibility for
the Group's 11 accident repair centres out of the dealership
divisional operations, into a new standalone division,
concentrating solely on the management of this channel. Greater
execution and improved performance is already apparent following
these changes.
Acquisitions, Disposals and Closures
Acquisitions made since 1 March 2020 have contributed an
additional GBP3.3m of profit before tax to the Group in the Period,
summarised as follows:
H1 FY22 H1 FY20
Revenue PBT Revenue PBT
GBP'000 GBP'000 GBP'000 GBP'000
BMW/MINI Acquisition (Dec
2020) 142,175 2,334 - -
Yorkshire Volkswagen Acquisition
(Jan 2020) 53,400 726 - -
Other acquisitions 36,645 220 - -
-------- -------- -------- --------
Total Acquisitions 232,220 3,280 - -
-------- -------- -------- --------
Dealership sales or closure 2,390 (78) 30,184 114
-------- -------- -------- --------
Total Non-Core 234,610 3,202 30,184 114
-------- -------- -------- --------
This contribution from acquisitions is above the levels
envisaged at the time of purchase, reflecting market tailwinds and
solid execution.
The significant BMW/MINI dealership acquisition, completed 6
December 2020, comprised a market area of 12 sales outlets located
in York, Sunderland, Teesside, Durham and Malton. Prior to their
acquisition by the Group, for the year ended 31 December 2019, the
dealerships achieved revenues of GBP305m and delivered a loss
before tax of GBP6.0m. The Group executed its plan to drive
performance improvements, which included the appointment of a new
management team, with significant BMW and MINI franchise
experience. The business was successfully integrated with Group
systems and processes implemented immediately, and this facilitated
significant business improvements in the areas of customer
experience and financial performance. The acquisition was expected
to be loss making in FY22 and earnings neutral by the year ending
28 February 2023 (FY23). Aided by the Group's actions and
favourable market conditions, these sites are performing
significantly in excess of these expectations, contributing a
profit of GBP2.3m in the Period. This acquisition is expected to be
at least earnings neutral in the coming year.
The other significant acquisition in the period since 1 March
2020 was the purchase on 16 January 2020 of four Volkswagen
Passenger car dealerships in West Yorkshire from the Sytner Group.
Integration progress in these dealerships, located in Leeds,
Harrogate, Skipton and Huddersfield, was delayed as a result of the
impact of the lockdown coming just 10 weeks after their purchase.
Nevertheless, these businesses are also fully integrated into the
Group and contributed GBP0.7m to Group profitability in the
Period.
Other acquisitions since 1 March 2020 include the addition of
two Honda outlets in Bradford and Huddersfield, Kia in Bradford and
the multi-franchise site in Edinburgh. These additions contributed
profits of GBP0.2m in the Period.
In addition to acquiring sales outlets, active management of the
portfolio led to the closure and disposal of a number of outlets.
These include the closure of a Volkswagen operation in Whitchurch,
Herefordshire (March 2021), the sale of Leicester Citroen (February
2021) and the disposal In November 2021 of the Group's wheelchair
accessible vehicle conversion business. These actions resulted in a
GBP0.2m decline in profit compared to the six month period ended 31
August 2019 (H1 FY20).
Operating Expenses
Reported operating expenses of GBP167.7m, increased by GBP16.1m
compared to the six-month period ended 31 August 2019. This
increase was partially offset by Government support of GBP5.6m and
as a consequence the increase excluding this support was greater at
GBP21.7m. Dealerships acquired in the period since 1 March 2019
contributed costs, excluding support, totalling GBP19.8m.
Underlying Core Group expenses therefore grew slightly, by GBP1.9m
when compared to H1 FY20.
The Group invested an additional GBP3.0m in television
advertising in the Period as part of the strategy to grow awareness
of the Group's three customer facing franchise automotive brands.
In addition, variable pay and commission levels exceeded H1 FY20
levels by GBP4.0m as a result of the record profitability
delivered. Cost savings, such as the headcount saving delivered in
FY21 through increased efficiency, have partially offset these cost
increases.
Costs increased over H1 FY21 levels, due to reduced Government
support, the impact of acquisitions and a reversal of variable and
other cost savings made during the period of reduced dealership
activity in the lockdown.
The Group received significant government support in the
six-month period ended 31 August 2020, the period which included
the dealership closures during the first national lockdown. This
support included GBP22.8m of receipts in respect of the Coronavirus
Job Retention Scheme and business rates relief of GBP4.3m. In the
current Period, support levels have significantly reduced, with
just GBP0.4m of receipts from the Coronavirus Job Retention Scheme,
for which no claims were submitted after the end of April 2021. In
addition, business rates support in the current Period had a value
of GBP5.2m. Under the business rates relief scheme, business rates
on English retail premises remained fully supported until 30 June
2021, with relief thereafter capped at GBP2m, whilst full rates
support continues at the Group's dealerships located in Scotland.
Business rates relief will therefore be at significantly reduced
levels for the remainder of the financial year.
Net Finance Charges
Net finance charges fell year on year as analysed below:
H1 FY22 H1 FY22
Var to Var to
H1 FY22 H1 FY21 H1 FY21 H1 FY20 H1 FY20
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
New vehicle Manufacturer
stocking interest 1,058 2,728 (1,670) 1,646 (588)
Interest on bank borrowings 848 870 (22) 739 109
Used vehicle stock funding
interest 36 211 (175) 317 (281)
Interest on lease liabilities 1,762 1,870 (108) 1,761 1
Interest income (66) (96) 30 (216) 150
-------- -------- --------- -------- ---------
Net Finance Charges 3,638 5,583 (1,945) 4,247 (609)
-------- -------- --------- -------- ---------
The bulk of the reduction in net finance charges arose in
interest charged by Manufacturers on funded new vehicle inventory.
