Vertu Motors Plc · LSE:VTU
Vertu Motors — FY2016 Earnings Presentation
31 slides from Vertu Motors's earnings presentation, May 11, 2016
Slide 1: Analyst & Investor Presentation
ANALYST & INVESTOR PRESENTATION Final results for the 12 months ended 29 February 2016 11 May 2016
Slide 2: Introduction and strategy
Introduction and strategy In addition to improving the core business, the Group’s strategy is to grow value by: • Acquiring further businesses, both currently profitable and turnaround opportunities, representing both existing manufacturer partners and those which may be new to the Group • Improving
Slide 3: Financial highlights
Financial highlights • Revenues increased by 16.8% to £2,423.3m (FY2015 : £2,074.9m) • Record profit before tax up 23.8% to £26.0m (FY2015 : £21.0m) • Adjusted(1) profit before tax up 24.5% to £27.4m (FY2015 : £22.0m) • Period end net cash of £23.1m (FY2015 : £15.7m) • Very strong cash generated fro
Slide 4: Operational highlights
Operational highlights • Fourth consecutive year of growth in revenues and profits • Like-for-like service revenues rose 6.5%: sixth successive year of growth with 90,000 live service plans in place • Continued strengthening of aftersales margin to 44.8% (2015: 43.5%) • New retail vehicle like-for-l
Slide 5: Current trading and outlook
Current trading and outlook • Trading in March and April 2016 ahead of prior year • Continued improvement in aftersales performance – Like-for-like service revenues up 7.0% – Aftersales margins increased from 45.2% to 46.7% • Growth in used vehicle volumes and margins • Stable new vehicle performanc
Slide 6: Record profitability: higher operating margins
Record profitability: higher operating margins % FY2016 FY2015 Change Revenue £2,423.3m £2,074.9m +16.8% Core Group revenues up 7.3% Adjusted(1) EBITDA £35.5m £28.7m +23.7% Adjusted(1) operating profit £28.6m £22.7m +26.0% 25.3% growth in operating profit: operational Operating profit £27.2m £21.7m
Slide 7: Excellent cash conversion
Excellent cash conversion FY2016 FY2015 £’m £’m Strong working capital control augmented by: Operating profit 27.2 21.7 – higher new vehicle consignment Depreciation, amortisation, share based payments inventory resulting in significant VAT charge and profit / loss on sale of fixed assets 8.1 7.3 be
Slide 8: Robust balance sheet
Robust balance sheet 29 February 28 February 2016 2015 £’m £’m Both pension funds in surplus: includes SHG Intangible assets 70.9 52.8 pension scheme acquired October 2015 Retirement benefit asset 6.1 3.0 (£1.7m) Tangible assets 150.4 135.1 Non-current assets 227.4 190.9 £138m of freehold and long l
Slide 9: Strong financial position
Strong financial position Borrowing facilities Facilities Drawn £’m £’m 4 year acquisition facility (from March 2015) 40.0 (14.0) • Facilities refinanced 1 March 2016 to fund Mercedes-Benz acquisition New term loan (9 months from March 2016) 10.0 - 1 year working capital facility (from March 2016) 5
Slide 10: Profit bridge – 12 months ended 29 February 2016
Profit bridge – 12 months ended 29 February 2016 45.0 Core Group gross profit: +£15.9m Expenses & interest :+£13.0m 3.8 (12.5) 40.0 2.4 35.0 3.2 Non-core adjusted PBT: +£2.5m 6.5 30.0 (0.5) 27.4 25.0 2.4 Operating expenses % of revenue reduced 22.0 0.7 (0.6) to 9.7% (2015: 9.9%) £’m £’m 20.0 Increas
Slide 11: A growing platform with increasing premium content
A growing platform with increasing premium content Feb 2015 May 2016 Volume Franchises Number Number +/- • National presence in regional clusters Ford 23 22 (1) provides excellent geographical reach to Vauxhall 14 14 - Nissan 9 10 +1 take advantage of UK-wide internet sales Peugeot 9 7 (2) Hyundai 7
Slide 12: Tried and tested process to drive dealership profit growth
Tried and tested process to drive dealership profit growth YEAR 4 Maturity YEAR 3 Vehicle replacement cycle aids sales YEAR 2 • Strong database Aftersales • High vehicle parc beginning to build • Low marketing spend • High aftersales YEAR 1 • Database marketing for absorption Focus on new and vehicl
Slide 13: Consistency embedded through people and process
Consistency embedded through people and process Telephone sales enquiry mystery shop Physical sales mystery shop (hidden video cameras) 100% 100% 91% 88% 85% 87% 85% 88% 87% 87% 85% 88% 84% 88% 86% 86% 88% 79% 81% 81% 75% 77% 80% 73% 71% 80% 70% 60% 60% 60% 40% 40% 20% 20% 0% 0% W1-5 W6-10 W11-15 W1
Slide 14: Portfolio development – Mercedes-Benz in Thames Valley
Portfolio development – Mercedes-Benz in Thames Valley • 1 March 2016 introduction of Mercedes-Benz, Mercedes AMG and smart into the Group’s franchise portfolio to further develop the premium mix: Vertu Mercedes-Benz • Three well established dealership operations, all with freehold properties in att
Slide 15: Continued review of the portfolio
Continued review of the portfolio Constant review of the Group’s portfolio in terms of franchise representation to drive appropriate allocation of capital and to maximise return on investment Since 1 March 2015 the Group has: • Refranchised: - Suzuki Mansfield, now a Renault and Dacia sales and serv
