Vertu Motors Plc Well set for long term growth – Zeus Capital

Vertu Motors Plc (LON:VTU) has reported another record performance for 2017A, with adjusted EPS +7% ahead of our forecast expectations. We are maintaining our cautious FY assumptions from 2018E and beyond. The Group has very strong foundations in place given its growing aftersales and used car operations accounting for over 70% of gross profit, coupled with having the strongest and most flexible balance sheet in the sector. We therefore believe Vertu remains well positioned to deliver strong growth over the medium term.

Final results: Vertu has delivered record results for the 12-month period ended 28 February 2017, beating our expectations at the adjusted EPS level by 7%. Revenues were 2% ahead of our expectations and +16.5% YOY. Gross profits were +19.1% YOY and 3% ahead of our forecast. This was driven by the strengthening of gross margin, which advanced 20bps. Adjusted EBIT was also ahead of our forecast with margins static YOY at 1.2%. Adjusted PBT at £31.5m was +15% YOY and bang in line with our forecast. Adjusted EPS was +1.2% and 7% ahead of forecast due to a lower tax rate. The dividend was in line with our forecast and +8% YOY, with dividend cover running at 4.6x. Cash conversion was once again excellent running at 181%, resulting in a stronger than expected net cash position (£21.0m vs £1.7m forecast).

Key performance drivers: The performance in used cars was particularly positive and generated nearly 70% of the core gross profit growth, with aftersales showing solid progress. It was also reassuring to see the acquisitions made in 2016 and 2017 come through and make a positive contribution in these results. We believe this validates the consistent strategy management have had in place since inception over a decade ago. New cars made a modest negative contribution to gross profit growth, albeit this does reflect negative private registration data across most of the period based on data from the SMMT.

Forecasts: We are maintaining our cautious forecast assumptions, and remain at the lower end of the consensus range. We have lowered our tax rate assumptions from 21% to 20%, which drives a 5% increase in our EPS forecast aided also by a slightly lower fully diluted share count than previously assumed.

Investment view: Compiling the various valuation techniques used in the note, we average 105p per Vertu Motors Plc share: this is based on values ranging from 160p for our DCF analysis to 60p reflecting typical mid‑cycle P/E multiples based on depressed 2017E EPS multiples (assuming no further acquisitions). At current levels, we see significant long-term value, as Vertu continues to benefit from being an even larger scale operator.

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Facebook
    Twitter
    LinkedIn
    Vertu Motors Plc

    More articles like this

    Vertu Motors Plc

    Vertu Motors share buyback programme update

    Vertu Motors plc (LON: VTU) has announced that on 07 April 2022, it purchased 201,999 ordinary shares of 10p each in the Company on the London Stock Exchange, pursuant to the share buyback programme that was announced on 2nd March 2022 as

    Vertu Motors Plc

    Vertu Motors acquires two Toyota dealerships located in the East Midlands

    HIGHLIGHTS ·    Acquisition of two established, profitable Toyota dealerships located in the East Midlands, building the Group’s market share with this leading manufacturer. ·    The businesses will be branded Vertu and supported by the increasingly successful website, vertumotors.com

    Vertu Motors Plc

    Vertu Motors delivers record trading results

    Vertu Motors plc (LON:VTU), the automotive retailer with a network of 154 sales and aftersales outlets across the UK and a sector leading online presence, has announced its interim results for the six months ended 31

    Vertu Motors Plc

    Vertu Motors: Capital allocation specialists

    Vertu Motors plc (LON:VTU) has delivered another earnings upgrade driven by strong ongoing used car margins, in what is effectively an early delivery of the H1 pre-close update. Dividend payments will resume, and a share buyback

    Vertu Motors Plc

    Vertu Motors to present investor presentation

    Vertu Motors plc (LON:VTU), the UK automotive retailer with a network of 154 sales outlets, has announced that its management will host an online investor presentation and Q&A session on Tuesday, 17 August 2021 at 4.30pm.

    Vertu Motors Plc

    Vertu Motors: Another upgrade

    Vertu Motors plc (LON:VTU) has released an unscheduled trading update, delivering another earnings upgrade to 2022E, this time in excess of 30%. This is driven by the strength of the used car market, although we believe

    Vertu Motors Plc

    Vertu Motors experiencing strong gross margin retention

    Vertu Motors plc (LON:VTU) has announced that, as a consequence of the continuing strong trading performance, the Group is providing an update on current trading and an upgrade to the full year outlook.  Exceptional UK used