This reduction is due to the issues in the supply chain which are
currently being experienced and which have led to reduced new
vehicle stock in the pipeline. Total new vehicle stock at 31 August
2021 was GBP209m (28 February 2021: GBP438m, 31 August 2020:
GBP342m).
Interest on bank borrowings in the Period declined to GBP0.8m
from GBP0.9m in H1 FY21 as the Group has generated significant
cash. This has resulted in the repayment of GBP10m of the Revolving
Credit Facility and all used vehicle stocking loans. In addition,
interest rate charges by the Group's banking partners have reduced
to more normalised levels following a temporary increase during the
Pandemic.
Pension Costs
The accounting surplus on the Group's closed defined benefit
pension scheme has increased to GBP7.9m at 31 August 2021 (28
February 2021: GBP6.2m). Actual investment returns achieved on the
assets were higher than that required to match the expected
increase in defined benefit obligations over the Period as a result
of changes in assumptions. These assumption changes were a lower
discount rate being applied, following falls in corporate bond
yields over the Period together with an increase in expected future
inflation.
The Scheme invests in an LDI portfolio which aims to fully hedge
the Scheme's interest rate (relative to gilts rather than corporate
bonds) and inflation risk. Changes in the discount rate and
inflation would therefore be mostly offset by a change in the value
of the Scheme's assets. A net actuarial gain of GBP1.6m was
recognised in the Statement of Comprehensive Income in the
Period.
Tax Payments
In the June 2021 Finance Act, it was enacted that the rate of
corporation tax in the UK will rise from 19% to 25% on 1 April
2023. This has resulted in the Group's deferred tax obligations
being measured at the higher rate of 25% in the Period. The impact
of this change has increased the Group's tax charge in the Period
by GBP2.9m.
The Group's underlying effective rate of tax (ignoring the
deferred tax adjustment above) for the Period was 20.9% (H1 FY21:
22.5%) The overall effective tax rate, impacted by the revaluation
of deferred tax obligations, increased to 26.6% (H1 FY21: 35.9%).
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.
Cash Flows
Free cash flow of GBP63.6m (H1 FY21: GBP66.4m) was generated in
the Period, from an operating profit of GBP54.7m, a conversion of
116.3%.
A GBP15.8m reduction in working capital contributed to this
positive cash performance. Current constraints on new vehicle
supply led to a GBP210.5m reduction in the level of both new
vehicle consignment inventory and the associated Manufacturer
funding in the Period. This constrained new vehicle supply also
resulted in an GBP18.1m cash inflow from a reduction in the level
of fully paid new vehicle inventory held by the Group.
Rising vehicle prices led to a GBP13.1m increase in used vehicle
inventory, despite a slight fall in the number of vehicles in
stock. Working capital was also absorbed as the Group's
demonstrator fleet, reduced during restrictions on showroom visits,
returned to normal levels, absorbing GBP8.0m.
Reduced period end fleet activity generated a GBP6.5m inflow of
working capital from lower trade receivables. Finally, a GBP12.3m
increase in trade payables and accruals arose in the Period. This
figure includes higher customer deposit levels as order lead times
extended and increased levels of deferred income in respect of
warranties and service plans.
Financing and Capital Structure
The Group has a balance sheet with shareholders' funds of
GBP315.1m (H1 FY2021: GBP265.8m) underpinned by a freehold and long
leasehold portfolio of GBP229.4m (H1 FY2021: GBP213.2m) and net
cash (excluding lease liabilities) of GBP57.3m at 31 August 2021.
The Group's conservative financing and capital structure results in
a strong tangible net assets position of GBP222.6m at 31 August
2021, representing 61.5p per share.
The Group has a committed acquisition debt facility of GBP62m,
maturing in February 2024, with the potential to add a further
GBP15m which is currently uncommitted. GBP44m of this committed
facility was drawn as at 31 August 2021. The Group operated
comfortably within all covenants during the Period.
The Group periodically makes use of used vehicle stocking loans
provided by third party banks, subject to interest and secured on
the related used vehicle inventories. In light of the strong cash
position of the Group throughout the Period, amounts utilised on
such facilities were repaid in the Period and remained undrawn at
31 August 2021. The Group has a GBP35m facility under these
arrangements, with the temporary uplift secured due to the impact
of the lockdown on the Group now removed. The Group held GBP134.8m
of unencumbered used vehicle inventory at 31 August 2021.
Capital Allocation
Consideration of capital allocation is central to the Board's
decision making. The Board proactively believes that the Group's
funding structure should remain conservative and that the
application of the Group's debt facilities to fund activities or
acquisitions which meet the Group's hurdle rates for investment,
will enhance return on equity and increase cash profits in the
future.
Cash returns to shareholders in the form of dividends are also
an important part of the Company's capital allocation decision
making process and are a priority for the Board. The Group
previously applied a dividend policy of a cover of three to four
times adjusted earnings per share. To protect the Group's liquidity
and in acknowledgement of the level of government support received
in response to COVID-19 restrictions imposed on the Group's
operations, no dividend payments were proposed in respect of FY21
and no final dividend in respect of FY20 was paid.
