TIDMVTU
RNS Number : 8539Y
Vertu Motors PLC
10 May 2023
10 May 2023
Vertu Motors plc ("Vertu", "Group")
Final results for the year ended 28 February 2023
Strong operational performance with excellent cash generation,
major acquisition integrated well, strong current trading
Vertu Motors, the UK automotive retailer with a network of 189
sales and aftersales outlets, announces its final results for the
year ended 28 February 2023 ("Year").
Commenting on the results, Robert Forrester, Chief Executive,
said:
"The year was critical for the Group as we undertook our largest
ever acquisition and generated over GBP4bn of revenues for the
first time. The Helston businesses have now been integrated into
our systems platform. The acid test was how our core Group and new
dealerships performed in March and April and I am delighted to
report that the trading result post year end has been encouraging
and gives confidence for the year ahead.
"The reported results reflect a strong profit and excellent cash
performance, both ahead of expectations. As a result, we have
chosen to propose a significantly increased final dividend,
delivering a 26.5% higher dividend for the year as a whole. The
business is in a healthy financial and operational position to
further develop and gain from the benefits of scale as sector
consolidation continues."
FINANCIAL SUMMARY
Years ended 28 February 2023 2022 2021
Revenue GBP4,014.5m GBP3,615.1m GBP2,547.7m
Adjusted(1) profit before
tax GBP39.3m GBP80.7m GBP24.6m
Basic Adjusted(1) EPS 9.16p 17.92p 5.27p
Dividends per share 2.15p 1.70p -
Free Cash Flow GBP54.3m GBP44.4m GBP48.4m
Net (Debt)(2) / Cash (GBP75.3m) GBP16.2m (GBP4.5m)
HIGHLIGHTS
-- Adjusted(1) profit before tax of GBP39.3m (FY22: GBP80.7m),
on record revenues of GBP4.0bn. Profit slightly ahead of market
expectations.
-- Acquisitions successfully integrated onto Group systems and
processes and on track to deliver expected synergies and earnings
enhancement.
-- Group portfolio grown by 31 sales outlets during the Year,
including 27 from Helston and 2 from BMW Motorrad acquisitions,
contributing to scale benefit opportunities.
-- Free Cash Flow of GBP54.3m in the Year (FY22: GBP44.4m)
reflecting excellent working capital management.
-- Net debt(2) of GBP75.3m as at 28 February 2023, significantly
ahead of market expectations (FY22: Net cash: GBP16.2m).
-- Expanded debt facilities agreed in December 2022, including a
new GBP74.8m 20-year mortgage, an upsized revolving credit facility
of GBP93m with a third bank added to syndicate, and an increased
used vehicle stocking facility to GBP70m (from GBP35m).
-- Net tangible assets per share of 65.3p reflecting strong asset base.
-- Final Dividend of 1.45p per share recommended, bringing full
year dividend to 2.15p per share (FY22: 1.70p) an increase of
26.5%.
-- GBP5.9m returned to shareholders via repurchase of 10.5m shares during the Year.
OUTLOOK
-- Trading performance in excess of last year delivered in key
months of March and April aided by the contribution from
acquisitions.
-- Improvement in new vehicle supply evident with continued high
Group order bank of high margin new vehicle orders in place.
-- Used vehicle demand remains strong and continued used supply
constraints underpin residual values. Vertu Insights rollout
underway to help optimise used car gross margin.
-- Aftersales revenues and profits remain highly resilient aided
by retention products such as service plans and ageing of the
vehicle parc.
-- Cost pressures, reflecting continued high inflation remain
evident with strategies in place to mitigate where possible.
-- Active portfolio management strategy expected to deliver a
further c.GBP9.5m of assets disposals in next 12 months, GBP3m
above book value.
-- Net debt expected to reduce through ongoing strong Free Cash Flow generation.
(1) Adjusted to remove share-based payments charge, amortisation
of intangible assets, impairment charges and exceptional
acquisition costs.
(2) Excludes lease liabilities, includes used vehicle stocking
loans
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 Tel: 0191 491 2121
Phil Clark, Investor relations PClark@vertumotors.com
Zeus (Nominated Advisor and Broker)
Jamie Peel Tel: 020 3829 5000
Andrew Jones
Dominic King
Camarco
Billy Clegg Tel: 020 3757 4983
Tom Huddart
CHAIRMAN'S STATEMENT
The Group again executed well during the year ended 28 February
2023, delivering an Adjusted(1) profit before tax of GBP39.3m,
slightly ahead of analysts' expectations which had previously been
raised on several occasions. There were noteworthy highlights in
the Year:
-- Successful and meaningful scale growth delivered, with an
increase of 31 sales outlets in the financial year and the planned
integration progressing well. The Group's strategic objective to
grow as a major scaled franchise automotive retail group is born
from the belief that scale benefits can be maximised in a larger
group, which we are demonstrating. Manufacturer relationships are
key to the delivery of these benefits, and I am proud that the
Group has such good relationships with its chosen manufacturer
partners. This is due to operational delivery and a strong, mutual
respect.
-- The delivery of operational excellence and digitalisation has
seen further development of the Group's in-house analytics systems.
A new 'Vertu Insights' used vehicle stock management tool to ensure
profit opportunities are maximised is being rolled out. In
addition, investment in self-service check-in technology has been
made to enhance customer choice, reduce friction in the customer
journey and aid the productivity of our colleagues. The Group's
scale justifies investment in the in-house development of systems
delivering both for customers and enhanced cost efficiency. These
scalable platforms have been quickly rolled into the acquired
dealerships and further work is now underway to maximise Group-wide
efficiency benefits using technology.
-- There has been continued application of stringent capital allocation disciplines:
o Acquisitions targeting returns above cost of capital, have
been delivered. The Group has continued to apply a
multi-franchising strategy to maximise the profit opportunity in
certain physical locations and to align with Manufacturer
representation plans. It is clear that consolidation will continue
within the automotive retail sector. The Group is in an excellent
position to take advantage of this. Our Manufacturer partners are
keen for us to grow with them, the board has the ambition to do so,
and the Group has the financial firepower to expand with
appropriate opportunities.
o The annual dividend, a vital element of shareholder return has
been increased by 26.5% reflecting the continued strong free cash
generation. Additionally, the Group has also returned GBP5.9m to
shareholders through the repurchase of over 10.0m shares in the
Year. A buyback authority for a further GBP3m of buybacks is in
place.
The Group has continued to progress towards increasing its
sustainability and to reduce its environmental impact. GBP1.2m has
been invested in green technologies such as solar panels and LED
lighting in the Year, with a remaining GBP3.2m planned for such
installations in FY24. The investment in solar panels has been made
in connection with the Group's energy strategy which seeks to
self-generate 10% of the Group's energy needs via onsite solar
energy.
I am very proud to see how every colleague has contributed to
the success of the Group and I would like to thank them for this.
The commitment that they have continued to show over the past year
has been exemplary.
As we enter the new financial year, the Group's excellent
financial position, continued investment in its colleagues and
systems and its established track record of execution gives
confidence that we will continue to deliver on our strategic
objectives and deliver scale benefits in the enlarged Group.
Andy Goss, Chairman
(1) Adjusted to remove share-based payments charge, amortisation
of intangible assets, impairment charges and exceptional
acquisition costs.
CHIEF EXECUTIVE'S REVIEW
Strategy Summary
The Group's key long-term strategic goal remains: To deliver
growing, sustainable cashflows from operational excellence in the
franchise automotive retail sector. The strategic objectives of the
Group are summarised below:
-- To grow as a major scaled franchised dealership group and to
develop our portfolio of Manufacturer partners, while 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 and cost
optimisation and efficiency:
o Optimise our omnichannel retail offering and promote our
brands to drive enquiry levels.
o Digitalise aftersales processes to improve customer
service.
o Reduce the cost base of the Group by delivering efficiency
using 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 automotive retail dealership business.
An update on progress in executing these strategies is set out
later in this report.
Key Sector Trends
The franchised automotive retail sector continues to evolve in
the areas of electrification and agency distribution. Responding
appropriately to these trends is top of mind for the Board.
1. Electrification
The UK Government has recently re-asserted its plan to ban the
sale of new petrol and diesel cars in the UK from 2030 despite the
European Union introducing delays to implementation of their ban
and flexibility around synthetic fuel ICE vehicles. Despite overall
supply constraints in new vehicles throughout 2022, electric and
hybrid vehicle registrations in the UK saw growth of over 20% in
calendar 2022 compared to 2021, representing a 7% market share
increase. Nevertheless, there has been a cooling of demand for
electric vehicles (BEV) from consumers in the last 6 months and
this is reflected in ordertake, if not in registration data due to
continued long lead times. The rising cost of electricity
increasing running costs and inadequate UK public charging
infrastructure have all had an impact on demand and public
perception.
The Group has ensured that all colleagues are appropriately
trained on electric vehicles, to respond to customer enquiries and
provide repair services. Training in this regard is provided by
both the Group's own sales and aftersales training, and colleagues
attending Manufacturer training. The Group is investing in
accreditation to the national EV accreditation scheme promoting
standards in electric vehicle retailing and servicing. Moreover,
electric vehicle mystery shops have taken place monthly across the
business where mystery shoppers visit dealerships to assess
effectiveness in retailing electric vehicles.
Increased electrification of the vehicle parc requires ongoing
investment in terms of EV infrastructure such as in aftersales
capabilities and charging facilities. The Group invested GBP0.4m in
charging infrastructure in the Year with a further GBP1.6m planned
in the next 12 months.
2. Agency Distribution
A number of Manufacturers in the UK have indicated they will
move to an agency sales distribution model over varying timescales.
Under this model, in respect of new vehicle sales, the Manufacturer
transacts with the customer while the retailer remains the physical
touchpoint with the customer and undertakes the sales process and
customer contact as an agent. The retailer-turned-agent receives a
commission on each new vehicle sale but will own no inventory and
will no longer set prices or discounts. There are varying
iterations of the agency model proposed and the picture is evolving
both legally and in detailed implementation.
