ANNUAL REPORT & FINANCIAL STATEMENTS
For the year ended 28 February 2021
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23 June 2021
October 2021
May 2022
Table of Contents
Strategic Report
Performance Highlights
At a Glance
Group Stakeholders
Chairman’s Statement
Group Strategy
Key Performance Indicators
Operating Review
Financial Review
Sustainability
Health and Safety
Colleagues
Risk Management
Viability and Going Concern
Corporate Governance Report
Chairman’s Corporate Governance Statement
Board leadership
Division of Responsibilities
Nominations, Composition and Succession
Audit, Risk and Internal Control
Remuneration Committee Report
Directors’ Remuneration Report
Directors Report
Statement of Directors Responsibilities
Financial Statements
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
Alternative Performance Measures
Company Information
Financial Diary
Annual General Meeting
Interim Results 2021/22
Final Results 2021/22
Vertu Motors plc (Company Number: 05984855)
1
Performance Highlights
Operational Highlights
• Adjusted1 profit before tax of £24.6m ahead of Analysts’ forecasts (2020: £23.0m)
• 18 sales outlets added to the Group since 1 March 2020, including the addition of 3
new franchise partners to the Group’s portfolio - BMW, MINI and BMW Motorrad
• Strong, stable management, supported by scalable, sector-leading
in-house
developed technology and systems, provides assurance of tight control of operations
and swift execution of strategies
• Substantial growth in online retailing using the Group’s ClicktoDrive sales technology
platform
•
Increased efficiency of transaction processing including use of robotic process
automation
• 38,446 new and used vehicles delivered from 1 January to 31 March 2021, despite
lockdown restrictions keeping showrooms closed
•
Increased awareness of the Group’s core brands delivered through strong, effective
marketing campaigns including significant TV advertising campaigns
• Excellent customer experiences delivered in the new environment: Used Car Net
Promoter Score in H2 of 84%
Outlook Highlights
• Strong start to new financial year with trading profits at a record level in the two
months to April 2021. Adjusted profit before tax in the two months of £19.2m
compared to £14.8m in the same months in 2019
• The Board expect the Group will deliver an adjusted profit before tax for the year
ending 28 February 2022 in the range of £24.0m to £28.0m
• The Board is confident that, dependent on the financial performance of the Group,
dividends can recommence in January 2022
Financial Highlights
• Group revenues of £2.5bn (2020: £3.1bn) (like-for-like decline of 21.6%) impacted by
Government imposed lockdowns
• Gross margin increased to 11.8% (2020: 10.9%)
• Cost reductions2 exhibited delivering a £16.0m (7.2%) reduction in like-for-like
operating expenses in the nine months from 1 June to 28 February
• Growth in Adjusted1 operating profit to £33.8m (2020: £32.2m)
• Profit before tax of £22.4m (2020: £7.3m)
• Underlying earnings per share increased to 5.27p (2020: 4.99p)
• No final dividend recommended in light of the Government support received during
the Year
• Net tangible assets per share of 50.2p (2020: 46.0p) reflecting very strong asset base
• Record Free Cash Flow3 of £48.4m delivered
• Adjusted4 net cash of £1.4m at 28 February 2021 (2020: net debt £2.8m)
1 Excludes non-underlying items.
2 Excludes grant receipts in respect of the furlough scheme.
3 Net cash flow from operating activities less leasing cash flows and net capital expenditure incurred.
4 Excludes amounts drawn on used vehicle stocking loans and IFRS 16 lease liabilities.
2
Vertu Motors plc (Company Number: 05984855)
At a Glance
149 sales outlets
32 car, bike and commercial franchise partners
115 locations across the UK
5,751 colleagues
130,208 vehicles sold
£2.5bn revenues
84% Used Car Customer Experience
(Net Promoter Score)
87% of Colleagues consider Group as a great
place to work
Car
Commercial
Bikes
Vertu Motors plc (Company Number: 05984855)
3
Group Stakeholders
Engaging with Stakeholders - section 172 statement
Positive relationships with the Group’s stakeholders are key to the long-term
success of the Group.
The Group engages with them to understand what matters to them and take this into account
when setting strategy and also in our day-to-day business operations. Our key stakeholder
groups are identified below. We have set out on these pages how the business engages with
these stakeholders, the key interests raised and the outcomes of that engagement.
Colleagues
How we engage:
Key interests raised:
• Pay and benefits
• Communication
• Wellbeing
• Training and
development
• Colleague
Recognition
• Business
performance
• Community
involvement and
fundraising
Engagement with our
colleagues takes place
through face-to-face
meetings including
regular appraisals,
team meetings, full
Team Briefings and
through a number of
channels including our
intranet, employee
newsletters and regular
blogs from the CEO
and CFO. A
comprehensive annual
colleague satisfaction
survey is undertaken to
gain feedback,
alongside a quarterly
pulse survey.
Outstanding
performance is
recognised through
personal letters from
the CEO, annual
colleague awards.
How we engage:
Key interests raised:
Outcomes of
engagement:
• Ensuring the safety
and wellbeing of
colleagues during the
COVID-19 pandemic
• Pay supported above
furlough grant levels
to ensure colleague
hardship minimised
• Regular video
communication to all
colleagues
• Appointment of
director for colleague
engagement
• Local and divisional
colleague satisfaction
action plans
Outcomes of
engagement:
Customer satisfaction
surveys are regularly
undertaken through
both the Group’s
Manufacturer partners
and via Trust pilot
reviews. The Group
has a dedicated
customer services
team. We also
communicate via social
media and regular
blogs. Customer focus
group meetings are
regularly held to obtain
feedback.
Customers
• Service delivery
• Prioritisation of
• Ability to self-serve
online
• Product knowledge
including electric
vehicles and
alternative fuels
• Access to local
service
• Value for money
• Community
involvement
customer safety on
the reopening of
operations
• Website and email
communications to
the 518,000
customers on the
Group’s database
• Improved sales
process giving
customers more
control over their
purchase
• 14-day money back
guarantee established
Vertu Motors plc (Company Number: 05984855)
4
Group Stakeholders (continued)
Engaging with Stakeholders - section 172 statement (continued)
How we engage:
Key interests raised:
The Executive Directors
meet regularly (in
person or via
conference call) with
existing and potential
investors. We also
provide webcasts and
events throughout the
year.
• Financial
Performance
• Capital Allocation
• Execution of
strategy
• Competition
• Sustainability
Investors
Outcomes of
engagement:
• Meetings held
throughout the year
• Technology ‘teach-in’
delivered highlighting
technological
development
• Dividend suspended
due to Government
support received
intention to resume in
FY22
• Feedback obtained on
Remuneration Policy
• Launch of ‘Driving
Sustainability’
Manufacturer
Partners
Suppliers
Key interests raised:
Outcomes of
engagement:
• Customer
satisfaction
• Financial
performance
• Volume of vehicles
sold
• Quality of premises
and compliance with
standards
• Portfolio
management and
representation
• Execution of franchise
developments
including multi-
franchising
• Expansion of the
Group
• Manufacturer partners
provided cash and
trading support
through the COVID-19
restrictions
• Agreement of volume
targets
• Investment in
premises
Key interests raised:
Outcomes of
engagement:
• Group strategy
• Collaborative
working
•
Integration of
systems
• Supplier event held to
communicate strategy
• Cost reductions
agreed during periods
of dealership closure
driven by COVID-19
restrictions
How we engage:
Group management is
organised along
franchise lines to
ensure sufficient
knowledge and aid
communication.
Regular meetings occur
with Manufacturer
management. The
Group is represented
on the dealer franchise
boards.
How we engage:
We look to secure
excellent value for
money, whilst
minimising risk in our
supply chain. Our
purchasing team hosts
events and ensures a
positive two-way
communication process
with all Group
suppliers. Our
suppliers sponsor and
attend the Group’s
annual colleague
awards ceremony.
Vertu Motors plc (Company Number: 05984855)
5
Group Stakeholders (continued)
Engaging with Stakeholders - section 172 statement (continued)
Finance Providers
Communities
How we engage:
Access to finance is
essential for the Group
to execute its strategy
as well as providing
customers with the
ability to finance vehicle
purchases. We work
together with our
financial partners to
ensure our customers
have access to finance
to purchase their
vehicles.
How we engage:
We are proud to give
something back to the
communities local to
our dealerships. We
provide regular
community updates via
social media,
participate in
volunteering and
fundraising initiatives,
sponsor local sports
teams and participate in
‘speakers for schools’ a
scheme to connect
schools with inspiring
and influential people.
Key interests raised:
Outcomes of
engagement:
• Customer
satisfaction
• Acquisition
financing
• Financial
Performance
• Compliance with
regulations
• Behaviour of the
credit book
• Finance penetration
achieved
Key interests raised:
• Funding of local
projects
• Local sponsorship
• Local operational
issues
• Education and
employment
• Covenant waivers and
amendments obtained
in H1
• Retail finance
commission
arrangements revised
• Renewal of annual
facilities
Outcomes of
engagement:
• Engagement with
schools via virtual
‘speakers for schools’
events
• Investment in
apprenticeship
programme to provide
youth employment
opportunities
• Sponsorship and
naming of Newcastle
Eagles Arena
providing funding to
Eagles Foundation
engaged in
community work
• Launched ‘Driving
Sustainability’
programme
Vertu Motors plc (Company Number: 05984855)
6
Group Stakeholders (continued)
Engaging with Stakeholders - section 172 statement (continued)
How we engage:
The Group maintains
regular contact with
Government and
regulatory stakeholders
and is a member of
expert working groups,
such as the National
Franchise Dealership
Association (‘NFDA’)
Key interests raised:
Outcomes of
engagement:
• Marketing and
Communication
• Health and Safety
• MOT compliance
• Compliance with
laws and
regulations
• Fair treatment of
customers
• Input to and member
of industry working
groups
• Responded to FCA
and COVID-19
working practice
consultations
Government and
Regulators
During the year, the Directors have acted to promote the success of the Company for the benefit of
shareholders while having regard to the following matters:
•
•
Likely long-term consequences
Interests of the Group’s colleagues
• Business relationships with suppliers and customers
•
Impact on the community and environment
• Reputation for high standards of business conduct
• Acting fairly between shareholders
Vertu Motors plc (Company Number: 05984855)
7
Chairman’s Statement
I am pleased to report that the Group has delivered a resilient, profitable result, in excess of
Analysts’ forecasts in this unprecedented year. This result reflects positively on all
management and colleagues within the Group, who have adapted to new ways of working
and executed exceptionally well in the most challenging of circumstances. I would like to
personally express my appreciation and thanks to the whole Vertu team. The Board is also
extremely grateful for the significant Government support received both in respect of
furloughed colleagues and business rates relief, and the assistance provided by its
Manufacturer partners. The latter demonstrates the partnership approach and a key strength
of the franchised dealer model.
On 1 June 2020, the business emerged from the first lockdown stronger in many ways for the
experience. Trading conditions throughout the summer months that followed were bolstered
by pent-up consumer demand. The period also saw the additional benefit of cost reductions,
achieved through the roll out of technology developed during the lockdown, which enhanced
efficiency across a number of different areas of the business.
When the UK faced further restrictions from November onwards, the Group’s showrooms
were again closed to customers. The Group’s strengthened customer and online offering,
together with its strong brands and local presence, meant that vehicle sales continued on a
click and collect/home delivery basis, despite the restrictions, at much higher levels than were
seen in the first lockdown. The Group’s customers could choose to buy their used car fully
online or complete part of their buying journey online and part in direct remote contact with
either our local dealership or central teams. Central sales and aftersales enquiries were
handled efficiently by the Group’s customer contact centre which was able to switch
seamlessly between home and office working using the Group’s digital telephony technology.
To illustrate the progress made, 38,446 vehicles were delivered during the latest restrictions
when showrooms were closed from 1 January to 31 March, demonstrating the strength of the
Group’s online offering, customer propositions, strong brands, national footprint and
reputation for strong customer service.
The Board is mindful that the immediate future of the Group will be affected by the continued
uncertainty around COVID-19 and the Government’s reaction to it. The Group is, however,
strong and resilient. It has one of the strongest balance sheets in the sector, and this was
further enhanced in the year through the generation of a record level of Free Cash Flow of
£48.4m. Costs were well controlled throughout and, whilst it was regrettable that many of the
Group’s colleagues have been furloughed at times during the year, capacity levels were
carefully matched to demand as the Group moved between lockdowns.
The Board is optimistic that the Group’s proven track record of execution and strong balance
sheet will allow the continued expansion of the Group, to deliver a business of greater scale
and efficiency. The forthcoming post COVID-19 period will again evidence some
consolidation in the Retail sector. Vertu is in a strong position to take advantage of this
environment as appealing opportunities arise. Our strong financial position, healthy appetite
for growth, considerable digital expertise and first-class leadership means that we can look
forward with optimism.
The business is fifteen years old in November 2021 and has achieved much in that
timeframe. From floating as a cash shell in December 2006, the business is now one of the
largest and strongest operations in the UK automotive retail sector. Whilst justifiably proud of
these achievements, the Board remains focused on the future and building on the very
successful platform put in place. We guard against complacency.
Andrew Goss
Chairman
Vertu Motors plc (Company Number: 05984855)
8
Group Strategy
Mission & Values
The aim for every dealership to
be the best retailer in their
respective town or city.
To deliver an outstanding
customer motoring
experience through
honesty and trust
Vertu Motors to be the most
admired and respected dealer
group in the automotive
industry
PASSION RESPECT PROFESSIONALISM INTEGRITY RECOGNITION
OPPORTUNITY COMMITMENT
Strategic Goals
To grow as a major scaled franchised dealership group
and to develop our portfolio of Manufacturer partners,
whilst being mindful of industry development trends,
to maximise returns
To be at the forefront of online retailing and digitalisation
in the sector, delivering a cohesive ”bricks and clicks”
strategy
To reduce the cost base of the Group through scale
economies using digitalisation of processes to reduce
costs
Growth
Digitalisation
Cost Focus
Colleague & Customer focus
To develop and motivate the Group’s colleagues to
ensure consistency of operational excellence and delivery
to customers across the business
To develop ancillary businesses to add revenue and
returns which complement the core business
Ancillary businesses
Sustainability Goals
Work with our Manufacturer
partners to provide
increasingly sustainable
choices for customers
Reduce the environmental
Impact of our business
Care for our colleagues and
support our communities
Vertu Motors plc (Company Number: 05984855)
9
Group Strategy (continued)
Update on Strategy Execution and Associated Risks
The Group is now in its fifteenth year and has executed a consistent strategy to build a scaled
UK automotive retailer with a strong culture, a reputation for execution and excellent relations
within its Manufacturer Partners. The Group now has normalised annual revenues of £3.7bn
and has built a substantial base of tangible net assets.
The Group’s key long-term strategic objectives remain:
• To grow as a major scaled franchised dealership group and to develop our portfolio of
Manufacturer partners, whilst being mindful of industry development trends, to
maximise long-run returns.
• To be at the forefront of online retailing and digitalisation in the sector, delivering a
cohesive ‘bricks and clicks’ strategy.
• To reduce the cost base of the Group through scale economies and digitalisation of
processes.
• To develop and motivate the Group’s colleagues to ensure consistency of operational
delivery across the business.
• To develop ancillary businesses to add revenue and returns which complement the
core business.
Growth
Portfolio Development and Changes
As part of the strategy for scale, the Group historically has sought to add additional
Manufacturer partners, not represented in the portfolio, to facilitate additional growth
opportunities. A noticeable gap in the Group’s portfolio of Manufacturer partners was closed
in December 2020, with the addition of the much sought-after BMW, MINI and BMW Motorrad
franchises. Both BMW and MINI are extremely well positioned to take advantage of the
electrification of the UK automotive market over the next decade and the addition of these
franchises had long been a strategic objective of the Group. The Group now operates 32 car,
van and motorcycle franchises which is more than any other UK player.
The well-timed acquisition of a BMW/MINI market area of 12 sales outlets in five locations:
York, Sunderland, Teesside, Durham and Malton, achieved immediate scale in a region
where the Group is headquartered and already has strong representation. The outlets were
acquired from The Cooper Group Limited, part of Inchcape plc, for total consideration of
£19.6m. The assets acquired include £16m of freehold and long leasehold properties and a
payment was made in respect of goodwill of £0.8m.
For the year ended 31 December 2019, these dealerships generated revenues of £305m and
a loss before tax of £6.0m. The Group has developed a clear plan to drive performance
improvements over a three-year period and the integration of these businesses into the Group
has proceeded in line with this plan. The Group’s systems and processes were implemented
immediately on acquisition, in order to facilitate business improvements in the areas of
customer experience and financial performance. Despite the COVID-19 related restrictions
imposed immediately post acquisition, the acquired businesses have performed ahead of the
business plan, which has not been adjusted for the impact of these restrictions. The Board is
therefore optimistic of a progressive turnaround of these businesses and the generation of
significant shareholder value, particularly given the minimal levels of goodwill paid for the
businesses. The businesses have been branded Vertu, reflecting the continued growth of the
Vertu brand in Premium franchises in the UK and supported by the increasingly successful
website, vertumotors.com.
Following the Group’s entry into the Kia franchise in January 2020, further growth with the Kia
franchise was achieved when, on 1 October, the Group acquired the Nottingham Kia business
from Sandicliffe for £1.9m, taking a short-term lease on the dealership premises. This
business will be relocated this month into existing large Group leasehold dealership premises
in Nottingham. This location currently represents one of two Group Volkswagen franchise
outlets located in the city and, whilst new vehicle activity will be consolidated in the remaining
flagship Nottingham Volkswagen dealership at West Bridgeford, Volkswagen authorised
repair and approved used vehicle sales activity will continue in this location, alongside the
relocated Kia franchise.
Vertu Motors plc (Company Number: 05984855)
10
Group Strategy (continued)
Growth (continued)
Portfolio Development and Changes (continued)
Subsequent to the financial year end, on 1 March 2021 the Group opened a Macklin
Motornation used vehicle outlet in Glasgow, following the acquisition in late 2020 of a vacant
freehold dealership from Lookers plc. Further on 12 March 2021, the Group acquired the
trade and assets of a Honda car dealership in Huddersfield from Hepworth Motor Group. The
purchase of this leasehold dealership complements the Group’s existing Honda outlets in
Yorkshire and the consideration, settled in cash, was £0.8m. The Group now has
considerable scale in Yorkshire, operating 23 outlets in the county.
The Group continues to actively manage its dealership portfolio including the regular
assessment of viability and returns achieved from each business and franchise and the
potential for property gains and cash generation from the portfolio. Execution of multi-
franchising, in order to maximise potential returns of each location, is seen as a key element
of the Group’s strategy in this regard. Increased flexibility of Manufacturer representation
requirements and varying formats will aid this process, allowing investment levels to be
reasonable and multi-franchising to be increased.
During the Year the Group added the Citroen brand to its existing Ford dealership operations
in Worcester and Macclesfield. The Group also added the Peugeot franchise to the Group’s
Edinburgh dealership which already represented Kia, Suzuki and Mitsubishi. Further multi-
franchising activity is planned to be delivered in the coming months, with several projects
currently being progressed.
Further network changes and consolidation for franchised retailers are anticipated. Potential
opportunities for growth for those established retail groups with a proven track record, strong
financial position and positive relationship with Manufacturers remain strong.
Further to the regular review process outlined above, a number of disposals and closures
have been implemented, in line with the Group’s capital allocation disciplines, both during the
year and post year end, to optimise the portfolio:
• The Group sold the trade and assets of its Citroen dealership in Leicester to
Manufacturer-owned Robins and Day on 28 February 2021. The leasehold premises
were retained and the dealership is currently being redeveloped and refranchised to
reopen as a franchise outlet in the coming months.
• The Group disposed of its ancillary wheelchair accessible vehicle (“WAV”) business,
Bristol Street Versa, to Gowrings Mobility, a well-established WAV operator on 30
November 2020. The Group will continue to supply commercial vehicles for
conversion to the enlarged entity. This disposal generated £1.7m of cash. In FY20
the business delivered a loss before tax of £68,000.
• On 26 April 2021, the Group closed a used car sales and Volkswagen service outlet
at Whitchurch, Herefordshire. The vast majority of colleagues were transferred to the
Volkswagen dealership in Hereford and it is anticipated that a large proportion of the
dealership’s activity will be retained in Hereford. The freehold property was sold on 7
May 2021 yielding cash proceeds of £430,000, slightly in excess of the book value.
In addition to the property disposal, working capital of approx. £0.9m has been
released to be re-invested in higher return assets.
• Following the acquisition of BMW Sunderland, the Group operated two accident
repair centres in the city. On 1 April 2021, these operations were consolidated into
one with a surplus freehold property now being marketed for sale.
Move to Agency Model
The Board notes that it is likely that the next few years will see an evolution of the business
model with regards to the sale of new cars in certain franchises. The Group undertakes sales
in a number of franchises on an agency basis in the fleet market and anticipate that a number
of Manufacturers will move new retail sales to an agency model in the next few years. It is
envisaged that such a move would reduce reported revenues, increase reported operating
margins and reduce working capital investment. The Board will keep shareholders updated on
developments in this area
Vertu Motors plc (Company Number: 05984855)
11
Group Strategy (continued)
Growth (continued)
Increasing Importance of Scale and Brand
The Group’s strategy is to continue to grow through the acquisition of both volume and
premium franchised dealerships. Scale benefits include: a national online and offline co-
ordinated marketing strategy based on a limited number of strong brands; maximising the
benefits of the Group’s national footprint; the Click2Drive platform; scaled highly efficient
contact centres; dedicated franchise management; purchasing efficiencies; and, access to
competitive consumer finance packages for the Group’s customers.
Brand awareness is vital in an online environment, with increasingly more of the sales
process, either in the research or buying phase, completed online. The Group currently
operates four brands in the UK, Bristol Street Motors (England Volume), Macklin Motors
(Scotland), Farnell (Jaguar Land Rover) and Vertu Motors (other premium franchises).
Having more than one brand allows the Group the flexibility to differ its offers and approach
between geographies or between volume or premium franchises. During the course of 2021,
the Group’s Jaguar Land Rover dealerships will be rebranded to Vertu, bringing all the
Group’s premium businesses under this one brand. When this is complete, the Vertu brand
will have 58 outlets in the UK, Bristol Street Motors 77 and Macklin Motors 14.
Brand awareness is supported by the Group’s marketing activity, including extensive TV
advertising campaigns and sponsorship of Formula One coverage on Channel 4, secured for
a second consecutive year for the Macklin Motors and Bristol Street Motors brands. In
addition, sponsorship arrangements have commenced for the Vertu Motors brand with
Yorkshire and Durham County Cricket Clubs to increase brand awareness in two of the
Group’s key regions of operation. The success of the Group’s marketing activity is supported
by a recent YouGov survey, which included responses from over 5,000 adults collected over
the period from 1 October 2020 to 1 March 2021. Bristol Street Motors currently has the
highest prompted awareness of the Group’s brands, with over 42% awareness, the second
highest of any automotive retail brand in the sector, including the so-called ‘disruptors’.
The strength of our brands and marketing activity led to the Group’s websites collectively
receiving a monthly average of 1.4m unique visits over the Year (2020: 1.2m). The Group
saw a 29% year on year increase in sales enquiries received from online sources in the
period from 1 June to 28 February, however, as expected in the light of restrictions, walk in
dealership visits were down year on year.
Of equal importance to brand awareness, is brand reputation. The Group’s Mission, “to
deliver an outstanding customer motoring experience through honesty and trust” recognises
the importance of excellent customer service and high ethical standards. The Group’s
commitment to customer service is verified through customer satisfaction feedback, gathered
either by our Manufacturer partners or from a third-party survey (Judge Service) in respect of
used cars. The Group’s dealerships regularly feature in the top quartile of our Manufacturer’s
customer service leagues and perform significantly above average for the sector overall. The
Group consistently achieves a net promoter score (“NPS”) in excess of 80% from Judge
Service. In H2 the Group received feedback from over 10,400 Group used car customers via
Judge Service averaging a NPS score of 84%.
