Vertu Motors Plc · LSE:VTU
Vertu Motors — FY2018 Earnings Presentation
29 slides from Vertu Motors's earnings presentation, May 9, 2018
Slide 1: Analyst & Investor Presentation
Analyst & Investor Presentation Final results for the 12 months ended 28 February 2018 9 May Strong balance sheet to drive growth and 2018 take advantage of tougher trading environment
Slide 2: Overview
Overview • Adjusted profit before tax of £28.6m (2017: £31.5m) reflective of a tougher trading environment • Aftersales and used cars represent 72.3% of gross profit (2017: 71.5%) • Exceptional property profits of £3.5m: evidence of value in freehold and long leasehold portfolio • Strong balance she
Slide 3: Disciplined management with capital allocation focus
Disciplined management with capital allocation focus Capital Allocation Regular Assessment • Dividends • Six monthly review of all Manufacturers operating in the UK • Share Buyback Programme • Includes market shares, products, investment requirements, dealer survey • Capex results, financial perform
Slide 4: Income statement
Income statement FY2017 FY2018 % Change Revenue £2,822.6m £2,796.1m (0.9%) Gross profit £313.5m £308.9m (1.5%) • Stable gross and operating margins Gross margin 11.1% 11.0% (0.1%) • Operating expenses as % of EBITDA £41.4m £43.2m +4.3% revenue flat despite cost Operating profit £32.1m £32.3m +0.6% p
Slide 5: Revenue and margin analysis Total Group
Revenue and margin analysis Total Group FY2017 FY2018 Gross Gross Revenue Revenue Profit Gross Profit Gross Revenue Revenue Profit Gross Profit Gross £'m Mix £'m Mix Margin £'m Mix £'m Mix Margin Aftersales(1) 227.0 8.0% 123.4 39.4% 44.6% 228.2 8.2% 124.7 40.4% 44.5% Used vehicles 1,037.5 36.8% 100.
Slide 6: Aftersales Recurring high margin income
Aftersales Recurring high margin income Parts & accident Core Group Service repair Total • Continued like-for-like revenue and gross £’000 £’000 £’000 profit growth across all aftersales streams Revenue(1) 102,762 145,861 248,623 • Service margins slightly reduced due to Revenue (1) change 4,568 2,0
Slide 7: Revenue and margin analysis Used vehicles
Revenue and margin analysis Used vehicles H1 H2 H1 H2 H1 H2 H1 H2 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 Selling price per unit (£) 11,404 11,579 11,943 11,772 12,524 12,905 13,146 13,658 Gross profit per unit (£) 1,187 1,194 1,176 1,153 1,246 1,222 1,197 1,278 • Continued growth in
Slide 8: Revenue and margin analysis New retail vehicles
Revenue and margin analysis New retail vehicles H1 H2 H1 H2 H1 H2 H1 H2 • Rising sales prices due to FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 premium mix and impact of currency pressures on Selling price per unit (1) (£) 13,342 13,639 14,213 14,738 15,515 15,913 16,571 16,490 Manufact
Slide 9: Revenue and margin analysis Fleet & commercial vehicles
Revenue and margin analysis Fleet & commercial vehicles H1 H2 H1 H2 H1 H2 H1 H2 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 FY2018 FY2018 • Currency related sales price Selling price per unit (£) 16,567 15,626 16,271 16,553 17,188 17,713 18,549 19,032 increases evident Gross profit per unit (£) 351 45
Slide 10: Profit bridge 12 months ended 28 February 2018
Profit bridge 12 months ended 28 February 2018 £’m Movement in core gross profit - (£1.7m) 34.0 0.9 (2.8) 33.0 (1) 0.5 32.0 31.5 3.0 (3.0) 31.0 0.7 (2.6) 30.0 29.0 0.4 28.6 (1) 28.0 27.0 26.0 25.0 FY2017 Closed sites Acquisitions New vehicles Fleet & Used Aftersales Operating Interest FY2018 FY2017
Slide 11: Operating expenses Self help mitigating headwinds
Operating expenses Self help mitigating headwinds; vital in low margin environment Adjusted operating expenses movement – March to February 2018 – Core Group £’m 282.0 Core Group increase - £3.0m 279.8 (7.4) 280.0 1.3 (1.2) 0.7 0.1 278.4 278.0 Analyst & Investor Presentation 0.8 1.3 276.0 3.0 274.0
Slide 12: Movement in net cash Positive move in second half
Movement in net cash Positive move in second half FY2017 FY2018 £’m £’m H1 H2 FY2018 FY2018 Adjusted EBITDA 42.1 40.7 £’m £’m Total Working capital movement 16.0 (13.3) Vehicle deposits (3.1) 1.8 (1.3) Capital expenditure (1) (30.0) (24.6) VAT (16.8) 7.0 (9.8) Disposals 1.8 15.8 Used vehicle stock (
Slide 13: Investing to support future cash growth
Investing to support future cash growth Significant reduction in capex FY2020 Actual Estimate FY2017 FY2018 FY2019 FY2020 £’m £’m £’m £’m Purchase of property 5.3 4.3 1.6 - New dealership build 10.4 4.3 4.6 2.5 Existing dealership capacity increases 5.9 8.2 13.1 4.4 Manufacturer led refurbishment pr
Slide 14: Robust balance sheet provides flexibility to drive growth
Robust balance sheet provides flexibility to drive growth 28 February 2017 28 February 2018 Pension fund remains in surplus £’m £’m Intangible assets 96.2 95.7 £183.8m of freehold and long leasehold property Retirement benefit asset 1.9 6.6 provides strong property backing Tangible assets 197.5 198.
