TIDMVTU
RNS Number : 6815H
Vertu Motors PLC
07 December 2020
7 December 2020
Vertu Motors plc ("Vertu" or the "Group")
Acquisition and Trading Update
Vertu gains significant BMW and MINI presence through
acquisition
Group's trading performance ahead of prior year and original
budget
Highlights
-- Significant BMW and MINI market area in Yorkshire and the
North East acquired from Inchcape plc
-- Introduction of the BMW and MINI franchises into the Group's
portfolio, with the Group set to benefit from these brands' strong
pipeline of electric vehicles
-- The businesses will be rebranded to trade as Vertu and the
dealerships will be supported by the increasingly successful
website, vertumotors.com
-- Acquisition adds a total of 12 sales outlets in five
locations to the Group's network of UK dealerships further adding
to Group scale economies
-- Asset backed with no significant goodwill
-- Estimated cash consideration funded through existing cash
resources and a new GBP12.76m, 20-year mortgage facility from BMW
Financial Services secured on the acquired freehold and long
leasehold properties
-- New, brand-experienced management team recruited to drive
performance over a three-year period. Group systems and processes
are being implemented immediately
-- Following record trading results in September, Group's
trading performance has remained ahead of prior year and original
budget
ACQUISITION
Vertu, the UK automotive retailer with a network of 146 sales
outlets across the UK, announces that it has acquired the business
and assets of a market area of 12 sales outlets located in York,
Sunderland, Teesside, Durham and Malton. These five locations each
represent the BMW and MINI franchises, in addition to a BMW
Motorrad motorcycle operation in Sunderland and a used car
operation located in York (together the "Business").
The Durham, Teesside and Sunderland dealerships acquired are
freehold and long leasehold premises. The remaining dealerships
operate from leasehold premises, and new leases have been agreed on
terms which secure the Group's future operational flexibility.
The Business was acquired from The Cooper Group Limited, part of
Inchcape plc for total cash consideration of GBP18.7m (subject to
finalising completion accounts) together with the assumption of
manufacturer used vehicle stocking finance of GBP8.9m. The assets
acquired include GBP16m of freehold and long leasehold properties
and a payment in respect of goodwill of GBP0.8m. The cash
consideration has been funded with a combination of a new GBP12.76m
20-year mortgage facility from BMW Financial Services, secured on
the acquired freehold and long leasehold dealership properties at a
fixed interest rate of 2.9% for the first 5 years, and a payment
from the Group's existing cash resources.
For the year ended 31 December 2019, the Business achieved
revenues of GBP305m and a loss before tax of GBP6.0m. The Group has
a clear plan to drive performance improvements over a three-year
period. A new management team, with significant BMW and MINI
franchise experience, has been hired and will be integrated with
existing, experienced Vertu operational management. The Group's
systems and processes are being implemented immediately to
facilitate business improvements in the areas of customer
experience and financial performance. The businesses will be
branded Vertu reflecting the continued growth of the Vertu brand in
Premium franchises in the UK, supported by the increasingly
successful website, vertumotors.com.
The acquisition is expected to be at least earnings neutral by
the year ending 28 February 2023 (FY23) as the benefit of
synergies, common systems and processes and integration activities
drive financial performance, and is anticipated to be substantially
earnings enhancing thereafter. The incremental return on invested
capital is anticipated to exceed cost of capital from FY24. The
acquisition has been undertaken with the full support of the
Manufacturers. Both BMW and MINI are extremely well positioned to
take advantage of the electrification of the automotive market in
the UK over the next decade.
TRADING UPDATE
Following record trading results in September, the Group's
trading performance has remained ahead of prior year and original
budget levels. For the financial year to date (being the nine
months ended 30 November 2020) the Group is now trading
approximately 15% above last year at an adjusted PBT level, despite
the impact of the further national lockdown in England from 5
November to 2 December on vehicle sales.
Overall profit performance has benefited significantly from the
continued business rates holiday on showrooms, grants claimed for
colleagues furloughed and the impact of cost savings from the
previously announced cost reduction programme. It remains uncertain
as to whether trading performance for the remainder of the
financial year will continue at the level seen year to date,
particularly given the potential impact on trading of further
COVID-19 restrictions and the impact of Brexit from 1 January 2021.
Following the announcement of the acquisition above, losses are
anticipated to arise in the acquired business in the remaining
three months of the financial year.
Robert Forrester, CEO of Vertu Motors said:
"We are delighted to announce the introduction of the much
sought after BMW, MINI and Motorrad franchises to the Group,
previously a gap in our portfolio of manufacturer partners . The
addition of these franchises has long been a strategic objective of
the Group. The acquisition achieves immediate scale in a region
where the Group is headquartered and already has strong
representation.
"The business has previously performed at a high level and it is
our intention to ensure that it returns to this previous success
delivering both for customers and financially.
"As the Group enters its 15(th) year of trading, this
acquisition reflects a further milestone in both its scale and
maturity." The Group now represents 32 franchises in the UK, more
than any other UK automotive retailer.
Graeme Grieve, CEO for BMW Group UK and Ireland, commented:
"Vertu has been working with BMW Group over a number of years as
a potential partner and we are delighted to be able to bring their
professionalism and energy into our retailer network. We very much
look forward to working closely with Vertu, to ensure customers in
the North East and Yorkshire have an excellent customer experience
with our brands and gain from the substantial investment we have
made in electric powertrains as the UK accelerates its transition
to zero carbon in new vehicles."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
For further information please contact:
Vertu Motors plc Tel: 0191 491 2121
Robert Forrester, CEO
Karen Anderson, CFO
Zeus Capital Limited Tel: 020 3829 5000
Jamie Peel
Andrew Jones
Dominic King
Camarco Tel: 020 3757 4983
Billy Clegg
Tom Huddart
Notes to Editors
Vertu Motors is the fifth largest automotive retailer in the UK
with a network of 146 sales outlets across the UK. Its dealerships
operate predominantly under the Bristol Street Motors, Vertu,
Farnell and Macklin Motors brand names.
Vertu Motors was established in November 2006 with the strategy
to consolidate the UK motor retail sector. It is intended that the
Group will continue to acquire motor retail operations to grow a
scaled dealership group. The Group's acquisition strategy is
supplemented by a focused organic growth strategy to drive
operational efficiencies through its national dealership network.
The Group currently operates 143 franchised sales outlets and 3
non-franchised sales operations from 116 locations across the
UK.
Vertu's Mission Statement is to "deliver an outstanding customer
motoring experience through honesty and trust".
Vertu Motors Group websites - www.investors.vertumotors.com /
www.vertucareers.com
Vertu brand websites - www.vertumotors.com /
www.bristolstreet.co.uk / www.vertuhonda.com / www.vertutoyota.com
/ www.macklinmotors.co.uk / www.farnelllandrover.com /
www.farnelljaguar.com / www.vertuvolkswagen.com /
www.vertumercedes-benz.com
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