Vertu Motors plc (Company Number: 05984855)
12
Group Strategy (continued)
Online and Omni-channel Retailing
There is a significant degree of confusion over the terms online and omni-channel retailing.
Whilst online sales could be defined as pure ecommerce transactions with no human
involvement, convention in the sector is that online sales relate to any sale where the enquiry
originated from an online source. The current automotive retailing environment in the UK is
certainly heavily digitised and omni-channel in nature – customers come in and out of the
digital world, interacting by phone and video call extensively with dealerships as well as
undertaking dealership visits and crucially, test drives. No one customer’s journey is now the
same, since the options and flexibility offered by platforms such as the Group’s Click2Drive
technology platform puts the customer in the driving seat as to how to buy a car. Given our
goal is firmly to sell a car, the Group is agnostic as to which journey the customer chooses as
long as a sale is achieved. Our experience is that pure ecommerce online transactions are a
small percentage of retail sales and omni-channel retailing is probably a better term to
describe the current position. Where the term online is used in this report, it is used in a
much wider sense and is akin to omnichannel. In time, greater definition of terms in the
sector is vital to increase understanding.
The Group continues to be at the forefront of developments to provide customers with
innovative ways to purchase and interact online. The Group’s online functionality is a fully
integrated end to end process termed Click2Drive, allowing customers the flexibility of a
purely online purchase, or one which includes interaction with our sales teams through
telephone or video appointments, should they require assistance with their vehicle search or
purchase. If the Group’s customers choose to transact fully online, they are able to value
their part exchange, choose a suitable finance option, make payment and arrange home
delivery of their vehicle, including the collection of any part exchange. Every one of the
Group’s used vehicles is prepared to a high standard, in accordance with a strict vehicle
preparation policy. All used vehicle customers also benefit from a 14-day money back
guarantee and a 90-day warranty as standard. This is superior to the current offering of
disrupters.
The strength of this proposition, together with the Group’s established brands, national
dealership network and reputation for excellent customer service, meant that the Group
delivered 38,446 new and used (retail and fleet) vehicles from 1 January to 31 March 2021,
despite customers being unable to visit showrooms or test drive their chosen vehicles. 257
(0.7%) of these vehicles were purchased completely online by the Group’s customers. The
majority of customers therefore elected to interact with the Group’s dealerships within the
sales process. 4,700 customers have chosen to reserve their vehicle online, through the
payment of a £99 deposit, since this new feature was introduced in May 2020. Use of this
reservation facility has been increasing over time, with over 1,100 deposits paid in January
and February 2021. Customers reserving vehicles in this way exhibit a very high conversion
to ultimate sale.
Disrupters who have recently entered the used car market have very little, if anything, to add
to the sector in terms of customer proposition or experience, and they do not sell new cars or
in some cases, support customers thereafter with their servicing needs. The best in class in
the sector, and Vertu in particular, have a fully established “bricks and clicks” platform and sell
far more used vehicles than these new entrants. The Group also builds relationships with
customers over many years facilitating the supply of new and used cars and customer
servicing activities.
The Group’s national franchise dealer network, with a strong customer service reputation,
gives customers the confidence to transact purely online, however, many still choose to
interact with the Group in their buying journeys and we expect that this will continue. A local
presence not only aids the building of brand awareness but remains essential to the delivery
of customer service, with the majority of customers preferring to undertake a test drive prior to
purchasing the big-ticket item of a car. Local aftersales support is also an important factor in
many vehicle buying decisions. The Group retains a high proportion of its vehicle sales
customers into the higher-margin service channel and this also aids overall long-term sales
Vertu Motors plc (Company Number: 05984855)
13
Group Strategy (continued)
Online and Omni-channel Retailing (continued)
retention. A “bricks and clicks” model is therefore crucial in this sector, with the Group’s
network of physical dealerships across the UK at the centre of its customer offering and vital
for the delivery of service and repair work to our customers. The fact disruptors to the sector
such as Cazoo and Tesla have been developing physical networks is illustrative of their
recognition of the need to have a physical presence in addition to their purely online
capabilities.
Cost Reduction
Enhanced scale of operations allows the Group to maximise on purchasing benefits, to
provide process efficiencies with common systems and technology, and to gain marketing
synergies from promoting a larger network for each of the Group’s brands.
A key feature of the Group’s digitalisation strategy has been to use system integration and
robotic process automation to enhance productivity and reduce the cost base of the Group.
Enhanced integration of the Group’s sales showroom and financial systems in FY21
facilitated significant efficiency improvements in processing vehicle sale transactions. By way
of example, robotic processes have now automated the taxation of each used vehicle the
Group sells with the DVLA. Similar technology has also automated the invoicing of all
vehicles traded at auction. Such in-house developed system automations have enabled the
Group to reduce costs, with the delivery of a programme completed in July 2020 yielding
anticipated annualised savings of £10m. The Group continues to develop technology to
maximise efficiency and aid decision making.
Motivated, Professional Colleagues
The Group seeks one consistent culture across all its operations. Delivery of the Group’s
Mission Statement (“To deliver an outstanding customer motoring experience through
honesty and trust”) through application of the Group’s Values (“Professionalism, Passion,
Recognition, Integrity, Respect, Opportunity and Commitment”) is at the core of how the
business operates. The Group has high standards, with colleagues expected to execute the
basics of the business and delight customers, acting with energy and urgency.
The Group’s colleagues are therefore at the core of the delivery of the Group’s vision and
strategy and their passion and commitment has certainly been demonstrated over the Year.
It was regrettable that so many of the Group’s colleagues were put into the Government
Furlough scheme as virus restrictions closed substantial parts of the business. The Group
provided enhanced benefits, designed to ensure that no colleague suffered undue hardship
whilst unable to work. The Group’s Board and senior management teams also accepted
reductions to their remuneration during the Year. Colleague communication was vital so
frequent and open dialogue was maintained throughout the Year. To measure the success of
the Group’s colleague engagement, the Group carries out an annual colleague satisfaction
survey as well as shorter quarterly surveys. Over 4,200 (84%) of Group colleagues
participated in this year’s survey in October 2020. Perhaps in recognition of the support given
to colleagues during the pandemic, 87.0% of responding colleagues considered the Group a
great place to work, up from 83.9% in the previous year. In addition, 98.2% of colleagues
knew the Vertu Values and 93.3% believed that the Directors actively practiced these Values.
These scores reflect the strength and consistency of the Group culture that has been built up
over time.
I would like to personally thank every Vertu colleague for their hard work and commitment
during the Year. I am proud to be the leader of such an exceptional team of people, who treat
others the way they themselves would like to be treated.
Vertu Motors plc (Company Number: 05984855)
14
Group Strategy (continued)
Responding to Regulatory Change
Electrification and Alternative Powertrains
Potential future development of the wider automotive sector has in recent years been linked
to the development of Connected, Autonomous, Shared and Electric (CASE) vehicles. The
ongoing impact of COVID-19 will almost certainly affect the ‘Shared’ element of mobility, with
the potential that consumers shy away from public and shared transport modes, at least in the
short-term. It is also apparent that, whilst increased autonomy is certainly assisting drivers,
full autonomous capability remains a long way off, with technological, regulatory and legal
considerations weighing heavily.
The UK Government’s stringent objective to achieve Net Zero in terms of Carbon emissions is
driving significant change to the powertrains used by new vehicles. 2030 is now the date the
UK proposes to phase out internal combustion engines in respect of new vehicle sales. A
glide path is therefore needed in terms of technological advancement and Government
support in terms of vehicle engineering, subsidies to promote uptake and a national
infrastructure for recharging which is capable of coping with significant growth in electric
vehicle sales. The SMMT estimates that a full, zero emission-capable UK new car market will
require 1.7 million public charge points by the end of the decade and 2.8 million by 2035,
costing some £16.7 billion. The UK has a long way to go in this regard.
The level of customer adoption of electric and alternatively fuelled vehicles is increasing in the
UK reflecting higher supply, enhanced ranges and more interest from customers. The SMMT
reported that 2020 was the best ever year for electric cars, with battery and plug-in hybrid
vehicle market share increasing to 10.7%, albeit in an overall reduced market, and with
regulation requirements being the key driver rather than customer preference. Group sales of
electric and alternatively fuelled vehicles doubled over the Year to 2,356 vehicles,
representing 9.3% of the Group’s sales of new retail vehicles.
The move to electric has undeniably put Manufacturer businesses, cash levels and future
returns under pressure, with this being exacerbated by the impact of COVID-19. A recent
study by the Financial Times highlighted that the cost of production of electric cars is
expected to continue to exceed that of the combustion engine vehicle until beyond 2030. This
is even after taking into account the expected reduction in the cost of battery production.
According to the SMMT, price is one of the main factors holding 52% of today’s potential
buyers back from purchasing an electric vehicle. This was perhaps recognised by the recent
changes in the UK to the plug-in grant scheme, which is now targeted exclusively at lower
priced cars.
Over 40% of the Group’s gross profit has historically arisen from its aftersales operations,
namely the provision of servicing and repairs and the retailing and wholesaling of parts. Pure
electric vehicles require less mechanical service intervention than those with an internal
combustion engine, however, they will not form a majority of the vehicle parc until well after
2030 (source: National Grid FES 2020 report). Thereafter, the potential diminution in
servicing, as a result of the electrification of the parc, is expected to be mitigated by the need
for increased specialist equipment, technology and knowledge to maintain these vehicles,
connectivity and a growth in prepaid maintenance programmes, all retaining a greater share
of maintenance work within the franchise dealer network. The Group is developing
substantial expertise in its service departments in the area of batteries. Leeds Volkswagen,
for example, is only one of 15 specialist battery centres in the Volkswagen network in the UK.
With our Manufacturer relationships, scale, financial strength and expertise, the Board sees
the drive train transition as an opportunity rather than a threat.
Vertu Motors plc (Company Number: 05984855)
15
Group Strategy (continued)
Responding to Regulatory Change (continued)
FCA
Following the publication of the FCA’s final findings in connection with their review of motor
finance, the Group amended its sales processes in January 2021 to ensure that its
arrangement with finance providers were aligned with the ban of discretionary commission
models. These changes have been seamlessly introduced, aided by the Group’s in-house
developed sales technology platform, Click2Drive. The changes have not had a material
impact on earnings from finance commission to date.
UK withdrawal from the EU
The UK’s future trading arrangements with the European Union are now clear, with
agreement having been reached prior to the 31 December 2020 deadline. The SMMT
reported that 7 out of 10 vehicles sold in 2020 in the UK were imported from Europe. The
application of zero tariffs and quota free trade was therefore critical to a strong new car
market in the UK. Clarity over the UK’s future relationship with the EU has removed a major
sector uncertainty.
The Sterling Euro exchange rate remains an important factor in the pricing and import of
vehicles manufactured in Europe into the UK. Since 1 January 2021, Sterling has
strengthened against the Euro and a stronger pound helps make imported new cars more
affordable to UK buyers.
Strategic Summary
The Group’s stable and experienced management team and financial strength ensures that
the Group is well positioned to take advantage of opportunities arising and we remain
ambitious to do so. We will ensure that capital is allocated to those activities, locations and
franchises that are best placed to meet the competitive challenges arising, to provide the best
growth opportunities and maximise return on invested capital.
We will continue to innovate to meet changes in customers’ needs, leveraging our brand
strength, reputation for excellence in customer service and national footprint to maximise on
the available online opportunity. We will execute cost saving initiatives, enhance operational
efficiency and pursue other new business opportunities which complement the Group’s core
activities. The goal is to drive growth in the cash flows of the business to provide returns for
shareholders.
Vertu Motors plc (Company Number: 05984855)
16
Key Performance Indicators
The Group has a number of Key Performance Indicators (“KPI’s”) by which it monitors its
business. These include analysis of results by channel; as set out on page 18, together with
the below:
KPI
Definition
Performance
Risk Factor Link
Underlying EPS
Underlying profit after tax divided by
weighted average number of shares
(note 13)
FY21 – Underlying EPS of 5.27p
FY20 – Underlying EPS of 4.99p
I
s
P
K
l
Underlying
PBT
Profit before tax and non-underlying
items
FY21 – Underlying PBT £24.6m
FY20 – Underlying PBT £23.0m
Gross
Margin by channel
Gross profit divided by revenue by
channel
See page 18
Like-for-Like Used
Volume growth
Number of used vehicles sold in
dealerships with comparable trading
periods in two consecutive years
FY21 – decline of (26.6%)
FY20 – decline of (0.1%)
Like-for-Like New
Retail volume
compared to UK
private registrations
Number of new retail vehicles sold in
dealerships with comparable trading
periods in two consecutive years
compared to the movement in UK
private registrations
Like-for-Like Service
Revenue growth
Labour sales activity for the servicing,
repair and preparation of motor
vehicles in dealerships with
comparable trading periods in two
consecutive years
Group
FY21 – decline of (28.9%)
FY20 – decline of (8.9%)
UK private registrations
FY21 – decline of (29.3%)
FY20 – decline of (4.8%)
FY21 – decline 15.0%
FY20 – growth 6.8%
i
a
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a
n
F
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s
P
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a
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t
a
r
e
p
O
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i
c
g
e
t
a
r
t
S
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
❷❸❹❺❻
❾⓮
❷❸❺❻❾
⓬⓭
❷❸❺❾⓬⓮
❷❻❽❾
Online
Growth
Website visits to all Group trading
websites
FY21 – 20.9m visitors
FY20 – 15.7m visitors
❷❸❼❾❿
⓫
Customer
Service
Customer service is measured via
email survey responses from
customers gathered by our
manufacturer partners for new
vehicles or on Judge Service for used
vehicles
97% (FY20: 97%) of our used vehicle
customers would recommend us –
Judge Service
❹❼❽❾
Vertu Motors plc (Company Number: 05984855)
17
Operating Review
Overview
This unprecedented Year has been impacted by successive lockdowns as a Government
response to COVID-19. The period from 1 March to 31 May 2020 saw the peak registration
month of March increasingly impacted by a pre-lockdown slowdown, until the first national
lockdown was initiated on 23 March. The Group was then significantly impacted for the
remainder of the first quarter of the Year. Vehicle sales activity was initially halted and the
Group’s aftersales operations opened on a much reduced basis, to provide only essential
repairs to keep key workers and their vehicles on the road. The period from 1 June to 31
October saw dealerships able to reopen to customers under social distancing restrictions and
trading benefitted from significant levels of pent-up demand following the first lockdown. The
remaining period from 1 November through to 28 February saw further local and national
lockdowns, which again closed sales showrooms to customers for prolonged periods.
However, in contrast to much of the first national lockdown, sales of vehicles were permitted
through click and collect or home delivery. In this period, our service departments remained
fully operational as an essential service and saw near normal levels of demand. In contrast,
trade parts operations and accident repair centres have seen continued year-on-year declines
in activity due to lower accident levels as journeys undertaken fell below normal levels in the
UK.
The Group’s revenues and margins are shown below. The impact of the first national
lockdown on trading in the first quarter of the financial year, March to May, was very
significant. This quarter has therefore been shown separately, along with the remaining nine
month period and full financial year below:
Mar to
May
FY21
£'m
132.2
77.1
92.6
30.4
332.3
11.7
3.6
7.7
16.5
39.5
8.9%
4.7%
8.3%
46.9%
11.9%
June to
Feb
FY21
£'m
607.5
501.3
915.8
190.8
2,215.4
42.6
19.6
86.2
113.1
261.5
7.0%
3.9%
9.4%
49.7%
11.8%
FY21
£'m
739.7
578.4
1,008.4
221.2
2,547.7
54.3
23.2
93.9
129.6
301.0
7.3%
4.0%
9.3%
49.3%
11.8%
Mar to
May
FY20
£'m
299.3
225.7
335.2
66.7
926.9
19.4
7.1
27.8
37.1
91.4
6.5%
3.1%
8.3%
46.5%
9.9%
June to
Feb
FY20
£'m
563.2
482.8
900.2
191.4
2,137.6
43.3
18.7
74.3
106.4
242.7
7.7%
3.9%
8.3%
47.1%
11.4%
Revenue
New
Fleet & Commercial
Used
Aftersales
Total Group Revenue
Gross Profit
New
Fleet & Commercial
Used
Aftersales
Total Gross Profit
Gross Margin
New
Fleet & Commercial
Used
Aftersales1
Total Gross Margin
1 Aftersales margin expressed on internal and external revenues
Mar to
May
Year on
Year
Variance
£’m
(167.1)
(148.6)
(242.6)
(36.3)
(594.6)
(7.7)
(3.5)
(20.1)
(20.6)
(51.9)
2.4%
1.6%
-
0.5%
2.0%
June to
Feb Year
on Year
Variance
£’m
44.3
18.5
15.6
(0.6)
77.8
(0.7)
0.9
11.9
6.7
18.8
(0.7%)
-
1.1%
2.6%
0.4%
FY20
£'m
862.5
708.5
1,235.4
258.1
3,064.5
62.7
25.8
102.1
143.5
334.1
7.3%
3.6%
8.3%
46.9%
10.9%
Vertu Motors plc (Company Number: 05984855)
18
Operating Review (continued)
Overview (continued)
Volumes of vehicles sold by the Group on a like-for-like basis for the same periods were:
Used retail vehicles
New retail cars
Motability cars
Direct fleet cars
Agency fleet cars
Total fleet cars
Commercial vehicles
Total New vehicles
Total vehicles
Mar to
May
FY21
5,813
4,771
910
1,478
752
2,230
1,965
9,876
15,689
Jun to
Feb
FY21
55,897
18,324
7,057
7,988
2,913
10,901
13,659
49,941
105,838
FY21
Mar to
May FY20
June to
Feb
FY20
61,710
23,095
7,967
9,466
3,665
13,131
15,624
59,817
121,527
61,651
20,770
6,667
11,831
4,220
16,051
11,719
55,207
116,858
22,446
11,731
2,826
5,136
1,484
6,620
5,951
27,128
49,574
UK Market (SMMT)
New retail cars
Motability cars
Fleet cars
Commercial vehicles
Mar to
May
FY21
% Var to
FY20
(74.1%)
(59.3%)
(67.8%)
(71.2%)
(49.3%)
(66.3%)
(67.0%)
(63.6%)
(68.4%)
June to
Feb
FY21
% Var to
FY20
(9.3%)
(11.8%)
+5.8%
(32.5%)
(31.0%)
(32.1%)
+16.6%
(9.5%)
(9.4%)
FY20
84,097
32,501
9,493
16,967
5,704
22,671
17,670
82,335
166,432
(60.5%)
(67.9%)
(69.3%)
(65.7%)
(11.2%)
4.8%
(17.5%)
3.3%
March to May Quarter
The Group incurred an adjusted loss before tax of £14.3m in the March to May quarter (“Q1”),
a shortfall of £27.4m on the prior year period (Q1 2020: Profit before tax of £13.1m).
The closure of the retail network during this first period of lockdown saw total registrations of
new cars in the UK in Q1 fall by 65.2%, representing a decline year-on-year of over half a
million vehicles. During this period, the Group maintained marketing activity and continued to
build a vehicle order bank via online and telephone orders. Nevertheless, the Group’s like-
for-like sales of new retail and Motability cars fell to 39.0% of prior year levels, fleet and
commercial sales to 33.4% and used retail vehicles to 25.9% of prior year in Q1. Total Group
gross profit from the sale of vehicles fell in Q1 by £31.3m compared to the same period in the
prior year.
After 23 March 2020, the vast majority of the Group’s aftersales operations remained open for
key worker and essential service vehicles, on much reduced capacity at first and then
progressively growing as lockdown eased. This resulted in the generation of total aftersales
gross profits of £16.5m, which was £20.6m below the same quarter last year.
The Group took all available actions to mitigate this significant reduction in activity and
profitability by reducing its costs during this period. Remuneration costs represent the largest
component of the Group’s operating expense and, whilst savings were made through the
furloughing of colleagues, the Group paid colleagues in excess of the amounts received
under the Job Retention Scheme. No colleague was paid below the national minimum wage
and colleagues were not capped at the maximum grant receipt of £2,500 per month. This
protected colleagues’ earnings during this critical and anxious time (paying 80% of average
earnings if above the £2,500 level). In addition, the Group’s Senior Management who
remained at work volunteered to take a 20% reduction in salary, and all members of the plc
Board elected to take a 30% reduction in salary for the period from 1 April to the end of May.
The executive directors also waived their entitlement to all bonuses for the financial year. In
light of the performance and the significant progress made by the Group during the year, the
Remuneration Committee have elected to award one-off bonuses to the executives. These
bonuses will be paid 50% in cash and 50% in shares in the Company, with the shares
required to be held for three years from the date of issue. Further details are provided in the
Remuneration Committee Report. Gross pay was £4.5m in excess of the grant receipt in the
quarter for those colleagues on furlough leave. The Group initially placed up to 80% of Group
colleagues on furlough leave, though this declined over time as activity increased. The
resultant receipt from the Government’s Job Retention Grant of £17.7m significantly
supported the Group in this first quarter as did the business rates relief of £1.5m in the same
period.
Vertu Motors plc (Company Number: 05984855)
19
Operating Review (continued)
March to May Quarter (continued)
Other costs were reduced significantly, particularly when showrooms were closed, to
conserve cash. Group centralised supplier arrangements facilitated swift actions to be taken
to remove costs. In addition, the Group received substantial support from third-party suppliers
who reduced or suspended charges. The Group’s Manufacturer partners were also excellent
in taking steps to reduce franchise costs and to ensure retailers were able to conserve cash.
June to February Period
The remaining nine months of the financial year from 1 June 2020 to 28 February 2021
(“Period”) generated an adjusted profit before tax of £38.9m, significantly more than the prior
year profit of £9.9m in the same period. Strong demand in most channels, beneficial used car
pricing movements, strong cost control and continued Government and Manufacturer support
all contributed to a very strong trading environment for the Group, despite successive local
and national lockdowns and restrictions. Enhancements to the Group’s Click2Drive sales
platform allowed the business to increasingly operate very effectively online in the sales area
despite showroom closures.
The following departmental trends were seen in this Period:
Used retail vehicles
The used vehicle market in the UK has been remarkably resilient since 1 June 2020. Pent-up
consumer demand was apparent, particularly from June to October. Despite further
restrictions closing showrooms from November, sales rates were significantly in excess of
those seen in the first lockdown, as both the Group and customers adapted to the situation.
The wholesale used vehicle market in the UK operates almost as a ‘perfect market’ as far as
pricing is concerned. From June to October, tight supply of vehicles coincided with a period
of robust consumer demand and consequently strong used vehicle pricing conditions were
apparent. This strength in used vehicle values was in contrast to historic seasonal norms. As
lockdowns again impacted on demand from November onwards, wholesale prices witnessed
slightly higher than normal seasonal reductions. Margins overall, however, remained strong
in the Period especially in relation to premium franchises.
Reduction in pressure to achieve new vehicle volume targets, particularly in premium
franchises, has led to a reduction in nearly new vehicles in the used supply channel and this
has also had a beneficial impact on margin retention from which the Group benefitted. In
addition, a new stock management and pricing system was developed in-house and
implemented in the Period (“Vertu Analytics”) which has also aided pricing decisions and
margin management.
The beneficial used car pricing environment went some way to offsetting the impact of a like-
for-like 9.3% year-on-year reduction in Group used vehicle sales volumes in the Period.
Gross profit per unit on a like-for-like basis increased to £1,467 from £1,197 (22.6%) with this
uplift even more apparent in the Group’s premium franchise dealerships. The growth in
profitability contributed to Group used gross margin percentages for the Period improving
from 8.3% to 9.6% on a like-for-like basis, despite a 5.4% increase in average selling prices.
Overall, core Group gross profit generated from used vehicle sales in the Period increased by
£8.3m compared to the prior year due to this enhanced margin retention.
New retail cars and Motability sales
Demand for new cars was weaker than used cars in the first national lockdown and was
slower to rebuild momentum. UK retail registrations have declined year-on-year in every
month of the Group’s financial year except for just one month, July. Supply constraints and a
reduced volume push by Manufacturers have been part of the reason for this reduction.