Slide 16: Future-proofing the business model
Future-proofing the business model Number of Group vehicle units sold via internet derived enquiries Internet derived sales volumes % of Total Retail Units as % of retail units sold 16.7% 20.0% 15.2% sold via internet 14.3% 14.7% Internet units 13.6% Vehicle units 20,000 12.0% 15.0% 10.0% 10,000 5.0
Slide 17: Revenue and margin analysis – Total Group
Revenue and margin analysis – Total Group FY2016 FY2015 Gross Gross Gross Gross Revenue Revenue profit profit mix Gross Revenue Revenue profit profit mix Gross £’m mix % £’m % margin % £’m mix % £’m % margin % Aftersales 189.0 7.8 102.9 39.1 44.8* 168.1 8.1 89.4 39.2 43.5* New retail 796.5 32.9 59.3
Slide 18: Aftersales – recurring high margin income – Core Group
Aftersales – recurring high margin income – Core Group Accident repair Petrol Service centres Parts forecourts Total £’000 £’000 £’000 £’000 £’000 Revenue(1) 79,577 6,813 106,291 5,364 198,045 Revenue(1) change +4,826 +507 +5,517 (1,739) +9,111 L4L revenue(1) change % +6.5% +8.0% +5.5% (24.5%) +4.8%
Slide 19: Service performance drivers
Service performance drivers • Underlying market growth in aftersales due Number of live Vertu service plans to: (excluding manufacturer plans) – growth in 0-3 year vehicle parc 100 driving private and fleet service 89,894 90 demand 80,902 – ageing of overall vehicle parc in last Cumulative number of
Slide 20: Vehicle volumes sold
Vehicle volumes sold Total units sold Like-for-like units sold Total Volumes 158,050 +12.2% 146,072 +6.2% 140,815 Total Volumes 137,603 New Retail 39,790 New Retail 36,489 35,859 +11.0% 35,082 +4.0% (SMMT +3.9%) New Motability 11,435 New Motability 10,484 10,549 +8.4% 10,321 +1.6% (SMMT -2.9%) New C
Slide 21: Revenue and margin analysis – New retail & Motability vehicles
Revenue and margin analysis – New retail & Motability vehicles H1 H2 H1 H2 H1 H2 • Continued growth in FY2014 FY2014 FY2015 FY2015 FY2016 FY2016 selling prices led by PCP finance offers and greater Selling price per unit 12,170 12,950 13,342 13,639 14,213 14,738 premium mix within the Gross profit p
Slide 22: Revenue and margin analysis – Fleet & commercial vehicles
Revenue and margin analysis – Fleet & commercial vehicles H1 H2 H1 H2 H1 H2 • Over 35,000 new fleet cars FY2014 FY2014 FY2015 FY2015 FY2016 FY2016 and commercial vehicles delivered Selling price per unit 15,929 16,796 16,567 15,626 16,271 16,553 Gross profit per unit 346 451 351 450 426 562 • Strong
Slide 23: Revenue and margin analysis – Used vehicles
Revenue and margin analysis – Used vehicles • Over 71,000 used cars retailed H1 H2 H1 H2 H1 H2 in the year FY2014 FY2014 FY2015 FY2015 FY2016 FY2016 Selling price per unit 10,364 11,055 11,404 11,579 11,943 11,772 • Volume/margin trade-off Gross profit per unit 1,120 1,203 1,187 1,194 1,176 1,153 •
Slide 24: Group well positioned for further growth
Group well positioned for further growth • Current trading ahead of prior year with strong operational management team in place • Strong aftersales dimension with growing resilience due to focus on retention strategies • Portfolio contains dealerships with significant potential to enhance margins •
Slide 25: Supplementary information
Supplementary information 1. Definition of key terminology 2. Drivers of acquisitions 3. Analysis of UK franchise outlets 4. Current dealership portfolio – May 2016 5. UK new vehicle registrations 24
Slide 26: Definition of key terminology
Definition 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 years. Onl
Slide 27: Drivers of acquisitions
Drivers of acquisitions • Highly fragmented sector with growing economies of scale (purchasing, web prominence, systems) • Benign market conditions for three years; good backdrop for exit • Manufacturer capital investment demands; reason to exit • Manufacturer intolerance of underperformance; need t
Slide 28: Analysis of UK franchise outlets
Analysis of UK franchise outlets 2005 2016 18% 21% 7% Top 10 Groups 7% Top 11 - 20 Groups 9% Top 21 - 40 Groups Below Top 40 Groups 7% 66% 65% Number of outlets 5,048 Number of outlets 5,147 • Proliferation of smaller franchises such as DS/Dacia have bolstered outlet numbers whilst overall number of
Slide 29: Current dealership portfolio
Current dealership portfolio Volume Franchises Number Ford Vauxhall 22 14 Sales outlets by brand Nissan 10 Peugeot 7 4 9 Hyundai 7 Renault 7 SEAT 5 22 Citroen 4 Macklin Motors Fiat 4 Vertu Mazda 4 Farnell Škoda 1 85 8 Bristol Street Motors Premium Franchises South Hereford Honda 12 84 Volkswagen 6 L
Slide 30: UK new vehicle registrations
UK new vehicle registrations UK New Vehicle Registrations 2.8 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.5 2.5 2.4 2.4 2.4 2.3 2.3 2.3 2.3 2.2 2.2 2.2 2.2 2.2 Vehic le Registrations - Units m's 2.1 2.0 2.0 2.0 2.0 2.0 2.0 2.0 1.9 1.9 1.8 1.8 1.6 1.6 1.6 1.4 1.2 1.0 1988 1989 1990 1991 1992 1993 1994 1995 1996 19
Slide 31: 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