In view of the trading performance and the significant cash
generation of the Group in the Period the Board proposes to
re-establish the payment of dividends, with an interim dividend in
respect of FY22 payable in January 2022. The extraordinary level of
profitability achieved by the Group in the Period, means that a
higher dividend cover than targeted in the Group's dividend policy
has been initially applied. The Board propose an interim dividend
of 0.65p per share payable 22 January 2022. The ex-dividend date
will be 16 December 2021 and the associated record date 17 December
2021.
During the Period, the Group recommenced its Share Buyback
Programme with an initial GBP3m earmarked for the repurchase of the
Group's shares. To date from announcement of the programme on 20
August 2021, 2.0m shares, representing 0.5% of the issued share
capital, have been purchased for cancellation for a total of
GBP1.1m. The Board believes that this is an appropriate use of
capital and will continue this Buyback programme as a relevant
element of returns to shareholders, alongside dividend
payments.
Karen Anderson, CFO
CURRENT TRADING AND OUTLOOK
-- September 2021 Trading
The Group delivered a trading profit of GBP20.0m in September.
This result was ahead of the original budget and prior year levels.
Despite sales volume performance being reduced by ongoing vehicle
supply constraints which have been widely reported, the trading
result was a record for a month in the Group's fifteen year
history. Margins were above historic levels bolstering profits.
The Group's total and like-for-like activity levels in September
2021 compared to September 2020 are summarised below and compared
to the market trends:
Like-for-like
Group Total Like-for-Like SMMT Market variance
Variance Variance Variance to SMMT
Market
Group Revenue (0.1%) (8.9%)
Service Revenues(11) (0.9%) (6.8%)
Volumes:
Used Retail Vehicles (1.9%) (7.4%)
New Retail Vehicles (11.6%) (18.2%) (25.3%) +7.1%
Motability Vehicles (39.0%) (38.8%) (44.7%) +5.9%
New Fleet Cars(12) (14.1%) (16.0%) (43.1%) +27.1%
New Commercial Vehicles (29.0%) (28.9%) (39.5%) +10.6%
(11) Includes internal and external revenues
(12) Includes agency volumes
Group revenue was stable in the month aided by the impact of
acquisitions. Like-for-like revenues and volumes reduced in all
channels as a result of supply constraints. The Group outperformed
significantly the wider market trends in all channels of new
vehicle sales.
Like-for-like service activity showed a decline compared to
September 2020. The prior year period benefitted from pent-up
demand as the UK emerged from lockdown and reduced new and used
vehicle volumes in 2021 resulted in less internal preparation work
for the Group's service departments.
A decline in UK registrations was seen in all new vehicle sales
channels in September. Well documented supply constraints in the
current period compared to strong comparatives, which had
benefitted from pent up demand for vehicles. Strong pricing
disciplines resulted in margins retained on the sale of new
vehicles remaining strong, as witnessed in recent months. Improved
margins compared to the prior year largely offset the impact of
reduced volumes.
The market dynamics for used vehicles continue to benefit the
profitability of the sector. CAPHPI reported that used vehicle
values rose again in September, making this the sixth consecutive
month of rises. These consecutive rises mean that September 2021
delivered the highest monetary single month increase in UK used
vehicle values ever recorded of GBP825 per vehicle. The Group
delivered improved used margin retention per vehicle as a result of
these market trends, and the continued application of strong
pricing disciplines. Core Group used gross profit per unit achieved
record levels in September growing 23.2% year-on-year to over
GBP2,000. This improved margin delivered an uplift in Core gross
profits generated from the sale of used vehicles when compared to
September 2020, despite a reduction in the volume of vehicles
sold.
-- Outlook
Shortfalls in the supply of both new and used vehicles in the UK
are expected to continue for the remainder of the financial year,
and well into the next financial year, as a result of the
dislocation in global supply chains, impacting on vehicle
production. Whilst vehicle supply constraints will continue to
underpin vehicle values in the short-term, a realignment of vehicle
margins to more normalised levels should be expected in the
medium-term. In response to short supply, the Group will continue
to apply strong pricing disciplines to ensure that returns on
inventory are maximised.
As discussed elsewhere in this statement the UK currently faces
labour shortages. The Group has taken action to secure a fully
resourced and stable colleague base, though the initiation of a
review of reward packages. This investment will be augmented by
enhanced colleague training and development programmes to ensure
that the Group continues to deliver outstanding customer
experiences and enhanced financial performance. Higher, stable
resource levels across the business should result in higher revenue
and gross profit generation to at least partially offset the
increased cost.
The Board remains cautious on the outlook for the remainder of
the financial year and beyond. In light of the trading performance
delivered for the year to date, the Board now anticipates that the
Group's adjusted profit before tax for the year ending 28 February
2022 will be no less than GBP65m.
