Vertu Motors shares jump on record profits

Vertu Motors shares rose 6% early this morning after the AIM-listed automotive retailer reported record profitability, excellent cash conversion, and a robust balance sheet in its finals. 

The company, which has a network of 124 outlets across the UK, said record trading had been driven by enhanced performance from its recent acquisition as well as strong used-car performance and growth in the higher margin service area.

N+1 Singer analyst Matthew McEachran said that around half of the growth was due to acquisitions made in the year:

"After factoring in the dilution from the £35m equity raise at 62.5p, FD adjusted EPS increased c5% to 6.4p (cons. 6.1p) and RoE edged down to 10.8% (11.4%). Including £50m M&A spend and increased capex, there was only a £2m cash outflow resulting in £21m Y/E net cash (vs cons. £2m). The beat was mainly a function of improved w/c. With debt facilities and unencumbered stock, available financial resource is over £100m, giving flexibility to fund future M&A opportunities should they arise."

Vertu finished the year with a strong balance sheet and £21m in net cash. This, in addition to a new five-year banking facility signed in Feb for £40m, positions the Group well for further value-enhancing acquisitions. 

CEO Robert Forrester said that Vertu was focused on consolidating the UK automotive retail sector to grow a scaled and sustainable dealership business:

"Today's results, our fifth consecutive year of growth, evidences our continued delivery of this strategy. Significant acquisitions have been integrated through the year and have enriched the premium mix of the franchise portfolio."

He added that the record pre-tax profit of nearly £30m was a 14.6% increase and EBITDA had risen to more than £40m for the first time. 

"Our strong balance sheet with net cash of £21.0m together with our unutilised debt facilities provide scope for further scaling-up in due course to drive value and further enhance shareholder returns." 

Looking ahead to the current financial year, Mr Forrester said trading had been strong. Consensus is expecting £2.8bn revenues for 2018 and £23.7m in net profit.