Vertu Motors Plc · LSE:VTU
Vertu Motors — H1 FY2020 Earnings Presentation
29 slides from Vertu Motors's earnings presentation, Oct 9, 2019
Slide 1: Analyst & Investor Presentation: Interim results for 6 months ended 31 August 2019
Interim results for the 6 months ended 31 August 2019 Analyst & Investor 9 October 2019 Presentation Interim results for the 6 months ended 31 August 2019 9 October 2019
Slide 2: Strategic highlights
Strategic highlights • Values driven business with well invested systems infrastructure and experienced leadership team • Financial position enables growth of franchised businesses with Manufacturer partners • Developing omni-channel retailing to be at the forefront of the transformation of the auto
Slide 3: Financial highlights
Financial highlights • £86.7m (5.6%) growth in total revenues to £1.6bn, with like-for-like revenue growth of 2.3% • Strong cost disciplines exhibited, like-for-like operating expense growth in the period slowed to 1% (H1 FY2019: 7%) • Operating profit of £20.3m (H1 FY2019: £18.6m) • Adjusted operat
Slide 4: Development of omni-channel retailing
Development of omni-channel retailing Total social media reach Buy on-line functionality rolling Chatbot functionality developed Group website page views grown by 17% improved by 355%. out across Group brand in house to generate service YOY. In Top 10 groups, Vertu ranks second in Market leading web
Slide 5: Technological and network change creates opportunities
Technological and network change Creates opportunities UK Vehicle Registrations by Engine Type • Physical dealership network vital to long-term 2,800 60.0% delivery of local, convenient customer service 2,700 50.0% 2,600 • Changes in the structure of UK franchise dealership 40.0% 2,500 network expec
Slide 6: Values driven business: colleague and customer satisfaction
Values driven business Colleague and customer satisfaction Improving colleague stability in customer facing roles Customer satisfaction % Dealerships above National Average as measured by Manufacturer surveys 74% 67% Sales Service Colleague satisfaction survey (August 2019) Recommendation rate 81% o
Slide 7: Regulatory change: FCA reviews
Regulatory change FCA reviews • Scope of FCA review: - 122 Mystery shops (37 franchise retailers) • Thematic FCA review on general Motor Finance - Lender finance contracts dated 2013-2016 insurance products released in General Insurance Review - March reviewed April 2019 2019 Review – April • Key fo
Slide 8: Regulated activity regarded as core operational competency
Regulated activity Regarded as core operational competency • Formal Compliance Committee reports to plc board (comprising COO, CFO, Group Counsel and others, with operations directors attending in rotation) • Comprehensive reporting produced monthly and reviewed by senior management including all Ap
Slide 9: Financial performance
Financial performance H1 FY2020 • Revenue growth of 5.6% (2.3% H1 FY2019 Pre IFRS % Change H1 FY2020 % Change 16 like-for-like) Revenue £1,560.4m £1,647.1m +5.6% £1,647.1m +5.6% • Stable gross margins Gross profit £165.9m £172.7m +4.1% £172.7m +4.1% • Growth in Adjusted operating profit Gross margin
Slide 10: Strong balance sheet: flexibility and resilience
Strong balance sheet Flexibility and resilience 31 Aug 2018 31 Aug 2019 31 Aug 2019 Pre IFRS 16 • Strong balance sheet underpinned by £’m £’m £’m property and Adjusted net cash Intangible assets 106.7 112.1 112.1 • Conservative financing structure with low Retirement benefit asset 6.9 7.8 7.8 use of
Slide 11: Movement in net cash/(debt)
Movement in net cash/(debt) Strong conversion and generation of Free Cash Flow H1 H1 H1 FY2019 FY2020 FY2020 H1 pre IFRS 16 Movement in working capital FY2020 £’m £’m £’m £’m Adjusted EBITDA 24.3 25.0 33.4 New vehicle inventory 52.4 Working capital movement 0.6 1.8 1.8 Payables (53.6) Capital expend
Slide 12: Profit bridge 6 months ended 31 August 2019
Profit bridge 6 months ended 31 August 2019 Movement in Core Group gross profit +£2.0m £'m 4.6 (1.5) 20.0 19.0 [1] (1.2) 18.1 (1.9) 18.0 1.2 (1.9) 0.3 (0.6) [1] 17.1 (1.8) 1.6 16.9 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 [1] Adjusted profit before tax, adjusted for share based payments charge, amort
Slide 13: Operating expenses
Operating expenses £’m Core Group increase - £1.5m • Falling operating expenses as % 154.0 0.6 0.2 153.1 (1.6) of revenue 1.0 152.0 6.6 (0.3) 151.5 • Rise in operating expenses just 150.0 1% (H1 FY2019: 7%) like-for-like, 148.0 reflecting strong cost disciplines 146.6 (1.6) 146.0 • Investment in add
Slide 14: Aftersales: recurring high margin income
Aftersales Recurring high margin income: Strong execution Impact of Service excluding • Continued focus on driving growth in vehicle service internal rate impact of internal departments; like-for-like service revenues up 8.5% Core Group Service change rate change £’000 £’000 £’000 • Service internal
Slide 15: Used vehicles: continued volume growth ahead of market