The Board believes that the Group is strategically very well
placed to capitalise on the challenges and opportunities in the UK
motor retail sector and remains confident in the prospects for the
Group. A good pipeline of potential acquisitions is currently
apparent.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the six months ended 31 August 2021
Six months ended 31 Six months ended 31 Year ended 28 February
August 2021 August 2020 2021
Note Underlying Non-underlying Total Underlying Non-underlying Total Underlying Non- Total
items items items items items underlying
items
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,924,134 - 1,924,134 1,119,332 - 1,119,332 2,547,665 - 2,547,665
Cost of
sales (1,701,013) - (1,701,013) (989,784) - (989,784) (2,246,642) - (2,246,642)
----------- -------------- ----------- ---------- -------------- --------- ----------- ---------- -----------
Gross
profit 223,121 - 223,121 129,548 - 129,548 301,023 - 301,023
Operating
expenses (167,650) (731) (168,381) (119,279) (712) (119,991) (267,240) (2,153) (269,393)
----------- -------------- ----------- ---------- -------------- --------- ----------- ---------- -----------
Operating
profit 55,471 (731) 54,740 10,269 (712) 9,557 33,783 (2,153) 31,630
Finance
income 5 66 - 66 96 - 96 174 - 174
Finance
costs 5 (3,704) - (3,704) (5,679) - (5,679) (9,405) - (9,405)
----------- -------------- ----------- ---------- -------------- --------- ----------- ---------- -----------
Profit
before
tax 51,833 (731) 51,102 4,686 (712) 3,974 24,552 (2,153) 22,399
Taxation 6 (10,837) (2,760) (13,597) (1,055) (371) (1,426) (5,217) (867) (6,084)
----------- -------------- ----------- ---------- -------------- --------- ----------- ---------- -----------
Profit for
the period
attributed
to equity
holders 40,996 (3,491) 37,505 3,631 (1,083) 2,548 19,335 (3,020) 16,315
=========== ============== =========== ========== ============== ========= =========== ========== ===========
Basic
earnings
per share
(p) 7 10.36 0.69 4.44
Diluted
earnings
per share
(p) 7 9.95 0.69 4.36
----------- --------- -----------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
For the six months ended 31 August 2021
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2021 2020 2021
Note GBP'000 GBP'000 GBP'000
Profit for the period 37,505 2,548 16,315
Other comprehensive income / (expense)
Items that will not be reclassified
to profit or loss:
Actuarial gain / (loss) on retirement
benefit obligations 10 1,639 (521) (2,619)
Deferred tax relating to actuarial
(gain) / loss on retirement benefit
obligations (410) 99 498
Items that may be reclassified subsequently
to profit or loss:
Cash flow hedges 149 (150) (6)
Deferred tax relating to cash flow
hedges (28) 38 10
Other comprehensive income / (expense)
for the period, net of tax 1,350 (534) (2,117)
---------- ---------- ------------
Total comprehensive income for the
period attributable to equity holders 38,855 2,014 14,198
========== ========== ============
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
As at 31 August 2021
31 August 31 August 28 February
2021 2020 2021
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill and other indefinite
life assets 12 99,444 99,315 99,192
Other intangible assets 2,019 1,934 1,948
Retirement benefit asset 10 7,906 8,365 6,246
Property, plant and equipment 246,920 230,280 246,664
Right of use assets 81,254 81,391 81,152
437,543 421,285 435,202
---------- ---------- ------------
Current assets
Inventories 392,491 477,525 597,391
Trade and other receivables 43,038 66,309 59,375
Cash and cash equivalents 113,504 102,958 67,828
---------- ---------- ------------
549,033 646,792 724,594
Property assets held for sale 995 - 1,369
---------- ----------
Total current assets 550,028 646,792 725,963
---------- ---------- ------------
Total assets 987,571 1,068,077 1,161,165
========== ========== ============
Current liabilities
Trade and other payables (482,109) (612,000) (688,948)
Current tax liabilities (6,563) (1,462) (1,573)
Contract liabilities (12,639) (12,042) (12,395)
Borrowings (638) (12,731) (6,582)
Lease liabilities (13,920) (14,175) (14,126)
---------- ---------- ------------
Total current liabilities (515,869) (652,410) (723,624)
---------- ---------- ------------
Non-current liabilities
Borrowings (55,544) (53,745) (65,777)
Lease liabilities (77,461) (77,100) (76,975)
Derivative financial instruments (348) (643) (497)
Deferred income tax liabilities (13,063) (8,848) (9,180)
Contract liabilities (10,159) (9,519) (9,172)
---------- ---------- ------------
Total non-current liabilities (156,575) (149,855) (161,601)
---------- ---------- ------------
Total liabilities (672,444) (802,265) (885,225)
---------- ---------- ------------
Net assets 315,127 265,812 275,940
========== ========== ============
Capital and reserves attributable to
equity holders of the Group
Ordinary share capital 36,859 36,917 36,917
Share premium 124,939 124,939 124,939
Other reserve 10,645 10,645 10,645
Hedging reserve (282) (519) (403)
Treasury share reserve (2,584) (787) (2,791)
Capital redemption reserve 2,868 2,810 2,810
Retained earnings 142,682 91,807 103,823
---------- ---------- ------------
Total equity 315,127 265,812 275,940
========== ========== ============
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
For the six months ended 31 August 2021
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2021 2020 2021
Note GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Operating profit 54,740 9,557 31,630
Profit on sale of property, plant
and equipment (64) (399) (432)
Profit on lease modification (157) - (234)
