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August 2018 Company Results

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Vertu results, reports and presentations

Date Title Results Reports Presentation Webcast
31st August 2018 Interim Results 2018 Download Download Download Watch now

Unaudited interim results for the six months ended 31st August 2018

Robert Forrester interview on the results

Analyst interview with Mike Allen, Head of Research, Zeus Capital

Robust half year profits

  • Revenues of £1.56bn (2017 H1: £1.45bn) representing growth of 7.9% (8.0% on like-for-like basis)
  • Group gross margin of 10.7% (2017 H1: 11.0%)
  • Adjusted1 operating profit of £19.4m (2017 H1: £21.4m)
  • Adjusted profit before tax of £18.1m (2017 H1: £20.9m)
  • Profit before tax of £17.3m (2017 H1: £24.2m) with no exceptional items (2017 H1: exceptional profit of £4.1m on disposal of freehold property)
  • Adjusted1 earnings per share of 3.90p (2017 H1: 4.24p)
  • Period end net debt of £8.7m (2017 H1: net cash £20.8m)
  • Hughes Acquisition completed for consideration of £21.8m in the Period
  • Freehold and long leasehold property portfolio: £202.9m (2017 H1: £175.0m)
  • Tangible net assets per share 45.9p (2017 H1: 44.5p)
  • Focus on returns to shareholders and capital allocation:
    - �Free cashflow of £10.9m (21017 H1: £4.6m)
    - �5.6m shares repurchased at an average of 43.6 pence per share deploying £2.5m of cash
    - �Interim dividend held at 0.55p per share (2017 H1: 0.55p)
  • (1) Adjusted for exceptional charges, amortisation of intangible assets and share based payments charge.
    (2) Core: Dealerships that have traded for two full consecutive financial years.

Current trading and outlook

  • September like-for-like new retail volumes down 13.8% (UK retail market down 20.1%) with weaker new car and fleet margins
  • New vehicle supply side issues:
    - September new vehicle supply impacted by EU wide WLTP emissions regulations
    - Continued depressed Sterling levels reducing supply to the UK and margins
  • Used car margins strengthened in September on back of reduction in supply: likely to continue
  • Aftersales continues to exhibit positive growth trends
  • Cost pressures continue and remain a crucial focus for management
  • Planned capex programme coming to an end with improving free cashflows anticipated
  • Political uncertainty may undermine consumer demand for the remainder of FY2019

Aftersales: Recurring high margin income

  • Continued like-for-like revenue and gross profit growth across all aftersales streams
  • Core Group aftersales gross profit up £3.4m
  • Increase in mix of warranty work: revenues up 12.0%
  • Service margins reduced due to higher technicians� pay levels and increased warranty sales (less efficient channel)
  • Continued focus on:
    - Recruiting and training of technicians to increase capacity
    - Enhancing customer experience through training and resourcing of customer facing colleagues and increased use of technology
    - Growing average invoice value per customer visit through focus on vehicle health check process (including video technology)

Movement in net cash: Tight management of working capital

  • Stability in overall working capital position: lower new vehicle inventories and trade receivables offset by higher used vehicle inventory values
  • Completion of Hughes acquisition with cash consideration (including borrowings acquired) of £23.7m (30th June 2018)
  • Purchased freehold of Newcastle Vauxhall, previously leased with fixed rental increases over remaining 14 year lease term

Operational Highlights

  • Like-for-like service revenues up 7.4% continuing the long term growth trend in aftersales
  • Rise in like-for-like aftersales gross profits of £3.4m year on year
  • Strong growth in like-for-like used vehicle volumes of 5.8%, representing 12.4% revenue growth
  • Increase in like-for-like used car gross profits due to volume growth and higher gross profit per unit; lower margins of 8.8% (2017 H1 : 9.2%) due to higher average prices
  • Group like-for-like new car retail volumes up 5.7%, gaining market share as UK private registrations declined by 2.4%
  • Average new car sales prices continue to rise; gross profit per unit stable; new car margins of 7.4% (2017 H1: 7.6%)
  • Operating expenses as a % of revenue lower at 9.4% (2017 H1: 9.5%) reflecting strong cost control despite on-going cost pressures
  • Surplus property realisations of £3.3m during the Period with more anticipated
  • New Board and management appointments

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