The Group has long operated on an agency basis for a significant
proportion of fleet and parts sales. The first of the Group's
significant manufacturer partners to operate the agency model for
new retail sales was Mercedes-Benz passenger cars which moved to a
genuine agency model on 1 January 2023. The implementation has been
successful from a systems perspective and the Board will monitor
how the change impacts volume and profit levels, albeit remaining
cognisant that the change to agency is, of course, only one of a
number of factors which impacts volume and profit. The Volkswagen
Group brands and Volvo are likely to be the next in line for agency
implementation.
Update on execution of Group Strategy
Developing the Scale of the Group
The Group has an excellent platform allowing it to capitalise on
growth opportunities and deliver scale benefits:
-- Financial capacity
The Group's balance sheet strength is underpinned by an
extensive freehold and long leasehold property portfolio and a
largely unencumbered inventory of used vehicles. This strong asset
base, together with a comparatively low level of debt including
used vehicle stocking loans, means there remains significant
firepower available to facilitate the Group's further growth
ambitions. The Group will continue to apply its very disciplined
approach to acquisitive growth to ensure that only the right
opportunities to drive long term success and shareholder value are
executed.
-- Management capacity
The Group has a stable and experienced senior management team,
with an established track record of execution and performance
delivery. The Group has always invested in training programmes to
ensure its talent pipeline is developed, and many of the Group's
colleagues have benefitted from this training and have been
promoted into management roles as a result. A 'Next Generation'
two-year talent programme, to develop the next generation of the
Group's senior management, has recently been launched to augment
the Group's existing training initiatives.
-- 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 highlighted. The scale of the Group
allows it to continue to increase investment in the development of
systems and operations to further augment the Group's customer
offering and enhance profitability through maximising margins and
increasing productivity to reduce costs. The Group's 54 colleague
strong development team ensures continued improvement and
scalability of platforms.
-- Brand Strength
The Group operates three major customer facing brands in the UK:
Bristol Street Motors, Macklin Motors and Vertu Motors. Bristol
Street Motors represents the franchise sectors leading brand in
England and Wales in terms of prompted brand awareness (54%:
Source: YouGov). In Scotland, the Group operates under the Macklin
Motors brand, which has a strong 49% prompted brand awareness.
Vertu Motors is the Group's premium focused brand, with a growing
prompted awareness of approx. 8%, in England. This is likely to be
much boosted by the significant expansion of the brand in the South
West in 2023. Each of these brands is supported by TV campaigns,
sports sponsorships and partnerships and digital marketing
initiatives. Tangible scale benefits arise from this strategy.
Growth
The Group has the brand strength and financial, operational, and
management capabilities to continue to add additional franchised
outlets to the business. The Board remain ambitious to do so. The
Group also continues to evaluate and execute multi-franchising
actions in its locations to maximise the long-term profitability of
each location.
The Year saw the Group execute on this strategy, increasing its
number of sales outlets by a net 31 over the Year, as set out
below:
-- Acquisitions
On 17 December 2022 the Group completed the acquisition of
Helston Garages Group Limited ('Helston') adding 28 predominantly
premium franchised sales outlets in the South West. This
acquisition radically enhanced the Group's scale and reach into the
South West of England. The integration of these acquired
dealerships onto the Group's systems and processes is now complete,
with the acquired Ferrari business and a standalone accident repair
centre operation, being the final businesses to have transitioned
in April 2023.
At the time of the Helston acquisition, the Group announced
expected synergies of at least GBP3.2m to be delivered for FY25.
The Board believe that the Group is well on track to deliver this
outcome.
On 31 October 2022 the Group acquired the business and assets of
two BMW Motorrad outlets in Shipley, near Bradford, and Rotherham
from Saltaire Motor Company Limited subsequent to the acquisition,
on 1 March 2023, the freehold interest in the Rotherham dealership
was purchased for GBP0.5m. These businesses have been rebranded to
trade under the Vertu brand and have been fully integrated into the
Group. The Group is now the largest UK partner of BMW Motorrad as
it continues to grow its motorcycle operations.
-- Multi-franchising and new outlets
On 1 April 2022 the Group opened Macklin Motors Toyota in
Darnley, South Glasgow. This dealership represented the first of
several dealerships to be opened, following the Group being awarded
the Toyota franchise in the West of Scotland territory. The second
dealership, located in the Group's former Ford premises in
Hamilton, opened on 21 October 2022 following a full refurbishment
alongside the Mazda franchise. These two outlets are expected to
make a positive profit contribution to the Group in FY24. A third
representation point for Toyota in Scotland, which will be in Ayr,
will be developed as a new build dealership over the next financial
year. It is currently anticipated that the development will cost
approximately GBP4.5m including the purchase of land for the
development. The development is currently subject to a planning
application.
On 1 May 2022, the Group opened a further Bristol Street Motor
Nation used car outlet in newly acquired leasehold premises at
Stockton, Teesside.
Work was finalised on the introduction of sales outlets for
Vauxhall and Citroen alongside the Group's Peugeot operation in
Harlow. The outlets opened in November 2022 following the move of
the aftersales operation off site to a new larger dedicated
aftersales operation.
The LEVC franchise commenced covering Scotland and the North
East of England as part of the Group's Taxi Centre operation.
Subsequent to the year end, on the 24 April 2023, the Group
agreed a sub-lease of a former Cazoo outlet in Tamworth,
Staffordshire. The outlet will be operated as a Bristol Street
Motor Nation used car outlet and is anticipated to open in July
2023.
-- Active portfolio management and changes
The Board continues to actively manage the Group's portfolio of
properties and dealerships and assess further growth opportunities,
utilising strict investment return metrics to ensure discipline in
capital allocation.
During the course of the year, the Group took pruning actions to
ensure business fitness, appropriate capital allocation and
creation of value. Since FY18, the Group has received cash proceeds
of GBP6.2m from the sale of surplus properties, GBP1.2m more than
book value.
Additional surplus properties are held by the Group and are
expected to be disposed in the next 12 months. Cash proceeds at
GBP9.5m are anticipated in due course, circa GBP3m in excess of
book value.
The Group's single Jeep sales outlet in Beaconsfield ceased
operation and the Ford outlet in Hamilton closed to allow for the
redevelopment of the site for the Toyota franchise alongside Mazda.
In addition, the Group closed its accident repair centre in
Chesterfield in the Year to facilitate further multi-franchising
including the addition of the MG franchise expected to open in
August 2023.
In January 2023, the Group disposed of a small Peugeot outlet in
Honiton, acquired as part of the Helston acquisition the month
earlier. This business was sold to the Snows Group, including
responsibility for the property lease. This optimises the Group's
Peugeot representation in the area, as Peugeot is also represented
in nearby Exeter and the franchise will not continue in
Honiton.
The pruning process continued post the year end when on 31 March
2023, the Group closed operations at its BMW/MINI outlet in Malton,
Yorkshire. The Malton property lease ceases shortly. This action
will reduce operating expenses and limit future capital expenditure
as the Group seeks to retain sales and service customers in its
nearby York BMW and MINI dealerships.
On 30 April 2023, the Group sold the trade and assets of its
standalone accident repair operation in Newburn, Newcastle upon
Tyne at above net book value. The business did not make a
sufficient financial return on invested capital. The sale included
the leasing of the long-leasehold property to the buyer. The Group
has now agreed to sell the long-leasehold interest for GBP1.4m to a
property investor with completion expected shortly. Cash proceeds
are above net book value and are included in the GBP9.5m referred
to above.
Jaguar Land Rover have announced their Re-imagine strategy,
which creates a House of Brands: Range Rover, Defender, Discovery
and Jaguar. Jaguar will be a luxury electric vehicle brand with
reduced points of sale reflecting its repositioning. The Group
currently operates six Jaguar outlets, alongside the Land Rover
brand. From November 2024, only the Group's outlet in Leeds will
continue to represent both Jaguar and Land Rover brands. Intangible
assets relating to the terminated Jaguar operations of GBP1.5m have
been written off as a non-underlying, non-cash impairment charge in
the Year.
Digitalisation Developments
-- Omni-channel Retail Sales
We have seen no major increase in the propensity for customers
to transact a vehicle purchase purely on-line. This appears to be
evidenced by the retrenchment of on-line operators who had hoped to
be sector disrupters.
Consumers continue to value a blended retail experience with a
desire to complete tasks digitally as well as visiting a dealership
to touch, feel and test drive their new vehicle ("omni-channel
retailing"). In FY23, we focused on increasing the number of
on-line vehicle sales reservations rather than driving pure on-line
sales, as reservations convert to a sale at more than twice the
rate of a traditional vehicle sales enquiries. The Group took over
14,800 on-line vehicle reservations in FY23, up 100% on the
previous year.
We continue to reap the benefits of placing much of our customer
facing technology infrastructure into the cloud provided by Amazon
Web Services. This has increased up-time and resilience, as well as
enabling further synergies between our outlets and digital
environments. We now offer consistent, automated vehicle valuations
across all our outlets and these are mirrored on both our "Sell My
Car" and "Click 2 Drive" on-line customer journeys. This provides
transparency and promotes trust. During the Year we developed new
dealership sales experience/process software built on the same
platform that underpins our eCommerce journeys. The Group also
developed a digital customer referral system and process which has
now been rolled out.
In FY24 we will roll out a further enhanced vehicle sales
process which provides an updated "Click2Drive" platform. This
upgrade to our web platforms and dealerships will allow for on-line
customers to have an enhanced selection of additional products and
risk based personalised finance rates as well as a "Total Cost of
Ownership" calculator. These enhancements further align the on-line
and in dealership sales processes so removing friction and customer
frustration. In addition, this will aid consumers in calculating
the "true cost" of changing their vehicle in a market with multiple
and often complex drivetrain options, enhancing customer experience
particularly given customer concerns over the cost of living at
present.