Amortisation of intangible assets 202 218 436
Depreciation of property, plant
and equipment 6,493 5,948 12,333
Depreciation of right of use asset 7,946 7,635 15,643
Impairment charges - - 1,452
Movement in working capital 11 15,842 64,197 29,640
Share based payments charge 455 425 373
----------- ----------- -------------
Cash inflow from operations 85,457 87,581 90,841
Tax received 128 188 188
Tax paid (5,289) (2,281) (6,692)
Finance income received 4 21 23
Finance costs paid (3,443) (5,519) (9,440)
Net cash inflow from operating
activities 76,857 79,990 74,920
----------- ----------- -------------
Cash flows from investing activities
Acquisition of businesses, net
of cash, overdrafts and borrowings
acquired (1,567) (182) (21,489)
Acquisition of freehold land and
buildings - (1,313) (2,713)
Proceeds from disposal of a business - - 1,698
Purchases of intangible assets (20) (34) (264)
Purchases of other property, plant
and equipment (5,907) (6,733) (11,844)
Proceeds from disposal of property,
plant and equipment 464 840 972
----------- ----------- -------------
Net cash outflow from investing
activities (7,030) (7,422) (33,640)
----------- ----------- -------------
Cash flows from financing activities
Proceeds from borrowings 8 - 10,000 22,760
Repayment of borrowings 8 (16,267) (12,816) (19,705)
Principal elements of lease repayments (7,798) (7,633) (15,342)
Sale/(purchase) of treasury shares 18 - (2,004)
Repurchase of own shares (104) - -
Net cash outflow from financing
activities (24,151) (10,449) (14,291)
----------- ----------- -------------
Net increase in cash and cash
equivalents 8 45,676 62,119 26,989
Cash and cash equivalents at beginning
of period 67,828 40,839 40,839
----------- ----------- -------------
Cash and cash equivalents at end
of period 113,504 102,958 67,828
=========== =========== =============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
For the six months ended 31 August 2021
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 2021 36,917 124,939 10,645 (403) (2,791) 2,810 103,823 275,940
Profit for the period - - - - - - 37,505 37,505
Actuarial gains
on retirement benefit
obligations - - - - - - 1,639 1,639
Tax on items taken
directly to equity - - - (28) - - (410) (438)
Fair value gains - - - 149 - - - 149
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Total comprehensive
income for the period - - - 121 - - 38,734 38,855
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Sale of treasury
shares - - - - 27 - (9) 18
Issuance of treasury
shares - - - - 180 - (15) 165
Cancellation of
repurchased shares (58) - - - - 58 - -
Repurchase of own
shares - - - - - - (306) (306)
Share based payments
charge - - - - - - 455 455
----------
As at 31 August
2021 36,859 124,939 10,645 (282) (2,584) 2,868 142,682 315,127
======== ========== ========== ========== ========= ============ =========== =========
The repurchase of own shares in the period was made pursuant to
the share buyback programme announced on 20 August 2021 and under
the authority provided at the AGM on 23 June 2021.
580,973 ordinary shares to the value of GBP306,000 had been
repurchased in the six months ended 31 August 2021, of which
GBP202,000 was unpaid at 31 August 2021. 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 for shares as consideration to the former shareholders of
acquired companies.
For the six months ended 31 August 2020
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 2020 36,917 124,939 10,645 (407) (803) 2,810 89,272 263,373
Profit for the period - - - - - - 2,548 2,548
Actuarial losses
on retirement benefit
obligations - - - - - - (521) (521)
Tax on items taken
directly to equity - - - 38 - - 99 137
Fair value losses - - - (150) - - - (150)
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Total comprehensive
income for the period - - - (112) - - 2,126 2,014
-------- ---------- ---------- ---------- --------- ------------ ----------- ---------
Sale of treasury
shares - - - - 16 - (16) -
Share based payments
charge - - - - - - 425 425
----------
As at 31 August
2020 36,917 124,939 10,645 (519) (787) 2,810 91,807 265,812
======== ========== ========== ========== ========= ============ =========== =========
For the year ended 28 February 2021
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 2020 36,917 124,939 10,645 (407) (803) 2,810 89,272 263,373
Profit for the year - - - - - - 16,315 16,315
Actuarial losses on
retirement benefit
obligations - - - - - - (2,619) (2,619)
Tax on items taken
directly to equity - - - 10 - - 498 508
Fair value losses - - - (6) - - - (6)
-------- -------- -------- -------- -------- ----------- --------- -------
Total comprehensive
income for the year - - - 4 - - 14,194 14,198
-------- -------- -------- -------- -------- ----------- --------- -------
Issue of treasury
shares - - - - 16 - (16) -
Purchase of treasury
shares - - - - (2,004) - - (2,004)
Share based payments
charge - - - - - - 373 373
-------- -------- -------- -------- -------- ----------- --------- -------
As at 28 February
2021 36,917 124,939 10,645 (403) (2,791) 2,810 103,823 275,940
======== ======== ======== ======== ======== =========== ========= =======
NOTES
For the six months ended 31 August 2021
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 2021
and similarly the period ended 31 August 2020 has neither been
audited nor reviewed by the auditors. The financial information for
the year ended 28 February 2021 has been based on information
contained in the audited financial statements for that year.
The information for the year ended 28 February 2021 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
2021.