Supply constraints in the Period were driven by post lockdown logistics dislocation, the impact
of social distancing on production levels both in Manufacturers and their suppliers and also
the challenges of switching the emissions mix of vehicle production to meet emissions
regulations.
In the vast majority of franchises, volume targets were amended, reduced or removed by
Manufacturers in response to showroom opening restrictions. The rise in consumer demand
seen in used cars was replicated in new cars from July, with underlying consumer demand
robust throughout the summer and this was witnessed in the building of strong order banks
for the September market. Overall, the Period saw UK new retail registrations fall 11.2%.
Vertu Motors plc (Company Number: 05984855)
20
Operating Review (continued)
June to February Period (continued)
New retail cars and Motability sales (continued)
The Group’s like-for-like new retail volumes declined by 11.8% broadly matching these
market trends.
UK Motability sales operations closed completely during the first lockdown, re-opening for
new applications from 1 July and remaining open during subsequent lockdowns. In the
Period, UK registrations in this channel grew by 4.8%, reflective of pent-up consumer demand
as deferred contracts were renewed. The Group’s Motability volumes in the Period grew
5.8% on a like-for-like basis representing outperformance. The Group has the largest
Motability vehicle fleet in the mainland of the UK.
Like-for-like gross profits from the sale of new retail and Motability vehicles fell £4.1m year on
year in the Period. Reduced volumes of vehicles sold, together with significantly reduced
quarterly manufacturer volume bonus income receipts in June (representing the period, April
to June) were the primary reasons for this decline. The lockdown impact on vehicle sales
volumes in April and May inevitably reduced volume bonus earnings recognised at the end of
the calendar quarter in June. New vehicle gross profit per unit fell 2.2% on a like-for-like
basis in the Period and the Group’s new vehicle margin percentages declined from 7.7% to
7.0% on a like-for-like basis. Excluding the impact of the reduction in quarterly volume
bonuses earned in the calendar quarter to June, underlying new retail margins were robust.
Fleet & Commercial vehicle sales
The UK car fleet market declined 17.5% in the Period. A lack of demand from the daily rental
market, principally due to reductions in leisure and airport travel, along with reduced demand
from corporate fleets, drove this decline. Like-for-like the Group delivered 10,901 fleet cars in
the Period, representing a decline of 32.1%, which was behind the market. This reflects the
mix of franchises held by the Group, with some Manufacturers moving away from this low
margin channel to preserve profit and reflecting constrained supply.
The SMMT reported a 3.3% increase in registrations of commercial vehicles in the UK in the
Period. This reflected strong demand for commercial vehicles, in particular, to satisfy
increased demand for home deliveries as internet shopping increased. The Group’s like-for-
like sales volumes of new commercial vans was significantly ahead of these market trends,
increasing by 16.6% in the Period. This was aided by very strong performance from the
Group’s Vansdirect business and the Group taking share from competitors seeking to reduce
their working capital demands by reducing their exposure to fleet and commercial vehicle
channels. As a consequence of strong demand for vans, both here in the UK and across
Europe, van supply was tight which aided margin retention.
Like-for-like gross profit per unit in the Fleet and Commercial vehicle channel grew 14.2%
from £671 to £766, reflecting both the change in mix away from the low margin daily rental
channel and strong demand for commercial vehicles. Group like-for-like gross profit
generation from fleet and commercial sales increased by £0.2m in the Period. As with new
vehicles, lack of calendar quarter volume bonus receipts in June, driven by the reduction in
volumes in the initial lockdown period held back performance.
Aftersales
From June to September pent-up demand from customers aided growth in the Group’s
vehicle servicing departments, driving increased like-for-like service revenues. Further
national COVID-19 restrictions from November drove year-on-year reductions in the Group’s
like-for-like service revenues from November to February. Overall, in the Period, 0.6% growth
in Group like-for-like service revenues was delivered with the impact of acquisitions driving
Group total service revenues up 8.1%.
The like-for-like gross margin percentage on vehicle servicing rose to 78.5% in the Period
(FY20: 77.5%). Higher average invoice values on retail work were achieved through the
Group’s effective vehicle health check processes. The introduction of individual timed
appointments for customers, to ensure social distancing in dealerships, allowed more time for
the Group’s Service Advisors to better explain identified work to customers, aiding improved
sales conversion. In addition, the Group saw a higher retail mix of work in workshops as
warranty work remained muted compared to normal and this also aided margins and
productive efficiency. Like-for-like gross profits generated from service activity increased by
£1.5m in the Period as a result of these trends.
Vertu Motors plc (Company Number: 05984855)
21
Operating Review (continued)
June to February Period (continued)
Aftersales (continued)
In contrast, like for like gross profits arising from the sale of parts and accident repair centres
fell £2.5m in the Period. Like-for-like revenues fell 11.0% in the Period as fewer motoring
journeys led to fewer accidents, reducing accident repair work and trade parts sales to
accident repair centres.
The Group currently operates 10 accident repair centres, with dealership acquisitions made
since 1 January 2020 representing half of this total. In recognition of this growing number of
operations, the Group formed Vertu Accident Repair Limited (“VARC”) in early 2021. VARC
has a separate dedicated management team, with significant accident repair experience, in
order to provide specialist focus to these businesses. All of the Group’s accident repair
centres will be transferred into VARC from the Group’s franchised dealership divisions over
the remainder of 2021. Growth in accident repair revenues is targeted, through the expansion
of the number of manufacturer repair approvals held by each outlet and improved
relationships with insurance work providers, as well as through further targeted acquisitions.
Greater efficiencies will be sought by enhancing standard Group systems and processes
across the accident repair centres and gaining from the impact of the dedicated new
management team.
Parts revenues were also negatively impacted by the previously announced changes to parts
distribution within the Vauxhall network. As a consequence of these changes, the Group
exited trade parts in the franchise in early 2020 with an impact on revenues and profits but a
gain in short term cash generation as working capital was liquidated. The Group previously
indicated this would reduce annual profits by £0.9m.
Overall, like-for-like gross profits in aftersales declined £1.0m in the Period.
Current trading and outlook
In March 2021, the Group’s sales showrooms remained closed as a result of the continued
national lockdown. The Group’s Macklin Motors sales showrooms in Scotland reopened on 5
April (subject to requiring an appointment to be made) with the rest of the Group’s sales
showrooms opening on 12 April without the need for an appointment. Despite the lockdown
restrictions, the Group saw strong trading conditions in March with trading profits at record
levels for the Group. The reopening of showrooms in April saw pent-up demand in sales
again evident as customers sought to test drive vehicles for the first time in three months.
The Group undertook significant marketing activity to gain market share. As a consequence,
the Group saw March and April deliver a combined adjusted profit before tax of £19.2m which
was in excess of the Group’s business plan, prepared assuming no impact of COVID-19 on
the business.
The Group’s trading performance in March and April (“the post year end period”) is
summarised below:
March and April Performance
Year on Year % Change
Total
Like-for- Like
SMMT
Group Revenues
Service Revenues1
Volumes:
Used Retail Vehicles
New Retail Vehicles
Motability Vehicles
New Fleet Cars2
New Commercial Vehicles
1 Includes internal and external revenues
2 Includes agency volumes
152.8%
107.7%
238.8%
59.1%
129.0%
103.9%
167.5%
134.8%
91.8%
215.9%
47.4%
122.8%
112.3%
169.3%
41.8%
110.2%
89.4%
157.4%
Group revenue rose substantially as expected since last year was significantly impacted by
the first national lockdown which started on 23 March 2020. The Group has also undertaken
considerable acquisition activity in the last 12 months and these acquired dealerships
contributed over £50m to Group revenues in the post year end period.
Vertu Motors plc (Company Number: 05984855)
22
Operating Review (continued)
Current trading and outlook (continued)
Group revenue rose substantially as expected since last year was significantly impacted by
the first national lockdown which started on 23 March 2020. The Group has also undertaken
considerable acquisition activity in the last 12 months and these acquired dealerships
contributed over £50m to Group revenues in the post year end period.
Service activity saw strong levels of demand in March aided by substantial vehicle sales
volumes, the Group’s well developed customer contact strategy and high level of pre-paid
service plans held by the Group’s customers. In April 2020, service departments operated on
a significantly reduced basis due to the impact of the lockdown in the prior year. Many
service and MOTs were postponed (until after the lockdown eased in late May). Group
vehicle sales levels in April 2020 were also very low due to the lockdown. As a result, in April
2021 the Group has seen some weakening of demand for retail annual servicing. This may
very well reverse in future months as the seasonalisation of service work has been changed
by lockdowns.
New and used retail vehicle demand and volumes have increased substantially year-on-year
in the Period as expected. Whilst sales under lockdown conditions in March 2021 were
considerably higher than in the first lockdown (at around 60% and 97% of normalised levels
for new retail and used volumes respectively), there was still an element of pent-up demand
exhibited when showrooms reopened in April 2021. This pent-up demand was primarily due
to customers holding off on purchases until test drives and physical visits to dealerships could
be resumed.
The new car market in the UK is as much driven by supply factors as those impacting
demand. There are increasing signs that new car supply will be tight in the coming months
reflecting the continued impact of COVID-19 on manufacturing both in the assembly plants
and the parts supplier base. Semi-conductor shortages are also likely to limit new vehicle
supply in the months ahead as several plant closures and curtailments of production have
been announced across the globe. Manufacturers are also having to balance the emission
levels of their sales, which may impact production and availability. In contrast, the renewed
strength of Sterling against the Euro and Yen makes the UK a more profitable market for
Manufacturers to export cars into and this tends to increase supply levels. Overall, the Board
believes constrained new vehicle supply is a key uncertainty in the near term which may
impact the business.
The used car market remains very robust from a demand perspective. Coming out of the
lockdown in April 2021, supply of used cars in the UK was much tighter than normal for the
time of year. In addition, new car supply constraints are also likely to contribute to this
tightness in used car markets continuing over the summer and perhaps beyond. Used car
values are therefore expected to remain robust for the remainder of H1 at least.
The fleet car market recovered well in March and April from the lows of last year. Fleets that
had postponed vehicle changes took advantage of the strong used car market for disposal of
defleeted vehicles, contributing to this recovery. The Group took share with like-for-like fleet
car volumes increasing 112.3% compared to a 89.4% growth in SMMT registrations in the
post year end period.
The Group’s new commercial vehicle sales were up 169.3% in volume terms on a like-for-like
basis, with the SMMT reporting a growth of 157.4%. The SMMT reported that the UK new
van market in April was the highest on record, reflecting strong demand driven principally by
the rise of courier services and delivery of online purchases. Whilst the Group took share in
this buoyant market, demand exceeded supply with new van order lead times very much
extended as supply remains tight. The global semi-conductor shortage will not help this
supply situation in the short-term.
The Group continued to benefit from the extended business rates holiday on showrooms in
March and April (impact of £1.8m) and the cost savings from the cost reduction programme
undertaken in 2020. The furlough scheme was utilised on a very small scale in March and
early April with receipts of £0.4m. It is envisaged that in the absence of further lockdowns
and restrictions related to COVID-19, the Group will make no further use of the Job Retention
Scheme.
Vertu Motors plc (Company Number: 05984855)
23
Operating Review (continued)
Current trading and outlook (continued)
The Group’s BMW and MINI dealerships acquired in December 2020 saw a strong
performance in March and April, delivering an adjusted profit before tax over the two months
of £0.5m. This is ahead of business plan for the year to date. The Board is pleased with the
progress of this new Division and the success of the integration process.
The Board remains confident in the prospects for the Group. With its strong asset base,
balance sheet, scale, Manufacturer relationships, well invested systems including the
Click2Drive sales technology platform and experienced leadership team, the Board believes
that the Group is strategically very well placed to capitalise on the consequent changes and
opportunities in the UK motor retail sector.
The promising trading result in the post year end period has been aided by strong consumer
demand. Supply of new vehicles in the coming months is a concern, however, reduced
supply should result in robust vehicle margins. The Board expect the Group will deliver an
adjusted profit before tax for the year ending 28 February 2022 in the range of £24.0m to
£28.0m.
Robert Forrester, CEO
Vertu Motors plc (Company Number: 05984855)
24
Financial Review
The Group’s income statement for the Year is summarised below, including analysis of the
initial quarter, March to May, which included the first national COVID-19 lockdown and the
remainder of the financial year’s results:
Mar to
May FY21
£'m
June to
Feb
FY21
£'m
Mar to
May
FY20
£'m
June to
Feb FY20
£'m
FY21
£'m
FY20
£'m
June to
Feb
% Var
Revenue
332.3
2,215.4
2,547.7
926.9
2,137.6
3,064.5
3.6%
39.5
(68.9)
17.7
(51.2)
91.4
(76.2)
-
(76.2)
301.0
(295.0)
27.8
(267.2)
261.5
(226.1)
10.1
(216.0)
Gross Profit
Operating Expenses (gross)
Job Retention Scheme Grant
Operating Expenses (net)
Adjusted Operating (Loss)
Profit
Net Finance Charges
Adjusted (Loss) Profit Before
Tax
Non-Underlying Items1
Profit Before Tax
Taxation
Profit After Tax
1Non-underlying items represent share-based payments, amortisation of intangible assets and non-cash impairment
of assets
23.0
(15.7)
7.3
(4.3)
3.0
242.7
(225.7)
-
(225.7)
334.1
(301.9)
-
(301.9)
24.6
(2.2)
22.4
(6.1)
16.3
(11.7)
(2.6)
17.0
(7.1)
32.2
(9.2)
33.8
(9.2)
15.2
(2.1)
45.5
(6.6)
(14.3)
38.9
13.1
9.9
7.7%
(0.2%)
-
4.2%
167.6%
7.0%
292.9%
Operating Expenses
In the three months to 31 May 2020 and in the light of the impact of the national lockdown, the
Group took decisive action to minimise costs as outlined in the previous section. As a
consequence of these actions, total Group operating expenses, excluding the Job Retention
Grant receipt, were 9.6% lower than the same quarter in the prior year. This represented a
saving of £10m in the Core Group, with the total inclusive of the impact of acquired
businesses. Relief on business rates in respect of the Group’s showrooms saved £1.5m of
this total. Savings were delivered on almost every other cost line in the business.
The focus on cost reduction continued throughout the remainder of the financial year on
reopening from 1 June 2020 to 28 February 2021 (‘Period’). The application of technological
developments to improve efficiency, allowed the Group to remove costs from some key areas.
This restructuring programme was completed in July and as previously announced, this
generated annualised headcount cost savings of approximately £10m. Total restructuring
costs for the financial year of £1.1m have been included in underlying expenses. Group
operating expenses in the Period, excluding furlough grant receipts, were £0.4m higher than
the prior year period as a result of dealership acquisitions. However, excluding the impact of
acquisitions and receipts from the Job Retention Grant, operating expense savings of £16m
were delivered in the Core Group in the Period with business rates relief saving £7.2m of this
total.
The Group disposed of a surplus property asset in the Period generating cash proceeds of
£0.8m and a profit on disposal, included within the underlying result of £0.4m.
Government Support
Given the forced closure of the business due to Government lockdown regulations, the Group
received Government assistance during the Year in two key areas. For the full financial year,
furlough grant receipts of £27.8m and business rates relief savings of £8.7m arose. This
assistance offset substantial losses particularly in the first lockdown. In April and May 2020,
for example, the Group reported a pre-tax loss of £20.1m after Government assistance.
The Group does not intend to repay this Government support which arose due to the forced
closure of its operations.
Vertu Motors plc (Company Number: 05984855)
25
Financial Review (continued)
Net Finance Charges
Net finance charges were static year on year, as analysed below:
Bank interest payable
Mortgage interest payable
Vehicle stocking interest expense
- New vehicle Manufacturer stocking
interest
- Used vehicle stock funding interest
Interest on lease liabilities
Interest income
Net finance charges
FY21
£’m
1.8
0.1
3.6
0.3
3.6
(0.2)
9.2
FY20
£’m
1.2
-
3.9
0.6
3.6
(0.1)
9.2
Variance
£’m
0.6
0.1
(0.3)
(0.3)
-
(0.1)
-
At the start of the first national lockdown in March 2020, the Group took action to protect
liquidity by drawing an additional £10m on its revolving credit facility. The increase in interest
on bank borrowings of £0.6m relates to this increase in drawings, together with a 0.8%
increase in the margin charged on bank borrowings effective from 1 June 2020 to 1
December 2020. This increase followed a waiver of covenants obtained in respect of the first
half of the financial year. The margin charged on this borrowing reverted to previous levels
on 1 December 2020.
The Group partly funded the purchase of its BMW/MINI acquisition in December 2020 through
taking a new £12.76m 20-year mortgage on the freehold and long leasehold properties
acquired. The mortgage is repayable in 240 equal instalments over the 20-year term and
carries a fixed annual interest rate of 2.9% for the first five years.
The Group saw a year-on-year reduction in interest charged by Manufacturers on funded new
vehicle inventory. As a consequence of the timing of the first nationwide lockdown, being
normally the most significant month for new vehicle sales in the calendar year, interest
bearing new vehicle stock levels in the Group were on average £80m higher in the first
quarter compared to the previous year. On the reopening from June onwards, the Group was
successful in significantly reducing the new vehicle stock pipeline and hence interest charged.
New vehicle supply constraints also had an impact reducing new vehicle pipeline stocks
below last year’s levels. As a consequence, over the year as a whole, consignment stock
interest reduced by £0.3m.
The Group also accesses used vehicle stocking loans to fund working capital. As a result of
the strong cash position of the Group throughout much of the financial year, amounts utilised
on this £45m facility were reduced to £5.9m at 28 February 2021, representing 4.9% of used
vehicle inventory (29 February 2020: £25.5m, 21.0% of inventory).
Finally, additional working capital requirements are met by a committed money market loan
(‘CMML’) facility. This facility varies over a financial year with peak availability in the months
following calendar quarter ends, namely April, July, October and January. The Group has not
utilised its peak CMML facility since early 2019 and consequently has agreed to reduce the
peak facility from £68m to £48m to better reflect utilisation patterns and to minimise recurring
costs. Margins on this facility were increased by 25pbs on renewal in April 2021.
Pension Costs
The accounting surplus on the Group’s closed defined benefit pension scheme was £6.2m at
28 February 2021 (29 February 2020: £8.9m). During the Year, there have been changes in
the financial and demographic assumptions underlying the calculation of the liabilities. In
particular, the discount rate, which is linked to movements in corporate bond yields, has
increased slightly as has the expectation of higher future inflation. The effect of these
changes in assumptions resulted in a decrease in liabilities of £0.4m. Scheme assets
reduced in value by £3.0m over the financial year. In total, an actuarial loss of £2.6m has
been recognised in the Statement of Comprehensive Income in the Year.
Vertu Motors plc (Company Number: 05984855)
26
Financial Review (continued)
Tax Payments
In the July 2020 Finance Act, the previously announced reduction in the rate of corporation
tax to 17% was removed. This resulted in the Group’s deferred tax obligations being
measured at the higher rate of 19% in the financial year (2020: 17%). On 3 March 2021, the
Chancellor announced that the headline UK corporation tax rate will rise to 25% from 1 April
2023. As this increase had not been enacted by the balance sheet date, the further
revaluation of the Group’s deferred tax obligations from 19% to 25% is likely to be applied in
the financial year ending 28 February 2022. This change is expected to increase the Group’s
non-underlying tax charge by £2.9m for FY22.
The Group’s underlying effective rate of tax for the year increased to 21.25% (2020: 19.65%).
The overall effective tax rate, impacted by the revaluation of deferred tax obligations, was
27.17% (2020: 59.18%). The Group continues to be classified as “low risk” by HMRC and
takes a pro-active approach to minimising tax liabilities whilst ensuring it pays the appropriate
level of tax to the UK Government.
Shareholder Returns
The Group commenced operations in March 2007 and in November 2021 will have been
incorporated for 15 years. In that time, the Group has utilised equity markets to create a Top
5 UK automotive retailer which is also the 9th largest in Europe by revenues. The Group has
delivered profitability each year since incorporation, has an excellent asset base with
£181.6m of tangible net assets and normalised annual revenues of over £3.7bn. Crucially,
returns generated to date are in excess of the weighted average cost of capital.
The Board remains cognisant of the importance of dividends to total shareholder returns.
Mindful of the substantial amounts of Government support received and the need to protect
the Group’s liquidity in the first quarter, the Board did not declare a final dividend for the year
ended 29 February 2020, nor propose any dividend for the financial year ended 28 February
2021. The Board anticipates that the payment of dividends will resume in respect of the
financial year to February 2022, dependent on the financial performance of the Group.
Another important element of shareholder return can be share buyback programmes,
particularly in an environment of share price weakness compared to the Board’s view of the
intrinsic value of the business. The Board will evaluate the benefits of such a programme in
2021.
Capital Expenditure
Despite the curtailment of capital expenditure to preserve liquidity during the Year, the Group
completed some key projects in the year ended 28 February 2021. These included the
completion of the redevelopment of the Bradford and Nelson Land Rover showrooms. These
developments deliver operations with greater capacity for sales and service and will underpin
the Group’s future profitability and cash generation.
In terms of large-scale projects for the coming financial year, the Group will construct a new
build dealership in Edinburgh so that the current multi-franchise operation in the city in short
leasehold premises can be relocated. The Group already owns the land on which this new
dealership will be built having acquired it a number of years ago. The Group also plans to
execute on its multi-franchising strategy in a number of existing locations which will require
capital expenditure investment albeit it is aided by support from Manufacturers. Capital
expenditure for FY22 is currently expected to be approximately £18.6m.
Managing Working Capital
The Group has generated cash from operating activities of £74.9m (2020: £19.5m) aided by a
substantial level of cash generation from a reduction in working capital of £29.6m. This was
due to reduced sales activity levels which have led to lower levels of receivables and
inventory at 28 February 2021 compared to last year.
The Group has significant levels of working capital in the form of inventory, receivables and
payables. These are ordinarily subject to significant, yet predictable, seasonal fluctuations
which coincide with plate change months and quarterly Manufacturer new car campaigns.
New vehicle funded inventory reduced by £49.1m as high levels of new inventory seen at the
end of the last financial year significantly unwound. A related £46.9m decrease in trade
creditors was also seen. Reduced levels of supply of new vehicles along with reduced sales
activity, particular in fleet car sales, meant that tactical registration activity was much reduced
Vertu Motors plc (Company Number: 05984855)
27
Financial Review (continued)
Managing Working Capital (continued)
compared to the prior year. Fully paid new vehicle stock was consequently lower than seen
at 29 February 2020, with a decline of £2.9m.
Trade receivables also fell by £12.7m year-on-year reflecting reduced levels of sale activity as
a result of the lockdown in the run up to the year end. Used vehicle inventory fell by £10.3m
as the Group sought to control its stock levels during lockdown, in the context of lower sales
levels and moderate month-on-month market value reductions in the run up to the year end.
Trade receivables also fell by £12.7m year on year reflecting reduced levels of sale activity as
a result of the January to April 2021 lockdown. Used vehicle inventory fell by £10.3m as the
Group sought to control its stock levels during lockdown, reflecting lower sales level and
moderate month on month market value reductions.
Financing and capital structure
The Group has a balance sheet with shareholders’ funds of £275.9m (2020: £263.4m)
representing net assets per share of 76.2p (2020: 71.7p). The net asset value is underpinned
by a freehold and long leasehold portfolio of £229.2m (2020: £211.8m) and net debt
(excluding lease liabilities) of £4.5m at 28 February 2021. The Group’s conservative
financing and capital structure results in a strong tangible net assets position of £181.6m at
28 February 2021.
The Group has a committed acquisition debt facility of £62m, maturing in February 2024, with
the potential to add a further £15m, which is currently uncommitted. £54m of this committed
facility was drawn as at 28 February 2021. As a consequence of the losses incurred in Q1,
waivers were obtained in respect of the covenants in place in respect of this facility for the test
periods ended 31 May and 31 August 2020. Strong cash generation means that the Group is
anticipated to be able to operate comfortably within all covenants for the foreseeable future.