-- Data Model and Customer Data Platform
During FY23 the Group continued to scale our data capability,
augmenting our existing team with an experienced Head of Data and
Analytics. This new role, alongside other investments in the data
and business intelligence teams, now numbering seven colleagues,
will enable the launch of a comprehensive data warehouse in Q1
FY24. Utilising existing infrastructure, this will provide a
bedrock of data for the Group and the opportunity to drive further
efficiencies across our finance, dealership and marketing
functions.
Initial use cases built upon the data warehouse include:
-- Feeding consistent and accurate data to our newly developed
Customer Data Platform, further increasing the personalisation,
targeting and ROI of our marketing spend.
-- Powering the "single version of truth" for our enhanced used
car analytics platform "Vertu Insights" which is scheduled for
first release in June. This will build on the success of the Vertu
Analytics tool launched in 2019, and further enable us to maximise
margin and speed of sale in used vehicles.
-- Improving sales conversion by providing real-time Customer
Relationship Marketing and vehicle information to colleagues
interacting with customers through the recently deployed Cloud
Telephony platform.
The business operates in an increasingly complex technology
environment and the above developments can only be undertaken by a
business with scale. As with important cyber risk investments, once
the platform is developed, scale benefits accrue as more outlets
are added to the platform.
-- Digitalisation in Aftersales
The Year saw significant investment through the introduction of
a third-party digital self-service check-in system for customers to
use in the Group's service departments. Customers can check in from
home or use the instore kiosks where they can safely deposit their
vehicle keys. This provides increased choice and convenience for
Customers and helps to reduce the need to further resource our
aftersales departments at busy "pinch point" periods at the start
and end of the day. Initial customer feedback has been excellent,
and the Group has seen increased penetration of add-on sales in
service from customers using this facility.
The Group has historically used a third party to provide service
customers with deferred payment term of 3 months following a
service visit where additional repair work is purchased. We have
started the roll out of an in-house developed deferred payment
option for service customers, which will substantially reduce the
cost to the business of offering this service. Working capital is
expected to increase by c. GBP3m following the rollout, with a
reduction in cost evident and no material credit issues
anticipated. The offering has a powerful impact on converting work
from Visual Health Check activity and drives higher average invoice
values. This functionality can be used instore or remotely by
customers and is executed by the same SMS signature technology
already in use in the sales process. The roll out of this across
all Group sales outlets will be complete in the first half of
FY24.
-- Digitalisation to improve efficiency and reduce cost
As the Group integrated the Helston acquired dealerships, some
highly efficient finance processes were identified that could
improve the Group's existing processes. Inspired by this, a new
project has commenced investing substantial development resource to
improve the productivity of the Group's financial processing. This
will mirror some of the approaches taken in a project in the
Group's vehicle administration function three years ago, where
substantial efficiencies and cost savings of GBP2.5m were
delivered.
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
and outstanding customer experiences. Workforce recruitment and
retention remains a challenge for UK business, with the number of
UK job vacancies remaining above 1.0 million (source: ONS) ,
throughout 2022. The inevitable consequence of these resource
constraints, especially when coupled with cost-of-living pressures,
has been wage inflation. The Group has been successful in reducing
vacancy levels from the highs of 500+ vacancies in FY22. Current
vacancy levels are approximately 300 colleagues in the core Group,
a level much closer to historic run rate of 5%.
A survey conducted in February 2023 saw 83% of colleagues
ranking the Group as a great place to work and this reflects well
both on the Group's culture and the strategies that have been
pursued. The Group targets an improvement in the score to 85% and
will work through dealership colleague forums, a formalised way in
which colleagues of all levels can provide their feedback locally,
to drive an improvement in this score.
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. Programmes include a degree
apprentice scheme, technician apprentice schemes and development
programmes to facilitate progression to management roles in all
areas.
Ancillary Businesses
The Group's ancillary business division has a dedicated
divisional team to drive the success of the businesses, which
include Vertu Vehicle Accident Repair, Vertu Cosmetic Repair,
Vansdirect, AceParts and Taxi Centre. The Group has a strategy to
develop such businesses to add revenue and returns that complement
the core dealership businesses.
Vansdirect had a strong year, underpinning the Group's
significant market share gain in the Commercial vehicle market.
Financial performance has been robust.
During this Year, the Group augmented its on-line parts sales
business, Aceparts, with the purchase of Wiper Blades Limited. This
business was acquired for a net cash consideration of GBP2.4m.
Aceparts sells parts to customers via Marketplaces, with over a
million listings on eBay and makes on average 3000 despatches per
day. Wiperblades.com augmented this business with a direct sales
platform with established reach and good rankings.
The Vertu Cosmetic Repair business delivered further growth in
the Year. The majority of its business remains servicing the Group
dealership network, but some external work is undertaken. Over
65,000 vehicles had bodywork repair and 56,000 wheels were repaired
by our fleet of 106 vans and a number of dedicated fixed sites.
This business will continue to grow in scale during the current
year.
The Group added the LEVC franchise to its taxi sales business,
the Taxi Centre. Aided by this additional franchise the business,
which has been in operation for over 20 years, delivered over 800
taxis in the Year.
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 the team is ambitious to
do so. The Group will continue to innovate and execute to ensure
that it excels in meeting customer needs and responds to the
changing external environment in which we operate. Capital is
allocated to those activities, locations and franchises that are
best placed to meet the competitive challenges arising, provide the
best growth opportunities and maximise long-term return on invested
capital. The Group will leverage on its proven strengths and
execute on cost saving initiatives, continued development of
colleagues, accelerating brand growth and pursuing new business
opportunities.
CURRENT TRADING AND OUTLOOK
-- March & April 2023 Trading
The Group delivered a trading profit above prior year levels in
March and April 2023 ("the post year end period") despite the
impact of significant cost headwinds driven by inflation, with Core
Group gross profit generated up by GBP4m compared to prior year.
The overall improvement in profitability was driven by the
contribution from the Helston acquisition completed in December
2022.
Like-for-Like revenue growth was delivered in the post year end
period, predominantly due to continued strong growth in Motability
new vehicle sales volumes.
The UK new vehicle market saw a growth in total registrations in
March and April in the fleet and commercial and Motability
channels. This improvement, driven from an easing of supply chain
challenges, has led the SMMT to upgrade its outlook for 2023 to
1.83m registrations (previously 1.79m). New retail volumes have
been stable.
Like-for-like total new vehicle volume growth of 5.1% was
delivered on the back of continued year-on-year strength in the
Motability channel, with the Group's Motability like-for-like
volumes up 64.6% in the post year end period. In a continuation of
the trends seen throughout FY23 outlined above, new vehicle margins
remained robust. Overall, the Core Group delivered increased gross
profit from the sale of new vehicles in the post year end period.
New vehicle order banks remain at high levels with nearly 39,000
outstanding orders to be delivered, compared to 35,000 at 28
February 2022.
The UK used vehicle market has remained resilient, whilst
continued stability of used vehicle prices is exhibited.
Like-for-like volumes of used cars sold by the Group declined 8.4%
with gross profits per unit up. Volumes were down year-on-year due
to timing of heavily marketed Group used car events in the prior
year period which drove volumes. The Group continues to have a
tight control of used vehicle inventory.
Like-for-like the Group delivered improved gross profit from all
aftersales channels in the post year end period compared to last
year. Service revenues in the Core Group grew by 4.6% with margins
reduced as expected due to the impact of higher technician salary
costs.
As anticipated, the Core Group saw an increase in operating
expenses in the post year end period, with energy costs, recent
salary actions and the Group's investment in IT infrastructure all
contributing to this rise in costs. Overall, Group operating
expenses as a percentage of revenue were at slightly higher levels
than in FY23.
-- Outlook
The Board is very optimistic for the future, with confidence in
the Group's ability to deliver on targeted acquisition synergies, a
robust order bank, and encouraging trading results in the first two
months of FY24. There are signs of improving new vehicle supply
whilst constraints in used vehicle supply in the UK are likely to
continue helping to underpin vehicle values and margins. Against
this backdrop, the Board remains mindful of the impact of
inflationary pressures and higher interest rates. Management is
focused on operational excellence around cost, conversion and
customer experience and the delivery of the Group's strategic
objectives through enhanced performance coming from scale. The
Board anticipates that full year results for FY24 will be in line
with current market expectations.
The Board believes that the Group is strategically very well
placed to capitalise on the challenges and opportunities in the UK
automotive retail sector and remains confident in the prospects for
the Group. Its strong balance sheet, scale, management and
technological capability underpin this confidence. The Group's
excellent relationships with its chosen Manufacturer partners
support further growth opportunities, which are likely to continue
to present themselves.
Robert Forrester, CEO
CHIEF FINANCIAL OFFICER'S REVIEW
The Group's income statement for the Year is summarised
below:
FY23 FY22 Variance
GBP'm GBP'm %
Revenue 4,014.5 3,615.1 11.0%
-------- -------- ---------
Gross profit 448.4 435.4 3.0%
----------------------------------------- -------- -------- ---------
Operating expenses excluding Government
support (399.6) (354.3)
Government support(5) - 6.6
----------------------------------------- -------- -------- ---------
Operating expenses reported (399.6) (347.7) (14.9%)
-------- -------- ---------
Adjusted Operating profit 48.8 87.7 (44.4%)
Net Finance Charges (9.5) (7.0) (35.7%)
-------- -------- ---------
Adjusted Profit Before Tax 39.3 80.7 (51.3%)
Non-Underlying items(6) (6.8) (1.9) (257.9%)
-------- -------- ---------
Profit Before Tax 32.5 78.8 (58.8%)
Taxation (6.9) (18.8) 63.3%
-------- -------- ---------
Profit After Tax 25.6 60.0 (57.3%)
-------- -------- ---------
(5) represents business rates relief
(6) Non-underlying items represent acquisition costs,
share-based payments charge, amortisation of intangible assets,
impairment charges and exceptional acquisition costs.
The Group generated an adjusted profit before tax of GBP39.3m
(FY22 GBP80.7m).