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 Revenue Revenue Gross Profit Gross Profit Gross Margin
August 2021 GBP'm Mix % GBP'm Mix % %
Aftersales(13) 143.4 7.5 83.1 37.3 47.5
Used cars 804.8 41.8 82.4 36.9 10.2
New car retail and
Motability 530.7 27.6 38.8 17.4 7.3
New fleet & commercial 445.2 23.1 18.8 8.4 4.2
-------- -------- ------------- ------------- -------------
Total 1,924.1 100.0 223.1 100.0 11.6
======== ======== ============= ============= =============
Six months ended 31 Revenue Revenue Gross Profit Gross Profit Gross Margin
August 2020 GBP'm Mix % GBP'm Mix % %
Aftersales(13) 98.0 8.8 56.4 43.6 49.7
Used cars 449.9 40.2 41.2 31.8 9.2
New car retail and
Motability 346.9 31.0 23.3 18.0 6.7
New fleet & commercial 224.5 20.0 8.6 6.6 3.8
-------- -------- ------------- ------------- -------------
Total 1,119.3 100.0 129.5 100.0 11.6
======== ======== ============= ============= =============
Year ended 28 February Revenue Revenue Gross Profit Gross Profit Gross Margin
2021 GBP'm Mix % GBP'm Mix % %
Aftersales(13) 221.2 8.7 129.6 43.1 49.3
Used cars 1,008.4 39.6 93.9 31.2 9.3
New car retail and
Motability 739.7 29.0 54.3 18.0 7.3
New fleet & commercial 578.4 22.7 23.2 7.7 4.0
-------- -------- ------------- ------------- -------------
Total 2,547.7 100.0 301.0 100.0 11.8
======== ======== ============= ============= =============
(13) Margin in aftersales expressed on internal and external
turnover
4. Non-underlying items
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2021 2020 2021
GBP'000 GBP'000 GBP'000
Impairment charges - - (1,452)
Share based payment charge (529) (494) (265)
Amortisation (202) (218) (436)
----------- ----------- -------------
Non-underlying loss before tax (731) (712) (2,153)
Non-underlying taxation charge (2,760) (371) (867)
----------- ----------- -------------
Non-underlying loss after tax (3,491) (1,083) (3,020)
=========== =========== =============
5. Finance income and costs
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2021 2020 2021
GBP'000 GBP'000 GBP'000
Interest on short-term bank deposits 4 21 24
Net finance income relating to
Group pension scheme 62 75 150
----------- ----------- -------------
Finance income 66 96 174
=========== =========== =============
Bank loans and overdrafts (848) (870) (1,874)
Vehicle stocking interest (1,094) (2,939) (3,899)
Lease liability interest (1,762) (1,870) (3,632)
----------- ----------- -------------
Finance costs (3,704) (5,679) (9,405)
=========== =========== =============
6. Taxation
In the June 2021 Finance Act, it was enacted that the rate of
corporation tax in the UK will rise from 19% to 25% on 1 April
2023. This has resulted in the Group's deferred tax obligations
being measured at the higher rate of 25% in the Period. The impact
of this change has increased the Group's non-underlying tax charge
in the Period by GBP2,873,000.
The Group's underlying effective rate of tax for the Period was
20.9% (H1 FY21: 22.5%) The overall effective tax rate, impacted by
the revaluation of deferred tax obligations, increased to 26.6% (H1
FY21: 35.9%). 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.
Six months Six months Year
ended ended ended
31 August 31 August 28 February
2021 2020 2021
GBP'000 GBP'000 GBP'000
Profit attributable to equity shareholders 37,505 2,548 16,315
Non-underlying items (note 4) 3,491 1,083 3,020
Adjusted earnings attributable to
equity shareholders 40,996 3,631 19,335
=========== =========== =============
Weighted average number of shares
in issue ('000s) 362,165 367,158 367,092
Potentially dilutive shares ('000s) 14,890 633 7,134
----------- ----------- -------------
Diluted weighted average number of
shares in issue ('000s) 377,055 367,791 374,226
=========== =========== =============
Basic earnings per share 10.36p 0.69p 4.44p
=========== =========== =============
Diluted earnings per share 9.95p 0.69p 4.36p
=========== =========== =============
Underlying earnings per share 11.32p 0.99p 5.27p
=========== =========== =============
Diluted underlying earnings per share 10.87p 0.99p 5.17p
=========== =========== =============
At 31 August 2021, there were 368,593,008 shares in issue
(including 6,746,862 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
2021 2020 2021
GBP'000 GBP'000 GBP'000
Net increase in cash and cash equivalents 45,676 62,119 26,989
Cash inflow from proceeds of borrowings - (10,000) (22,760)
Cash outflow from repayment of borrowings 16,267 12,816 19,705
Cash movement in net cash 61,943 64,935 23,934
Capitalisation of loan arrangement
fees - - 75
Amortisation of loan arrangement
fees (90) (88) (175)
---------- ---------- ------------
Non-cash movement in net cash (90) (88) (100)
Movement in net cash/(debt) (excluding
lease liabilities) 61,853 64,847 23,834
Opening net debt (excluding lease
liabilities) (4,531) (28,365) (28,365)
---------- ---------- ------------
Closing net cash/(debt) (excluding
lease liabilities) 57,322 36,482 (4,531)
Opening lease liabilities (91,101) (96,894) (96,894)
Capitalisation of new leases (8,245) (2,014) (12,098)
Disposal of lease liabilities 167 - 2,549
Interest element of lease repayments (1,762) (1,870) (3,632)
Cash outflow from lease repayments 9,560 9,503 18,974
---------- ---------- ------------
Closing lease liabilities (91,381) (91,275) (91,101)
Closing net debt (including lease
liabilities) (34,059) (54,793) (95,632)
========== ========== ============
9. Acquisitions
On 12 March 2021, the Group acquired the trade and assets of a
Honda car dealership in Huddersfield, West Yorkshire, which also
holds an authorised repair contract for Mitsubishi, from Hepworth
Motor Group. Total consideration of GBP739,000 was settled from the
Group's cash resources.
On 31 May 2021, the Group acquired the entire issued share
capital of Power Bulbs Ltd and Power Bulbs Online Ltd, an online
vehicle lighting retail business, from Network Brands Limited.
