Vertu Motors: Capital allocation specialists

Vertu Motors plc (LON:VTU) has delivered another earnings upgrade driven by strong ongoing used car margins, in what is effectively an early delivery of the H1 pre-close update. Dividend payments will resume, and a share buyback programme has also recommenced. The shares look too cheap to us even on 2023/24 EPS backed with a current forecast yield of 3.6% and trading below net tangible assets per share of 50.2p. We believe this update should be taken well with Vertu very well positioned to capitalise on the inevitable changes in the industry with a well-executed capital allocation strategy to boot.

  • Trading update: Vertu Motors has confirmed that it continues to trade ahead of forecast expectations. The key driver remains used car margins as prices remain high with no sign of abating in the near term. In the new car market,  September LFL order intake is running ahead of prior year levels. However, due to well documented supply issues that have been previously flagged, vehicle deliveries could be delayed into future periods, which remains highly uncertain. This could have a knock-on effect into used vehicle supply as well if this persists, albeit it is too early to assess. Cost pressures have also been flagged once again with Vertu being impacted by labour shortages, high vacancy rates and upward pressure on employment costs as we have seen across many industries of late. An H1 dividend will be reinstated.
  • Increasing guidance again: The board is now guiding adjusted PBT to be in the range of £50-55m vs. previous guidance of £40-45m. The key driver behind this has been used car margins, and it’s anticipated that Vertu will announce an adjusted PBT of £50m for H1. Clearly the assumptions in H2 remain very modest, albeit uncertainty levels remain high as outlined. The risks of COVID-19 have also not been removed, with the Group still seeing some impact from staff absence, with potential future restrictions possible as we move into the autumn/winter.
  • Impact on forecasts: On the back of this latest statement, we are increasing our 2022E PBT forecasts by 35.8% which drives an equivalent upgrade to EPS. As we see no sign of used car prices/margins abating from current levels, our forecast assumptions are at the top end of management guidance. We are not changing our forecasts in future years after 2022E given current levels of uncertainty but will review these in detail when Vertu announces H1 results in October.
  • Share buyback resuming: A share buyback programme has resumed with Vertu Motors investing up to £3m until 28 February 2022. This has been a consistent part of its capital allocation strategy for some time. We believe this is sensible given the Group trades below its net tangible assets per share of 50.2p and below our assessment of intrinsic value in excess of 80p. We will adjust our forecasts to reflect this buyback once complete at year end.
Click to view all articles for the EPIC: ,
Or click to view the full company profile:
    Share on facebook
    Share on twitter
    Share on linkedin
    Vertu Motors Plc

    More articles like this

    Fintel plc

    Fintel core revenue growth is higher than Zeus forecast

    Fintel plc (LON:FNTL), the leading provider of Fintech and support services to the UK retail financial services sector, has released a trading update for the six months to 30 June 2022, which reveals: Core revenue grew c.9% to

    Shoe Zone plc

    Shoe Zone analyst Zeus upgrades FY22 adjusted PBT forecast

    Shoe Zone plc (LON:SHOE) Better than expected demand and further strong margin performance leads to an upgrade in FY22E adjusted PBT from “no less than £8.5m” to “no less than £9.5m”. Zeus revenue forecasts increase by £1.5m (1.0%)

    OnTheMarket Plc

    OnTheMarket analyst Zeus confident in forecasts

    Foxtons, one of London’s leading estate agencies with more than 50 interconnected branches across London, has signed an agreement to advertise its UK residential sales and letting properties at OnTheMarket plc (LON:OTMP). Zeus view: Foxtons, the well-known London

    SpaceandPeople analyst Zeus restores estimates and valuation

    SpaceandPeople plc (LON:SAL) secures, sells, and manages flexible space for brand experiences, short term promotions and retailing in high footfall venues for its customers, including in shopping centres and travel hubs. The Group has issued a positive pre-close

    Lookers Plc

    Lookers shares are still undervalued says Zeus

    Lookers plc (LON:LOOK) has released an H1 trading update reporting a continuation of strong performance year to date. H1 2022 underlying PBT is expected to be c. £45m and Management anticipate full year PBT will also be ahead

    SysGroup plc

    SysGroup analyst Zeus forecast a 39.0% increase in revenue in FY23

    SysGroup plc (LON:SYS) is an award-winning provider of managed IT services, cyber security, cloud hosting and IT consultancy. The Group offers investors an attractive business model with high recurring revenue and a diversified customer base. SysGroup is competitively

    AFC Energy

    AFC Energy’s long term opportunity remains vast says Zeus

    AFC Energy plc (LON:AFC) has signed an agreement with another leading UK construction/infrastructure player, this time in Kier Group. We believe this further endorses our long term thesis that AFC will play an active role in encouraging the


    Inchcape performance exceeding expectations says Zeus

    Inchcape plc (LON:INCH) has released another positive trading update, with performance exceeding expectations so far this year. This follows on from a positive Q1 update on 28 April. Through quarterly improvement in Distribution volumes and operating margin, the

    boohoo Plc

    Boohoo Group analyst Zeus sees a strong performance in Q1

    ¨ Q1 financial highlights: Boohoo Group plc (LON:BOO) revenue of £445.7m is -8.3% YOY vs. a strong comp (Q1 FY22 revenue +32.1%), in line with Zeus’s forecast and management’s previously stated guidance. Gross sales growth remained positive +9%

    No more posts to show