Vertu Motors (VTU) pre-tax profits slumped after the automotive retailer recorded a £14.4m impairment, made in response to cash flow forecast revisions that reflect the impact of coronavirus. The charge was largely attributable to goodwill connected with Vertu’s Mercedes-Benz activities and a freehold property linked to its Vauxhall franchise.
Vertu, which regularly closes its financial periods with net cash (it had £22.9m at the end of the prior year), made use of used car stocking loans for the first time in a bid to boost its balance sheet - these accounted for the lion’s share of its net debt, before the inclusion of lease liabilities. It has £35m of loans borrowed against £136m of used car stock, giving a low loan-to-value ratio of 26 per cent, compared with an industry norm of around 80 per cent. The retailer has extended this funding line to £45m since the close of the period.
Vertu expanded its fleet during the year, and this played a part in more than halving its operating cash flow from £51m to £23.1m. Its new and used car stock grew by £11.9m and £9.3m respectively, contributing to a £23.6m rise in the retailer’s working capital.
Liberum forecasts Feb 2021 pre-tax profits and EPS of £23.7m and 5.1p respectively, rising to £25.8m and 5.6p in FY2022.
VERTU MOTORS (VTU) | ||||
ORD PRICE: | 30p | MARKET VALUE: | £ 111m | |
TOUCH: | 30-31p | 12-MONTH HIGH: | 43p | LOW: 17p |
DIVIDEND YIELD: | 2.0% | PE RATIO: | 37 | |
NET ASSET VALUE: | 71p* | NET DEBT: | 48%** |
Year to 29 Feb | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2016 | 2.42 | 26.0 | 6.10 | 1.3 |
2017 | 2.82 | 29.8 | 6.10 | 1.4 |
2018 | 2.80 | 30.4 | 6.30 | 1.5 |
2019 | 2.98 | 25.3 | 5.45 | 1.6 |
2020 | 3.06 | 7.32 | 0.81 | 0.6 |
% change | +3 | -71 | -85 | -63 |
Ex-div: | na | |||
Payment: | na | |||
*Includes intangible assets of £99m, or 27p a share **Includes lease liabilities of £96.9m |