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Vertu profits hit by coronavirus impairment

The automotive retailer's sales have been ahead of last year since reopening its doors this week
June 4, 2020

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.

IC TIP: Hold at 30p

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:30pMARKET VALUE:£ 111m
TOUCH:30-31p12-MONTH HIGH:43pLOW: 17p
DIVIDEND YIELD:2.0%PE RATIO:37
NET ASSET VALUE:71p*NET DEBT:48%**
Year to 29 FebTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162.4226.06.101.3
20172.8229.86.101.4
20182.8030.46.301.5
20192.9825.35.451.6
20203.067.320.810.6
% 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