Revenue grew to GBP4.0bn, a growth of GBP399.4m (11.0%) compared
to the prior year. Acquisitions completed after 1 March 2021
contributed additional revenues of GBP183.2m and have contributed a
loss before tax of GBP0.9m as new start-up operation and the
seasonality of losses in acquisitions undertaken post September led
to losses as anticipated. Rising vehicle prices were largely
responsible for the underlying GBP233.8m (6.5%) increase in Core
Group revenues.
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is
set out below:
FY23 FY22 Variance
GBP'm GBP'm
Revenue
New 1,121.9 969.9 152.0
Fleet & Commercial 897.6 772.0 125.6
Used 1,658.2 1,584.4 73.8
Aftersales 336.8 288.8 48.0
-------- -------- ---------
Total Group Revenue 4,014.5 3,615.1 399.4
Gross Profit
New 98.4 80.6 17.8
Fleet & Commercial 42.3 35.5 6.8
Used 125.2 154.4 (29.2)
Aftersales 182.5 164.9 17.6
-------- -------- ---------
Total Gross Profit 448.4 435.4 13.0
Gross Margin
New 8.8% 8.3% 0.5%
Fleet & Commercial 4.7% 4.6% 0.1%
Used 7.5% 9.7% (2.2%)
Aftersales(7) 44.5% 47.1% (2.6%)
-------- -------- ---------
Total Gross Margin 11.2% 12.0% (0.8%)
-------- -------- ---------
(7) Aftersales margin expressed on internal and external
revenues
The total and like-for-like volumes of vehicles sold by the
Group and trends against market data are set out below:
Like-for-Like
Total Units Sold % Units Sold %
FY23 FY22 Variance FY23 FY22 Variance
Used retail vehicles 82,561 88,772 (7.0%) 78,208 86,949 (10.1%)
New retail cars 33,727 33,366 1.1% 31,484 32,644 (3.6%)
Motability cars 11,029 8,404 31.2% 10,507 8,184 28.4%
--------------------- -------- -------- -------- ------- ------- ------------
Direct fleet cars 18,259 16,015 14.0% 18,024 15,898 13.4%
Agency fleet cars 5,236 5,172 1.2% 4,349 5,095 (14.6%)
--------------------- -------- -------- -------- ------- ------- ------------
Total fleet cars 23,495 21,187 10.9% 22,373 20,993 6.6%
Commercial vehicles 17,710 17,528 1.0% 17,523 17,512 -%
-------- -------- -------- ------- ------- ------------
Total New vehicles 85,961 80,485 6.8% 81,887 79,333 3.2%
-------- -------- -------- ------- ------- ------------
Total vehicles 168,522 169,257 (0.4%) 160,095 166,282 (3.7%)
-------- -------- -------- ------- ------- ------------
UK Market Group year-on-year
year-on-year change v UK
change(9) market(8)
New Retail Car (1.9%) (1.7%)
Motability Car 8.1% 20.3%
Fleet Car (3.6%) 10.2%
Commercial (17.2%) 17.2%
----------------- ------------- ------------------
(8) Represents the year-on-year variance of like-for-like Group
volumes compared to the UK trends reported by SMMT
(9) Source SMMT
Used retail vehicles
Three consecutive years of muted new vehicle registrations in
the UK has led to a constrained supply of used vehicles. Based on
current registration predictions for 2023, the number of sub 5 year
old cars on the road in the UK is expected to fall further by 4% in
2023; and be 27% below 2019 levels. Overall, over 2.0 million new
car sales have been lost in the last three years with an inevitable
flow through into reduced used car supply. These supply trends,
suggest that in a stable demand environment, UK used car pricing
dynamics are unlikely to change in 2023, even though average prices
remain high. Residual values have seen an increase of 19% over
2022, and currently remain some GBP1,900(10) ahead of 'normal'. An
exception to this overall benign picture, however, is electric
vehicles. Used EV supply is growing rapidly, albeit from a very low
base, and it is anticipated that, one in seven 1-3 year-old cars in
the UK parc will be electric by the end of 2023. Consequently, used
EV supply is now outstripping demand (which is impacted by the same
dynamics discussed in the previous section regarding new vehicles).
As a result, used EV prices in the UK have now fallen for seven
consecutive months, and by approximately 30%, compared to a 1.4%
fall in petrol vehicle averages(11) . These falls are now likely to
bottom out and a new, more affordable base price established for
used electric vehicles. EV sales in used cars represent c. 4% of
Group volumes.
The Group monitors the pricing and supply environment and has
continued to develop its used vehicle pricing and analytical tools
to optimise gross profit generation and stock turn and control
inventory. An enhanced version of this tool, Vertu Insights, is
currently being rolled out to assist the Group's dealerships in
inventory pricing and management disciplines.
Overall, the number of used retail vehicles in stock at 28
February 2023 compared to 28 February 2022 fell by 2.3% in the Core
Group, whilst the overall value of Core used retail inventory was
GBP6.8m lower. The Group has been running stocks tighter with a
view to maximising margin, return on investment and to reduce
exposure to any consumer downturn impacts. The Group's
like-for-like used vehicle volumes were 10.1% lower in the Year
reflecting both the prevailing supply and demand dynamics in the
market, and the exceptional conditions of last year. Margin per
unit did decline year on year from the exceptional levels of last
year but the Group is still achieving gross profits per unit
significantly better than the pre-pandemic norm.
Core Group gross profit from the sale of used vehicles totalled
GBP120.2m for the Year. Excluding the exceptional result delivered
in FY22 of GBP153.1m, this represents the highest level of Core
Group annual used vehicle gross profit delivered. The following
like-for-like variances compared to last year arose:
-- GBP32.9m decrease in gross profit generated from used vehicle
sales compared to the exceptional level of profit achieved last
year.
-- 10.1% decrease in the number of used retail units sold,
reflecting the reduced supply in the market and rebalancing of
volume and margin.
-- Gross profit per unit of GBP1,530, down from the exceptional
GBP1,748 achieved in FY22. This remains above historical norms for
the Group.
-- Average selling price of GBP19,987 per unit, a 11.9% increase.
-- Gross margin of 7.7% (FY22: 9.8%) reflective of higher sales
prices and more normalised gross profit per unit.
The Group measures customer experience on used cars via the
JudgeService third party platform. The Net Promoter Scores
throughout the Year have been very strong at c.85%, which is sector
leading amongst major market players. Great service goes
hand-in-hand with profitability and future retention, which is so
vital in creating a sustainable business.
(10) Source: Autotrader
(11) Source: CAPHI: April 2023 Car market overview
New retail cars and Motability sales
UK retail car registrations declined 1.9% in the year to 28
February 2023, marking a third consecutive year of muted
registrations, linked to well documented production and logistics
challenges for global vehicle Manufacturers. Against this backdrop,
the Group's like-for-like new retail vehicle volumes declined by
3.6% when compared to the prior year, slightly behind the market.
This was driven in part by strong comparatives in FY22 where the
Group strongly outperformed the market trends coming out of
lockdowns. Overall, the Group marginally increased UK retail market
share to 4.1% (FY22: 4.0%) aided by acquisitions. The Group's order
bank levels for new retail vehicles remain high but have reduced
over the Year as would be expected as production issues slowly
unwind. New retail vehicles ordered but remaining undelivered as at
28 February 2023 totalled approximately 12,900 units (28 February
2022: 16,000).
UK Motability registrations benefitted from pent up demand, as
already extended contracts came to an end and supply came through
from Manufacturers, rising 8.1%, compared to FY22. The Group's
Motability volumes significantly outperformed the market, growing
28.4% on a like-for-like basis and representing an increasing UK
market share of 5.9% (FY22: 4.8%). The Group is Motability's
largest partner in the UK with over 34,500 vehicles on the fleet.
These vehicles require an annual service funded by Motability in
the Group's service departments.
The continued supply constraints and consequently reduced
pressure to achieve volume targets, led to improved gross profit
retention, aided by the application of effective pricing
disciplines. It was this improved gross margin that drove a
year-on-year improvement in core retained gross profit in new
vehicle sales. The following trends were apparent on a
like-for-like basis for the New Retail and Motability sales
channel:
-- A GBP13.7m increase in gross profit generated, aided by stronger margins.
-- Gross profit per unit of GBP2,182, a rise of 13.2% from
GBP1,928 representing a record for the Group despite the higher mix
of lower margin Motability volumes.
-- An average selling price of GBP24,128 per unit, a 9.8% increase.
-- Gross margin rising to 8.8% from 8.3%.
In new vehicles, sales customer experience is measured by the
Group's Manufacturer partners. Approximately 70% of the Group's
Core sales outlets delivered experience levels above national
average levels.
Fleet & Commercial vehicle sales
The UK car fleet market saw reduced activity compared to
historic levels for much of the Year as Manufacturers prioritised
constrained supply to higher margin retail channels. However, in
latter months, fleet supply has significantly improved and has been
growing faster than retail registrations. Registration volumes in
the UK car fleet market declined 3.6% in the Year as a whole. In
contrast to a market decline, the Group delivered 22,373 fleet cars
on a like-for-like basis, in the Year, representing a growth of
6.6% compared to FY22. As with new cars, fleet and commercial
margins strengthened due to the ongoing supply constraints, pricing
mix changes and the Group adopting strong pricing disciplines.
Overall, the Group has a 3.0% share of the UK fleet car market.
UK van registrations fell 17.2% in the year to 28 February 2023,
as production and supply issues also impacted this channel and the
prior year had been strong, aided by strong pent-up demand for home
delivery and construction coming out of lockdowns. In stark
contrast to these national, negative trends, the Group maintained
its like-for-like volumes of new commercial vehicles sold. This
considerable market outperformance by the Group reflected the
strong market position of the Group and the investment in teams to
sell into different market channels. Reflecting this, the Group
sold 6.1% of UK new light commercial vehicles in the Year (FY22:
5.0%).
When compared the year ended 28 February 2022, the following
fleet and commercial trends were seen on a like-for-like basis:
-- A GBP5.0m increase in gross profit.
-- Record gross profit per unit of GBP1,027, a rise of 12.0% from GBP917.