The Group’s Adjusted net cash position of £1.4m is stated excluding £5.9m of used car
stocking loans (2020: £25.5m). These used car stocking loans with third party banks are
subject to interest and are secured on the related used vehicle inventories. The Group has a
£45m facility under these arrangements but uses these facilities selectively, and this has
acted to the benefit of the Group in the Period, as significant cash was able to be generated
from reducing used vehicle stock levels, aiding liquidity. This resulted in the repayment of
significant amounts of used car stocking loans given the Group’s strong cash position. The
Group had £121.2m of used vehicle inventory at 28 February 2021 (2020: £121.3m) and the
low level of used car stocking loan utilisation is a major structural difference in financing
compared to many industry peers.
Karen Anderson, CFO
Vertu Motors plc (Company Number: 05984855)
28
Sustainability
The Group has long recognised that whilst the primary objective for the business is to
generate long-term sustainable profit and cash flows, this will only be achieved by serving a
need society has and to meet this by adding value to the communities it serves. The Mission
of the Group is ‘to provide an outstanding customer motoring experience through honesty and
trust’. The Group’s values, which are at the heart of its culture, show that the Group always
aims to do the right thing by our colleagues, and wider stakeholders. Recent global events
have re-enforced the importance of local communities, the value of collaboration and the
power of working together. All of these will be vital in our collective ability to tackle some of
the complex national, social, environmental and economic problems that we face. The Group
will play its part to secure its future and the future of the society it serves.
The Group has a track record of making a positive contribution to its colleagues and to the
communities we operate in, as well a commitment to minimise cost and maximise efficiency to
ensure resources are not wasted. The Group is building on this by launching in April 2021 its
‘Driving Sustainability’ strategy, based around three strategic sustainability goals:
1. Work with our Manufacturer partners to provide increasingly sustainable choices for
customers
2. Reduce the environmental impact of our business
3. Care for our colleagues and support our communities
These sustainability goals have been mapped to the United Nations (‘UN’) Sustainable
Development Goals (‘SDG’) to show how we are contributing. We have ambitions to improve
and therefore targets to achieve this are also shown against each of our sustainability goals.
Sustainability Goals
Goals
Link to SDG
Work with our Manufacturer
partners to provide
increasingly sustainable
choices for all customers
Increase the share of the
Group’s sales of alternatively
fuelled vehicles by a minimum
30% each year to 2030
Maintain our position as the
UK’s largest supplier of vehicles
to the Motability fleet
Goals
Link to SDG
Deliver an annual 10% like-for-
like reduction in the energy the
Group draws from the national
grid
Reduce the environmental
footprint of our business
70% of all dry waste to be
recycled by 2025
25% of the corporate fleet to be
alternatively powered by 2025
Goals
Link to SDG
Care for our colleagues and
support our communities
At least 90% of Colleagues to
agree that the Group is a great
place to work
Continue to support causes
local to our dealership network
applying a central support
budget of £150,000 per annum
Vertu Motors plc (Company Number: 05984855)
29
Sustainability
Environmental Footprint
21,644,543 kWh electricity used
25,059,458 kWh gas used
168,152 m3 water used
60% of dry waste recycled
57% reduction in paper used
compared to FY20
Responsible Sourcing
All of the Group’s business locations are situated within the UK and operate in strict
compliance with all applicable labour relations laws. We have no presence, either directly or
via sub-contractors, in any areas which present a material risk of the exploitation of men,
women or children in the workplace. We work with vehicle manufacturers and other suppliers
who manage their supply chains in a responsible way. The Group’s modern slavery
statement is published on the Group’s website, at https://investors.vertumotors.com/.
Environmental Management
The Group’s strategy on environmental matters is to ensure legal and regulatory compliance
as well as seeking to manage costs and usage through effective resource allocation. Half
Hourly energy usage data and purchasing monthly usage data is monitored to highlight areas
of potential wastage for attention, as well as providing a firm benchmark for energy and usage
reduction activities.
Vertu Motors plc (Company Number: 05984855)
30
Sustainability
Community
As the Group has expanded, so has the scope of its involvement in the community as part of
our wider corporate and social responsibility strategy and newly launched Group sustainability
goals.
The projects chosen for support reflect the diversity and depth within the business, and also
the desire of colleagues to be an active part of the communities served by their dealership.
During the year to 28 February 2021 the Group’s community activities have included:
Great Northern Raffle:
The Group supported the Great Northern Raffle, which raised funds for a range of North East
charities, who had seen fundraising depleted as a consequence of the pandemic. The Group
donated a car to be raffled and this helped to raise £45,000.
St. Oswald’s Hospice:
Another charity that the Group supported through the donation of a car was St Oswald’s
Hospice, who provide outstanding, specialist and expert care to adults and children with life-
limiting conditions. This year, the donation helped to raise £54,000, enough to cover the
salary of a nurse and an auxiliary nurse for a full year.
Vertu Motors Arena naming rights:
Vertu Motors is proud to support the Newcastle Eagles Foundation, a charity very much at the
heart of their community. Vertu Motors’ naming rights sponsorship of the Eagles Arena, in
Newcastle upon Tyne, helps the Foundation to continue delivering vital services to the local
community with the venue acting as both a sports arena and community centre, currently
used as a Covid vaccination centre.
Haircuts for Heroes:
The Group’s colleagues joined together during the first national lockdown to raise more than
£20,000 for NHS Charities Together, by donating the cost of a haircut.
Back to Eden Project:
The Group has long been a supporter of the New Testament God’s Church, based in the
Birmingham area. Recently the Group’s support has extended to include sponsorship of a
new community project which has secured land for use as a community allotment. Anyone
from the local community can come along to meet, learn about growing fruit and vegetables
and take produce home. The allotment will also be used by a local primary school.
Other:
The Group’s Dealerships have also been busy supporting their local communities including
sponsorship of grassroots sport, donations and fundraising for food banks and community
groups. Examples include Vertu Toyota Chesterfield who were main sponsors of the Sparkle
Night Walk in aid of local charity, Ashgate Hospice Care. Farnell Land Rover Bolton donated
the proceeds from their Christmas Jumper fundraiser to Urban Outreach, a charity providing
food for households in crisis. Bristol Street Hyundai in Bristol, sponsored Brislington Ladies
FC and junior football club Heanor Junior Titans have received sponsorship support from
Bristol Street Nissan Ilkeston. These are just a few examples of the work by our dealerships
in providing support to their communities.
Vertu Motors plc (Company Number: 05984855)
31
Health and Safety
A consistent Group-wide approach is taken with regards to Health and Safety and
environmental matters. A Health and Safety Committee meets monthly to consider all
aspects of our Health and Safety performance, including reviewing any incidents, and
considering how to spread best practice across the Group. All line managers receive
comprehensive, externally provided training to ensure they understand relevant legislation
and the scope of their responsibility in this critical area. There are clear lines of responsibility
which are communicated to all colleagues. The General Manager is the main responsible
individual at each dealership for all Health and Safety matters, supported by a dealership
Health and Safety Co-ordinator. A Group Health and Safety Manager is responsible for
monitoring compliance with Health and Safety systems and providing support and advice to
the General Managers, as well as continually assessing the quality of our systems, outputs
and recommending improvements. The Health and Safety Committee also reports monthly to
the Board, and key findings are communicated regularly to Senior and General Managers to
retain a focus on Health and Safety matters.
As part of the Group’s planning around the re-opening of retail premises following the COVID-
19 lockdown, a sub-Committee of the CEO Committee was formed to prepare a cohesive
approach to health and safety. This Committee prepared a COVID-19 Safety Policy, all
colleagues returning to work from furlough leave must confirm that they have read this policy
and watched the accompanying training video. Colleague consultation around the safety
measures introduced by this Policy was completed prior to 1 June 2020. The Committee
prepares risk assessments reflecting latest guidelines. These risk assessments are then
completed each month by all dealership General Managers for the sites under their
responsibility from 22 May. Appropriate PPE has been obtained and social distancing
measures will be applied in all dealerships.
Our Health and Safety Dashboard, which focuses on key risk areas within the Dealerships, is
a cornerstone of our processes with consistent reporting on any shortfalls being provided to
the Board. This has allowed us to quickly identify any locations where the required level of
concentration on this critical area is falling short and allows us to generate corrective actions.
In order to manage the Health and Safety risk involved in driving, telematics devices are fitted
into the cars of the Group’s younger drivers, as they are our largest risk population, and this
system gives us real time reporting on driver behaviour.
During the year, the Group’s systems for monitoring compliance with Health and Safety were
subject to external audit. In addition, Group locations also received an independent external
audit carried out without prior warning to assess adherence to our Health and Safety
Operating System. The results of these audits have been encouraging with most Dealerships
scoring very highly, and only a small number of failed audits which resulted in immediate
corrective action. The audit output also provides a list of improvements to be addressed at
each dealership and attending to these will again raise the bar on delivering a safe
environment for Customers and Colleagues.
Vertu Motors plc (Company Number: 05984855)
32
Colleagues
Engaging our Colleagues
The development and motivation of colleagues is one of the Group’s core strategic objectives.
The Group seeks to fulfil the career aspirations and potential of all colleagues. The Board
seeks to create an environment in which every colleague feels valued in everything that they
do and takes pride in their contribution to the Group. The enthusiasm and dedication of
colleagues is a vital factor in the Group’s success.
The Group is committed to providing colleagues with information on matters of interest to
them on a regular basis. Individual achievement is recognised publicly and privately to
reinforce behaviours in line with the Group’s Values and Mission Statement. ‘Working
together’ is vital when developing a successful team and at the very heart of this is good
communication. The Group utilises many formal and informal channels to achieve this. For
example, the CEO and CFO produce regular vlogs and blogs and regular news updates are
emailed to colleagues, posted onto the Group wide intranet site or included in monthly Team
Briefs. Additionally, the Group produces online newsletters, which feature news stories from
colleagues working across the Group’s network of dealerships. Each General Manager
undertakes a monthly Team Brief, updating colleagues in small groups on relevant issues
impacting the Group, their operating division and the dealership. These meetings seek to
reinforce the Group’s values and contribute to the creation of a Group culture.
The Group operates several award schemes covering all colleagues. These schemes are
intended to recognise and reward talented and committed individuals throughout the Group.
One such scheme is the CEO Management Awards, which are announced each December
and recognise a number of managers for their outstanding performance. The Group also
operates ‘The Masters’ Awards’, through which colleagues throughout the Group can
nominate their co-workers for awards linked to demonstration of the Group’s Values. These
awards reinforce the Group’s culture through the recognition of those behaviours which
exemplify the Values. The Masters Awards also have a number of categories that cover
individual performance based on achievement of specific performance targets. This facilitates
engagement through competition, as the associated league tables of performance are
communicated throughout the Group. The recipients range from sales executives, service
advisors and technicians to drivers, cleaners, valeters and receptionists, with a category to
cover every dealership-based colleague.
The Group also recognises colleagues with long service, with specific recognition for those
reaching 10 and 20 years within the Group. This recognition programme includes celebratory
social events, which bring together long-serving colleagues and the Group’s senior
management team as a thank you for their commitment. These colleague award
programmes are designed to reward and reinforce behaviours underpinning both Group
financial performance and other strategic objectives including the delivery of an outstanding
customer experience. The Group’s seeks colleague feedback through an annual colleague
satisfaction survey. Overall colleague engagement in this year’s survey increased to 84% in
October 2020 (2019 81%). 87% of responding colleagues would recommend the Group to
someone they know as a great place to work (2019: 84%).
Vertu Motors plc (Company Number: 05984855)
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Colleagues (continued)
In order to develop a culture that is positive and contributes to the Group performance, seven
core values are used extensively in the business to signpost desired behaviours. These are
as follows:
Values
• Passion
We are proud of our Company and dedicated to its purpose. We are enthusiastic, enjoy
challenges and are eager for success.
• Respect
We are friendly and courteous in all our relationships with colleagues, customers and
suppliers.
• Professionalism
We are reliable and consistent and we excel in the standards and presentation of our
people, products and premises.
•
Integrity
We are trustworthy and honest in all that we say and do and take responsibility for our
own actions.
• Recognition
We appreciate the endeavours of our colleagues. We praise their achievements and
enjoy celebrating their success.
• Opportunity
We have a vision of what can be achieved and provide colleagues with personal
development, supportive training and exciting career progression.
• Commitment
We are all determined to achieve total customer satisfaction by providing a service built
on trust.
Promoting Diversity and Inclusion
The Group has always focused on the recruitment and promotion of colleagues who embody
the five unteachable attributes, namely, Character, Attitude, Energy, Drive and Talent. All
appointments are made solely based on a person's suitability for a particular post and without
reference to gender, sexual orientation, age, ethnic origin, religion or disability (except when
there is a genuine occupational requirement). The principle of equality also applies to career
development opportunities and training. That said, the industry in which we operate has
traditionally attracted more male applicants. Colleagues are comprised 23% female and 77%
male currently and therefore there is more to do in achieving a greater balance in this area.
The Group is a member of the Automotive 30% Club, which is focused on achieving a better
gender balance within the automotive industry, and with the aim of filling at least 30% of key
leadership positions in the member organisations with women by 2030 through a “30 by 30”
strategy.
The Group's aim is to attract and retain the best people in the automotive retail sector while
observing best practice in employment policies and procedures through a commitment to:
• Offering equal opportunities in recruitment and promotion;
• The continuous development of all colleagues;
• Encouraging internal promotion;
• Using progressive, consistent and fair selection methods;
• Offering family friendly policies and ensuring colleagues are treated with respect and
dignity in an environment where no form of intimidation or harassment is tolerated.
Employment career progression and development of disabled people is considered on merit
with regard only to the ability of the applicant to carry out the function required. Arrangements
to enable disabled people to carry out the function required will be made if it is reasonable to
do so. A colleague becoming disabled would, where appropriate, be offered retraining and
support to continue in their role where possible.
Vertu Motors plc (Company Number: 05984855)
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Colleagues (continued)
Number of Group colleagues by gender:
At 28 February 2021
At 29 February 2020
Female
Male
Total
Female
Male
Total
Directors
Group Senior Managers
2
5
4
55
6
60
2
6
4
47
6
53
All Colleagues
1,350
4,401
5,751
1,474
4,470
5,944
Learning and Development
The Group invests in the personal development of every colleague.
The Group’s ‘Active Training’ team provide programmes ranging from sales process training
to management and leadership development as well as compliance and technical training. All
colleagues also have access to an e-learning platform containing a wide range of relevant
modules. Certain e-learning modules are set as required learning whilst others can be
accessed to widen a colleague’s understanding beyond what would be expected for their role.
In response to restrictions imposed in respect of COVID-19, training courses were delivered
remotely by the Group’s training team to ensure that the Group’s colleagues continued to be
developed throughout.
A significant Leadership development programme, in partnership with Dale Carnegie, is also
in operation. Selection for development through the Group’s leadership programmes is made
through the application of a talent strategy model, which links both current performance and
an individual colleagues potential. 10% of the Groups management will progress through
these programmes during FY22.
The Group also operates a substantial apprenticeship programme in partnership with the
Group’s Manufacturer partners, with over 220 apprentices currently engaged in training.
Additionally, a Degree Apprenticeship programme in partnership with Northumbria University
is used to attract talented individuals who may otherwise go to University outside the sector to
join the Group. The Group expects to have between 20-30 of these Degree Apprentices in
training during FY22.
The Group also offers access to an ‘Evolution’ programme which provides a development
path for promising colleagues in the areas of sales, aftersales and finance to line
management roles.
Whistleblowing
The Group has a long-established whistleblowing policy and process, where all colleagues
may, in confidence, report any concerns where the interests of the Group or others are at risk.
Colleagues are encouraged in this first instance to talk to their line manager, member of the
HR team or a higher level of management. Where the circumstances mean this is not
possible, or is inappropriate, colleagues can access and independent, external whistleblowing
helpline.
All reports received via this helpline are treated in the strictest confidence and are typically
investigated by the Group’s employee relations team. The output of these investigations is
reviewed by the Group HR Director, General Counsel and other senior management
colleagues as appropriate, dependent upon the nature of the complaint.
Anti-fraud, Bribery and Corruption
The Group has an anti-corruption and bribery policy which sets out the standards that are
expected of colleagues and the procedures in place to minimise the opportunity for corrupt
behaviours. The policy applies to all colleagues and includes guidance on the giving,
receiving, and recording of business gifts and hospitality.
A fraud register is maintained by the Group, any items recorded on this register are
investigated by the Group Head of Risk and are reported to the Audit Committee.
Vertu Motors plc (Company Number: 05984855)
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Colleagues (continued)
Preventing Modern Slavery
Modern slavery is a crime and a violation of fundamental human rights. It takes various forms,
such as slavery, servitude, forced and compulsory labour and human trafficking, all of which
have in common the deprivation of a person's liberty by another in order to exploit them for
personal or commercial gain. The Group applies a zero-tolerance approach to modern
slavery and is committed to acting ethically and with integrity in all our business dealings and
relationships and to implement and enforce effective systems and controls to ensure modern
slavery is not taking place anywhere in our own business or in any of our supply chains.
Vertu Motors plc (Company Number: 05984855)
36
Risk Management
Process
THE BOARD
Responsibility for identifying significant risks, determining the Group’s risk appetite and oversight of the principal
risks to the Group’s strategic objectives
HEALTH AND SAFETY
COMMITTEE
Delegated responsibilities for
compliance with Health & Safety
and Environmental law and
regulations
AUDIT COMMITTEE
Delegated responsibility from
the Board for risk management
and Internal Controls
COMPLIANCE COMMITTEE
Delegated responsibility from the
Board for Compliance and
Whistleblowing
INTERNAL AUDIT
Responsibility for reviewing financial and operational controls, monitoring risk capture and mitigating actions,
reporting to the Audit Committee
CHIEF EXECUTIVE’S (CEO) COMMITTEE
Key day to day risk oversight is managed through the CEO Committee which is chaired by
the Group Chief Executive Officer
Financial and Business Reporting
The Board is responsible for presenting a fair, balanced and understandable assessment of
the Group’s position and prospects. A statement of the Directors’ responsibilities for
preparing the Annual Report and financial statements is set out on page 70. The statement
by the auditors about their reporting responsibilities is given on pages 77 and 78.
Risk Management and Internal Controls
The Board is responsible for establishing and maintaining adequate internal controls over
regular financial reporting for the Group, including the consolidation process. There is a
comprehensive system of internal controls in place, including the Annual Business Plan
(“Plan”) which is reviewed and approved by the Board. Monthly actual results are reviewed
by management against both the Plan and prior year results. All data to be consolidated in
the Group’s financial statements is reviewed thoroughly by management to ensure that it
complies with relevant accounting policies and the financial reporting presents a true and fair
reflection of the financial performance and position of the Group.
The Board has overall responsibility for risk management and is advised of key risks facing
the Group on a regular basis with a formal review of the most significant risks annually, or
more frequently if required. The Board takes a proactive approach to the management of all
forms of risk, and views risk management as a vital constituent of its commitment to provide
value protection and growth for its various stakeholders. The internal controls system is
designed to manage, rather than eliminate, the risk of failure to achieve the Group's
objectives and can, therefore, only provide reasonable, rather than absolute, assurance
against material misstatement or loss. The Board regularly reviews the risks to which the
Group is exposed, as well as the operation and effectiveness of the system of internal
controls.
The day-to-day responsibility for compliance and certain regulatory activities has been
delegated to the Compliance Committee, chaired by the COO and made up of members of
senior management including the CFO and Company Secretary. This includes the Group’s
compliance with regulation under the requirements of the Financial Conduct Authority (FCA),
the Advertising Standards Authority, the Trading Standards Institute, the Data Protection Act
and all other applicable regulations.
Oversight of health and safety and environmental regulatory risk is delegated to the Health
and Safety Committee, made up of members of senior management.
Vertu Motors plc (Company Number: 05984855)
37
Risk Management (continued)
Risk Management and Internal Controls (continued)
The Board's approach involves identification of material risks that may restrict the Group's
ability to meet its objectives, the assessment of these risks in terms of impact, likelihood and
control effectiveness, and the establishment of risk management strategies. For some key
risks, where it is considered necessary, specialist advice is sought from external agencies
and professional advisers.
Principal Risks and Uncertainties
There are certain risk factors which could result in the actual results of the Group differing
materially from expected results. These factors, as set out below, are not an exhaustive list of
all the potential risks and uncertainties that could adversely impact the Group’s results:
STRATEGIC
Description of risk
Impact
Mitigation
❶ Failure to deliver on
the strategic goal of the
Group to acquire and
consolidate UK motor
retail businesses
Stalled growth of the
Group and associated
shareholder returns
Reputation risk
❷ Failure to meet
competitive challenges
to our business model
or sector
Loss of customers to
competitors
Reduced profitability
❸ Advances in vehicle
technology provide
customers with mobility
solutions which bypass
the dealer network
Business model
becomes obsolete
• Maintain strong relationships with manufacturer
partners to ensure that the Group remains a valued
and relevant candidate for any potential franchised
network development opportunities
• Thorough reviews of acquisition opportunities to
ensure Group investment hurdles are met
• Established process for swift integration of acquired
businesses into the Group
• The Group’s scale, technological capability and
diversification creates the ability to capitalise on
market opportunities
• Omni-channel development / digital progress
• Customer experience focus of the Group attracts
customer loyalty
• Ongoing monitoring to identify emerging competitive
threats and act on these quickly
• Maintain strong relationships with manufacturer
partners to work closely with them as the future shape
of the sector evolves
• Establish sufficient scale with manufacturer partners
to ensure the Group is a key part of their route to
market
• Provide manufacturer partners with excellent retail
facilities and customers with excellent services, to
ensure Group is successful in the event of significant
industry consolidation
• Building on the Group’s established on-line sales
capability
BRAND PARTNERS AND REPUTATION
Description of risk
Impact
Mitigation
❹ Inability to maintain
current high quality
relationships with
manufacturer partners
Impact on our ability to
retain existing contracts
and to take on new
opportunities for growth
• Group Vision and Values set the tone from the top to
deliver strong service to our Group stakeholders
• Constant focus on improvement in performance and
effective communication with our manufacturer
partners to ensure that our objectives are closely
matched to theirs
Vertu Motors plc (Company Number: 05984855)
38
Risk Management (continued)
Principal Risks and Uncertainties (continued)
ECONOMIC, POLITICAL AND ENVIRONMENTAL
Description of risk
Impact
Mitigation
❺ Economic conditions,
including the lasting
effects of the
measures taken to
tackle COVID-19
❻ Market and
environmental
considerations may
drive fluctuation in
used vehicle values
Volume and margin are
affected particularly in
vehicle sales
Amendments to
franchise contracts,
embracing new
legislation
Used vehicle margin is
affected and value of
used vehicle inventory
may decline
LEGAL AND REGULATORY
• Close monitoring of UK economic conditions
• Maintain close relationships with manufacturer partners
• Focus on retention initiatives particularly in aftersales
• Focus on cost control
• Daily monitoring of used vehicle market to detect pricing
movements
• Real time inventory management and control to enable
the Group to react quickly to pricing changes
Description of risk
Impact
Mitigation
❼ Litigation and
regulatory risk in an
environment of ever
increasing regulatory
scrutiny
Litigation or breaching
regulations could have a
financial impact and/or
reputational impact
• Standard Group-wide policies and procedures are in
place to ensure compliance with relevant regulations,
adherence to which is overseen by the Compliance
Committee
❽ Failure to comply with
Health and Safety
(H&S) Policy
Injury to customers or
colleagues
•
In-house developed sales system to ensure regulatory
compliance and ease of customer journey, with key
checks in place.
