Vertu Motors Plc · LSE:VTU
Vertu Motors — FY2017 Earnings Presentation
22 slides from Vertu Motors's earnings presentation, May 10, 2017
Slide 1: Analyst & Investor Presentation
ANALYST & INVESTOR PRESENTATION Final results for the 12 months ended 28 February 2017 10 May 2017 Record profitability, excellent cash conversion and robust balance sheet to drive future growth
Slide 2: Record profitability: Excellent cash conversion: Robust balance sheet
Record profitability: Excellent cash conversion: Robust balance sheet • Revenues up 16.5% to £2,822.6m (2016: £2,423.3m) • Gross Margins increased to 11.1% (2016: 10.9%) • Adjusted profit before tax up 15.0% to £31.5m (2016: £27.4m) • Cash generated from operations of £58.1m (2016: £65.8m) represent
Slide 3: Encouraging outlook
Encouraging outlook • Strong trading in March and April 2017 • Like-for-like profitability increased with strengthening margins and the positive impact of cost reductions flexed for lower vehicle volumes and cost control initiatives • Strong growth in aftersales and used vehicle profitability • Like
Slide 4: Group strategy and objectives
Group strategy and objectives • Deliver long-term value for owners focused on growing cash-flows • Build a sustainable scaled franchised dealership business around a diversified portfolio March 2016 • Apply an established business model with a stable, experienced management team £35m • Establish a r
Slide 5: Disciplined growth of the portfolio
Disciplined growth of the portfolio Regular Assessment • Six monthly review of all Manufacturers operating in the UK • Includes market shares, products, investment requirements, dealer survey results, financial performance • All classified: Add; Hold; Reduce; Avoid • Action plans prepared for Add an
Slide 6: Highly experienced, stable senior management team
Highly experienced, stable senior management team Robert David Michael Liz Steve Nicola Forrester Crane Sherwin Cope Ferry Loose Chief Chief Operations Chief Financial Chief Marketing Group Sales Group Executive Officer Officer Officer Director Counsel 10 Years 10 Years [1] 7 Years 1 Year 10 Years 2
Slide 7: Brand model - Strong customer experience improves quality of income streams
WHO WE DO IT FOR Brand model - Strong customer experience improves quality of income streams +P RIDE ) RIG HT PE OP D NT MITME COM W AR CU IGHT D LE Y& +R : NIT EW SE +R GRE UES S RTU WEBS AMLES W TOM EAL + O DIG EXPE H P • The customer has to be at the centre of our business ITE/ S HE OP G IT N, SS
Slide 8: Marketing: Increasing our reach to Customers
Marketing: Increasing our reach to Customers The appointment of the Chief Marketing Officer in April 2016 has given us further impetus to drive a number of first stage marketing initiatives and to seek to become sector-leading in the marketing arena: • Development of the “What’s Yours Called?” marke
Slide 9: Group Culture to deliver customer experience and retention
Group Culture to deliver customer experience and retention Colleagues • Our Mission Statement is “to deliver an outstanding customer motoring experience through honesty and trust” • Having the right Values and Culture is key to building stable teams and lasting customer relationships • It is our col
Slide 10: Group Culture to deliver customer experience and retention
Group Culture to deliver customer experience and retention Customer Retention • Customer experience is a significant driver of loyalty and retention • The Group’s Business Development Centre, based in Gateshead, manages customer contact to book service work (in addition to on-line booking facilities
Slide 11: Income statement
Income statement FY2016 FY2017 % Change Revenue £2,423.3m £2,822.6m +16.5% Gross Profit £263.3m £313.5m +19.1% • Enhanced gross margins Gross Margin 10.9% 11.1% +0.2% Adjusted EBITDA [1] £35.4m £42.1m +18.9% • Increased operating expenses as a % Operating profit £27.2m £32.1m +18.0% of revenues in H