-- Gross margin rising to a record 4.7% from 4.6%.
Aftersales
The Group's aftersales operations are a vital contributor to
Group profitability, generating over 40% of total gross profit. The
Group pleasingly saw growth in revenues and gross profit generation
in all channels of aftersales on a like-for-like basis as set out
below.
Accident Fuel
Parts & Smart Forecourt
Service Repair Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Revenue(7) 159.5 189.2 20.1 13.9 382.7
Revenue(7) change 8.9 17.3 3.8 6.0 36.0
Revenue(7) change
(%) 5.9% 10.0% 24.1% 75.7% 10.4%
Gross profit 117.8 42.3 10.7 0.9 171.7
Gross profit
change 3.0 3.9 1.8 0.3 9.0
Gross margin(8)
FY23 (%) 73.8% 22.4% 53.3% 6.4% 44.9%
Gross margin(8)
FY22 (%) 76.2% 22.3% 55.3% 7.5% 46.9%
Margin change
(%) (2.4%) 0.1% (2.0%) (1.1%) (2.0%)
(7) includes internal and external revenues
(8) Aftersales margin expressed on internal and external
revenues
-- Service
The UK has a vehicle parc of approximately 32.0 million cars
plus commercial vehicles requiring access to maintenance and repair
services and this is now ageing due to lack of recent new vehicle
activity.
Vehicle service and repair is a key and resilient profit source
for the Group. Through strong execution of retention and aftersales
processes and the active targeting of conquest business, the Group
has grown like-for-like service revenues by 5.9% over the Year.
Each retail invoice raised by the Group's service operations
averages GBP281 (FY22: GBP259), and over half the invoices raised
in FY23 were in respect of over 3 year old vehicles. The average
age of a retail vehicle seen by the Group is 4.7 years with the
Group's average invoice value for vehicles in the 4-5 year old
category at GBP306, the highest average value of each age category.
The Group therefore gains a revenue benefit as the parc ages.
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 or upfront for their annual
service are a vital part of the retention strategy. The Group has
over 167,000 live service plans, including manufacturer service
plans, which creates significant resilience. Excellence of customer
service is vital to retention with over 62% of service departments
over national average on the Manufacturer customer experience
measurements.
Gross margin percentages on vehicle servicing declined to 73.8%
(FY22: 76.2%) in the Core Group reflecting increased remuneration
to address technician resource constraints, particularly in early
FY23, which increased cost of sales in the service department. This
pay action aided the stability levels amongst technicians and
reduced the level of vacancies, aiding service department
performance. Higher technician numbers drove the increased
revenues, up 5.9%, and gross profit generation achieved, with
like-for-like gross profit in service up GBP3m. There remains
considerable competition for skilled technicians in the UK.
-- Parts
The Group's substantial parts operations include traditional
wholesale operations, agency distribution and on-line parts
retailing. These operations supply parts to the Group's service and
accident repair operations as well as to other businesses and
retail customers in the UK and across the world. Parts revenues in
the Core Group grew GBP17.3m compared to last year, as price rises,
increased vehicle service and repair activity and an increase in
sales in wholesale parts operations all contributed to growth.
-- Accident and Smart Repair
The Group continues to expand its substantial Smart Repair
operations through adding additional vans to the core cosmetic
business as well as introducing new streams including vans
specialising in wheel repairs and glass replacement. In addition,
enhanced smart repair fixed facilities are being created, such as
in Exeter to serve the substantial dealership operations there. The
Group now has a fleet of 106 (2022: 88) vans with plans for further
expansion to maximise the opportunity. This fleet largely serves
the Group's dealerships, but also does carry out some limited sales
to external customers across the UK. There is considerable scope
for continued expansion of this business.
During FY22, the Group moved responsibility for all of the
Group's accident repair centres out of the dealership divisional
operations, into a new standalone division, concentrating solely on
the management of accident repair operations. This management
dedication has driven the increase in gross profit, with specific
KPI improvement targets and focus on a consolidation of work
providers, all driving enhanced profit generation.
Collectively, accident and smart repair services saw revenue
growth of 24.1% in the core group with GBP1.8m more gross profit
generated. Margins of 53.3% (FY22 55.3%), reflected increased pay
levels put in place in the Year.
-- Fuel Forecourt
The Group's fuel forecourt at Widnes saw increased activity as
pricing strategies led to a considerable increase in market share.
Revenues rose 75.7% to over GBP13m. A second forecourt has been
acquired in Yeovil as part of the Helston Group, which will be
redeveloped in the coming months to enhance the retail
offering.
Operating Expenses
A summary of Group operating expenses is set out below:
FY23 FY22 FY23 Var to FY22
GBP'm GBP'm GBP'm %
Salary costs 214.0 199.9 14.1 7.1%
Vehicle and valeting costs 38.6 35.3 3.3 9.3%
Marketing costs 36.2 36.0 0.2 0.6%
Property costs and rates 39.3 40.7 (1.4) (3.4%)
IT expenditure 11.6 9.1 2.5 27.5%
Energy costs 7.9 4.6 3.3 71.7%
Other 28.7 23.7 5.0 21.1%
Core Group operating expenses
before Government support 376.3 349.3 27.0 7.7%
Acquisitions 23.2 2.7 20.5 759.3%
Disposals 0.1 2.3 (2.2) (95.7%)
------ ------ -------- ---------
399.6 354.3 45.3 12.8%
Government support (CVJRS
receipts and rates relief) - (6.6) 6.6 -
------ ------ -------- ---------
Group Net Underlying Operating
Expenses 399.6 347.7 51.9 14.9%
------ ------ -------- ---------
Reported operating expenses of GBP399.6m, increased by GBP51.9m
compared to the year ended 28 February 2022. This increase includes
the impact of Government support of GBP6.6m (largely business rates
relief) in the prior year. Dealerships acquired or sold in the
period since 1 March 2020 generated a net GBP18.3m increase.
Underlying Core Group operating expenses therefore grew, by 7.7%,
(GBP27.0m) compared to last year.
The largest operating cost of the Group is salaries, which have
increased by GBP14.1m in the Core Group, compared to last year. The
Group reported high vacancy levels throughout the second half of
FY22 and adjusted salaries to aid the recruitment and retention of
colleagues. This action has delivered a reduction in vacancy
levels, which, together with investment in central functions, such
as in digital development, Concierge and customer retention
accounted for GBP9.1m of the uplift in salary costs in the Core
Group. Pay awards, including the impact of the rise in National
Minimum Wage, generated a further GBP9.3m increase. This increase
in salaries also includes the Group's changes to its sales roles.
Sales advisors have been introduced to the dealerships sales teams
and these new roles have higher basics but lower commissions than
traditional sales executives. This change, along with the reduced
level of Group profitability generated a GBP4.3m reduction in
commissions and bonus earnings.
The Group has continued to respond to high inflation levels,
increased National Minimum Wage awards and tight labour markets by
ensuring pay levels are competitive and motivational. A further pay
rise largely to colleagues earning less than GBP35,000 per annum
was made on 1 March 2023 following a review. This will aid
retention of colleagues.
Vehicle costs increased because of rising vehicle prices, which
drove up lease costs and depreciation charges on the higher values.
An improving supply position also meant a return to full
demonstrator requirements by many Manufacturers, which was not the
case during and following the lockdown periods. Rising fuel prices
have also had an impact on vehicle running costs.
The Group maintained its core marketing costs at broadly FY22
levels while further enhancing the awareness of the Group's brands.
Return on investment is a priority for all marketing spend with a
focus on increasing its effectiveness, especially in the digital
space, maximising conversion, and a renewed focus on retention
rather than just conquest activity. This helped keep spend stable
despite inflationary pressures.
IT expenditure rose by GBP2.5m compared to the prior year. This
cost increase represents the further investment in digitalisation,
the roll out of self-check-in capability, together with investments
in the Group's IT and telephony network, data and cyber security.
The increase also includes costs of integration of the Helston
businesses onto Group networks and systems. The incremental element
of which has been included in the synergy target as a negative
synergy.
The Group benefitted from a below market rate fixed contract on
electricity up to September 2022. The contract expiry has led to a
GBP3.3m increase in energy cost in the Year, despite the Group
delivering a reduction in energy use. The Group reduced gas
consumption by 25.7% and electricity consumption by 5.8% on a
like-for-like basis compared to FY22. Most of this saving was
achieved by the Group's colleagues having a refreshed and
disciplined focus on energy consumption. Weekly league tables are
distributed, and dealerships given on-site support in the form of
energy management reviews.
In FY23 the Board approved an investment into LED Lighting and
solar panel installation with costs totalling GBP4.4m to be
incurred across FY23 and FY24 in the core business. LED lighting
has replaced older lighting technology across the majority of the
Group's workshops and nine roof solar installations were complete
and producing onsite electricity by the end of the Year. A further
25 roof solar installations are underway for completion in FY24 in
the Core Group. When these projects are complete at least 10% of
the Group's total electricity requirements will be generated by
this onsite clean solar energy. A review has recently been
undertaken of the former Helston businesses to identify
opportunities for further beneficial investment in solar panels and
LED lighting to impact future energy costs. The Board have approved
an additional GBP1m of capital expenditure in solar panels for
these Group locations over the remainder of FY24.
Other costs have also seen an increase of GBP5.0m. This includes
an increase in respect of colleague training, as Manufacturers
returned to full training schedules after restrictions curtailed
activity. Other costs in the category also increased due to
inflationary pressures.
Non-underlying operating expenses
FY23
Var to
FY23 FY22 FY22
GBP'm GBP'm GBP'm
Impairment charges 1.5 0.1 1.4
Share based payments charge 2.1 1.4 0.7
Amortisation 0.5 0.4 0.1
Acquisition fees 2.7 - 2.7
6.8 1.9 4.9
------ ------ --------
Impairment charges of GBP1.5m relate to the write-off of
intangible assets attributable to certain of the Group's Jaguar
franchise outlets, which will cease operations in FY25.