• Risk management programme in place aimed at
preventing issues in the first instance but also providing
appropriate response to any issues that do arise
• Continuation of Group focus on customer experience
and a partnership approach with its manufacturer
partners, to minimise impact of regulatory changes, and
ensure continued customer relationship
• Group has a dedicated H&S Manager
• Group H&S Committee monitors compliance and
recommends any corrective or preventative actions
• Risk assessments in respect of COVID-19 carried out in
all locations
• Training for all colleagues
• Specific H&S dashboard developed, monitoring KPIs
•
Independent external H&S audits carried out
COLLEAGUES
Description of risk
Impact
Mitigation
❾ Failure to attract,
develop and retain
talent
Unable to deliver on
business plans
Colleagues who lack
motivation and
engagement
• Annual colleague satisfaction survey and action
planning based upon the results
• Significant investment in on-line and formalised training
and development programmes delivered by in-house
training department and external trainers as appropriate
• Talent review and succession plans in place
Vertu Motors plc (Company Number: 05984855)
39
Risk Management (continued)
Principal Risks and Uncertainties (continued)
SYSTEMS AND TECHNOLOGY
Description of risk
Impact
Mitigation
❿ Failure of Group
Business is interrupted • Robust business continuity process has been
Information or
telecommunication
systems
developed
• Operation of this process is regularly tested, reviewed
and updated as necessary
⓫ Group or key system
Business is interrupted
• Robust business continuity process has been
provider is targeted for
malicious cyber attack
Data is compromised
• Policy prohibits installation of non-Group software
developed
• Firewall and anti-virus protocols active and reviewed
regularly
• Penetration and vulnerability testing reviewed regularly
to assess new threats
FINANCE AND TREASURY
Description of risk
Impact
Mitigation
⓬ Availability of credit
and vehicle financing
1. ⓭ Use of estimates
⓮ Currency risk
Inability to secure
funding impacting on
distribution sales or
expansion opportunities
• Detailed working capital cash flow monitoring in place
• Maintain relationships with key banks
• Leverage Group relationship with OEM finance
companies and retail finance providers
Variance in accounting
judgement impacts
profitability
• Key accounting judgements are reviewed on a regular
basis to ensure these remain appropriate
• Regular review of changes in accounting standards
framework to assess any likely impact on the Group
• Portfolio of manufacturer partners spreads potential
risk
• No material foreign exchange transactions are
undertaken directly by the Group
Fluctuation in exchange
rates impact the
profitability of our
manufacturer partners
which may change their
prices or support
packages to the dealer
network
.
Vertu Motors plc (Company Number: 05984855)
40
Viability and Going Concern
Viability Statement
Assessment of Prospects
The Group’s business model and strategy are central to an understanding of its prospects.
The Group’s strategy is to grow a scaled automotive retail group in both volume and premium
motor retail franchises, by acquisition or organic growth through enhanced performance.
Further details of the Group’s strategy can be found in the Strategic Report. The nature of the
Group’s activities is long-term, and the business model is open-ended.
The Assessment Process and Key Assumptions
The Group’s prospects are assessed primarily through its strategic planning process. This
process includes a detailed annual business plan review, led by the CEO through the Chief
Executive’s Committee.
The Board participates fully in the annual process through both the review and approval of the
annual business plan and through annual strategic reviews. Part of the Board’s role is to
consider whether the plan continues to take appropriate account of the external environment
including macroeconomic, political, social and technological changes. The output of the
annual review process is an analysis of the risks that could prevent the plan from being
delivered and financial forecasts highlighting the impact of the strategic plan. The latest
updates to the strategic plan were finalised in February 2021 following this year’s review.
This considered the Group’s current position and the development of the business as a
whole, and the Board assessed the viability of the Company over the three-year period to 28
February 2024.
The Directors believe that a three-year period is appropriate as the Group’s financial
forecasting encompasses this period.
Financial forecasts were prepared for the three-year period to 29 February 2024, so that two
years nine months remains at the time of approval of this year’s annual report. The first year
of the financial forecasts comprised of the Group’s detailed business plan. Years two and
three of the forecasts are extrapolated from the first year, based on the overall content of the
strategic plan.
The key assumptions in the financial forecasts, include:
• The core group with no acquisitive growth beyond a known pipeline, reflecting the
Strategic and Brand Partners principal risks set out on page 38 of the Strategic
Report.
• Prudent growth assumptions in both volume and margin, reflecting the risks set out
on pages 38 to 40 of the Strategic Report.
The Board carried out a robust assessment of the principal risks facing the Group and the
purpose of the principal risks on pages 38 to 40 is primarily to summarise those matters that
could prevent the Group from implementing its strategy. A number of other aspects of the
principal risks, because of their nature or potential impact, could also threaten the Group’s
ability to continue in business in its current form if they were to occur. This was considered as
part of the assessment of the Group’s viability, as explained below.
Assessment of Viability
Although the strategic plan reflects the Directors’ estimate of the future prospects of the
business, the Board has also considered the potential impact on the Group of a number of
scenarios over and above those included in the plan, that would represent serious threats to
its liquidity. The principal risks and mitigation steps that the Board considered as part of this
viability assessment are set out in pages 38 to 40 of the Strategic Report. The Group also
mitigates the principal risks it faces through the diverse revenue generation from all parts of
the vehicle cycle, range of franchise representation and investment in complementary
business streams together with regular monitoring to identify change quickly. The Board
believes that the Group is well placed to manage its business risk successfully.
Vertu Motors plc (Company Number: 05984855)
41
Viability and Going Concern (continued)
Viability Statement (continued)
Assessment of Viability (continued)
Based on their assessment of prospects and viability as set out above, the Directors confirm
that they have a reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the three-year period ending 29 February 2024.
Going Concern
By their very nature forecasts and projections are inherently uncertain. Based on what is
known at this time and based upon the forecast information available, the Directors believe it
appropriate to prepare accounts under the going concern basis. Therefore, the financial
statements do not include the adjustments that would result if the Group and Company were
unable to continue as going concerns.
On behalf of the Board
Robert Forrester
Chief Executive Officer
12 May 2021
Karen Anderson
Chief Financial Officer
12 May 2021
Vertu Motors plc (Company Number: 05984855)
42
Corporate Governance Report
Chairman’s Corporate Governance Statement
I am pleased to present the Group’s Corporate Governance Report for this year. As
Chairman, my role is to lead the Board, ensuring it operates effectively, and I take overall
responsibility for the governance framework of the Company. I have worked with the
Company Secretary and the Executive Directors throughout the year to continue to develop
the Company’s governance structures and practices and to improve its wider Environmental,
Social & Governance (ESG) Strategy, and then to provide this report.
We continue to report under the QCA Corporate Governance Code (“QCA Code”) and this
report sets out how we comply with, and have applied, the principles and Code during the
year.
As previously stated, the Group has a successful year, continuing to deliver on its strategy
and achieving creditable financial results. This is despite, in the initial weeks of the financial
year, the Board moving its focus to the Company’s response to the impact of COVID-19,
providing oversight and approving a number of updates to the market and measures to
preserve the Group liquidity. The Board continues to work and interact well together and held
frequent conference calls at which it received updates on the status of the response planning
and the impact on our employees, other stakeholders and the business. The ability to remain
nimble and adapt remained as restrictions continued throughout the financial year. The
challenges of the last year have not prevented the Board from reviewing and strengthening its
governance and wider ESG processes, and the changes made will be essential in supporting
the long-term success of the Group and to communicating effectively with stakeholders on the
Group’s priorities and targets.
The Group has published its first long-term Sustainability Strategy ‘Driving Sustainability’ in
this annual report (pages 29 to 31). The strategy, builds on the Group’s long track record of
making a positive contribution to Colleagues and the communities it operates in, outlines the
Company’s ambition to drive the sustainability agenda in the years ahead. The strategy
includes ambitious targets and goals aligned to the strategic objectives of the Group. The
sustainability strategy will also be made available on the Group’s website.
The Group has had a consistent set of Values since its inception. These values are at the
heart of Group culture and are embedded throughout the Group as described in the earlier
Group Strategy and Colleagues sections. All decisions by the Board reflect these Values to
ensure that the culture is maintained and all Group premises display and actively refer to the
Values regularly. The colleague feedback survey indicated that this culture continues to be
very strong -and has improved throughout the last year despite the challenges faced by
colleagues. The Board reviews this in detail each year -as well as the results of the quarterly
snapshot of colleague sentiment about the Group.
Changes During the Year
There have been no changes to the Board during the year. However, the expected term of
Ken Lever’s Non-executive directorship has been extended for a further 3 years to 2024 as
Ken continues to make a significant and vital contribution.
It has been agreed that the Board will appoint a designated Non-executive Director to ensure
effective engagement with the Groups’ colleagues outside of the current feedback routes.
Pauline Best will take on this role which will be developed over the coming year.
The Board delayed its annual board evaluation process this year and will undertake this when
physical meetings are possible again and the operation of the Group has returned closer to
normal. For this reason, the normal disclosures in respect of Principle 7 have not been
included. Annual appraisals of the Executive Directors, with the CEO appraised by the
Chairman, have continued as normal.
This year’s Annual General Meeting (“AGM”) will be held on 23 June 2021.
Andrew Goss
Non-executive Chairman
12 May 2021
Vertu Motors plc (Company Number: 05984855)
43
Corporate Governance Report
QCA Code Principle
Where to find out more (page)
1. Establish a Strategy and business model which promotes long-
Group Strategy - pages 9 – 16
term value for shareholders.
2. Seek to understand and meet shareholder needs and
investors.vertumotors.com
expectations.
3. Take into account wider stakeholder and social responsibilities
s172 statement - pages 4 – 7
and their implications for long-term success.
4. Embed effective risk management, considering both opportunities
Risk Management - pages 37 – 40
and threats, throughout the organisation.
5. Maintain the Board as a well-functioning balanced team led by the
Board Leadership - pages 45 – 48
Chair.
6. Ensure that, between them, the Directors have the necessary up-
Board Leadership - pages 45 – 48
to-date experience, skills and capabilities.
7. Evaluate Board performance based on clear and relevant
objectives seeking continuous improvement.
8. Promote a corporate culture that is based on ethical values and
behaviours.
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board.
Not applicable this year
Group Strategy - pages 9 – 16
Colleagues - pages 33 – 36
Roles and Responsibilities – page 50
Division of Responsibilities – page 49
investors.vertumotors.com
10. Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other stakeholders.
Division of Responsibilities - page 49
Audit Report - pages 71 – 78
Remuneration Committee Report - pages 56 – 61
investors.vertumotors.com
Vertu Motors plc (Company Number: 05984855)
44
Board Leadership
Board of Directors
The Board has three Non-executive Directors including the Chairman, together with three
Executive Directors. The Chairman was considered independent on appointment and the
other Non-executive Directors are considered to be independent.
Andrew Goss
Non-Executive Chairman
Relevant Experience
Appointed 3 September 2018 as director
24 July 2019 as Chairman
Committee Membership
Audit Committee, Remuneration Committee, and
Chair of the Nominations Committee
Andrew (63) brings to the Group 40 years of experience in the automotive sector, having held
senior roles in Citroen UK, Nissan Europe, Lexus (GB), Toyota (GB), Porsche and most
recently Jaguar Land Rover. Between 2010 and 2013 Andrew headed Jaguar Land Rover’s
business in North America as its President and CEO, and between 2013 and 2018 he sat on
the Jaguar Land Rover Board as Global Sales Operations Director. During this period, he
also represented Jaguar Land Rover in its joint venture interests in China and in its Spark 44
advertising agency.
Ken Lever
Senior Independent Director
Relevant Experience
Appointed 1 June 2015
Committee Membership
Remuneration Committee, Nominations
Committee and Chair of the Audit Committee
Ken (67) is a former partner of Arthur Andersen and has held senior executive director roles
in many listed companies including Alfred McAlpine plc, Albright & Wilson plc and Tomkins
plc. Ken was CFO of Numonyx in Switzerland from April 2008 to September 2010 and was
CEO of Xchanging plc from June 2011 until December 2015. From 2007 to 2013, Ken was a
Member of the Accounting Council of the Financial Reporting Council (formerly the UK
Accounting Standards Board).
Ken is highly experienced in public company boardrooms as well as PLC transactions and
also brings technical financial experience to the Board and his role as Chair of the Audit
Committee.
External Appointments
Ken is Non-executive Chairman of Biffa plc and RPS Group plc and a Non-executive Director
of Blu Prism plc and Gresham House Strategic plc.
Pauline Best
Non-Executive Director
Relevant Experience
Appointed 31 May 2016
Committee Membership
Audit Committee, Nominations Committee and
Chair of the Remuneration Committee
Pauline (57) is an experienced Human Resources professional who was the Global People
and Organisation Director of Specsavers and whose previous roles include Global Leadership
and People Capability Director for Vodafone and Human Resources Director of Talkland.
Pauline’s human resources and people experience
the
Remuneration Committee and she also brings that perspective to the Board. In the next year,
Pauline’s skills will be further utilised as the designated non-executive director for workforce
engagement.
invaluable as Chair of
is
Vertu Motors plc (Company Number: 05984855)
45
Board Leadership (continued)
Board of Directors (continued)
Robert Forrester
Chief Executive Officer
Relevant Experience
Appointed 6 November 2006
Robert (51) was a Director of Reg Vardy plc between 2001 and 2006 where he held the roles
of Finance Director and Managing Director. Robert qualified as a chartered accountant with
Arthur Andersen. He was also a member of the Economic Growth Board of the
Confederation of British Industry. Robert founded the Company in 2006.
David Crane
Chief Operating Officer
Relevant Experience
Appointed 26 July 2018
David (53) was appointed as Commercial Director of the Group in February 2007 having been
previously at Reg Vardy PLC since 1999. He was Commercial Director of Reg Vardy PLC
between 2004 and 2006, until the sale of Reg Vardy PLC to Pendragon PLC in February
2006, at which point he was appointed Group Services Director of Pendragon PLC. Prior to
his employment with Reg Vardy PLC he was Aftersales Operations Manager at Renault UK
between 1991 and 1999. He was appointed to the position of COO in March 2016.
Karen Anderson
Chief Financial Officer
Relevant Experience
Appointed 1 March 2019
Karen (49) was the Finance Director of the Group from 2006 to 2010 through its initial
flotation and growth period, and stepped back into the Chief Financial Officer role from her
role as Deputy CFO and Company Secretary.
From 2001 to 2006 she was employed by Reg Vardy PLC, where she ultimately held the
position of Group Financial Controller. Karen qualified as a chartered accountant with Arthur
Andersen. She was also a Trustee Director of the Group’s defined benefit pension scheme,
the Bristol Street Pension Scheme from 2007 to 2019.
Karen has a wealth of motor industry finance experience together with detailed knowledge of
the operations of the Group, having helped to found the Company in 2006.
Board Meetings and Attendance
Board meetings are structured to allow the Board sufficient time to discuss and review
financial performance, achievement of objectives, development of the Group’s strategy,
operational performance and risk and internal controls. Standing agenda items are discussed
at each Board meeting, which include:
• Executive’s Directors Reports – update on performance, strategic opportunities,
industry and property matters compliance update and colleague matters
• Health and Safety Report – Summary of training undertaken throughout the Group,
•
risk management plus commentary on any reported incidents
Investor Relations (‘IR’) Report – update on market trends, share register movements
and summary of IR activity
Vertu Motors plc (Company Number: 05984855)
46
Board Leadership (continued)
Board Meetings and Attendance (continued)
During the financial year the Board has met formally 23 times via Teams video call. The
number of meetings attended by each Director was as follows:
BOARD
MEETINGS
AUDIT COMMITTEE
MEETINGS
NOMINATION
COMMITTEE
MEETINGS
REMUNERATION
COMMITTEE
MEETINGS
SCHEDULED ATTENDED SCHEDULED ATTENDED SCHEDULED ATTENDED SCHEDULED ATTENDED
23
23
23
23
23
23
23
23
23
23
23
23
4
4
4
4
4
4
4
1
1
4
4
4
2
2
2
2
2
2
2
1
-
-
2
2
6
6
6
6
6
6
6
3
-
-
6
6
A P Goss
R T Forrester
D P Crane
K Anderson
K Lever
P Best
Conflicts
Any potential conflicts of interest with individual Directors are reviewed annually to ensure that
there is no impact on a director’s judgement. The Board’s committees have non-executive
membership or leadership, where appropriate.
Time Commitment
All Non-Executive Directors are required to devote sufficient time to meet their Board
responsibilities and demonstrate commitment to their role, including understanding the
Group’s business. The time commitment varies for each individual Director but as a minimum
two days per month is expected. All Executive Directors are full-time and are ordinarily
expected to devote their full time and attention to the Group.
Additional Appointments
All Directors are required to consult with the Chairman and obtain Board approval before
taking on any additional appointments. Executive Directors are not permitted to take on any
other substantial appointment. As part of the selection process for any new Board
candidates, any significant external time commitments are considered before an appointment
is agreed.
Access to Advice
Should any Director judge it necessary to seek independent legal advice about the
performance of their duties with the Company, they are entitled to do so at the Company’s
expense. All Directors have access to the advice and services of the Company Secretary for
advice on their responsibilities or relevant regulation for advice on their responsibilities or
relevant regulation. The Senior Independent Director also acts as a sounding board for
Directors to ensure they benefit from his experience.
Vertu Motors plc (Company Number: 05984855)
47
Board Leadership (continued)
Key Areas of Board Focus During the Year
STRATEGY
FINANCIAL
PERFORMANCE
GOVERNANCE
SHAREHOLDER
ENGAGEMENT
RISK
Immediate and
ongoing response to
the COVID-19
related restrictions
Approval of the
FY2020 full year
results and FY2021
interim results
Group strategy
review
Business
development
Reviewing M&A
opportunities
Approval of annual
business plan and
capital budget
Review of colleague
engagement survey
Monthly
management
accounts and
comparison against
annual business plan
Long range forecast
and funding
requirement planning
including the impact
of COVID-19
restrictions on the
liquidity requirements
and debt covenants
of the Group
Annual review of key
Group risks and
mitigating controls
Re-appointment of
auditors
Annual General
Meeting
Monitoring
Compliance and
Health and Safety
Committees
Monitoring Senior
Managers and
Certification Regime
by the FCA regulated
entities in the Group.
Meetings with key
shareholders on
results roadshows
Publication of regular
updates in respect of
the impact of the
COVID-19
restrictions on the
Group
Monitoring the
culture and Values
including colleague
survey feedback
Implementation of
amended retail
finance commission
models following
FCA publication of
Motor Finance
Review
Vertu Motors plc (Company Number: 05984855)
48
Division of Responsibilities
The table below shows the key committees and their responsibilities.
AUDIT COMMITTEE REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
CEO COMMITTEE COMPLIANCE
COMMITTEE
Members
PLC BOARD COMMITTEES
• K Lever (Chair)
• A P Goss
• P Best
• P Best (Chair)
• K Lever
• A P Goss
• A P Goss (Chair)
• K Lever
• P Best
• R T Forrester
(Chair)
• D P Crane
• K Anderson
• N Loose
• 10 Senior
Managers
Delegated
authorities
• Financial reporting
• Financial risk
management
• Internal control
• Remuneration
• Balance of the
• Review,
policy
Board
• Incentive plans
• Performance
targets
• Leadership of the
Group
• Director
succession
planning
communication,
delivery and
management of
Group strategy
and day to day
operations
• D P Crane (Chair)
• K Anderson
• N Loose
• 2 Senior Managers
• Compliance with
laws and
regulations
(excluding Health &
Safety and
environmental)
• Whistleblowing
procedures
• Communication
with regulators
where required
Reviews
• Full year and half
year results
• Accounting policies
• Terms of
engagement of
auditors
• Internal audit
• Achievement of
performance
targets for short
and long term
incentives
• Senior
management pay
structure
• Composition of
• Group HR and IT
• Adequacy and
the Board
strategy
• Skills, knowledge
& experience on
the Board
• Diversity
• Allocation of
resources
(financial and
colleague)
• Group
performance
effectiveness of
Group policies in
response to current
law and regulation
• Licences and
consents required
• Internal regulatory
audit
HEALTH AND
SAFETY
COMMITTEE
• 4 Senior
Managers
• H & S Manager
• Compliance with
Health & Safety
and
environmental
law and
regulations
• Developing
Group best
practices
• Health & Safety
policies and
procedures
• Health & Safety
audits
• Accident
statistics and
causes
Recommends
• Re-appointment of
• Level and
auditors
• Audit tender
• Auditors’
remuneration
structure of
Executive
remuneration
• Remuneration
policy
• Appointments to
the Board
• Annual business
plan to the Board
• Training
• Policy change
• Training
• Policy change
• Group Vision
• Remedial or pre-
emptive action
• Remedial or pre-
emptive action
Monitors
• Integrity of financial
statements
• Effectiveness of
internal controls
and risk
management
• Internal audit
function
• Legal & regulatory
requirements
• External audit
• Statements in
Annual Report
concerning internal
controls and risk
management
Approves
• Appropriateness
of Remuneration
policy
• Independence of
Non-Executive
Directors
• Succession
planning
• Performance
against key
performance
indicators, plans
and prior year
• Compliance with
Group risk
management
strategy, policy
and procedures
• Appropriate retail
finance metrics
• Indicators of non-
compliance with
policy
• Any relevant
complaints
• Legal and
regulatory
developments
• Accidents and
near misses
• Changes to law
and regulations
• New sites to the
Group and
redevelopments
• Other changes in
working practice
• Remuneration
• Appointments for
• Appointments to
• Reports to the
• Reports to the
Executive
Directors
• Skills profile for
Non-Executive
Directors
policy
• Remuneration
packages for
Executive
Directors
• Design of long
term incentive
plans
dealership
management
positions
• Performance
related
remuneration of
dealership
colleagues
• Operational
process and
changes
Board
Board
• Submissions to
• Changes to
relevant authorities
relevant policies
• Training
programmes
• Changes to
relevant policies
and processes
• Training
programmes
• Whistleblowing
procedures
Vertu Motors plc (Company Number: 05984855)
49
Division of Responsibilities (continued)
Roles and Responsibilities
Chairman –
Andrew Goss
Senior Independent Director –
Ken Lever
Non-executive Director –
Pauline Best
Chief Executive Officer –
Robert Forrester
The Chairman leads the Board and is responsible for its overall
effectiveness in directing the Company. He promotes a culture of
openness and debate facilitating constructive Board relations and
the effective contribution of all Non-Executive Directors, and
ensures that the Board receive accurate, timely and clear
information.
The Senior Independent Director (SID) is an independent Non-
Executive Director, who provides a sounding board for the Chairman
and serves as an intermediary for the other Directors and
shareholders where necessary. The SID also leads the annual
appraisal and review of the Chairman’s performance.
As Non-Executive Director, Pauline is responsible for bringing an
external perspective, sound judgement and objectivity to the Board’s
deliberations and decision making, and to support and constructively
challenge the Executive Directors using her broad range of
experience and expertise. She will also act as the nominated non-
executive director for workforce engagement from 2021.
The Chief Executive Officer is responsible for the day-to-day running
of the Group’s businesses and the development and implementation
of strategy, decisions made by the Board and operational
management of the Group, supported by the Group Executive and
Senior Management Teams.
Chief Operating Officer –
David Crane
The Chief Operating Officer supports the Executive Management
Team in developing and implementing strategy and is responsible
for the oversight of the day-to-day administrative and operational
functions of the Group.
Chief Financial Officer –
Karen Anderson
The Chief Financial Officer, oversees the day-to-day financial
activities of the Group, including ensuring that Group financial and
operating policies and practices are adopted at all levels of the
Group.
Vertu Motors plc (Company Number: 05984855)
50
Nominations, Composition and Succession
The Nominations Committee continually reviews board composition to ensure that the Board
provides the Group with the strategic oversight, vision and governance that it needs.
Ordinarily, Non-executive Directors serve for a maximum of six years.
The Nominations Committee has carried out an assessment of the skills and experience of
the Directors to identify any areas of weakness that can be addressed through training or
future recruitment to the Board. The Board is currently satisfied that its current composition
includes an appropriate balance of experience and skills including experience in the motor
retail sector, experience with motor manufacturers and other relevant areas. The Board has
received briefings during the year on relevant areas of regulatory change and the impact on
the Group, and attended external training.
