Vertu Motors plc (VTU) Earnings Call Transcript & Summary

Welcome to BRR Media. I'd like to welcome back Robert Forrester who's the CEO of Vertu Motors. Good morning to you, Robert.

Good morning.

Robert, Vertu released a pre-close trading update this morning. Maybe you could talk us through the key highlights for the period.

Yes. Well, we're looking at trading period from 1 September through to the end of January. I notice there's a current trading and outlook section as well. And we saw an interesting period. Obviously, Brexit happened. We saw some consumer volatility around that. But we're pleased overall that the Board is able to say that we expect the group's trading performance for the year to February to be in line with its overall expectations. So that's good. And in that, we actually bought some dealerships as well and absorbed some losses. So I think it was a good trading performance. We've seen a very strong performance yet again out of our service departments, like-for-like revenue up 5.4% and better margins, and that's great. On used cars, we changed tack a little bit. We've seen some supply constraints coming through as the new car market went down, which meant we went slightly more for margin than we did for volumes. So volumes were off a little, about 2.3% like-for-like, but we saw stronger pricing and stronger margins, and overall, made more money. So we were pleased with that. New cars was the area of the business, which was tighter in terms of volume. So our like-for-like new retail volumes were down 9.4%, though we did see strong growth out of Motability, and particularly new fleet volumes, which in cars were up 13.6%, which helped us significantly in the period. So margins actually were stable in new retail, and fleet and commercial have actually rose. So overall, our gross profit generation was actually sound and that's obviously helped us to have the expectation of being in line with expectations at the end of the period.

Now Robert, there's been a lot of activity in Vertu's portfolio recently. Maybe you could tell us more about the portfolio changes.

Yes. Well, we've certainly got the view that the group needs more scale going forward. And we've got a strong group in terms of systems, in terms of management. We're seeing far better levels of colleague stability. We're becoming far more consistent in the delivery of customer experiences, which means we should be confident, especially around our strong balance sheet, about growing the business from a solid base and you can see that from the 1st of January. We purchased 4 Volkswagen dealerships in Yorkshire in middle of January from Sytner Group, which are excellent dealerships in great locations. We've augmented our Hyundai representation in the North East. We already had a very good dealership in Peterlee. We've now got one at Silverlink, which is a major motor retailer in Newcastle, and opened a satellite in Morpeth. And then we took an opportunistic look at administration that happened in Edinburgh in late January and we've purchased the Kia, Suzuki and Mitsubishi franchises in Edinburgh off the administrators bulking up our Macklin Motors brand, which I think is important. We do see Scotland as an important area for us. So we were pleased with that. And then in the last couple of days, and there's obviously new news in the pre-close, we've purchased Bradford Honda and Kia off Vantage, including the freehold property, which we're already the largest player in Honda so that bulks up the Honda division even more. And it produces the second Kia dealership for the group in the space of a month. We didn't have Kia. Kia is a highly respected franchise. It always scores very highly on the NFDA survey. So it's great to have our second Kia dealership in the space of a month. And hopefully, we can go on and do good things with Kia. Finally, in December, we did announce that we had transferred our Volvo dealership in Derby to Marshall's, but we kept the premises. This was part of a strategic move whereby we've then refurbished over the last couple of months our dealership to Peugeot standards and transferred the business in from Robins and Day over the weekend. So yesterday, we commenced operations at Derby Peugeot. Peugeot has really transformed itself as a franchise in the last couple of years. Our business is profitable. They've got the volume margin mix right on new cars, and we look very much forward to having that business in the portfolio. We've got 7 franchises in Derby, and Derby is a big part of our operations. So we're very much looking forward to that.

So the group has a strong foundation. And how do you see the outlook moving forward?

Well, I mean March is obviously the biggest month of the financial year. So we're bang in the middle of March now. The business clearly is geared up to deliver the strongest March possible. We've got a very strong base with which to work from in terms of a strong balance sheet, experienced leadership team, great systems and we recently did a teach-in in the city of our systems, which I think was useful. So we are aligned for more growth. And we've got a strong pipeline actually of potential opportunities which we're evaluating. But clearly, we've also got to trade through the next few months. And we've said we're in line -- that we expect to be in line in terms of overall expectations at the end of February. Clearly, we've given -- the analysts have revised their numbers in respect of '21 and '22 on the background of where we see things at the moment. But things for this financial year will be a lot clearer when we produce our numbers in May, having gone through March and April. So lots to do, but I think we are well positioned.

Robert, thank you for your time today.

Thank you very much, Scott.

You've been listening to BRR Media with Robert Forrester who's the CEO of Vertu Motors.