The Group's Partnership share option (PSO) scheme was introduced
in FY21. Under the scheme, colleagues receive nil cost options in
the Company, pro-rata to their On Target Earnings. Vesting is
determined by the proportion of the colleagues' annual bonus
earned, compared to their on-target bonus, up to a maximum of 100%.
Vested options are capable of exercise at the end of a three-year
holding period. FY23 was the third year that such awards were made
to colleagues, with the increase in the share-based payment charge
reflective of this third grant and an increase in the scale of the
Group. Under the PSO scheme, charges in respect of the grants are
spread over the 4-year period from award to the end of the holding
period. As such, FY24 should represent the final year of increased
charges with the expectation that annual costs will level off after
this.
Acquisition fees represent legal and other due diligence
professional fees in respect of the substantial Helston
acquisition, completed in December 2022.
Net Finance Charges
Net finance charges are analysed below:
FY23
Var to
FY23 FY22 FY22
GBP'm GBP'm GBP'm
New vehicle Manufacturer stocking
interest 3.4 1.7 1.7
Interest on bank borrowings 3.1 1.7 1.4
Used vehicle stock funding interest 0.8 0.1 0.7
Interest on lease liabilities 3.5 3.6 (0.1)
Interest income (1.3) (0.1) (1.2)
Net Finance Charges 9.5 7.0 2.5
------ ------ --------
The Group saw an increase in interest charged by Manufacturers
on funded new vehicle inventory. This increase was due to increased
interest rates being charged as successive base rate rises took
effect, the increased average price of new vehicles in the pipeline
and an easing of supply of new vehicles in some franchises so
extending the pipeline consigned. Total Group new vehicle stock as
at 28 February 2023 was GBP427m (2022: GBP275m), up 55.3%.
Interest on bank borrowings increased due to the additional
facilities drawn for the acquisition of Helston Garages in December
2022.
To minimise the interest rate risk to the Group, derivative
contracts have been entered into. The Group has secured an interest
rate cap contract over GBP50m of mortgage borrowing capping the
underlying rate to a maximum of 4.50%. In addition, in respect of
the RCF, an interest rate swap over GBP30m of borrowing has been
entered into, fixing the underlying SONIA rate charged at 4.42%
until March 2025. This replaced an existing Swap agreement over
GBP22m of borrowings, which expired 27 February 2023.
Pension Costs
The Group has a closed defined benefit scheme which remains
fully funded and requires no ongoing cash contribution from the
Company.
The Scheme invests in an LDI portfolio which aims to fully hedge
the Scheme's interest rate and inflation risk to maintain this
fully funded position.
On the accounting valuation basis the scheme is in surplus.
Different valuation assumptions apply to the accounting and
actuarial valuations such as the use of corporate bond yields
rather than gilt yields to discount liabilities. The impact of the
Scheme's hedge being related to the actuarial position rather than
accounting value generated a reduction in the accounting surplus of
approximately GBP4m over the Year. A further reduction in surplus
arose relating to movements in the applicable inflation
assumptions. Overall, a net actuarial loss of GBP6.0m was
recognised in the Statement of Comprehensive Income for the Year.
The accounting surplus on the scheme decreased to GBP3.2m as at 28
February 2023 (2022: GBP9.1m).
Tax Payments
The Group's underlying effective rate of tax for the Period was
19.5% (FY22: 19.9%). The overall effective tax rate, decreased to
21.3% (FY22: 23.8%)as a result of FY22 being impacted by the
revaluation of deferred tax obligations. The total tax charge for
the Year fell to GBP6.9m from GBP18.8m. 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 GBP54.3m (FY22: GBP44.4m) was generated in the
Year. The Year saw a GBP23.7m reduction in working capital.
A reduction in the Group's used vehicle inventory, led to an
GBP11.9m cash inflow. Improving new vehicle supply saw a
significant increase in the level of both new vehicle consignment
inventory and the associated Manufacturer funding. These movements
did have a cash impact in so far as they led to a net cash inflow
because of the VAT cash flow advantage on such funded vehicles of
GBP21.0m.
Improved new vehicle supply resulted in an GBP20.8m cash outflow
from an increase in the level of fully paid new vehicle inventory
held by the Group. The Group continues to have a strong forward
order bank and the increase in fleet activity year on year has led
to a GBP12.4m increase in the value of vehicle deposits and advance
payments held against outstanding orders, a cash inflow in the
Year.
Financing and Capital Structure
The Group has a balance sheet with shareholders' funds of
GBP341.4m (2022: GBP331.9m) underpinned by a freehold and long
leasehold portfolio of GBP306.6m (2022: GBP236.4m) and net debt
(excluding lease liabilities) of GBP75.3m as at 28 February 2023.
The Group's conservative financing and capital structure resulted
in a strong tangible net assets position of GBP224.1m as at 28
February 2023, representing 65.3p per share.
The Group has a committed acquisition debt facility of GBP93m.
This facility was re-financed during the year with the Group's two
existing lending banks plus a third lending bank added at
re-financing. This refinanced facility matures in December 2025,
with the potential to extend for a further two years to December
2027. GBP44m of this committed facility was drawn as at 28 February
2023. The Group operated comfortably within all covenants during
the Year.
The Group also has long term debt funding in the form of a
20-year mortgages totalling GBP85.5m provided by BMW Financial
Services ('BMW FS').
The Group makes use of used vehicle stocking loans provided by
third party banks, subject to interest and secured on the related
used vehicle inventories. At 28 February 2023, amounts utilised on
such facilities totalled GBP25.4m. These balances are included as
debt in the calculation of Net Debt/Cash. The Group has a GBP70m
facility under these arrangements and held GBP173m of used vehicle
inventory at 28 February 2023 resulting in used vehicle stock being
largely unencumbered.
Capital Allocation
Consideration of capital allocation is central to the Board's
decision making. The Board 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.
The Group spent GBP122.1m on acquisitions during the year, in
line with its strategy to drive consolidation where acquisitions
meet hurdle rates. The Group continues to monitor post- acquisition
returns and remains confident hurdle rates are being achieved.
The Helston acquisition on 17 December 2022 utilised GBP115.2m
of cash and debt. This net consideration paid reflected the net
asset position at 31 August 2022 of the acquired businesses. Cash
of GBP6.9m from profits of the business acquired generated after
this date to completion accrued to the Group. This offset the
headline goodwill number paid of GBP28.6m. Finalised goodwill and
other intangibles relating to this transaction, after other
adjustments, totalled GBP23.4m.
Cash returns to shareholders in the form of dividends are an
important part of the Company's capital allocation decision making
process and remain a priority for the Board. The Group applies a
dividend policy of dividends being covered three to four times by
adjusted diluted earnings per share. An interim dividend of 0.70p
per share was paid in January 2023. The Board recommends a final
dividend in respect of the year ended 28 February 2023 of 1.45p per
share to be approved at the Annual General Meeting on 28 June 2023.
This dividend will be paid, subject to shareholder approval, on 28
July 2023. The ex-dividend date will be 29 June 2023 and the
associated record date 30 June 2023. This final dividend brings the
total dividend in respect of FY23 to 2.15p per share (FY22: 1.70p),
an increase of 26.5%. Against adjusted, fully diluted EPS of 8.69p
this dividend is covered 4.0 times in line with the Group's stated
policy.
During the Year, the Group purchased 10,477,450 shares for
cancellation, representing 2.9% of opening total issued share
capital, for GBP5.9m. The Board believes that this is an
appropriate use of capital and will continue a programme of
Buybacks as a relevant element of returns to shareholders,
alongside dividend payments. Authority is held for a further GBP3m
buyback programme to be appropriately deployed. A further GBP2m was
spent in the Year on the acquisition of shares into the Group's
Employee Benefit Trust ("EBT") to be used for the satisfaction of
colleague share incentive programmes. GBP6.0m was spent on
dividends paid representing the final dividend in respect of the
year ended 28 February 2022 and interim dividend in respect of the
Year.
The Group also deploys capital on its extensive franchised
dealership network, with fixed asset additions totalling GBP23.8m
in FY23. This included GBP12.0m on freehold purchases or projects
which increased the Group's brand representation or augmented
productive capacity ("Expansion capex"). The balance of GBP11.8m is
considered replacement capital expenditure. For FY24, replacement
capital expenditure is anticipated to be approximately GBP16.0m,
which includes large scale redevelopment projects to meet revised
Manufacturer standards which do not necessarily increase Group
capacity. In addition, GBP5.0m of investments in FY24 of green
technology such as solar, EV charging points and LED lighting will
be undertaken. A further GBP17.0m of expenditure is anticipated in
respect of Expansion capex. This high level of activity includes
the land purchase and build cost of the Ayr Toyota dealership, the
redevelopment and expansion of Exeter BMW/Mini, the expansion of
the Group's Toyota dealership in Chesterfield as well as the
continued investment in multi-franchising by the Group. The Group
has surplus property assets which are expected to be disposed over
the next 12 months for anticipated proceeds of c.GBP9.5m.