Used vehicles Continued volume growth ahead of market Average selling prices and gross profit per unit • Remarkably resilient profit performance given market 1,278 16,000 1,176 1,153 1,246 1,222 1,197 1,233 1,182 1,172 value declines in Period 1,200 14,000 12,000 1,000 • Like-for-like volumes up 1.6
Slide 16: New retail vehicles
New retail vehicles Revenue growth despite market decline Average selling prices and gross profit per unit • SMMT private registrations in the period fell 20,000 1,359 1,370 1,382 1,365 1,447 1,418 1,600 4.2% distorted by reclassifications from 18,000 16,000 1,116 1,202 1,211 1,400 1,200 Business ca
Slide 17: Fleet & commercial vehicles
Fleet & commercial vehicles Market share gains in Fleet car sector Average selling prices and gross profit per unit • Core Group gross profit in Fleet & 30,000 3.40% 3.20% 3.40% 3.20% 3.20% 3.50% 3.40% 4.00% commercial channel increased by £1.2m 25,000 2.80% Gross Margin % 20,000 2.60% 3.00% • Group
Slide 18: Current trading and outlook
Current trading and outlook Current trading Outlook September 2019 • Board confident in future prospects for Group Increase/(decrease) year-on-year SMMT • Strategically well placed to capitalise on Revenue: Like-for-Like % Registrations % challenges and opportunities in the sector • New vehicle supp
Slide 19: Summary
Summary • Values driven business with strong systems and experienced leadership team • Strong execution demonstrated around; • resilient used vehicle profitability • increased generation of Free Cash Flow • cost control • Focus on delivery of omni-channel retailing and marketing: building brand stre
Slide 20: List of appendices
List of appendices 1. Definitions of key terminology 2. Revenue & margin analysis: Total Group 3. Used vehicle trends 4. New retail vehicle trends 5. Fleet & commercial vehicle trends 6. Vehicle volumes sold 7. Cash and borrowing facilities 8. Dealership portfolio Analyst & Investor Presentation | 1
Slide 21: Definitions of key terminology
Appendix 1 Definitions of key terminology Core: Dealerships that have traded for two full consecutive financial years and comparatives are restated each year, this definition is used for the profit bridge Like-for-like: Dealerships that have comparable trading periods in two consecutive financial ye
Slide 22: Revenue and margin analysis Total Group
Appendix 2 Revenue and margin analysis Total Group H1 FY2019 H1 FY2020 Revenue Gross Gross Profit Gross Revenue Gross Gross Profit Gross Revenue Mix Profit Mix Margin Revenue Mix Profit Mix Margin £'m % £'m % % £'m % £'m % % Aftersales[1] 127.2 8.2 67.4 40.6 43.5 130.7 7.9 73.1 42.3 47.1 Used vehicl
Slide 23: Used vehicle trends
Appendix 3 Used vehicle trends H1 H2 H1 H2 H1 H2 H1 H2 H1 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 FY2020 Selling price per unit (£) 11,943 11,772 12,524 12,905 13,146 13,658 14,069 14,797 14,517 Gross profit per unit (£) 1,176 1,153 1,246 1,222 1,197 1,278 1,233 1,182 1,172 Margin (G
Slide 24: New retail vehicle trends
Appendix 4 New retail vehicle trends H1 H2 H1 H2 H1 H2 H1 H2 H1 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 FY2020 Selling price per unit [1] (£) 14,213 14,738 15,515 15,913 16,571 16,490 16,829 17,864 18,355 Gross profit per unit [1] (£) 1,116 1,202 1,211 1,359 1,370 1,382 1,365 1,447 1
Slide 25: Fleet & commercial vehicles trends
Appendix 5 Fleet & commercial vehicles trends H1 H2 H1 H2 H1 H2 H1 H2 H1 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 FY2019 FY2019 FY2020 Selling price per unit (£) 16,271 16,553 17,188 17,713 18,549 19,032 19,901 20,544 20,662 Gross profit per unit (£) 426 562 536 585 576 588 528 695 603 Margin (Grou
Slide 26: Vehicle volumes sold
Appendix 6 Vehicle volumes sold Total units sold Like-for-like units sold 45,036 43,786 Used Retail Used Retail +2.8% 43,092 +1.6% 43,823 New Fleet & 11,419 New Fleet & 10,862 +19.6% Agency Car 9,541 +13.8% SMMT (1.3%) Agency Car 9,546 10,274 8,948 New Commercial +15.2% New Commercial +2.0% SMMT +12
Slide 27: Cash and borrowing facilities
Appendix 7 Cash and borrowing facilities Facilities Drawn at 31 Aug 19 at 31 Aug 19 £’m £’m 5 year acquisition facility (from February 2019) 62.0 (43.6) 1 year working capital facility (from February 2019) 68.0 - Total committed facilities 130.0 (43.6) • “Accordion” facility of a further £15m curren
Slide 28: Dealership portfolio
Appendix 8 Dealership portfolio Volume Outlets Premium Outlets Ford 22 Honda 12 Vauxhall 14 Land Rover 6 Nissan 11 Volkswagen 5 Hyundai 8 Mercedes-Benz 5 1 5 9 Macklin Motors Renault 6 Jaguar 3 Peugeot 5 Volvo 1 Vertu SEAT 4 Audi 1 26 Citroen 4 Toyota 1 Skoda 4 Jeep 1 Farnell Mazda 2 35 80 Bristol S
Slide 29: Disclaimer
Disclaimer This presentation contains forward looking statements. Although the Group believes that the estimates and assumptions on which such statements are based are reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond the Group’s control. The G