North East motor retailer Vertu says its biggest acquisition to date has boosted cash generation, just two months after the deal.
The Team Valley used and new car dealership business snapped up premium car company Helston Garages Group last December, a £499m turnover family firm which has added 27 sales outlets to Vertu including the likes of Ferrari and Volvo. Vertu said the Helston integration is well on track and that it continues to assess further growth opportunities, applying strict investment return metrics to seek out solid additions.
Since December 2021 the company has added 37 outlets to the group, taking the group’s total to 191 sales and aftersales outlets the under the Bristol Street Motors, Vertu Motors and Macklin Motors banners, and in a trading update for the five months ended January, CEO Robert Forrester has signalled improvements in the new car market, which has been severely hampered by supply issues.
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Meanwhile, to mitigate interest rate risks, the company also implemented an interest rate cap on £50m of mortgage debt. To further limit exposure to future interest rate fluctuations on its revolving credit facility, the existing £22m current interest rate swap which expired in January 2023 will be replaced with a new fixed rate swap on £30m of its facility.
The firm said its year-end net debt is now expected to be £80-85m, compared to the previous guidance of £100-110m, based on its strong operating cashflow and working capital management.
Mr Forrester said energy has been a cost headwind for the group and while it benefitted from below market rate fixed contracts on electricity up to September 2022, contract expiry led to £2.7m of additional costs in the five-month period, prompting an investment sum to be spent on solar panels to match the extra costs.
The firm said: “The group is highly focused on reducing energy usage, achieving a 3.9% reduction in like-for-like electricity usage during the period. Furthermore, the group is deploying its previously announced energy purchase strategy and installing solar panels. The group has to date installed solar panels at seven of 46 planned installations which when complete in December 2023 should generate 10% of the group’s electricity load with an expected total capital expenditure of £2.7m.”
Looking ahead, Mr Forrester said the group focus remains on areas under its control and that costs will be managed tightly while it invests in growth opportunities.
He added: “I am pleased to report that trading remains in line with expectations against a complex macro backdrop. The entire Vertu team has put in hard work and dedication once again, and I would like to thank them all. Used car margins have normalised back towards historical levels as we had expected and there are tentative signs of improving new car supply. The performance of our service and repair business has been strong.
“We have been working at pace to integrate the recently acquired Helston Motors business and this is progressing well. We are excited about the opportunities our enlarged portfolio will create for Vertu Motors.”
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