Vertu Motors Plc · LSE:VTU
Vertu Motors — H1 2018 Earnings Presentation
30 slides from Vertu Motors's earnings presentation, Oct 11, 2017
Slide 1: Analyst & Investor Presentation
ANALYST & INVESTOR PRESENTATION Interim results for the 6 months ended 31 August 2017 11 October 2017 Strong results in challenging market
Slide 2: Financial highlights
Financial highlights · Revenues of £1.45bn (2016 H1: £1.45bn) · Group gross margin 11.0% (2016 H1: 11.1%) · Record profit before tax up 29.4% to £24.2m (2016 H1: £18.7m) · Adjusted profit before tax up 7.2% to £20.9m (2016 H1: £19.5m) · Adjusted earnings per share of 4.24p (2016 H1: 4.06p) · Excepti
Slide 3: Outlook highlights
Outlook highlights • Following the September trading performance, full year adjusted profit before tax anticipated to be in line with market expectations • Aftersales outlook strong with 104,142 active service plans (2016 H1: 97,427) • Used car residuals strengthening due to reduced supply into the
Slide 4: Objectives and Group strategy
Objectives and Group strategy • Deliver long-term value for owners by growing profits and cashflows • Build a sustainable, scaled, diversified franchised dealership business through acquistion and organic growth • Apply a consistent business model with a stable, experienced management team • Establi
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: Return on consideration by acquisition year - FY2017
Return on consideration by acquisition year - FY2017 EBITDA earned from acquisitions made between FY2010 and FY2016 in the year ended 28 February 2017, shown as a percentage of the total consideration (Enterprise Value) 45.0 30.0% 40.0 26.9% 35.2 25.0% 35.0 EBITDA return on total consideration % 23.
Slide 7: Income statement
Income statement H1 FY2018 H1 FY2017 % Change Revenue £1,445 .7m £1,454 .6m (0 .6%) • Stable gross margins Gross Profit £159 .1m £160 .8m (1 .1%) Gross Margin 11 .0% 11 .1% (0 .1%) • Reduction in operating expenses as % of Adjusted EBITDA [1] £26 .1m £24 .8m +5 .2% revenue - like-for-like cost reduc
Slide 8: Revenue and margin analysis - Total Group
Revenue and margin analysis - Total Group H1 FY2018 H1 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 115.5 8.0 64.2 40.4 45.2 113.4 7.8 62.9 39.1 45.4 [1] Used vehicles 546.9
Slide 9: Aftersales - recurring high margin income
Aftersales - recurring high margin income Core Group Service Parts & accident repair centres Total • Continued revenue growth across aftersales streams £’000 £’000 £’000 • Significant increase in gross Revenue [1] 52,862 74,207 127,069 profit levels in core business Revenue [1] Change 2,242 1,854 4,
Slide 10: Revenue and margin analysis - Used vehicles
Revenue and margin analysis - Used vehicles H1 H2 H1 H2 H1 H2 H1 • Twelfth successive six-month period of FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 like-for-like used vehicle volume growth Selling price per unit (£) 11,404 11,579 11,943 11,772 12,524 12,905 13,146 • Rising sales prices (partl
Slide 11: Revenue and margin analysis - New retail vehicles
Revenue and margin analysis - New retail vehicles H1 H2 H1 H2 H1 H2 H1 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 • Rising sales prices due to premium mix and Selling price per unit (£)[1] 13,342 13,639 14,213 14,738 15,515 15,913 16,571 impact of currency pressures on Gross profit per unit (£
Slide 12: Revenue and margin analysis - Fleet & commercial vehicles
Revenue and margin analysis - Fleet & commercial vehicles H1 H2 H1 H2 H1 H2 H1 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 • Currency related sales price Selling price per unit (£) 16,567 15,626 16,271 16,553 17,188 17,713 18,549 increases evident Gross profit per unit (£) 351 450 426 562 536 5
Slide 13: Operating expenses - March to August 2017
Operating expenses - March to August 2017 Adjusted operating expenses movement - Core Group £m 141.0 Core Group reduction - £0.8m 140.2 4.3 140.0 0.2 0.6 0.6 139.0 0.5 2.6 0.1 0.4 138.0 137.7 137.0 136.0 135.0 134.0 H1 FY2017 Closed sites Acquisitions Property costs, rates Payroll Marketing Vehicle
Slide 14: Profit Bridge - 6 months ended 31 August 2017
Profit Bridge - 6 months ended 31 August 2017 £m Movement in core gross profit 22.0 1.3 (1.3) [1] 21.0 0.7 20.9 0.8 20.0 0.2 (2.3) 0.3 19.5 [1] 1.7 19.0 18.0 17.0 16.0 15.0 H1 FY2017 Closed Sites FY2017 New vehicles Fleet & commercial Used vehicles Aftersales Operating expenses Interest H1 FY2018 Ac
Slide 15: Movement in net cash
Movement in net cash H1 FY2017 H1 FY2018 H1 H1 £’m £’m FY2017 FY2018 £’m £’m Adjusted EBITDA 24 .4 26 .1 Vehicle deposits - (3 .1) VAT - (16 .8) Working capital movement 2 .1 (24 .4) Used vehicle stock - (6 .7) Capital expenditure (15 .8) (8 .2) Warranty & service plan 2.1 2 .2 Disposals 1 .0 14 .2