Appointment and Powers of the Company’s Directors
All Directors appointed by the Board must retire and seek election at the first Annual General
Meeting following their appointment. One third of the other Directors are then required to
retire and submit themselves for re-election each year so that all Directors are required to
retire and submit themselves for re-election at least once in every three years. The Board is
satisfied that plans are in place for orderly succession for appointments to the Board and
senior management, so as to maintain an appropriate balance of skills and experience within
the Company and on the Board.
Appointment and removal of Directors is governed by the Company’s articles of association
(the Articles), the Companies Acts and related legislation. A Director may be appointed by an
ordinary resolution of the Company’s shareholders following recommendation of the
Nominations Committee as approved by the Board, or following retirement by rotation if the
Director chooses to seek re-election. Alternatively, the Directors may appoint a Director to fill
a vacancy or as an additional Director provided that the individual retires at the next Annual
General Meeting (and offers themselves to election if appropriate).
Subject to the Articles (which shareholders may amend by special resolution), relevant
legislation and any directions given by special resolution, the Company and its Group is
managed by its board of Directors. By resolutions passed at Company general meetings, the
shareholders have authorised the Directors: (i) to allot and issue ordinary shares; and (ii) to
make market purchases of the Company’s ordinary shares (in practice exercised only if the
Directors expect it to result in an increase in earnings per share). The authorities conferred
on the Directors at the 2020 Annual General Meeting will expire on the date of the 2021
General Meeting. Details of movements in the Company’s share capital are given in note 31
to the consolidated financial statements.
Succession
The Nominations Committee has responsibility for succession planning for the Board and
recommended Ken Lever’s term of appointment be extended in the last year. Where
appropriate the Committee uses external advisers to assist with candidate identification and
benchmarking.
Succession planning for other senior management roles is conducted by the HR Director and
CEO with input from other members of management as appropriate and overview by the
Remuneration Committee.
Andrew Goss
Non-Executive Chairman
Vertu Motors plc (Company Number: 05984855)
51
Audit, Risk and Internal Control
Audit Committee Report
Audit Committee Membership and Meetings
During the year the Audit Committee was comprised of Committee Chairman, K Lever and
two other Non-Executive Directors of the Group, namely, A P Goss and P Best. The
Committee met three times during the financial year and attendance is shown in the table on
page 47.
Only members of the Committee are required to attend Committee meetings, however, other
individuals (such as the Chief Executive, Chief Financial Officer, Chief Operations Officer or
Company Secretary and external auditors) are able to attend by invitation.
The key responsibilities of the Committee are set out in the table on page 49.
Activities during the year
During the year the Committee focused on the following matters:
• Review of the interim and year-end financial statements for the Group
• Review of the consistency and appropriateness of the accounting policies
• Review of the methods used to account for significant transactions, completeness of
disclosures and material areas in which significant judgements had been applied
• Review of the effectiveness of internal controls, risk assessment process, the assurance
•
process and changes to significant risks
Approval of the terms of engagement, strategy, scope and effectiveness of external
auditors
Significant Issues
As part of the reporting and review process, the Committee has discussed the significant
issues considered in relation to the financial statements and how those issues were
addressed.
During the year the Committee considered the following key risks, accounting issues and
judgements:
Significant issue
Action taken
Carrying value
of goodwill,
other
intangibles and
tangible assets
Valuation of
inventory
Management performed a detailed impairment review on
the goodwill, other
intangibles and tangible assets, in the consolidated financial statements of the Group,
based on forecast future cash flows. The Committee challenged the methodology,
assumptions, and sensitivity analysis used by management. The Committee also
considered the independent review by the external auditors.
The Committee concluded that the February 2021 carrying amounts shown in notes
15, 16 and 18 of the consolidated financial statements were appropriate and approved
the disclosures.
The Group’s assessment of the valuation of used vehicle inventory at 28 February
2021 involves an element of estimate to determine the expected net realisable value
post year end. Key assumptions used in the valuation of used vehicle inventory at 28
February 2021 include sales which took place post year end latest industry guidance
and historical trends.
The committee reviewed and challenged the assumptions applied in determining the
valuation of inventory at 28 February 2021 as shown in note 21 and concluded that
these were appropriate.
Vertu Motors plc (Company Number: 05984855)
52
Audit, Risk and Internal Control (continued)
Audit Committee Report (continued)
Significant Issues (continued)
Significant issue Action taken
Viability and
Going Concern
Management have prepared detailed financial projections for a period of 12 months from
the date of signing the financial statements (‘Review Period’). These projections are
based on the Group’s detailed annual business plan.
Management have reviewed the output of these detailed projections alongside the
Group’s funding facilities and banking covenants, further details of which are provided in
note 26 of the consolidated financial statements.
Sensitivity analysis has been performed to model the impact of more adverse trends
compared to those included in the financial projections to model the impact of severe but
plausible downside risks.
By their very nature forecasts and projections are inherently uncertain. Circumstances
could arise under which extreme downside scenarios may occur that would render the
preparation of accounts based on the assumption of a going concern inappropriate.
Based on what is known at this time and based upon the forecast information available,
the Directors believe it appropriate to prepare accounts under the going concern basis.
The Committee challenged the assumptions used and also considered the review
conducted by the external auditors. The Committee concluded that the Board is able to
make the Viability and Going Concern statements on pages 41 and 42.
Assets and obligations under the “Bristol Street Pension Scheme”, which is a defined
benefit scheme in which accrual ceased on 31 May 2003, are recognised in the balance
sheet.
The valuation of the scheme assets and the present value of the obligations are
calculated by external advisors.
The Committee reviewed the assumptions applied in calculating the scheme assets and
obligation (set out in note 30) at 28 February 2021 and confirmed that these were
appropriate.
Income is received from manufacturer partners in the form of rebates and volume related
bonuses. A Group wide income recognition policy is in place in respect of this income.
Management allocate responsibility to Divisional Finance Directors, as nominated
‘franchise experts’ to ensure bonus programmes are fully understood and communicated
to Dealership teams. The Group’s internal audit function reviews the treatment of
manufacturer bonus income recognition on a dealership-by-dealership basis. The
Committee also considered the review performed by the external auditors.
The Committee concluded that it was satisfied with the income recognition policy, and
with the appropriateness of the controls currently in operation, over manufacturer bonus
income recognition.
The Group’s main product/service lines are the sale of motor vehicles, parts and
aftersales services. The Group operates an income recognition policy that ensures that
revenue is recognised in line with satisfaction of the performance obligation, as set out in
note 1 of the consolidated financial statements.
Given the complexity of the initial sale of a vehicle which can represent several bundled
products, judgement is involved in isolating the constituent parts of the transaction and
ensuring revenue is recognised appropriately.
The committee reviewed the assumptions set out in the revenue recognition policy and
confirmed that the assumptions applied are appropriate.
Pension
benefits
Manufacturer
bonus income
Revenue
recognition
Vertu Motors plc (Company Number: 05984855)
53
Audit, Risk and Internal Control (continued)
Audit Committee Report (continued)
Financial and Business Reporting
The Committee is responsible for monitoring the integrity of the financial statements including
the Group’s annual and half-yearly results and ensuring they are fair, balanced and
understandable.
The external auditors also provide an auditors’ report to the members providing an
independent opinion on the truth and fairness of the Group’s financial statements. This report
can be found on pages 71 to 78.
Risk Management and Internal Controls
The Group has well established risk management and internal control processes. These are
regularly subject to audit and the results are reported to the Audit Committee and the Board
for their review.
Day to day management of risk is delegated to the Chief Executive’s Committee, which
consists of the Chief Executive, the Chief Financial Officer, the Company Secretary, the Chief
Operations Officer, the Chief Marketing Officer, the HR Director, and the seven Divisional
Operations Directors of the Group.
The Audit Committee confirms that the effectiveness of the system of internal control,
covering all material controls including financial, operational and compliance controls and risk
management systems, has been reviewed during the year under review and up to the date of
approval of the Annual Report.
Internal Audit
The Group Risk team report regularly on the audits carried out in each dealership which, for
the financial year ended 28 February 2021, covered both balance sheet and sales process
audits as well as audits of key financial control processes. The Group Risk team met with the
Committee without the presence of management.
External Audit
for a
further year subject
The Audit Committee has recommended to the Board that a resolution be put to shareholders
at the Annual General Meeting to reappoint PricewaterhouseCoopers LLP as auditors of the
Company
their continued satisfactory performance.
PricewaterhouseCoopers LLP have been appointed as auditors to the Company for the
previous twelve financial years. In accordance with ethical standards requirements the audit
partner responsible for the engagement was subject to rotation after each five-year period
and since February 2019 has been Jonathan Greenaway. No tender has been conducted.
The Committee reviewed the effectiveness, independence and objectivity of the external
auditors and no matters of concern were raised during the financial year to 28 February 2021.
to
The external auditors attend some of the Committee meetings and the Committee meets with
the external auditors without management present.
Vertu Motors plc (Company Number: 05984855)
54
Audit, Risk and Internal Control (continued)
Audit Committee Report (continued)
Independence of the Independent Auditors
Both the Audit Committee and the Independent Auditors have in place safeguards to avoid
the Independent Auditors' objectivity and independence being compromised. The Group's
policy with regard to services provided by the Independent Auditors, PricewaterhouseCoopers
LLP, is as follows:
• Statutory audit services
The Independent Auditors, who are appointed annually by the shareholders, undertake
this work. The Independent Auditors also provide regulatory services and formalities
relating to shareholder and other circulars. The Committee reviews the Independent
Auditors' performance on an ongoing basis.
• Further assurance services (this includes work relating to acquisitions and disposals)
The Group's policy is to appoint advisors to undertake such work where their knowledge
and experience is appropriate for the assignment. Where PricewaterhouseCoopers LLP
are used the Board reviews their independence and expertise on every assignment.
Other professional services firms are employed in certain cases on acquisition and
disposal related assignments.
• Other non-audit services
The Independent Auditors are not permitted to provide internal audit, risk management,
litigation support or remuneration advice. The provision of other non-audit services, is
assessed on a case by case basis, depending on which professional services firm is best
suited to perform the work. These safeguards, which are monitored by the Committee,
are regularly reviewed and updated to ensure they remain appropriate. The appointment
of PricewaterhouseCoopers LLP to provide non-audit services requires Board approval
for any assignment with fees above a set financial limit. The Independent Auditors report
to the Committee on the actions they take to comply with the professional and regulatory
requirements and best practice designed to ensure their independence, including the
rotation of key members of the audit team. PricewaterhouseCoopers LLP have formally
confirmed
to
PricewaterhouseCoopers LLP during the year is included in note 7 to the consolidated
financial statements.
The disclosure of non-audit
the Board.
fees paid
this
to
K Lever
Chairman of Audit Committee
12 May 2021
Vertu Motors plc (Company Number: 05984855)
55
Remuneration Committee Report
Annual Statement from the Chair of the Remuneration Committee
Introduction
On behalf of the Board, I am pleased to present our Directors’ Remuneration Report for the
year ended 28 February 2021. This Directors’ Remuneration Report has been prepared on
behalf of the Board by the Remuneration Committee (“the Committee”) in accordance with the
Companies Act 2006, as well as with the spirit, principles and, as far as is reasonably
practical, the requirements of the Quoted Companies Alliance Remuneration Guidance, the
Investment Association’s Principles of Remuneration and the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008, notwithstanding that, as
the Company is listed on AiM, these regulations do not all strictly apply. This report is split
into two sections;
•
•
the Directors’ remuneration policy sets out the Company’s intended policy on
Directors’ remuneration from 1 March 2021 and is provided for information to
shareholders; and
the annual report on remuneration sets out payments and awards made to the
Directors and details the link between Company performance and remuneration for
the year to 28 February 2021 and is subject to an advisory shareholder vote at this
year’s AGM.
The information in the Directors’ Remuneration Report set out on pages 63 to 64 highlighted
as being subject to audit, has been audited by the Group’s auditors.
Key remuneration decisions for the year to 28 February 2022
In the last remuneration report, the Company announced that the Executive Directors had
agreed to waive their annual bonus entitlement for the financial year ended 28 February 2021
in light of the expected impact of the COVID-19 pandemic. In the light of the performance of
the Group and the Executive team over the year, the Committee decided to award a one-off
bonus to the Executives for FY21 to be paid in May 2021. This bonus (of £100,000 to each of
David Crane and Karen Anderson, and £200,000 to Robert Forrester) will be paid 50% in
cash and 50% in shares in the Company (by way of transfer from the Company’s employee
benefit trust). The Executives will be required to retain these shares for at least three years
from the date of issue.
Following the review of Executive Director packages carried out in FY20, the basic salary for
R Forrester was further increased with effect from 1 March 2021 to bring it more into line with
competitors in the sector.
The Executive Director annual bonus structure has been adjusted for the year commencing 1
March 2021. It continues to include measures on financial performance, customer satisfaction
and colleague satisfaction with 70% of bonus relating to profit targets with the remaining 30%
split equally across customer outcome and colleague outcome measures. The maximum
earnings level of 135% of on-target earnings equates to delivery of 135% of the business
plan.
The Partnership Share Scheme that was introduced for other senior management colleagues
in the Group for the year commencing 1 March 2020 has been very well received and
resulted in 66.66% of the nil cost options awarded vesting. Colleagues will receive the vested
shares in 3 years’ time. The Partnership Share Scheme has been repeated for the year
commencing 1 March 2022 on the same basis.
LTIP changes
As mentioned in the last remuneration report, the Committee had postponed the proposal to
consult with shareholders in 2020 to alter the Group’s Long Term Incentive Plan (“LTIP”) for
the Executive Directors at the 2020 Annual General Meeting.
The Remuneration Committee concluded that it is necessary to move away from a long-term
incentive plan that required the setting of three-year targets (historically absolute TSR growth
and average Group ROE and last year cumulative adjusted profit before tax) to a four-year
plan where the targets are annual targets. Even before the disruption caused by COVID-19, it
became clear to the Remuneration Committee that the volatility and uncertainty that is
impacting on the Motor Retail Industry has meant that three-year targets do not provide an
Vertu Motors plc (Company Number: 05984855)
56
Remuneration Committee Report (continued)
Annual Statement from the Chair of the Remuneration Committee (continued)
LTIP changes (continued)
incentive for participants and do not fairly align pay with the performance of the Company
taking into account the macro economic factors which apply to the Company. The LTIP has
historically not achieved the objective of increasing the executives’ shareholdings in the
Company.
Therefore, the Remuneration Committee is proposing to amend the current Long-term
Incentive Plan for the Executive Directors to match the nil-cost option Restricted Share
Scheme introduced for the other senior management in the Group last year (the Partnership
Share Scheme). Under the amended plan, an award will be made in the form of a nil-cost
option at the beginning of each financial year over a maximum value of shares (to be
determined annually by the Remuneration Committee). Following the end of each year, there
will be an initial testing of performance directly linked to the level of pay-out of each
participant's annual bonus for that year. For example, if the annual bonus pay-out is at 75%
of maximum then 25% of the award under the LTIP will lapse at that time. If no bonus was
payable, then all of the award under the nil-cost option would lapse. However, an award
under the nil-cost option will not be exercisable at this time but will continue for a further three
years (so four years in total). Exercise will be subject to continued employment and a soft
underpin under which the Remuneration Committee will need to be satisfied that the
Executive Directors have continued to perform in accordance with the long-term strategic plan
of the Company. If the Remuneration Committee is not satisfied, then it may reduce the level
of exercisable options to such level (including zero) as it feels is appropriate.
The Committee has decided to implement the changes this year to apply the Partnership
Share Scheme to the Executive Directors from 1 March 2021. As for other senior colleagues,
the Executives would receive nil cost share options in the Company this year equivalent to
30% of their on-target earnings. The changes to the LTIP to implement this will be proposed
for shareholder approval at the AGM in 2021.
These award levels are much lower than the level of awards made historically under the LTIP,
but have much greater likelihood of being earned, resulting in shareholdings for the
Executives being increased over time.
Conclusion
The Directors’ remuneration policy which follows this annual statement sets out the
Committee’s principles on remuneration for the future and the annual report on remuneration
provides details of remuneration for the year ended 28 February 2021. The Committee will
continue to be mindful of shareholder views and interests, and we believe that our Directors’
remuneration policy continues to be aligned with the achievement of the Company’s business
objectives. We hope that we can rely on your votes in favour of the annual report on
remuneration.
By Order of the Board:
P. Best
Chairman of Remuneration Committee
12 May 2021
Vertu Motors plc (Company Number: 05984855)
57
Remuneration Committee Report (continued)
Remuneration Policy
The policy of the Committee is to ensure that the Executive Directors are fairly rewarded for
their individual contributions to the Group’s overall performance and to provide a competitive
remuneration package to Executive Directors, including long-term incentive plans, to attract,
retain and motivate individuals of the calibre required to ensure that the Group is managed
successfully in the interests of shareholders. In addition, the Committee’s policy is that a
substantial proportion of the remuneration of the Executive Directors should ordinarily be
performance related, consistent with the balance of remuneration paid to Directors and Senior
Management in the automotive retail sector.
Future Policy Table
The main elements of the remuneration package of Executive Directors are set out below:
Purpose and link to
strategy
BASIC SALARY
Attract and retain high
calibre Executive Directors
to deliver strategy.
BENEFITS
Provide benefits consistent
with role.
ANNUAL BONUS
Incentivises achievement of
business objectives by
providing rewards for
performance against annual
profit targets, customer
outcome targets including
manufacturer new car and
service customer
satisfaction (“CSI”) scores
as well as used car Judge
Service results, and
colleague satisfaction
and/or stability measures,
with exact measures
reviewed annually.
Operation
Maximum potential value
Performance metrics
Paid in 12 equal monthly
instalments during the year.
Currently these consist of the
option of two company cars, or
access to an employee car
ownership scheme, health
insurance, critical illness and
life assurance and the
opportunity to join the
Company’s share incentive
plan (“SIP”). The Committee
reviews the level of benefit
provision from time to time and
has the flexibility to add or
remove benefits to reflect
changes in market practices or
the operational needs of the
Group.
Paid in cash after the end of
the financial year to which it
relates.
None
Reviewed periodically to reflect
experience, role, responsibility
and performance of the individual
and the Group, and to take into
account rates of pay for
comparable roles in similar
companies. When selecting
comparators, the Committee has
regard to, inter alia, the Group’s
revenue, profitability, market
worth and business sector.
There is no prescribed maximum
increase. Annual rates are set
out in the annual report on
remuneration for the current year
and the following year.
The cost of providing benefits is
borne by the Company and varies
from time to time.
None
It is the normal policy of the
Committee to cap maximum
annual bonuses. The level of
such caps are reviewed annually.
Targets are based on
adjusted profit before
tax of the Group and
customer outcome
measures.
The Committee sets
performance measures,
threshold and
maximum targets on an
annual basis.
A sliding scale operates
between threshold and
maximum performance.
No bonus is payable
where performance is
below the threshold of
85% (increased from
75%).
Payment of any bonus
earned is subject to
overriding discretion of
the Committee in the
event of gross
misconduct.
Vertu Motors plc (Company Number: 05984855)
58
Remuneration Committee Report (continued)
Remuneration Policy (continued)
Future Policy Table (continued)
Operation
Maximum potential value
Performance metrics
Purpose and link to
strategy
LONG-TERM INCENTIVES
Alignment of interests with
shareholders by providing
long-term incentives
delivered in the form of
shares through the
Partnership Share Scheme
(subject to approval at the
2021 AGM).
Grant of £Nil cost options
under the Partnership Share
Scheme. Options vest in
proportion to the amount of
annual bonus earned in the
year of issue. Options may
then be exercised after 3 years
PENSION
Attract and retain Executive
Directors for the long-term
by providing funding for
retirement.
All Executive Directors are
entitled to participate in money
purchase arrangements, or to
receive a cash allowance in
lieu of pension contributions.
Vesting is pro rata to
achievement of the
participant’s bonus
measures for the year.
None
Annual award of options is 30%
of on-target earnings for FY22.
The Remuneration Committee
will determine at the beginning of
future financial years, the
maximum value of shares over
which an award can be granted.
The previous maximum award
level under the Remuneration
Policy is 125% of salary and the
Remuneration Committee is
reducing this to 75% of salary.
The Group currently makes
payments of up to 16.5% of basic
salary into any pension scheme
or similar arrangement as the
Executive Director may
reasonably request.
Such payments are not counted
for the purposes of determining
bonus or LTIP levels.
Any new Directors would receive
a pension contribution in line with
the majority of the workforce.
Notes to the Policy Table
Differences from remuneration policy for all employees
All employees of the Company are entitled to base salary or hourly rate and various other
colleague benefits. The opportunity to earn a bonus is made available to all management
colleagues in the Group. The maximum opportunity available is based on the seniority and
responsibility of the role.
Share options are only granted under the Partnership Share Scheme to senior management
in the Group.
Statement of consideration of employment conditions of employees elsewhere in the Group
The Committee receives reports on an annual basis on the level of any pay rises awarded
across the Group and takes these into account when determining salary increases for
Executive Directors. In addition, the Committee receives regular reports on the structure of
remuneration for senior management in the tier below the Executive Directors and uses this
information to ensure a consistency of approach for the most senior managers in the Group.
The Committee also approves the award of any long-term incentives and other share
schemes.
The Committee does not specifically invite colleagues to comment on the Directors’
remuneration policy, but it does take note of any comments made by colleagues.
Statement of consideration of shareholder views
The Chairman of the Committee consults with major shareholders from time to time or where
any significant remuneration changes are proposed, in order to understand their expectations
with regard to Executive Directors remuneration and reports back to the Committee. The
Committee consulted with certain major shareholders in relation to the amendments to the
LTIP for Executive Directors proposed in 2021, and in relation to the bonuses being paid to
the Executive Directors for FY21. The Committee also takes into account emerging best
practice and guidance from major institutional shareholders and advisors.
Vertu Motors plc (Company Number: 05984855)
59
Remuneration Committee Report (continued)
Remuneration Policy (continued)
Notes to the Policy Table (continued)
Approach to recruitment remuneration
The Committee’s approach to recruitment remuneration is to offer a market competitive
remuneration package sufficient to attract high calibre candidates who are appropriate to the
role but without paying any more than is necessary.
Any new Executive Director’s regular remuneration package would include the same
elements and be in line with the policy table set out earlier in this Directors’ remuneration
policy (subject to the statement regarding pension contributions and any specific personal
targets or development), including the same limits on performance related remuneration.
Where an internal candidate is promoted to the Board the original grant terms and conditions
of any bonus or share award made before that promotion will continue to apply, as will
membership of any of the Group’s pension arrangements.
Reasonable relocation and other similar expenses may be paid if appropriate.
Directors’ Service Contracts, Notice Periods and Termination Payments
Provision
Policy
Notice periods in
Executive
Directors’ service
contracts
Compensation for
loss of office
Treatment of
annual bonus on
termination
Treatment of LTIP
awards
Exercise of
discretion
12 months by Company or Executive Director
No more than 12 months’ basic salary and benefits (including
company pension contributions).
Bonuses which have already been declared are payable in full. In
the event of termination by the Company (except for cause) pro-
rated bonus to the end of the notice period is payable at the
discretion of the Remuneration Committee.
Unvested awards will normally lapse on cessation of employment.
However, for Good Leavers the Committee shall determine
whether the award is released on the normal release date or on
some other date.
The extent of vesting will be determined by the Committee taking
into account the extent to which the performance condition is
satisfied and, unless the Committee determines otherwise, the
period of time elapsed from the date of grant to the date of
cessation relative to the performance period.
Following release, Good Leavers may exercise their options within
12 months (or such a period as the Committee determines).
Good Leaver awards that have vested but not been released (i.e.
during the holding period) will ordinarily continue to the normal
release date when they will be released to the extent vested. The
Committee retains the discretion to release awards earlier.
LTIP awards of other leavers will cease to be exercisable following
notice of cessation of employment, unless
the Committee
determines otherwise in exceptional circumstances.
Intended only to be relied upon to provide flexibility in exceptional
or inequitable circumstances.