Karen Anderson, CFO
CONSOLIDATED INCOME STATEMENT (AUDITED)
For the year ended 28 February 2023
Underlying Non-underlying Total Underlying Non-underlying Total 2022
items items 2023 2023 items 2022 items 2022
2023
(Note (Note 2)
2)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4,014,544 - 4,014,544 3,615,052 - 3,615,052
Cost of sales (3,566,134) - (3,566,134) (3,179,632) - (3,179,632)
----------- --------------- ----------- ----------- --------------- -----------
Gross profit 448,410 - 448,410 435,420 - 435,420
Operating expenses (399,590) (6,828) (406,418) (347,753) (1,934) (349,687)
----------- --------------- ----------- ----------- --------------- -----------
Operating profit
/ (loss) 48,820 (6,828) 41,992 87,667 (1,934) 85,733
Finance income 3 1,300 - 1,300 163 - 163
Finance costs 3 (10,842) - (10,842) (7,126) - (7,126)
----------- --------------- ----------- ----------- --------------- -----------
Profit / (loss)
before tax 39,278 (6,828) 32,450 80,704 (1,934) 78,770
Taxation 4 (7,663) 746 (6,917) (16,062) (2,708) (18,770)
----------- --------------- ----------- ----------- --------------- -----------
Profit / (loss)
for the year attributable
to equity holders 31,615 (6,082) 25,533 64,642 (4,642) 60,000
=========== =============== =========== =========== =============== ===========
Basic earnings per
share (p) 5 7.40 16.64
Diluted earnings
per share (p) 5 7.02 15.96
----------- -----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (AUDITED)
For the year ended 28 February 2023
2023 2022
GBP'000 GBP'000
Profit for the year 25,533 60,000
Other comprehensive (expenses)
/ income
Items that will not be reclassified
to profit or loss:
Actuarial (losses) / gains on retirement
benefit obligations (5,973) 2,801
Deferred tax relating to actuarial
losses / (gains) on retirement benefit
obligations 1,493 (700)
Items that may be reclassified subsequently
to profit or loss:
Cash flow hedges 172 503
Deferred tax relating to cash flow
hedges (43) (96)
Other comprehensive (expense) /
income for the year, net of tax (4,351) 2,508
-------- --------
Total comprehensive income for
the year
attributable to equity holders 21,182 62,508
======== ========
CONSOLIDATED BALANCE SHEET (AUDITED)
As at 28 February 2023
2023 2022
GBP'000 GBP'000
Non-current assets
Goodwill and other indefinite
life assets 127,590 103,470
Other intangible assets 2,286 1,797
Retirement benefit asset 3,188 9,055
Property, plant and equipment 328,405 254,133
Right-of-use assets 73,078 78,278
Derivative financial instruments 507 -
Total non-current assets 535,054 446,733
------------------------------ ----------
Current assets
Inventories 674,380 475,027
Trade and other receivables 86,317 51,839
Current tax assets 1,654 -
Cash and cash equivalents 78,984 83,793
------------------------------ ----------
841,335 610,659
Property assets held for sale 6,077 -
Total current assets 847,412 610,659
------------------------------ ----------
Total assets 1,382,466 1,057,392
============================== ==========
Current liabilities
Trade and other payables (758,594) (529,086)
Current tax liabilities - (3,734)
Derivative financial instruments - (13)
Contract liabilities (13,477) (11,752)
Borrowings (29,821) (12,283)
Lease liabilities (14,498) (14,132)
------------------------------ ----------
Total current liabilities (816,390) (571,000)
------------------------------ ----------
Non-current liabilities
Borrowings (124,519) (55,343)
Lease liabilities (68,959) (74,698)
Deferred income tax liabilities (19,117) (13,023)
Contract liabilities (12,104) (11,447)
------------------------------ ----------
Total non-current liabilities (224,699) (154,511)
------------------------------ ----------
Total liabilities (1,041,089) (725,511)
============================== ==========
Net assets 341,377 331,881
============================== ==========
Capital and reserves attributable
to equity holders of the Group
Ordinary share capital 34,894 35,942
Share premium 124,939 124,939
Other reserve 10,645 10,645
Hedging reserve 133 4
Treasury share reserve (2,653) (1,586)
Capital redemption reserve 4,833 3,785
Retained earnings 168,586 158,152
------------------------------ ----------
Total equity 341,377 331,881
============================== ==========
CONSOLIDATED CASH FLOW STATEMENT (AUDITED)
For the year ended 28 February 2023
2023 2022
Note GBP'000 GBP'000
Cash flows from operating activities
Operating profit 41,992 85,733
Loss / (profit) on sale of property,
plant and equipment 102 (9)
Profit on lease modification (449) (269)
Amortisation of other intangible
assets 509 407
Depreciation of property, plant
and equipment 14,510 14,365
Depreciation of right of use asset 16,225 16,658
Impairment charges 1,500 131
Movement in working capital 23,737 (27,973)
Share based payments charge 1,651 1,061
---------- ---------
Cash inflow from operations 99,777 90,104
Tax received 100 135
Tax paid (9,118) (14,479)
Finance income received 1,053 39
Finance costs paid (10,983) (6,798)
---------- ---------
Net cash inflow from operating
activities 80,829 69,001
---------- ---------
Cash flows from investing activities
Acquisition of businesses, net
of cash, overdrafts and borrowings
acquired (122,066) (9,508)
Acquisition of freehold and long
leasehold land and buildings (7,468) -
Purchases of intangible assets (186) (44)
Purchases of other property, plant
and equipment (13,785) (16,571)
Proceeds from disposal of property,
plant and equipment 179 1,605
---------- ---------
Net cash outflow from investing
activities (143,326) (24,518)
---------- ---------
Cash flows from financing activities
Proceeds from borrowings 7 110,570 5,699
Repayment of borrowings 7 (23,358) (10,638)
Principal elements of lease repayments (16,187) (15,786)
Purchase of treasury shares (2,000) -
Sale of treasury shares 744 951
Cash settled share options (180) (403)
Repurchase of own shares (5,898) (6,014)
Dividends paid to equity holders (6,003) (2,327)
---------- ---------
Net cash inflow / (outflow) from
financing activities 57,688 (28,518)
---------- ---------
Net (decrease) / increase in
cash and cash equivalents 7 (4,809) 15,965
Cash and cash equivalents at beginning
of year 83,793 67,828
---------- ---------
Cash and cash equivalents at
end of year 78,984 83,793
========== =========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (AUDITED)
For the year ended 28 February 2023
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
2022 35,942 124,939 10,645 4 (1,586) 3,785 158,152 331,881
Profit for the
year - - - - - - 25,533 25,533
Actuarial losses
on retirement
benefit obligations - - - - - - (5,973) (5,973)
Tax on items
taken directly
to equity - - - (43) - - 1,493 1,450
Fair value gains - - - 172 - - - 172
--------- --------- --------- --------- --------- ------------ ---------- --------
Total comprehensive
income for the
year - - - 129 - - 21,053 21,182
--------- --------- --------- --------- --------- ------------ ---------- --------
Purchase of treasury
shares - - - - (2,000) - - (2,000)
Sale of treasury
shares - - - - 933 - (189) 744
Repurchase of
own shares - - - - - - (5,898) (5,898)
Cancellation
of repurchased
shares (1,048) - - - - 1,048 - -
Dividends paid - - - - - - (6,003) (6,003)
Share based payments
charge - - - - - - 1,471 1,471
--------- --------- --------- --------- --------- ------------ ---------- --------
As at 28 February
2023 34,894 124,939 10,645 133 (2,653) 4,833 168,586 341,377
========= ========= ========= ========= ========= ============ ========== ========
The other reserve is a merger reserve, arising from shares
issued as consideration to the former shareholders of acquired
companies.
The treasury share reserve relates to shares acquired by Ocorian
Limited, the Trustee of Vertu Motors plc's Employee Benefit Trust
("EBT"). The shares were purchased by the Trustee to be held for
the purposes of the EBT and may be used to transfer shares to
individuals when options are exercised. This could include the
Company's Long Term Incentive Plan ("LTIP"), the Company Share
Option Plan ("CSOP") or Partnership Share Options ("PSO"), under
which each of the executive directors of the Company, the Company's
other PDMRs and certain other senior managers are potential
participants and is therefore regarded as having a notional
interest in these shares. During the year, a further 3,960,331
shares were purchased for GBP2,000,000.
During the year, 2,436,251 shares were transferred from the EBT
on exercise of vested CSOP, LTIP and PSO awards. 5,665,352 shares
remain in the EBT at 28 February 2023.
For the year ended 28 February 2022
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
2021 35,917 124,939 10,645 (403) (2,791) 2,810 103,823 275,940
Profit for the
year - - - - - - 60,000 60,000
Actuarial gains
on retirement
benefit obligations - - - - - - 2,801 2,801
Tax on items
taken directly
to equity - - - (96) - - (700) (796)
Fair value gains - - - 503 - - - 503
--------- --------- --------- --------- --------- ------------ ---------- --------
Total comprehensive
income for the
year - - - 407 - - 62,101 62,508
--------- --------- --------- --------- --------- ------------ ---------- --------
Sale of treasury
shares - - - - 1,025 - (74) 951
Issuance of treasury
shares - - - - 180 - (15) 165
Repurchase of
own shares - - - - - - (6,014) (6,014)
Cancellation
of repurchased
shares (975) - - - - 975 - -
Dividends paid - - - - - - (2,327) (2,327)
Share based payments
charge - - - - - - 658 658
--------- --------- --------- --------- --------- ------------ ---------- --------
As at 28 February
2022 35,942 124,939 10,645 4 (1,586) 3,785 158,152 331,881
========= ========= ========= ========= ========= ============ ========== ========
NOTES
For the year ended 28 February 2023
1. Basis of preparation
Vertu Motors plc is a Public Limited Company which is listed on
the AiM market and is incorporated and domiciled in England. 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.
Whilst the financial information included in this announcement
has been computed in accordance with UK IFRS, this announcement
does not itself contain sufficient information to comply with UK
IFRS. The Group audited consolidated financial statements that
comply with IFRS will be published on the Group's website,
www.vertumotors.com .
The consolidated financial statements have been prepared on the
going concern basis under the historical cost convention, as
modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) at fair value.
In order to prepare the financial statements on the going
concern basis, the Directors have considered detailed financial
projections for a period of 12 months from the date of signing the
financial statements ('Review Period'). These projections are based
on the Group's detailed annual business plan for the year ending 29
February 2024 as well as the known financial performance of the
Group in the period subsequent to 28 February 2023, projected
forward to cover the Review Period ("Base Case"). The Directors
have considered these financial projections in conjunction with the
Group's available facilities.
The Directors have also considered sensitivity analysis
performed in respect of these forecasts to model the impact of
various severe but plausible downside scenarios including continued
restricted supply of new and used cars or reduced demand from
consumers as well as further cost increases. This analysis did not
indicate any issues with the Group's ability to operate within its
banking facilities during the Review Period.
