Vertu Motors – Ahead Of Next Tuesday’s AGM The Shares Of The UK’s Fourth Largest Motor Retail Group Could Be Moving Higher

Vertu Motors (LON:VTU) was established in November 2006 with the strategy to consolidate the UK motor retail sector – effectively it was a ‘Buy-To-Build’ vehicle.

A senior management team, with a wealth of experience within the sector, was put in place and on 27th March 2007 the company acquired Bristol Street Motors, the 13th largest motor retailer in the UK.

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Its subsequent acquisition strategy has been supplemented by focused organic growth driving operational efficiencies through its expanding national dealership network.

Today Vertu Motors is the fourth largest automotive retailer in the UK, with a network of 184 franchised sales outlets and 4 non-franchised sales operations from 143 locations across the UK.

The Group’s Brands And Its Dealerships

Its dealerships operate predominantly under the Bristol Street Motors, Vertu and Macklin Motors brand names.

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Manufacturer partners are Audi, BMW, Citroen, CUPRA, Dacia, Ferrari, Ford, Honda, Hyundai, Jaguar, Kia, Land Rover, LEVC, Mazda, Mercedes-Benz, Mercedes-AMG, MG, MINI, Nissan, Peugeot, Renault, SEAT, SKODA, smart, Toyota, Vauxhall, Volkswagen and Volvo.

Its non-franchised operations include Vansdirect, Ace Parts, Powerbulbs and The Taxi Centre.

Ongoing Growth Strategy

It is intended that the group will continue to acquire motor retail operations to grow a scaled dealership group.

Its acquisition strategy is supplemented by a focused organic growth strategy to drive operational efficiencies through its national dealership network.

Management Comment

Commenting on the mid-May announced results CEO Robert Forrester stated that:

”It was pleasing to see the Group successfully navigating a difficult period of trading with declining used car values in the last few months of 2023. 

Used vehicle prices and margins have now stabilised and there has been strong cash generation from lower working capital reducing net debt below market expectations.

During the year, record revenues of £4.72 billion were achieved.

Moving to the new financial year, March and April 2024 were successful months. 

The Group delivered new retail like-for-like sales volumes ahead of the market decline in March and April. 

This demonstrates the robustness and strength of the Group’s operations.”

The Equity

There are some 337.6m shares in issue.

The larger holders include TDR Capital (9.76%), FIL Investment Advisors (5.22%), Janus Henderson Investors (5.05%), Santander Asset Management (4.22%), Nivag Holdings (4.10%), Close Asset Management (4.02%), Robert Forrester, Founder, (2.22%), William Dobie (2.09%), Norges Bank Investment Management (2.04%) and Ennismore Fund Management (1.40%).

In the middle of last month the group announced that is has agreed a new £3m share buyback programme, for up to 30m shares, all repurchased will be for cancellation.

Analyst View

Ian Robertson at Progressive Research considers that the group, in the last trading year to end February 2024, delivered a strong performance against a difficult market.

He noted that the current year had started well with trading ahead of management expectations for the first two months.

His estimates for the current year to end February 2025 are for sales of £4.97bn (£4.72bn), adjusted pre-tax profits of £42.2m (£37.1m), with earnings of 8.66p (7.8p) per share.

My View

Ahead of next Tuesday’s AGM I would expect the group to announce a Trading Update, which hopefully could show a continuation of the trend set in the first two months.

The shares, now at just 78.50p, have always been undervalued when set against the £255m capitalised group’s business.

They are not expensive, and I would expect to see them trading back over the recent 88p High scored last November, with 90p to 95p being a challenging price aim.

Fresh guidance from the company next Tuesday could well help the upwards move.

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