Outside
appointments
Non-Executive
Directors
Subject to approval
Re-election
Vertu Motors plc (Company Number: 05984855)
60
Details
Executive Directors may be
required
the
notice period.
to work during
leaver
Good
circumstances
comprise death, illness, injury,
disability, retirement, transfer of
outside
employing
Group
exceptional
circumstances at the discretion
of the Committee.
business
or
take
into account
The Committee’s determination
will
the
particular circumstances of the
Executive Director’s departure
and the recent performance of
the Company and will be
detailed in the next published
Remuneration
Committee
Report.
Board approval must be sought.
All Non-Executives are subject
to re-election every three years.
No compensation payable
if
required to stand down.
Remuneration Committee Report (continued)
Directors’ Service Contracts, Notice Periods and Termination Payments (continued)
In the event of the negotiation of a settlement agreement between the Company and a
departing Director, the Committee may make payments it considers reasonable in settlement
of potential legal claims. Such payments may also include reasonable reimbursement of
professional fees in connection with such agreements.
The Committee may also include the reimbursement of fees for professional or outplacement
advice in the termination package, if it considers it reasonable to do so. It may also allow the
continuation of benefits for a limited period.
Non-Executive Directors’ Fee Policy
The policy for the remuneration of the Non-Executive Directors is as set out below. Non-
Executive Directors are not entitled to a bonus, they cannot participate in the Company’s
share option scheme and they are not eligible for pension arrangements.
Performance
metrics
None
Purpose and link to strategy Operation
Maximum potential value
Annual rate set out in the annual
report on remuneration for the
current year and the
following
year. No prescribed maximum
annual increase.
The cost of providing benefits is
borne by the Company and varies
from time to time.
NON-EXECUTIVE DIRECTOR (‘NED’) FEES
To attract NEDs who have a
broad range of experience
and skills
the
implementation of our strategy
to oversee
NED fees are determined by the
Board within the limits set out in the
Articles of Association and are paid
in 12 equal monthly instalments
during the year.
Non-Executive Directors may be
eligible for benefits such as the use
of secretarial support or other
benefits that may be appropriate.
They also receive a company car
with insurance, using a scheme and
type of the Company’s choosing.
Vertu Motors plc (Company Number: 05984855)
61
Directors’ Remuneration Report
Total 2021/22 Remuneration Opportunity
The chart below illustrates the remuneration that would be paid to each of the Executive
Directors in 2021/22 financial year under three different performance scenarios: (i) Minimum;
(ii) On-target; and (iii) Maximum.
The elements of remuneration have been categorised into three components: (i) Fixed; (ii)
Annual variable (annual bonus awards); and (iii) Multiple year (LTIP awards) which are set out
in the future policy table above. The element included for multiple year (LTIP Awards) relates
to options which are capable of vesting in the financial year to 28 February 2022.
Each element of remuneration is defined in the table below:
Element
Fixed
Annual Bonus
Multiple Year (LTIP
Awards)
Description
Base salary for the 2021/2022 financial year plus pension and benefits.
Annual bonus awards based on adjusted profit before tax, customer
outcome measures and colleague retention targets.
Value of LTIP awards (including Partnership Shares) which are capable of
vesting in the year ending 28 February 2022 based on the share price on 1
March 2021.
The on-target scenario assumes that for the annual bonus, adjusted profit is in line with
financial targets.
Vertu Motors plc (Company Number: 05984855)
62
Directors’ Remuneration Report (continued)
Annual report on remuneration
The annual basic salaries and fees to be paid to Directors in the year ending 28 February
2022 are set out in the table below, together with any increase expressed as a percentage.
28 February
2022
£’000
395
250
250
62
52
130
Annual Salary/fees
28 February
2021
£’000 1
355
250
250
55
40
100
R T Forrester
K Anderson
D P Crane
K Lever
P Best
A P Goss
1 The Executive Directors waived 30% of their basic salary for the months of April and May 2020, and the Non-
Executive Directors waived 30% of their fees for the months of April and May. The figures in the table above do not
include this reduction.
Increase
%
11.3
-
-
12.7
30.0
30.0
Information subject to audit
Single Total Figure of Remuneration
The remuneration of the Directors who served during the period from 1 March 2020 to 28
February 2021 is as follows:
Salary or fees
£’000
Taxable
Benefits1
£’000
Pension
£’000
Bonus
£000
Long Term
Incentive Plan
£’000
Single total
figure
£’000
2021
2020
2021
2020
2021
2020
20212
2020
2021
2020
2021
2020
Executive Directors
R T Forrester
K Anderson
D P Crane
337
238
238
315
170
250
3
3
3
3
3
3
56
39
39
52
28
41
200
100
100
283
106
106
-
-
-
37
14
14
A P Goss
K Lever
P Best
1 Taxable benefits include vehicle insurance, together with medical and life assurance premiums
2 Bonuses in respect of the financial year ended 28 February 2021 were awarded 50% with cash and 50% with shares of an equivalent
95
52
38
76
55
40
1
-
1
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
596
380
380
96
52
39
690
321
414
77
55
41
value (transferred from the Employee Benefit Trust).
Annual Bonuses
The Executive Directors agreed to waive their annual bonus entitlement for the financial year
ended 28 February 2021 in light of the expected impact of the COVID-19 restrictions on the
business. However, in light of the performance of the Group and Execution team over the
year, the Remuneration Committee decided to award a one-off bonus to the Executives for
the financial year, to be paid in May 2021. This bonus (of £100,000 to each of D. P. Crane
and K. Anderson and £200,000 to R. T Forrester) will be paid 50% in cash and 50% in shares
in the Company (by way of transfer from the Company’s employee benefit trust). The
Executives will be required to retain these shares for at least three years from the date of
issue.
Pensions
The Group operates a group personal pension plan for eligible colleagues. R T Forrester and
D P Crane elected to cease active membership of the plan and receive a payment of 16.5% of
current basic salary rather than Company pension contributions during the year ended 28
February 2021.
Directors' Share Options
The movement in share options held by the Directors during the year ended 28 February 2021
is as follows:
Number at 1
March 2020
1,031,903
1,394,512
1,478,095
Exercised in
Year
-
-
-
Lapsed in
Year
(303,030)
(113,636)
(113,636)
Granted in
Year
-
-
-
Cancelled
in the year
(466,665)
(350,876)
(350,876)
R T Forrester
K Anderson
D P Crane
1 The July 2018 LTIP issue lapsed in full subsequent to 28 February 2021 as a result of not satisfying the relevant performance
Number at 28
February 2021
262,2081
930,000
1,013,583
criteria. This included 262,208 options held by R T Forrester.
Vertu Motors plc (Company Number: 05984855)
63
Directors’ Remuneration Report (continued)
Directors' Share Options (continued)
LTIP option vesting criteria:
Vesting of one half of the LTIP options is dependent on absolute growth in the Company's
TSR. TSR calculations will be based on the average of opening and closing share prices
over a 10 Business Day period prior to the commencement and end of the performance
period. Vesting of the remaining half of the LTIP options is dependent on the Group’s return
on shareholders’ equity (‘ROE’).
The TSR performance condition, applying to half of the LTIP options granted is:
Growth in Company TSR
Less than 26% absolute growth
More than 26% but less than 42% absolute growth
42% or more than 42% absolute growth
Proportion of awards subject to TSR condition
vesting
0%
Straight line vesting 0 – 100%
100%
The ROE performance condition, applying to the remaining half of the LTIP options is:
Group ROE1
Proportion of awards subject to ROE condition
vesting
0%
Less than 8%
Straight line vesting 0 – 100%
More than 8% but less than 10%
10% or more than 10%
100%
1ROE is measured as average annual adjusted profit after tax as stated in the financial statements for the
performance period, divided by average Group Net Assets
CSOP Options vesting criteria
Options issued on 2 July 2018 may only be exercised if the average share price of the
Company over at least one continuous period of 30 days between 1 August 2021 and 31 July
2022 is above 62.5p and then 100% of the options vest. At an average share price of 57.5p
50% of the options are exercisable. At prices between 57.5p and 62.5p, options will vest on a
straight-line basis between 50% and 100%. At a share price below 57.5% none of the options
are exercisable.
Options issued on 8 November 2018 may only be exercised if the average share price of the
Company over at least one continuous period of 30 days between 1 August 2021 and 31 July
2022 is above 50.9p and then 100% of the options vest. At an average share price of 44.6p
50% of the options are exercisable. At prices between 44.6p and 50.9p, options will vest on a
straight-line basis between 50% and 100%. At a share price below 44.6p none of the options
are exercisable.
Statement of Directors’ Shareholding
The Directors who held office at 28 February 2021 and their connected persons had interests
in the issued share capital of the Company as at 28 February 2021 as follows:
Number of shares held (including
by connected persons)
28 February
2021
7,225,215
901,074
195,705
100,800
-
62,083
29 February
2020
7,071,465
893,039
187,670
100,800
-
62,083
Vested unexercised share
options
Unvested share options subject
to performance conditions
28 February
2021
-
430,000
513,583
-
-
-
29 February 28 February
2021
262,2081
500,0002
500,0002
-
-
-
2020
-
430,000
513,583
-
-
-
29 February
2020
1,031,903
964,512
964,512
-
-
-
R T Forrester
K Anderson
D P Crane
K Lever
P Best
A P Goss
1 The July 2018 LTIP issue lapsed in full subsequent to 28 February 2021 as a result of not satisfying the relevant
performance criteria. This included 262,208 options held by R T Forrester.
2 These unvested share options are CSOP options subject to vesting criteria relating to share price performance.
Vertu Motors plc (Company Number: 05984855)
64
Directors’ Remuneration Report (continued)
Information not subject to audit
Performance Graph
The chart below shows the Company’s eight-year annual Total Shareholder Return (“TSR”)
performance against the FTSE small cap index (excluding investment trusts), which is
considered to be an appropriate comparison to other public companies of a similar size.
The middle market price of the shares as at 28 February 2021 was 39.3p (29 February 2020:
31.7p) and the range during the financial year was 17.3p to 40.2p (2020: 31.1p to 42.0p).
Change in Remuneration of Chief Executive
The following table sets out the change in the Chief Executive’s salary, benefits and bonus
between the years ended 29 February 2020 and 28 February 2021 compared with the
average percentage change in each of those components for the employees of the Group.
CEO
Employees
Increase in base
salary
7.0%
4.4%
Change in
benefits
-
-
Change in
bonus
(29.3%)
(15.8%)
Date of Service Contracts/Letters of Appointment
DIRECTOR
R T Forrester
K Anderson
D P Crane
A P Goss
K Lever
P Best
Date of service contract/
letter of appointment
20 December 2006
1 March 2019
25 July 2018
19 July 2019
25 February 2021
1 June 2016
Copies of Directors’ service contracts and letters of appointment are available for inspection
at the Company’s registered office.
Vertu Motors plc (Company Number: 05984855)
65
Directors’ Remuneration Report (continued)
Relative Importance of Spend on Pay
The table below sets out the total spend on remuneration in the Group in the years ended 29
February 2020 and 28 February 2021 compared with other disbursements from profit (i.e. the
distributions to shareholders).
Spend on remuneration (including Directors)
Profit distributed by way of dividend
Spend in the
year ended 28
February 2021
£’000
176,306
-
Spend in the
year ended 29
February 2020
£’000
200,167
6,122
Shareholders’ Vote on Remuneration at the 2020 AGM
2020 Directors’ Remuneration Report
Votes cast in favour
Votes cast against
Total votes cast in favour or against
Votes withheld
The Committee
Number
164,073,925
14,996,436
179,070,361
6,539,629
% change
(11.9%)
(100.0%)
Proportion of
votes cast (%)
91.63
8.37
100.00
The Committee is responsible for reviewing and recommending the framework and policy for
remuneration of the Executive Directors. The Committee’s terms of reference are available
on the Company’s website. The members of the Committee during the financial year were P
Best (Chairman), K Lever and A P Goss.
Vertu Motors plc (Company Number: 05984855)
66
Directors Report
The Directors report sets out the information required to be disclosed by the Company in
compliance with the Companies Act 2006 and the Financial Conduct Authority’s Disclosure
and Transparency Rules (DTR). It forms part of the management report as required under
the DTR, along with the Strategic Report (pages 2 - 42) and other sections of this Annual
Report and Accounts. The below requirements are covered by reference as set out below:
Information
Acquisitions and disposals
Business model
Corporate Governance Framework
Community and charitable giving
Details of Directors
Directors’ share interests and remuneration
Diversity, equality and inclusion
Employee engagement
Financial Instruments
Future developments and strategic priorities
Going concern statement
Principal risks and risk management
Modern Slavery Statement
Results
Section 172 Statement
Stakeholder engagement
Statement of Directors Responsibilities
Viability Statement
Annual General Meeting (“AGM”)
Reported within
Strategic Report
Strategic Report
Corporate Governance Report
Strategic Report
Corporate Governance Report
Directors Remuneration Report
Strategic Report
Strategic Report
Financial Statements (Note 27)
Strategic Report
Strategic Report
Strategic Report
Strategic Report
Consolidated Income Statement
Strategic Report
Strategic Report
Corporate Governance Report
Strategic Report
Pages
2-42
2-42
43-70
2-42
43-70
62-66
2-42
2-42
2-42
2-42
2-42
2-42
79
2-42
2-42
43-70
2-42
At the AGM, a separate shareholders’ resolution is proposed for each substantive matter. We
will publish to shareholders the Company’s annual report and financial statements together
with the notice of AGM, giving not less than the requisite period of notice. The notice will set
out the resolutions the Directors are proposing and explanatory notes for each. At the AGM,
Directors’ terms of appointment are available for inspection. On the day of the AGM, the
Board takes the opportunity to update shareholders on the Company’s trading position via an
RNS announcement. Normally, the Chairman and each committee chairman are available at
the AGM to answer questions put by shareholders present. We expect this year’s AGM on 23
June 2021 to be held as normal as it is due to be held after the restrictions relating to COVID-
19 are anticipated to be lifted in June. Any changes to this will be communicated on the
Company’s website.
Branches
The Group does not have any branches outside of the UK.
Change of control
The Company and members of its Group are party to agreements relating to banking,
properties, employee share plans and motor vehicle franchises which alter or terminate if the
Company or Group Company concerned undergoes a change of control. None is considered
significant in terms of its likely impact on the business of the Group as a whole other than the
motor vehicle franchises.
Charitable Donations
Charitable donations of £60,000 were made by the Group during the year ended 28 February
2021.
Contracts
In 2018 Biffa plc, of which Mr K Lever is a director and shareholder, acquired SWRnewstar
Limited, which provides the Group’s waste services. There have been no negotiations with
SWRnewstar Limited since this date and Mr Lever will not be involved in any renewal or
review of the Group’s contract with SWRnewstar Limited. None of the other Directors had an
interest in any contract with the Group (other than their service agreement or appointment
terms and routine purchases of vehicles for their (or their family’s) own use) at any time
during the financial year to 28 February 2021.
Vertu Motors plc (Company Number: 05984855)
67
Directors Report (continued)
Directors Indemnities and Insurance
In line with market practice and the Company’s Articles, each Director has the benefit of an
ongoing deed of indemnity from the Company, which includes provisions in relation to duties
as a Director of the Company or an associated company, qualifying third party indemnity
provisions and protection against derivative actions. Copies of these are available for
shareholders’ inspection at the AGM. Directors’ and Officers’ insurance has also been
established for all Directors and Officers to provide cover for their reasonable actions on
behalf of the Group.
Dividend
In light of the substantial Government support received in respect of the trading restrictions
imposed in response to COVID-19, the Board did not recommend a final dividend for the year
ended 29 February 2020, nor was any dividend proposed for the year ended 28 February
2021. The Board anticipates that the payment of dividends will resume in respect of the
financial year ended February 2022, dependent on the financial performance of the Group.
External Auditors
In the case of each person who was a Director of the Group at the date when this report was
approved:
•
•
so far as each of the Directors is aware, there is no relevant audit information of which
the Group and Company’s auditors are unaware, and;
each of the Directors has taken all the steps that they ought to have taken as a Director,
as far as is reasonably practical, in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s auditors are aware of that
information.
The auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in
office, and a resolution concerning their reappointment will be proposed at the Annual
General Meeting.
Political Donations
The Group made no political donations and incurred no political expenditure during the year
(2020: Nil).
Post Balance Sheet Events
Details of events after 28 February 2021 are disclosed in note 39 of the Financial Statements.
Powers for the issuance or repurchase of Shares
At 1 March 2020, 2,053,821 shares were held by Ocorian Limited (“Trustee”), the trustee of
the Company’s employee benefit trust. The shares are held for the purpose of the trust and
may be used to transfer shares to individuals exercising share options in the Company.
During the year ended 28 February 2021, 40,337 shares held by the trust were transferred to
individuals pursuant to exercises of options (or sold to satisfy the resulting tax), and 5,273,820
shares were purchased by the trust at an average share price of 37.91p per share. The
Trustee waives its right to dividends on any Company shares held in the trust and such
holdings are disclosed within ‘Treasury Shares’ in the Financial Statements. 7,287,304
ordinary shares in the Company were held by the Trustee at 28 February 2021.
The rights and obligations attaching to the Company’s ordinary shares are set out in the
Articles. The Company is currently authorised to issue up to two-thirds of its current issued
share capital pursuant to a resolution passed at its 2020 AGM.
Vertu Motors plc (Company Number: 05984855)
68
Directors Report (continued)
Share Capital
As at 28 February 2021, the Company’s issued share capital comprised a single class:
ordinary shares of 10 pence each of which 369,173,981 were in issue. The Articles permit
the creation of more than one class of share, but there is currently none other than ordinary
shares. Details of the Company’s share capital are set out in note 31 to the consolidated
financial statement. All issued shares are fully paid.
Shareholders (other than any who, under the Articles or the terms of the shares they hold, are
not entitled to receive such notices) have the right to receive notice of, and to attend and to
vote at, all general and (if any) applicable class meetings of the Company. A resolution put to
the vote at any general or class meeting is decided on a show of hands unless (before or on
the declaration of the result of the show of hands or on the withdrawal of any other demand
for a poll) a poll is properly demanded. At a general meeting, every member present in
person has, upon a show of hands, one vote, and on a poll, every member has one vote for
every 10 pence nominal amount of share capital of which they are the holder. In the case of
joint holders of a share, the vote of the member whose name stands first in the register of
members is accepted to the exclusion of any vote tendered by any other joint holder. Unless
the Board decides otherwise, a shareholder may not vote at any general or class meeting or
exercise any rights in relation to meetings whilst any amount of money relating to his shares
remains outstanding. A member is entitled to appoint a proxy to exercise all or any of their
rights to attend, speak and vote on their behalf at a general meeting. Further details
regarding voting can be found in the notes to the notice of the AGM. To be effective,
electronic and paper proxy appointments and voting instructions must be received by the
Company’s registrars not later than 48 hours before a general meeting. The Articles may be
obtained from Companies House in the UK or upon application to the Company Secretary.
Other than those prescribed by applicable law and the Company’s procedures for ensuring
compliance with it, there are no specific restrictions on the size of a holding nor on the
transfer of shares, which are governed by the Articles and prevailing legislation. The
Directors are not aware of any agreement between holders of the Company’s shares that may
result in restrictions on the transfer of securities or the exercise of voting rights. No person
has any special rights of control over the Company’s share capital.
By order of the Board
Nicola Loose
Company Secretary
12 May 2021
Vertu Motors plc (Company Number: 05984855)
69
Statement of Directors Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in
accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have prepared the group financial statements in accordance with
international accounting standards in conformity with the requirements of the Companies Act
2006 and the parent company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising
FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”,
and applicable law).
Under company law, directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Group and parent
company and of the profit or loss of the Group for that period. In preparing the financial
statements, the Directors are required to:
•
•
select suitable accounting policies and then apply them consistently;
state whether applicable international accounting standards in conformity with the
requirements of the Companies Act 2006 have been followed for the Group financial
statements and United Kingdom Accounting Standards, comprising FRS 102 have
been followed for the parent company financial statements, subject to any material
departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate
to presume that the Group and parent company will continue in business.
The Directors are also responsible for safeguarding the assets of the Group and parent
company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Group’s and parent company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Group and parent company and
enable them to ensure that the financial statements comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the parent company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Karen Anderson
Chief Financial Officer
12 May 2021
Vertu Motors plc (Company Number: 05984855)
70
Independent Auditors’ Report to the members of Vertu
Motors plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Vertu Motors plc’s Group financial statements and Company financial statements
(the “financial statements”) give a true and fair view of the state of the Group’s
and of the Company’s affairs as at 28 February 2021 and of the Group’s profit
and the Group’s cash flows for the year then ended;
•
•
•
the Group financial statements have been properly prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006;
the Company financial statements have been properly prepared in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland”, and applicable law); and
the financial statements have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report & Financial
Statements (the “Annual Report”), which comprise: the consolidated and Company balance
sheets as at 28 February 2021; the consolidated income statement and consolidated
statement of comprehensive income, the consolidated cash flow statement and the
consolidated and Company statements of changes in equity for the year then ended; and the
notes to the financial statements, which include a description of the significant accounting
policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the
Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
Our audit approach
Overview
Audit scope
•
•
Three full scope audit components have been identified, alongside the company.
This approach provides coverage of 72% of the Group's revenue.
Key audit matters
•
•
•
•
•
•
Carrying value of intangible assets including goodwill (Group)
Accounting for manufacturer bonuses (Group)
Going concern as a result of COVID-19 (Group and parent)
Valuation of used inventory (Group)
Valuation of pension scheme liabilities (Group)
Carrying value of investments in subsidiaries (parent)
Vertu Motors plc (Company Number: 05984855)
71
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Our audit approach (continued)
Materiality
•
•
•
Overall Group materiality: £2,200,000 (2020: £2,400,000) based on 0.09% of
revenue.
Overall Company materiality: £2,090,000 (2020: £2,280,000) based on 1% of total
assets (capped for Group materiality).
Performance materiality: £1,650,000 (Group) and £1,567,500 (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of
most significance in the audit of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit
matter
Carrying value of intangible assets including goodwill
(Group)
The Group has significant goodwill and other intangible
balances in respect of acquisitions made across various
CGUs. The recoverable amount of the CGU is impacted
by various factors, a number of which are outside of
Vertu's control, which could affect whether results are in
line with expectations. Where this is the case and a
CGU has been subject to poor historical performance,
there is a risk around the recoverability of goodwill and
other intangible assets. There is inherent uncertainty
and judgement in forecasting future cash flows and
therefore this is a judgemental area of the audit.
historical
following:
performance
To address this risk, we have performed
the
the Group’s
Assessed
budgeting procedures as a basis for value
in use calculations;
Compared
to
historical forecasts to assess accuracy in
the budget process;
Assessed the appropriateness of CGUs
used for Goodwill and other intangible
assets;
Key inputs are assessed, for example
discount
forecast
revenues and costs;
We engaged with PwC experts to assess
the discount rate; and
We performed sensitivity analysis on the
forecasts, including downside scenarios to
assess headroom.
inflation and
rates,
We are satisfied with management’s
the carrying value of
conclusion on
goodwill and other intangibles.
Vertu Motors plc (Company Number: 05984855)
72
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Key audit matters (continued)
Key audit matter
How our audit addressed the key audit matter
To address this risk we have performed the
following:
On a sample basis, agreed the manufacturer
bonus
supporting
through
documentation and agreed the amounts held on
the balance sheet at the year end date to
supporting documentation such as invoice and
subsequent receipt.
income
to
We are satisfied with
manufacturer bonus income in the year.
the
recognition of
To address this risk in respect of going concern
as a result of COVID-19, we have:
Challenged management on the key assumptions
included in the scenarios and determined that
management's mitigating actions are within their
control and bank facilities are in place to support
the Group;
We have assessed management's forecasts and
stress test scenarios including obtaining support
for the facilities in place for a period of at least 12
months from the date of signing;
We have reviewed the trading results of the
previous lockdowns in the financial year and
assessed the impact COVID-19 had on these
results; and
in
We evaluated management's disclosures
relation to the COVID-19 impact and found them
to be in line with the accounting framework.