Based on the forecast information available and the sensitivity
analysis performed as set out above, the Directors believe it is
appropriate to prepare the annual financial statements on the going
concern basis.
The financial information presented for the years ended 28
February 2023 and 28 February 2022 does not constitute the
Company's statutory accounts as defined in Section 434 of the
Companies Act 2006 but is derived from those financial statements.
The auditors' reports on the 2023 and 2022 financial statements
were unqualified. A copy of the statutory accounts for 2022 has
been delivered to the Registrar of Companies. Those for 2023 will
be delivered following the Company's annual general meeting, which
will be convened on 28 June 2023.
Accounting policies
The annual consolidated financial statements of Vertu Motors plc
are prepared in accordance with UK IFRS. The annual report has been
prepared on the going concern basis under the historical cost
convention, as modified by the revaluation of financial assets and
liabilities (including derivative financial instruments) at fair
value through profit or loss.
The accounting policies adopted in this report can be found on
our website, www.vertumotors.com , and are consistent with those of
the Group's financial statements for the year ended 28 February
2022.
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.
Year ended 28 February 2023
Gross
Revenue Gross Profit Gross
Revenue Mix Profit Mix Margin
GBP'm % GBP'm % %
Aftersales (*) 336.8 8.4 182.5 40.7 44.5
Used cars 1,658.2 41.3 125.2 27.9 7.5
New car retail and
Motability 1,121.9 27.9 98.4 22.0 8.8
New fleet and commercial 897.6 22.4 42.3 9.4 4.7
---------- ---------- --------- -------- ---------
4,014.5 100.0 448.4 100.0 11.2
========== ========== ========= ======== =========
Year ended 28 February 2022
Gross
Revenue Gross Profit Gross
Revenue Mix Profit Mix Margin
GBP'm % GBP'm % %
Aftersales (*) 288.8 8.0 164.9 37.9 47.1
Used cars 1,584.4 43.8 154.4 35.5 9.7
New car retail and Motability 969.9 26.8 80.6 18.5 8.3
New fleet and commercial 772.0 21.4 35.5 8.1 4.6
---------- ---------- --------- -------- ---------
3,615.1 100.0 435.4 100.0 12.0
========== ========== ========= ======== =========
* Margin in aftersales expressed on internal and external
revenue. A significant part of the role of the service department
is to support the vehicle sales department and therefore this is
considered to be an important measure for the purpose of monitoring
departmental performance
2. Non-underlying items
2023 2022
GBP'000 GBP'000
Acquisition costs (2,753) -
Share based payments charge (2,066) (1,396)
Amortisation (509) (407)
Impairment charges (1,500) (131)
-------- --------
Non-underlying loss before tax (6,828) (1,934)
======== ========
Acquisition costs relating to the acquisition of Helston Garages
Group Limited have been included in non-underlying items in the
year ended 28 February 2023 due to the one-off nature and material
value of the individual acquisition.
Non-underlying items are presented separately in the
Consolidated Income Statement to enhance comparability of trading
performance between periods.
Details of current and deferred tax arising in respect of
non-underlying items is shown in note 4.
3. Finance income and costs
2023 2022
GBP'000 GBP'000
Interest on short-term bank deposits 1,053 39
Net finance income relating to defined
benefit pension scheme 247 124
Finance income 1,300 163
========= ========
Bank loans and overdrafts (3,112) (1,701)
Vehicle stocking interest (4,242) (1,844)
Lease liability interest (3,488) (3,581)
Finance costs (10,842) (7,126)
========= ========
4. Taxation
2023 2022
GBP'000 GBP'000
Current tax
Current tax charge 6,444 16,350
Adjustment in respect of prior
years (1,836) 14
-------- --------
Total current tax 4,608 16,364
Deferred tax
Origination and reversal of temporary
differences 409 (245)
Adjustment in respect of prior
years 1,684 (147)
Rate differences 216 2,798
-------- --------
Total deferred tax 2,309 2,406
Income tax expense 6,917 18,770
======== ========
Profit before taxation 32,450 78,770
Profit before taxation multiplied
by the rate of corporation tax
in the UK of 19% (2021: 19%) 6,166 14,966
Non-qualifying depreciation 658 638
Non-deductible expenses 658 432
Effect on deferred tax balances
due to rate change 216 2,798
IFRS 16 (65) 77
Property adjustment 10 41
Permanent benefits (574) (49)
Adjustments in respect of prior
years (152) (133)
-------- --------
Total tax expense included in the income
statement 6,917 18,770
======== ========
A summary of the Group's tax expense in respect of underlying
and non-underlying items is as follows:
Non-underlying Non-underlying
Underlying items Total Underlying items 2022 Total
items 2023 2023 2023 items 2022 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit / (loss)
before tax 39,278 (6,828) 32,450 80,704 (1,934) 78,770
Taxation (7,663) 746 (6,917) (16,062) (2,708) (18,770)
Profit / (loss)
after tax 31,615 (6,082) 25,533 64,642 (4,642) 60,000
============= =============== ======== ============= =============== =========
Effective tax
rate 19.51% 21.32% 19.90% 23.83%
The Group's underlying effective rate of tax is 19.51% (2022:
19.90%) which is higher than the standard rate of corporation tax
in the UK as a result of the impact of non-qualifying depreciation
and non-deductible expenses in the year ended 28 February 2023.
In the June 2021 Finance Act it was enacted that the rate of
corporation tax in the UK would rise from 19% to 25% on 1 April
2023. As a result the Group's deferred tax obligations at 28
February 2023 and 28 February 2022 have been measured at 25%.
The overall effective tax rate of 21.32% includes tax on
non-underlying items (2022: 23.83%).
5. 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 year or the diluted
weighted average number of ordinary shares in issue in the
year.
For the purposes of calculating the weighted average shares in
issue, shares held by the Group's employee benefit trust are
excluded as rights to dividends on such shares have been
waived.
Details of the shares held in the Group's employee benefit trust
are included in the notes to the consolidated statement of changes
in equity.
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 at 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 set out above, is compared
with the number of shares that would have been issued assuming the
exercise of the share options.
Underlying earnings per share is calculated by dividing
underlying earnings attributable to equity shareholders by the
weighted average number of ordinary shares in issue during the
year.
2023 2022
GBP'000 GBP'000
Profit attributable to equity shareholders 25,533 60,000
Non-underlying loss after tax (note
4) 6,082 4,642
Underlying earnings attributable
to equity shareholders 31,615 64,642
=========== ===========
Weighted average number of shares
in issue ('000s) 345,239 360,651
Potentially dilutive shares ('000s) 18,703 15,222
----------- -----------
Diluted weighted average number
of shares in issue ('000s) 363,942 375,873
=========== ===========
Basic earnings per share 7.40p 16.64p
=========== ===========
Diluted earnings per share 7.02p 15.96p
=========== ===========
Basic underlying earnings per share 9.16p 17.92p
=========== ===========
Diluted underlying earnings per
share 8.69p 17.20p
=========== ===========
6. Dividends per share
Dividends of GBP6,003,000 (1.75p per share) were paid in the
year ended 28 February 2023.
A final dividend of 1.45p per share is to be proposed at the
Annual General Meeting on 28 June 2023. The ex-dividend date will
be 29 June 2023 and the associated record date 30 June 2023. The
dividend will be paid, subject to shareholder approval, on 28 July
2023 and these financial statements do not reflect this final
dividend payable.
7. Reconciliation of net cash flow to movement in net debt
2023 2022
GBP'000 GBP'000
Net (decrease)/increase in cash
and cash equivalents (4,809) 15,965
Cash inflow from proceeds of borrowings (110,570) (5,699)
Cash outflow from repayment of borrowings 23,358 10,638
Cash movement in net debt (92,021) 20,904
Capitalisation of loan arrangement 1,037 -
fees
Amortisation of loan arrangement
fees (131) (206)
Increase in accrued loan interest (408) -
Non-cash movement in net debt 498 (206)
Movement in net debt (excluding lease
liabilities) (91,523) 20,698
Opening net cash/(debt) (excluding
lease liabilities) 16,167 (4,531)
----------------------- ---------
Closing net (debt)/cash (excluding
lease liabilities) (75,356) 16,167
Lease liabilities at 1 March (88,830) (91,101)
Capitalisation of new leases (13,307) (14,132)
Disposal of lease liabilities 2,493 617
Interest element of lease repayments
(note 3) (3,488) (3,581)
Cash outflow from lease repayments 19,675 19,367
----------------------- ---------
Lease liabilities at 28 February (83,457) (88,830)
Closing net debt (including lease
liabilities) (158,813) (72,663)
======================= =========
8. Business combinations
On 1 July 2022, the Group acquired the entire issued share
capital of Wiper Blades Limited which operates as an e-commerce
specialist. Total consideration of GBP3,513,000 was settled from
the Group's existing cash resources.
On 31 October 2022, the Group acquired the business and assets
of two BMW Motorrad outlets in Shipley and Rotherham, Yorkshire.
Total consideration of GBP4,150,000 was settled from the Group's
existing cash resources.
On 17 December 2022, the Group acquired the entire issued share
capital of Helston Garages Group Limited ("Helston"). Helston is a
predominantly premium manufacturer automotive retail group in the
South West of England representing 28 franchised outlets.
Total consideration of GBP181,914,000 was met from a combination
of a new GBP74,757,000 mortgage facility secured against a
portfolio of 22 freehold and long leasehold properties including a
combination of acquired properties and existing Group properties,
renegotiated banking facilities and existing cash resources.
GBP22,000,000 of the renegotiated banking facility was drawn down
for the initial acquisition payment, however, was subsequently
repaid in February 2023.
9. Post balance sheet events
On 30 April 2023, the Group sold the trade and assets of its
standalone accident repair operation in Newburn, Newcastle upon
Tyne at above net book value. The sale included the leasing of the
long-leasehold property to the buyer.
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END
FR QKLFBXELEBBK
(END) Dow Jones Newswires
May 10, 2023 02:00 ET (06:00 GMT)
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