Slide 12: Revenue and margin analysis - Total Group
Revenue and margin analysis - Total Group FY2016 FY2017 Revenue Revenue Gross Profit Gross Profit Gross Revenue Revenue Gross Profit Gross Profit Gross £’m Mix % £’m Mix % Margin % £’m Mix % £’m Mix % Margin % Aftersales 189.0 7.8 102.9 39.1 44.8* 227.0 8.0 123.4 39.4 44.6* Used vehicles 850.2 35.1
Slide 13: Volumes and margins
Volumes and margins Core Group • Service saw like-for-like revenue growth in all channels and improving margins Total Revenue Like-for-like Gross Margins % Growth % Revenue Growth % FY2016 FY2017 • Used retail sales saw continued strong volume and margin increases Service Revenue • Over five years o
Slide 14: Profit Bridge - 12 months ended 28 February 2017
Profit Bridge - 12 months ended 28 February 2017 Core Group gross profit: +£15.6m Expenses & interest: +£15.5m £m 50.0 4.6 (14.5) 45.0 10.6 40.0 35.0 1.4 (1.0) 2.5 (1.0) 31.5 30.0 1.5 27.4 0.0 25.0 20.0 15.0 10.0 5.0 0.0 FY2016 Closed Sites FY2017 FY2016 New vehicles Fleet & commercial Used vehicles
Slide 15: Managing operating expenses
Managing operating expenses 11.7% 12.0% Operating Expenses as % of Revenue 11.5% 10.7% 11.0% 10.6% 10.5% 10.3% 10.5% 10.2% 10.0% 10.0% 9.7% 9.4% 9.5% 9.2% H1 9.0% H2 FY2013 FY2014 FY2015 FY2016 FY2017 • Costs as a % of revenue grew in H1 after a long period of reduction due to: • Number of customer
Slide 16: Managing tax payments
Managing tax payments • Tax represents significant cash cost to Group: Business rates, employers NIC and corporation tax cost £31.0m • Group classified as “low risk” by HMRC • FY2017 Effective Tax rate is below underlying rate 9.0 35.0 8.0 30.0 £2.2m Settlement of historic 7.0 24.2 corporation tax o
Slide 17: Cash flow
Cash flow FY2016 FY2017 £’m £’m FY2016 FY2017 £’m £’m Adjusted EBITDA 35.4 42.1 Vehicle deposits - 4 Working capital movement 30.5 16.0 VAT 14 3 Inventory 5 2 Capital expenditure (net of disposals) (19.7) (29.0) Accruals 2 3 Interest (1.4) (2.4) Warranty & service plan 2 3 Tax (7.7) (5.7) Receivable
Slide 18: Managing working capital
Managing working capital • Significant, yet predictable, seasonal fluctuations in working capital arise around plate change months and quarter ends as a result of inventory movements and manufacturer incentive receivables • Manufacturer new vehicle supply levels and financing changes can impact work
Slide 19: Investing to support future cash growth
Investing to support future cash growth • Significant period of investment in dealership capacity and standards led by Jaguar Land Rover • Phase expected to be completed by December 2018 after which investment levels will decline, improving free cashflow FY2017 FY2018 FY2019 £’m £’m £’m Purchase of
Slide 20: Robust balance sheet provides flexibility to drive growth
Robust balance sheet provides flexibility to drive growth • Ungeared balance sheet • New 5 year £40m committed facility in place with potential to add a further £30m • Future acquisitions will utilise this facility 29th February 2016 28th February 2017 £’m £’m Intangible assets 71.1 96.1 • Pension f
Slide 21: Shareholder returns
Shareholder returns • Board focus to improve long-term returns • Free cashflow* to shareholders’ invested equity** 10 years to February 2017 12.1% 9 years to February 2016 12.7% 12 months to February 2017 9.6% • Returns are above the weighted average cost of capital of 8.0% • Short-term returns dilu
Slide 22: Summary
Summary • Stable, experienced management team focused on business fundamentals • Record profitability • Excellent cash conversion • Strong, long term dividend growth • Robust balance sheet • Debt capacity for growth • Strong trading in March and April 2017: Board confident about Group’s prospects fo