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Vertu Motors Plc

Vertu Motors plc Profit and cash generation ahead of expectations: dividend increased

Vertu Motors plc (LON: VTU), the automotive retailer with a network of 123 sales and aftersales outlets across the UK, announced today its final results for the year ended 28 February 2019.

Commenting on the results, Robert Forrester, Vertu Motors plc Chief Executive Officer, said:

“Our highly skilled, disciplined and motivated team offers our aftersales, used and new vehicle customers outstanding service. By executing the basic fundamentals well, and with our strong financial position, Vertu will continue to generate significant and growing levels of cash. Over the last three years, we have invested over £85.0m in our capex programme across our dealership estate. This programme is now coming to an end and we would expect to generate increased levels of cash which, through our disciplined capital allocation framework, we will invest in operations, acquisitions and dividends as well as share buybacks, where appropriate.”

HIGHLIGHTS

Strategy

· Strong management and financial position enables growth of franchised businesses with major Manufacturer partners to deliver growth in value

· Leads the sector in on-line capability for omni-channel retailing. On-line retailing capability developed in used cars, parts and vans

· Delivery of market beating used car sales growth through use of technology in stock management and vehicle pricing together with cost-effective digital and TV marketing

· Growing high margin service revenues through expanded capacity, high penetration of retention products such as service plans and delivery of outstanding customer experiences

· Strong portfolio management including divestment of sub-scale and underperforming outlets/properties generating cash and reducing cost structures

· Continuing value enhancing acquisitions

Financial

· Profit before tax of £25.3m (2018: £30.4m)

· Adjusted1 profit before tax of £23.7m ahead of market expectations (2018: £28.6m)

· Full year dividend of 1.6p per share, up 6.7% (2018: 1.5p per share)

· VAT income of £3.1m, in addition to Adjusted PBT, received following HMRC clarification of finance deposit allowance treatment

· Excellent cash conversion: Free Cash Flow of £21.2m delivered in the year (2018: £10.7m)

Operational

· £186m (6.7%) growth in revenues to £3bn, with like-for-like revenue growth of 5.1%

· Excellent aftersales performance with like-for-like revenue growth of 7.0% delivering a 6.4% growth in gross profit

· Like-for-like used vehicle revenue growth of 11.6% delivering £2.5m additional gross profit

· New retail volumes stable and ahead of the market trends

1 Adjusted to remove non-underlying items

Capital Structure

· Adjusted2 Net Cash of £22.9m (2018: £32.1m)

· Strong balance sheet to fund future growth: tangible net assets per share of 44.9p reflective of extensive freehold property base

· Major capital expenditure programme now largely complete aiding future Free Cash Flow generation

· Used car stocking funding utilised of £23.2m (cover of 4.6 times used car stock value) (2018: £12.8m). Substantially lower than industry peer group reflecting resilient balance sheet

· £3.6m of shares bought back in FY19 together with £5.7m of dividend payments

· Share Buyback Programme recommenced on this announcement with £3m allocated

2 Adjusted to remove used car stocking loans

Outlook

· Group has traded in line with management’s expectations in March and April 2019 with trading profit expected to be in line with prior year period