Slide 16: Investing to support future cash growth
Investing to support future cash growth Actual Estimate H1 FY2017 FY2018 FY2018 FY2019 FY2020 £’m £’m £’m £’m £’m Purchase of property 2.2 - 6.0 - - New dealership build 10.4 1.0 5.2 3.1 2.5 Existing dealership capacity increases 5.9 4.2 8.8 11.8 4.0 Manufacturer led refurbishment projects 2.4 1.0 4
Slide 17: Robust balance sheet provides flexibility to drive growth
Robust balance sheet provides flexibility to drive growth 31st August 2016 31st August 2017 £’m £’m • Pension fund remains in surplus: schemes merged Intangible assets 96.4 96 .1 • £175m of freehold and long leasehold property provides Retirement benefit asset 1.4 5 .7 strong property backing Tangib
Slide 18: Shareholder returns
Shareholder returns Dividend Per Share (p) • Interim dividend increased by 10% to 0.55p per share (2016 H1: 0.50p) 1.00 0.90 0.90 0.85 • Moving towards four times dividend cover for full year 0.80 0.70 0.70 • £1.6m of share buy-backs performed at average of 42.8p per share to date 0.60 0.55 0.50 0.5
Slide 19: Current issues: technological impacts in the future
Current issues: technological impacts in the future 2017 has confirmed technology is driving a sustained shift in the automotive sector: 1. Digital Products and Services • Vehicles likely to move to CASE formats (Connected, Autonomous, Shared & Electric) • New mobility and digital services provide s
Slide 20: Current issues: regulatory environment
Current issues: regulatory environment • FCA is examining the motor finance market to assess whether customers are “at risk of harm” • Areas of focus are: • Affordability : primarily the responsibility of lender • Transparency : investment in Showroom systems and lender communications • Vulnerable c
Slide 21: Summary
Summary • Motivated management team actively engaged in ensuring business positioned for technological sector changes: close Manufacturer partner engagement • Strong balance sheet with quality freehold property portfolio and ungeared position: well placed to execute value creating acquisitions • Con
Slide 22: List of Appendices
List of Appendices 1. Definition of key terminology 2. Brand Model 3. Business Model 4. Vehicle volumes sold 5 UK New vehicle registrations 6. Cash and borrowing facilities 7. Electric vehicles: Forecast impact on vehicle parc Analyst & Investor Presentation | Slide 21 | Appendices
Slide 23: Definition of key terminology
Definition of key terminology Appendix 1 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
Slide 24: Brand model
Brand model - Appendix 2 Strong customer experience improves quality of income streams • The customer has to be at the centre of our business • The Brand model sets out how we do things: • Vision and Mission Statement • Core Values • All stakeholders considered • Brand touchpoints to guide how we go
Slide 25: Business Model: Tried and tested process to drive dealership turnaround
Business Model: Tried and tested process to drive dealership turnaround Appendix 3 ACQUIRE / YEAR 1 YEAR 2 YEAR 3 YEAR 4 Focus on new and Aftersales Vehicle replacement START UP used car sales beginning to build cycle aids sales Maturity • Strong database • Database marketing • High vehicle parc for
Slide 26: Vehicle volumes sold
Vehicle volumes sold Appendix 4 Total units sold Like-for-like units sold Total Volumes 84,309 (6.3%) Total Volumes 82,934 (5.0%) 89,984 87,289 19,273 18,682 New Retail (15.6%) New Retail (14.7%) SMMT (6.4%) 22,825 21,908 5,747 5,627 New Motability 6,089 (5.6%) New Motability 5,925 (5.0%) SMMT (4.8%
Slide 27: UK new vehicle registrations
UK new vehicle registrations Appendix 5 2.8 UK New Vehicle Registrations 2.7 2.6 2.6 2.6 2.6 2.6 2.6 2.5 2.5 2.5 2.4 2.4 2.4 2.3 2.3 2.3 Vehicle Registrations - Units m’s 2.2 2.3 2.2 2.2 2.2 2.2 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 199
Slide 28: Cash and borrowing facilities
Cash and borrowing facilities Appendix 6 Facilities Drawn at 31 Aug 17 at 31 Aug 17 £’m £’m • Facilities refinanced February 2017 5 year acquisition facility (from February 2017) 40.0 (9.8) • “Accordion” facility of a further £30m currently uncommitted 1 year working capital facility (from February
Slide 29: Electric vehicles: Forecast impact on vehicle parc
Electric vehicles: Forecast impact on vehicle parc Appendix 7 2017 2020 2025 2030 Forecast installed base of EVs millions millions millions millions United States 0.5 2.2 11.3 45.0 European Union 0.8 1.5 9.5 45.4 USA and EU 1.3 3.7 20.8 90.4 New car registrations (in millions) 36.0 36.6 39.0 45.9 To
Slide 30: 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