Total consideration of GBP481,000 was settled from the Group's cash
resources.
On 30 June 2021, the Group acquired the trade and assets of a
Renault and Dacia dealership in Leicester from Renault Retail Group
Limited. Total consideration of GBP347,000 was settled from the
Group's cash resources.
10. 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. During the six month period ended 31
August 2021, there have been changes in the financial and
demographic assumptions underlying the calculation of the
liabilities. In particular, the discount rate has fallen due to
reductions in corporate bond yields, and the expectation of future
inflation has increased. The effect of these changes in assumptions
was an increase in liabilities of GBP2,887,000. The hedging
strategy in place within the scheme investment portfolio meant that
the Period saw a gain on assets of GBP4,526,000, offsetting the
increase in liabilities. In total, an actuarial gain of
GBP1,639,000 was recognised in the Statement of Comprehensive
Income.
11. Cash flow from movement in working capital
The following adjustments have been made to reconcile from the
movement in working capital balance sheet headings to the amount
presented in the cash flow as the movement in working capital. This
is in order to more appropriately reflect the cash impact of the
underlying transactions.
For the six months ended
31 August 2021
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 (482,109)
Contract liabilities (22,798)
-----------
At 31 August 2021 392,491 43,038 (504,907)
At 28 February 2021 597,391 59,375 (710,515)
Balance sheet movement 204,900 16,337 (205,608)
Acquisitions 686 347 (8)
Movement excluding business
combinations 205,586 16,684 (205,616) 16,654
============== =================== ===========
Pension related balances 41
Increase in capital creditor (643)
Increase in interest accrual (172)
Increase in share buyback
accrual (202)
Bonus accrual settled in
shares 164
Movement in working capital 15,842
==============
For the six months ended
31 August 2020
Trade and Trade and Total working
Inventories other receivables other payables capital movement
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables (612,000)
Contract liabilities (21,561)
----------------
At 31 August 2020 477,525 66,309 (633,561)
At 29 February 2020 639,177 71,720 (737,538)
Balance sheet movement 161,652 5,411 (103,977)
Acquisitions 2 293 (96)
Movement excluding business
combinations 161,654 5,704 (104,073) 63,285
============== =================== ================
Pension related balances 56
Decrease in capital creditor 928
Increase in interest accrual (72)
Movement in working capital 64,197
==================
For the year ended 28 February
2021
Trade and Trade and Total working
Inventories other receivables other payables capital movement
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables (688,948)
Contract liabilities (21,567)
----------------
At 28 February 2021 597,391 59,375 (710,515)
At 29 February 2020 639,177 71,720 (737,538)
-------------- ------------------- ----------------
Balance sheet movement 41,786 12,345 (27,023)
Acquisitions 23,691 142 (20,639)
Deferred consideration on
acquisitions (1,885) (16) 230
Movement excluding business
combinations 63,592 12,471 (47,432) 28,631
============== =================== ================
Pension related balances 152
Decrease in capital creditor 722
Decrease in interest accrual 135
Movement in working capital 29,640
==================
12. Goodwill and other indefinite life assets
31 August 31 August 28 February
2021 2020 2021
GBP'000 GBP'000 GBP'000
Goodwill 71,862 72,228 71,610
Other indefinite life assets - Franchise
relationships 27,582 27,087 27,582
At end of period 99,444 99,315 99,192
========== ========== ============
13. 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, currency risk
and the ongoing financial impact of the global COVID-19
pandemic.
All of the above principal risks are consistent with those
detailed in the Annual Report for the year ended 28 February
2021.
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 28 February 2022.
ALTERNATIVE PERFORMANCE MEASURES
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 FY22 The six month period ended 31 August 2021
H1 FY20 The six month period ended 31 August 2019
Adjusted Adjusted for amortisation of intangible assets and
share based payment charges 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 Profit Before Tax (PBT) Six months Six months Six months
ended ended ended
31 August 31 August 31 August
2021 2020 2019
GBP'000 GBP'000 GBP'000
Profit before tax 51,102 3,974 16,099
Amortisation 202 218 321
Share based payment charge 529 494 461
Adjusted PBT 51,833 4,686 16,881
=========== =========== ===========
Tangible net assets per share 31 August 28 February
2021 2021
GBP'000 GBP'000
Net assets 315,127 275,940
Less:
Goodwill and other indefinite life
assets (99,444) (99,192)
Other intangible assets (2,019) (1,948)
Add:
Deferred tax on above adjustments 8,901 6,764
---------- ------------
Tangible net assets 222,565 181,564
Tangible net assets per share (p) 61.5p 50.2p
---------- ------------
At 31 August 2021, there were 368,593,008 shares in issue (28
February 2021: 369,173,981), of which 6,746,862 were held by the
Group's employee benefit trust (28 February 2021: 7,287,304).
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.
