Vertu Motors

Vertu, the UK’s ninth largest car retailer, has motored in with a speedy profits increase for the year to February and news of robust recent trading.

Robert Forrester, CEO of the Newcastle-headquartered concern, which floated on AIM in late 2006, said 2009/10 turned out to be a stronger year than anticipated due to the ‘twin supports’ of the Government’s scrappage programme, introduced to stimulate new car sales, as well as a rebound in used car sales.

Driven by acquisitions, revenues revved up by 7.6% to £818.9m and pre-tax profits, adjusted for exceptional costs and amortisation, accelerated 97% to £6.9m. Strong cash flow generation, together with £30m raised for acquisitions last June, drove a swing from £3.4m net debt to net cash of £23.5m.

Last summer’s fundraising provided Vertu with the financial firepower to push on with its strategy of building a ‘scaled dealership group’, driving performance improvements at its sites by implementing proven systems and ensuring strong financial controls. Accordingly last year, the dealer network was expanded by 36%, with sales outlet numbers increasing from 44 to 60.

Furthermore, Forrester cheered with news trading in March was ahead of expectations, with new car volumes increasing by 16.1% and used car volumes and margins remaining robust. Trading in April, he explained, met with the expectations of the Vertu board.

Despite recessionary headwinds, Vertu, first backed by Growth Company Investor at 77.5p in 2007, has continued to grow market share whilst generating cash and profits. Planning to hit the dividend trail this year, Vertu, trading at a discount to net assets of 45.8p per share, remains our preferred sector pick.