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Vertu profits from Covid car rush

Used and new cars accelerating out of Vertu's lots around the UK although 2021 will bring new challenges
October 7, 2020

Vertu Motors (VTU) said sales of new and used cars were boosted during the summer months, improving profitability after the hiatus brought about by the lockdown. The company said it had seen a “record” trading performance in September, but structural problems affecting the industry are still in play. 

IC TIP: Hold at 31p

On top of the added demand, tight used car supply saw Vertu do better from each used car it sold. On a gross profit per unit basis, the company increased its take from £1,116 per car in June, July and August last year to £1,436 this year. Despite the ramp-up, sales and profits fell because of the poor start to the period. Vertu’s adjusted operating profit for the half was £4.7m, compared to £16.9m last year. 

Chief executive Robert Forrester said there were possibly further bumps in the road ahead. “We are well placed for the opportunities that an uncertain future offers,” he said. 

The company will see an impact after the current trading relationship between the EU and the UK ends in a few months, largely around VAT payments and refunds. “The change is anticipated to reduce the group's current cash flow advantage in respect of VAT by up to £15m, depending on seasonality,” Vertu said. 

Liberum forecasts 2021 cash flow to be 10 per cent down on last year’s £44m and earnings per share down a fifth at 3.9p. 

VERTU MOTORS (VTU)   
ORD PRICE:31pMARKET VALUE:£ 114m
TOUCH:31-33p12-MONTH HIGH:43pLOW: 17p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:72p*NET DEBT:21%
Half-year to 31 AugTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20191.6516.13.480.6
20201.123.970.69nil
% change-32-75-91-
Ex-div:na   
Payment:na   
*Includes intangible assets of £101m, or 28p per share