Vertu Motors
BUY/HOLDDespite the savage impact of the downturn on its sector, Vertu, the UK’s ninth largest motor retailer, drove in with robust financials for the year to February.
Debuting on AIM in late 2006 with a sector consolidation brief, the company now runs 45 dealerships across England and last year grew its top line from £677.2m to £760.8m, a performance enhanced by the impact of earlier acquisitions. Pre-tax profits, adjusted for exceptional costs, amortisation and other charges, rose from £1.8m to £3.5m, driving earnings north from 1.6p to 3.7p.
Vertu continued to outperform and take market share, with like-for-like new car volumes falling only 2.4% (versus a 16.1% wider market decline) and its like-for-like used car volumes increasing by 10.5%. Taking out costs whilst continuing to generate healthy levels of cash, net debt was pared back from £16.9m to £3.4m.
Although chief executive Robert Forrester believes the market will remain challenging for the foreseeable future, he says that since year-end, ‘trading has been ahead of the board’s expectations’ with ‘profits up year on year’. Moreover, he plans to place £30m of new shares at 30p to invest in new dealerships, expand existing sites and buy up existing leasehold sites.
Shares in Vertu, recommended by Growth Company Investor at 77.5p in 2007, have bounced from their 10p low. And considering its net assets are worth 62.2p per share, backed by a £53m property portfolio, one could argue the shares have been significantly oversold and should experience an eventual strong recovery.
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Market cap: £32.19m
PE Forecast: n/a
Share price: 35p
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