Free Cash Flow
Six months Six months
ended Ended
31 August 31 August
2021 2020
GBP'000 GBP'000
Net cash inflow from operating activities 76,857 79,990
Purchase of other property, plant
and equipment (5,907) (6,733)
Purchase of intangible assets (20) (34)
Proceeds from disposal of property,
plant and equipment 464 840
Principal elements of lease repayments (7,798) (7,633)
Free cash flow 63,596 66,430
=========== ===========
Like-for-like reconciliations:
Revenue by department
H1 FY22 H1 FY22
Group revenue Acquisitions Disposals Like-for-like
GBP'm revenue revenue revenue
GBP'm GBP'm GBP'm
New car retail and
Motability 530.7 (77.5) (0.4) 452.8
New fleet and commercial 445.2 (31.9) - 413.3
Used cars 804.8 (104.5) (1.8) 698.5
Aftersales 143.4 (18.3) (0.2) 124.9
--------------- --------------- ------------ ---------------
Total revenue 1,924.1 (232.2) (2.4) 1,689.5
=============== =============== ============ ===============
H1 FY20 H1 FY20
Group Acquisitions Disposals Like-for-like
revenue revenue revenue revenue
GBP'm GBP'm GBP'm GBP'm
New car retail and
Motability 472.1 - (10.6) 461.5
New fleet and commercial 390.5 - (0.6) 389.9
Used cars 653.8 - (16.2) 637.6
Aftersales 130.7 - (2.8) 127.9
--------- --------------- ------------ ---------------
Total revenue 1,647.1 - (30.2) 1,616.9
========= =============== ============ ===============
Aftersales revenue by department
H1 FY22 H1 FY22
Group revenue Acquisitions Disposals Like-for-like
GBP'm revenue revenue revenue
GBP'm GBP'm GBP'm
Parts 86.3 (11.1) (0.1) 75.1
Accident repair 11.5 (0.8) - 10.7
--------------- --------------- ------------ ---------------
Parts and accident
repair 97.8 (11.9) (0.1) 85.8
Service 77.2 (10.0) (0.1) 67.1
--------------- --------------- ------------ ---------------
Total revenue * 175.0 (21.9) (0.2) 152.9
=============== =============== ============ ===============
*Inclusive of both internal and external revenue
H1 FY20 H1 FY20
Group revenue Acquisitions Disposals Like-for-like
GBP'm revenue revenue revenue
GBP'm GBP'm GBP'm
Parts 77.1 - (1.8) 75.3
Accident repair 9.4 - (0.2) 9.2
--------------- --------------- ------------ ---------------
Parts and accident
repair 86.5 - (2.0) 84.5
Service 68.8 - (1.7) 67.1
--------------- --------------- ------------ ---------------
Total revenue * 155.3 - (3.7) 151.6
=============== =============== ============ ===============
*Inclusive of both internal and external revenue
Gross profit by department
H1 FY22 H1 FY22
Group gross Acquisitions Disposals Like-for-like
profit gross profit gross profit gross profit
GBP'm GBP'm GBP'm GBP'm
New car retail and
Motability 38.8 (5.3) - 33.5
New fleet and commercial 18.8 (1.5) - 17.3
Used cars 82.4 (8.2) (0.1) 74.1
Aftersales 83.1 (10.4) (0.1) 72.6
------------- --------------- --------------- ---------------
Total gross profit 223.1 (25.4) (0.2) 197.5
============= =============== =============== ===============
H1 FY20 H1 FY20
Group gross Acquisitions Disposals Like-for-like
profit gross profit gross profit gross profit
GBP'm GBP'm GBP'm GBP'm
New car retail and
Motability 33.7 - (0.9) 32.8
New fleet and commercial 13.1 - - 13.1
Used cars 52.8 - (1.0) 51.8
Aftersales 73.1 - (1.7) 71.4
------------- --------------- --------------- ---------------
Total gross profit 172.7 - (3.6) 169.1
============= =============== =============== ===============
Aftersales gross profit by department
H1 FY22 H1 FY22
Group gross Acquisitions Disposals Like-for-like
profit gross profit Gross profit gross profit
GBP'm GBP'm GBP'm GBP'm
Parts 19.0 (2.3) - 16.7
Accident repair 4.8 (0.6) - 4.2
------------- --------------- --------------- ---------------
Parts and accident
repair 23.8 (2.9) - 20.9
Service 59.3 (7.5) (0.1) 51.7
------------- --------------- --------------- ---------------
Total gross profit 83.1 (10.4) (0.1) 72.6
============= =============== =============== ===============
H1 FY20 H1 FY20
Group gross Acquisitions Disposals Like-for-like
profit gross profit Gross profit gross profit
GBP'm GBP'm GBP'm GBP'm
Parts 16.7 - (0.3) 16.4
Accident repair 3.7 - (0.2) 3.5
------------- --------------- --------------- ---------------
Parts and accident repair 20.4 - (0.5) 19.9
Service 52.7 - (1.2) 51.5
------------- --------------- --------------- ---------------
Total gross profit 73.1 - (1.7) 71.4
============= =============== =============== ===============
Number of units sold by department
H1 FY22 H1 FY22
Group Acquisitions Disposals Like-for-like
New car retail 18,086 (2,780) (19) 15,287
New car Motability 4,865 (448) (3) 4,414
New fleet 11,413 (2,234) - 9,179
New commercial 9,917 (14) - 9,903
Used cars 49,697 (5,426) (113) 44,158
-------- --------------- ------------ ---------------
Total units 93,978 (10,902) (135) 82,941
======== =============== ============ ===============
H1 2020 H1 2020
Group Acquisitions Disposals Like-for-like
New car retail 18,343 - (319) 18,024
New car Motability 5,196 - (151) 5,045
New fleet 11,716 - (9) 11,707
New commercial 10,259 - (23) 10,236
Used cars 45,036 - (1,113) 43,923
-------- --------------- ------------ ---------------
Total units 90,550 - (1,615) 88,935
======== =============== ============ ===============
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END
IR UUSBRAWURAAA
(END) Dow Jones Newswires
October 13, 2021 02:00 ET (06:00 GMT)
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