Slide 15: IFRS 16 Accounting for leases pro-forma example
IFRS 16 Accounting for leases – effective for FY2020 year end – pro-forma example Indicative unaudited pro-forma example • Major impact on balance sheet, income statement, Current Pro-forma* Variance and cash flow statement FY2018 FY2018 • Higher property, plant and equipment as leased £m £m £m asse
Slide 16: Dividend per share
Shareholder returns 8th consecutive year of dividend growth Dividend per share (p) 1.00 0.95 • Dividend increased by 7.1% to 1.50p per share 0.90 0.90 0.85 (2017: 1.40p) 0.80 0.70 • Four times dividend cover 0.70 Dividend per share • £7.9m of share buy-backs to dateAnalyst performed&atInvestor0.60 P
Slide 17: Current developments
Current developments • Retail formats • digitalisation; innovative retail formats; network restructuring • Powertrain developments • petrol/diesel demand switch: growth of electric/hybrid market • WLTP • potential for new car supply dislocation in short-term • GDPR • management of customer data and
Slide 18: Current trading Solid start to current year
Current trading Solid start to current year In March and April 2018: March/April 2018 Increase/(decrease) year-on-year • Trading performance is in line with management expectations, which were lower SMMT than prior year levels Revenue: Like-for-Like % Registrations % • Like-for-like new car retail v
Slide 19: Outlook
Outlook • Stabilisation of UK private new car market anticipated from April 2018 onwards: April encouraging • WLTP and petrol vehicle supply issues may cause short-term supply limitations • Positive outlook for used cars and vehicle servicing • Cost pressures remain with strong management required A
Slide 20: Summary
Summary • Experienced and energetic management team to navigate changing sector environment • Strong balance sheet to enable acquisition growth with conservative debt levels • Capital allocation at forefront of Board thinking Analyst & Investor Presentation • Active portfolio management: potential a
Slide 21: List of appendices
List of appendices 1. Definition of key terminology 2. Objectives and Group strategy 3. Brand Model 4. Business Model Analyst & Investor Presentation 5. Vehicle volumes sold 6. UK New vehicle registrations 7. Cash and borrowing facilities Analyst & Investor Presentation | 21
Slide 22: Definitions of key terminology
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 years, only t
Slide 23: 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 acquisition and organic growth • Apply a consistent business model with a stable, experienced management team • Establ
Slide 24: Brand model Tried and tested process to drive dealership turnaround
Brand model Tried and tested process to drive dealership turnaround • 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 about our business
Slide 25: Business model Tried and tested process to drive dealership turnaround
Business model Tried and tested process to drive dealership turnaround ACQUIRE / YEAR 1 YEAR 2 YEAR 3 YEAR 4 START UP Focus on new and Aftersales Vehicles replacement Maturity used car sales beginning to build cycle aids sales • Strong database • Database marketing • High vehicle parc for vehicle sa
Slide 26: Vehicle volumes sold
Vehicle volumes sold Total units sold Like-for-like units sold 160,855 159,068 Total Volumes (6.1%) Total Volumes (4.7%) 171,298 166,964 35,412 34,811 New Retail (14.7%) New Retail (13.3%) 41,525 40,157 10,770 10,650 New Motability (5.5%) New Motability (4.3%) 11,396 11,127 16,140 16,076 New Commerc
Slide 27: UK new vehicle registrations
UK new vehicle registrations 2.8 Vehicle Registrations - Units m's 2.7 2.6 2.6 2.6 2.6 2.6 2.5 2.5 2.4 2.5 2.4 2.4 2.4 2.3 2.3 2.3 2.2 2.3 2.2 2.2 2.2 2.2 Analyst & Investor Presentation 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 1
Slide 28: Cash and borrowing facilities
Cash and borrowing facilities Facilities Drawn at 28 Feb 18 at 28 Feb 18 £’m £’m 5 year acquisition facility (from February 2018) 40.0 (9.6) 1 year working capital facility (from February 2018) 68.0 - • Facilities extended February 2018 Total committed facilities Analyst & Investor 108.0Presentation
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