We consider the scenarios to be reasonable and
that the preparation of the financial statements on
a going concern basis remains appropriate.
Accounting for manufacturer bonuses (Group)
The level of manufacturer bonus the Group receives
has a significant impact on financial performance.
Due to the complex nature of some of
these
arrangements, there is often judgement required in
relation to whether targets have been met at a point
in time. As a result, the related income which is
recognised on the balance sheet as at the year end is
a judgemental part of the audit.
Going concern as a result of COVID-19 (Group and
parent)
the
impact
to consider
it has been necessary
that
During FY21, the scale and impact of the COVID-19
pandemic on
the global economy has had a
significant impact. Although the results for the Group
have been ahead of expectation, the pandemic has
continued the increase the level of uncertainty in the
for
market. Therefore
management
the
pandemic has had or may have on the Group's
balance sheet, cash flows, liquidity and accordingly
its ability to continue as a going concern. In order to
conclude that it is appropriate for the financial
statements to be drawn up on a going concern basis,
management have prepared a detailed "base case"
cash flow model and applied various sensitivities in
order to model a number of scenarios given the
period of uncertainty. Note 1 of
financial
the challenges posed by
statements
COVID-19 pandemic and the impact this has had on
the Group's and company's ability to continue as a
going concern, along with detail on
the key
assumptions included in management's modelling
and sensitivities calculated. Management have
concluded that the Group has adequate resources to
meet financial obligations as they fall due and have
the going concern basis of
therefore adopted
accounting in preparing the financial statements.
indicates
the
Vertu Motors plc (Company Number: 05984855)
73
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Key audit matters (continued)
Key audit matter
How our audit addressed the key audit matter
Valuation of used inventory (Group)
levels of vehicle
The Group holds significant
inventory. Used vehicle selling prices can vary
depending upon a number of factors, and as a
result large price fluctuations can be experienced in
short periods. Therefore, valuation and provisions
in relation to used stock is an area of particular
judgement.
Valuation of pension scheme liabilities (Group)
There is inherent judgement in valuing the Group’s
post-retirement benefit liabilities within the pension
scheme. The nature of the calculation means that
small movements in key assumptions could have a
significant effect on the pension obligations. In
addition, factors impacting the pension liability can
be outside of management’s control.
Carrying value of
(parent)
investments
in subsidiaries
investments
recoverable amount of
The Company has significant
in
respect of acquisitions made across various
subsidiaries. The
the
subsidiary is impacted by various factors, a number
of which are outside of Vertu's control, which could
affect whether results are in line with expectations.
Where a subsidiary has been subject to poor
historical performance, there is a risk around the
recoverability of this investment. There is inherent
uncertainty and judgement in forecasting future
cash flows which are above more recent results,
and therefore this is a particularly judgmental area
of the audit.
To address the risk of valuation on used vehicle
inventory we have:
Performed detail testing over the used vehicle
stock held at year end, relying on the post year
end sales and market data on car valuations;
Performed analysis on the used vehicle stock to
understand history of profits and losses on used
car stock, and use this to assess the adequacy of
the year end provision, also testing the data in the
underlying calculation; and
Considered
disclosures about
involved
provision.
the Group’s
the degree of estimation
inventory
the adequacy of
in arriving at
the vehicle
We are satisfied based on
the procedures
performed that the valuation of used vehicle stock
was reasonable.
To address this risk in respect of valuation of
pension scheme liabilities, we have:
Used our actuarial specialists
appropriateness of the assumptions used;
Compared key
inputs, such as mortality/life
expectancy, discount rate and inflation rate to
market data; and Considered the adequacy of the
Group’s disclosure in respect of the sensitivity of
the scheme liabilities to changes in key inputs.
to review
the
that
the key
We concluded
in
calculating the pension liability were within an
acceptable range when compared with market
data.
inputs used
to assess accuracy
To address this risk, we have done the following:
Assessed the Group’s budgeting procedures as a
basis for value in use calculations;
Compared historical performance to historical
forecasts
the budget
process;
Key inputs are assessed, for example discount
rates, inflation and forecast revenues and costs;
We engaged with PwC experts to assess the
discount rate; and
We performed sensitivity analysis on
the
forecasts, including downside scenarios to assess
headroom.
in
We are satisfied with management’s conclusion
on the carrying value of investments.
Vertu Motors plc (Company Number: 05984855)
74
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Key audit matters (continued)
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to
give an opinion on the financial statements as a whole, taking into account the structure of the
Group and the Company, the accounting processes and controls, and the industry in which
they operate.
The Vertu Motors Group has grown organically and through acquisition, and as a result has a
number of subsidiary entities which contain geographically dispersed dealership locations.
Much of the day to day accounting function is performed at these individual dealerships, with
the support of a central Group accounting function. As a result of this structure there are three
components which required a full scope audit of their financial information, due to their size
and contribution to the financial results of the Group. These are Bristol Street First
Investments Limited, Bristol Street Fourth Investments Limited and Albert Farnell Limited.
Vertu Motors Plc is also subject to full scope audit of its financial information, due to the
separate presentation of these financial statements within this report. The audit work over
these components is performed principally from the central Group accounting function,
however site visits to all in scope components are carried out as part of our audit procedures,
in order to verify the existence of stock, and to carry out testing over sales records.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain
quantitative thresholds for materiality. These, together with qualitative considerations, helped
us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as
a whole.
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Overall
materiality
How we
determined it
Rationale for
benchmark
applied
Financial statements - Group
Financial statements - Company
£2,200,000 (2020: £2,400,000).
£2,090,000 (2020: £2,280,000).
0.09% of revenue
1% of total assets (capped for
Group materiality)
We applied our professional judgement to
determine an amount that was relevant to both
revenue and profit before tax, which are
measures used to assess the performance
and growth objectives of the Group, as well as
the scale of the Group’s operations.
We believe that total assets is the
primary measure used by
the
the
in assessing
shareholders
performance of the entity, and is a
generally
auditing
accepted
benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less
than our overall Group materiality. The range of materiality allocated across components was
£1,100,000 and £2,100,000.
We use performance materiality to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance materiality was 75% of overall
materiality, amounting to £1,650,000 for the Group financial statements and £1,567,500 for
the Company financial statements.
In determining the performance materiality, we considered a number of factors - the history of
misstatements, risk assessment and aggregation risk and the effectiveness of controls - and
concluded that an amount at the upper end of our normal range was appropriate.
Vertu Motors plc (Company Number: 05984855)
75
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Materiality (continued)
We agreed with those charged with governance that we would report to them misstatements
identified during our audit above £110,000 (Group audit) (2020: £120,000) and £105,000
(Company audit) (2020: £114,000) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group's and the Company’s ability to
continue to adopt the going concern basis of accounting included:
•
•
•
•
Challenging management on the key assumptions included in the base case model,
along with challenging the scenarios modelled by management.
Reviewing the sensitivities performed by management and understood the impact this
has on the level of headroom on facilities.
Comparing historical performance to historical forecasts to assess accuracy in the
budget process.
Reviewing the facilities which are in place.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the Group's and the Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the Group's and the Company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the
financial statements and our auditors’ report thereon. The Directors are responsible for the
other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires
us also to report certain opinions and matters as described below.
Vertu Motors plc (Company Number: 05984855)
76
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given
in the Strategic report and Directors’ Report for the year ended 28 February 2021 is
consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the Group and Company and their
environment obtained in the course of the audit, we did not identify any material
misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors' Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are
responsible for the preparation of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The Directors are also
responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s
and the Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of
non-compliance with laws and regulations related to the Listing Rules and UK tax legislation,
and we considered the extent to which non-compliance might have a material effect on the
financial statements. We also considered those laws and regulations that have a direct impact
on the financial statements such as the Companies Act 2006. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including
the risk of override of controls), and determined that the principal risks were related to posting
inappropriate journal entries to increase revenue or increase the Group's EBITDA, or through
management bias in manipulation of accounting estimates. Audit procedures performed by
the engagement team included:
•
•
•
Discussions with management, including consideration of known or suspected
instances of non-compliance with laws and regulation and fraud.
Review of Board minutes.
Review of legal expenditure in the year to identify potential non-compliance with laws
and regulation.
Vertu Motors plc (Company Number: 05984855)
77
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Responsibilities for the financial statements and the audit (continued)
•
•
Challenging assumptions and judgements made by management in their significant
accounting estimates, in particular in relation to impairment of assets and the
impairment of the investment in the company (see key audit matters above).
Identifying and testing journal entries, in particular any journal entries posted with
unusual account combinations and reviewing any high margin revenue transactions.
There are inherent limitations in the audit procedures described above. We are less likely to
become aware of instances of non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and
balances, possibly using data auditing techniques. However, it typically involves selecting a
limited number of items for testing, rather than testing complete populations. We will often
seek to target particular items for testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion about the population from
which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
•
•
•
we have not obtained all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Company, or returns
adequate for our audit have not been received from branches not visited by us; or
certain disclosures of Directors’ remuneration specified by law are not made; or
the Company financial statements and the part of the Directors' Remuneration Report
to be audited are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Jonathan Greenaway (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle
12 May 2021
Vertu Motors plc (Company Number: 05984855)
78
Consolidated Income Statement
For the year ended 28 February 2021
Underlying
items 2021
Non-
underlying
items 2021
(Note 8)
Total 2021 Underlying
items 2020
Total 2020
Non-
underlying
items 2020
(Note 8)
Note
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit
Finance income
Finance costs
Profit / (loss) before
tax
5
6
11
11
5
2,547,665
(2,246,642)
301,023
-
-
-
2,547,665
3,064,530
(2,246,642)
(2,730,473)
301,023
334,057
-
-
-
3,064,530
(2,730,473)
334,057
(267,240)
(2,153)
(269,393)
(301,878)
(15,706)
(317,584)
33,783
(2,153)
31,630
32,179
(15,706)
16,473
174
(9,405)
-
-
174
405
(9,405)
(9,561)
-
-
405
(9,561)
24,552
(2,153)
22,399
23,023
(15,706)
7,317
Taxation
12
(5,217)
(867)
(6,084)
(4,523)
193
(4,330)
Profit / (loss) for the
year attributable to
equity holders
Basic earnings per
share (p)
Diluted earnings per
share (p)
13
13
19,335
(3,020)
16,315
18,500
(15,513)
2,987
4.44
4.36
0.81
0.80
Vertu Motors plc (Company Number: 05984855)
79
Consolidated Statement of Comprehensive Income
For the year ended 28 February 2021
Profit for the year
Other comprehensive (expenses) / income
Items that will not be reclassified to profit or loss:
Actuarial (losses) / gains on retirement benefit
obligations
Deferred tax relating to actuarial losses / (gains) on
retirement benefit obligations
Items that may be reclassified subsequently to profit or
loss:
Cash flow hedges
Deferred tax relating to cash flow hedges
Other comprehensive (expense) / income for the
year, net of tax
Total comprehensive income for the year
attributable to equity holders
Note
30
30
32
32
2021
£’000
16,315
(2,619)
498
(6)
10
2020
£’000
2,987
2,400
(408)
(468)
80
(2,117)
1,604
14,198
4,591
Vertu Motors plc (Company Number: 05984855)
80
Consolidated Balance Sheet
As at 28 February 2021
Non-current assets
Goodwill and other indefinite life assets
Other intangible assets
Retirement benefit asset
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Property assets held for sale
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Contract liabilities
Borrowings
Lease liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Deferred income tax liabilities
Contract liabilities
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves attributable to equity
holders of the Group
Ordinary share capital
Share premium
Other reserve
Hedging reserve
Treasury share reserve
Capital redemption reserve
Retained earnings
Note
15
16
30
18
19
21
23
24
22
25
29
26
19
26
19
27
28
29
31
31
31
32
31
31
2021
£’000
99,192
1,948
6,246
246,664
81,152
435,202
597,391
59,375
67,828
724,594
1,369
725,963
2020
£’000
99,315
2,120
8,867
229,148
87,013
426,463
639,177
71,720
40,839
751,736
417
752,153
1,161,165
1,178,616
(688,948)
(1,573)
(12,395)
(6,582)
(14,126)
(723,624)
(65,777)
(76,975)
(497)
(9,180)
(9,172)
(161,601)
(716,270)
(2,935)
(10,974)
(25,547)
(14,071)
(769,797)
(43,657)
(82,823)
(493)
(8,179)
(10,294)
(145,446)
(885,225)
(915,243)
275,940
263,373
36,917
124,939
10,645
(403)
(2,791)
2,810
103,823
36,917
124,939
10,645
(407)
(803)
2,810
89,272
Total equity
275,940
263,373
These consolidated financial statements on pages 79 to 124 have been approved for issue by
the Board of Directors on 12 May 2021 and signed on its behalf by:
Robert Forrester
Chief Executive
Karen Anderson
Chief Financial Officer
Vertu Motors plc (Company Number: 05984855)
81
Consolidated Cash Flow Statement
For the year ended 28 February 2021
Cash flows from operating activities
Operating profit
Profit on sale of property, plant and equipment
Profit on lease modification
Amortisation of other intangible assets
Depreciation of property, plant and equipment
Depreciation of right of use asset
Impairment charges
Change to fair value of contingent consideration
Movement in working capital
Share based payments charge
Cash inflow from operations
Tax received
Tax paid
Finance income received
Finance costs paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts
and borrowings acquired
Acquisition of freehold and long leasehold land and
buildings
Proceeds from disposal of a business
Purchases of intangible assets
Purchases of other property, plant and equipment
Proceeds from disposal of property, plant and
equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Principal elements of lease repayments
Purchase of treasury shares
Repurchase of own shares
Dividends paid to equity holders
Net cash outflow from financing activities
Net increase / (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
6
19
16
18
19
8
8
34
2021
£’000
31,630
(432)
(234)
436
12,333
15,643
1,452
-
29,640
373
90,841
188
(6,692)
23
(9,440)
74,920
2020
£’000
16,473
(238)
-
595
11,309
14,065
16,878
(2,500)
(23,563)
619
33,638
362
(5,348)
237
(9,387)
19,502
17
(21,489)
(12,398)
(2,713)
1,698
(264)
(11,844)
972
(33,640)
22,760
(19,705)
(15,342)
(2,004)
-
-
(14,291)
26,989
40,839
67,828
(1,421)
-
(155)
(14,180)
3,255
(24,899)
2,381
-
(13,392)
(401)
(2,749)
(6,122)
(20,283)
(25,680)
66,519
40,839
33
33
19
33
24
Vertu Motors plc
82
Consolidated Statement of Changes in Equity
For the year ended 28 February 2021
Ordinary
share
capital
Share
premium
Other
reserve
Hedging
reserve
Treasury
share
reserve
Capital
redemption
reserve
Retained
earnings
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 March 2020
Profit for the year
Actuarial losses on
retirement benefit
obligations
Tax on items taken
directly to equity
Fair value losses
Total comprehensive
income for the year
Issue of treasury shares
Purchase of treasury
shares
Share based payments
charge
36,917
124,939
10,645
(407)
(803)
2,810
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
(6)
4
-
-
-
-
-
-
-
-
16
(2,004)
-
-
-
-
-
-
-
-
-
Total
equity
£’000
263,373
16,315
89,272
16,315
(2,619)
(2,619)
498
-
14,194
(16)
-
373
508
(6)
14,198
-
(2,004)
373
As at 28 February 2021
36,917
124,939
10,645
(403)
(2,791)
2,810
103,823
275,940
The other reserve is a merger reserve, arising from shares issued as consideration to the
former shareholders of acquired companies.
The purchase of treasury shares in the period relates to the acquisition of 5,273,820 shares
by Ocorian Limited, the Trustee of Vertu Motors plc’s Employee Benefit Trust (“EBT”). The
shares were purchased by the Trustee to be held for the purposes of the EBT and may be
used to transfer shares to individuals when options are exercised. This could include the
Company’s Long Term Incentive Plan (“LTIP”) or Partnership Share Options (“PSO”), under
which each of the executive directors of the Company, the Company’s other PDMRs and
certain other senior managers are potential participants and is therefore regarded as having a
notional interest in these shares.
During the year, 40,337 treasury shares were transferred from the EBT on exercise of vested
LTIP options. 7,287,304 shares remain in the EBT at 28 February 2021.
Vertu Motors plc
83
Consolidated Statement of Changes in Equity (continued)
For the year ended 29 February 2020
Ordinary
share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Hedging
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
37,661
-
124,939
-
10,645
-
(19)
-
(602)
-
2,066
-
92,745
2,987
267,435
2,987
-
-
-
-
-
-
-
(744)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80
(468)
(388)
-
-
-
-
-
-
-
-
-
-
200
(401)
-
-
-
-
-
-
-
-
-
-
-
744
-
-
2,400
2,400
(408)
-
4,979
(200)
-
(328)
(468)
4,591
-
(401)
(2,749)
(2,749)
-
(6,122)
-
(6,122)
619
619
As at 1 March 2019
Profit for the year
Actuarial gains on
retirement benefit
obligations
Tax on items taken
directly to equity
Fair value losses
Total comprehensive
income for the year
Sale of treasury shares
Purchase of treasury
shares
Repurchase of own
shares
Cancellation of
repurchased shares
Dividend paid
Share based payments
charge
As at 29 February 2020
36,917
124,939
10,645
(407)
(803)
2,810
89,272
263,373
Vertu Motors plc
84
Notes to the Consolidated Financial Statements
1. Accounting Policies
Basis of preparation
Vertu Motors plc is a Public Limited Company which is listed on the Alternative Investment
Market (AiM) and is incorporated and domiciled in England. The address of the registered
office is Vertu House, Fifth Avenue Business Park, Team Valley, Gateshead, Tyne and Wear,
NE11 0XA. The registered number of the Company is 05984855.
The consolidated financial statements of Vertu Motors plc have been prepared in accordance
with international accounting standards in conformity with the requirements of the Companies
Act 2006 (“UK IFRS”).
The consolidated financial statements have been prepared on the going concern basis under
the historical cost convention, as modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) at fair value.
In order to prepare the financial statements on the going concern basis, the Directors have
considered detailed financial projections for a period of 12 months from the date of signing the
financial statements (‘Review Period’). These projections are based on the Group’s detailed
annual business plan for the year ending 28 February 2022 as well as the known financial
performance of the Group in the period subsequent to 28 February 2021, projected forward to
cover the Review Period. The Directors have considered these financial projections in
conjunction with the Group’s available facilities, which are outlined in detail in note 26.
The Directors have also considered sensitivity analysis performed in respect of these
forecasts to model the impact of a potential further 3 month period of COVID-19 related sales
restrictions taking place later in the year ending 28 February 2022, based on assumptions
driven by analysis of the actual trends that the Group experienced during the latest
restrictions imposed in the year ended 28 February 2021. This analysis did not indicate any
issues with the Group’s ability to operate within its banking facilities during the Review Period.
Based on the forecast information available and the sensitivity analysis performed as set out
above, the Directors believe it is appropriate to prepare these financial statements on the
going concern basis.
The consolidated financial statements include the results of all subsidiaries owned by Vertu
Motors plc listed on pages 131 to 133 of the annual report. Certain of these subsidiaries,
which are listed below, have taken the exemption from an audit for the year ended 28
February 2021 by virtue of s479A of Companies Act 2006. Certain other subsidiaries, which
are also listed below, have taken the exemption from preparing individual accounts for the
year ended 28 February 2021 by virtue of s394A of Companies Act 2006. In order to allow
these subsidiaries to take the audit exemption or exemption from the preparation of individual
accounts (as appropriate), the parent company Vertu Motors plc has given a statutory
guarantee of all the outstanding liabilities as at 28 February 2021 of the subsidiaries listed
below, further details of which are provided in note 36.
The subsidiaries which have taken an exemption from an audit for the year ended 28
February 2021 by virtue of s479A Companies Act 2006 are:
Albert Farnell Limited
All Car Parts Limited
Bristol Street First Investments Limited
Bristol Street Fourth Investments Limited
Grantham Motor Company Limited
Hughes of Beaconsfield Limited
Macklin Property Limited
Sigma Holdings Limited
South Hereford Garages Limited
South Hereford Garages Trade Parts LLP
Tyne Tees Finance Limited
Vans Direct Limited
Vertu Motors (Chingford) Limited
Vertu Motors (Continental) Limited
Vertu Motors (Knaresborough) Limited
Vertu Motors (Property) Limited
Vertu Motors (Property 2) Limited
Vertu Motors (VMC) Limited
Vertu Motors plc (Company Number: 05984855)
85
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Basis of preparation (continued)
The subsidiaries which have taken an exemption from the preparation of individual accounts
in respect of the year ended 28 February 2021 by virtue of s394A of Companies Act 2006 are:
Aceparts Limited
Best4Vans Limited
Blacks Autos Limited
Blake Holdings Limited
Boydslaw 103 Limited
Bristol Street (No.1) Limited
Bristol Street (No.2) Limited
Bristol Street Commercials (Italia) Limited
Bristol Street Fifth Investments Limited
Bristol Street Fleet Services Limited
Bristol Street Group Limited
Bristol Street Limited
Brookside (1998) Limited
BSH Pension Trustee Limited
Carsandvansdirect Limited
Compare Click Call Limited
Dobies (Carlisle) Limited
Dunfermline Autocentre Limited
Easy Vehicle Finance Limited
Gordon Lamb Group Limited
Gordon Lamb Limited
Gordon Lamb Holdings Limited
Hillendale Group Limited
Hillendale LR Limited
Horseshoe Vehicle Contracts Limited
Hughes Group Holdings Limited
International Concessionaires Limited
K C Motability Solutions Limited
Merifield Properties Limited
Motor Nation Car Hypermarkets Limited
National Allparts Limited
Newbolds Garage (Mansfield) Limited
Nottingham TPS LLP
Peter Blake (Chatsworth) Limited
Peter Blake (Clumber) Limited
Peter Blake Limited
SHG Holdings Limited
The Taxi Centre Limited
Typocar Limited
VanMan Limited
Vertu Fleet Limited
Vertu Motors (AMC) Limited
Vertu Motors (Durham) Limited
Vertu Motors (Finance) Limited
Vertu Motors (Pity Me) Limited
Vertu Motors Property 2 Holdings Limited
Vertu Motors (Retail) Limited
Vertu Ventures Limited
Why Pay More For Cars Limited
Widnes Car Centre Limited
Widnes Car Centre (1994) Limited
The preparation of financial statements in conformity with UK IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the
process of applying the Group’s accounting policies. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities are set out in note 4.
The Directors consider that the accounting policies set out below are the most appropriate
and have been consistently applied.
Standards and interpretations adopted by the Group in the year ended 28 February
2021
The Group has applied the following standards and amendments for the first time for their
annual reporting period commencing 1 March 2020:
• Definition of Material – amendments to IAS 1 and IAS 8
• Definition of a Business – amendments to IFRS 3
New standards and interpretations issued but not yet effective and not early adopted
Certain new accounting standards and interpretations have been published that are not
mandatory for 28 February 2021 reporting periods and have not been early adopted by the
Group. These standards are not expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future transactions.
Leases
The Group adopted IFRS 16 ‘Leases’ for the first time in the year ended 29 February 2020.
As the new standard was adopted prospectively, the impact on the Consolidated Income
Statement was presented within non-underlying items in the year ended 29 February 2020 to
enhance the comparability of the financial results in that year. As the standard has now been
adopted for two full financial years, the Consolidated Income Statement for the year ended 29
February 2020 has been restated to present the impact of IFRS 16 ‘Leases’ within underlying
items.
Vertu Motors plc (Company Number: 05984855)
86
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Leases (continued)
As a result, underlying operating expenses in the year ended 29 February 2020 have
decreased by £3,117,000 (and non-underlying operating expenses have increased by the
same value) and underlying finance costs have increased by £3,595,000 (non-underlying
finance costs have decreased by the same value).
The Group leases various dealership premises, compounds and vehicles. Rental contracts
are typically made for fixed periods of a minimum of 12 months to a maximum of 150 years
and may have extension options as described below.
Contracts may contain both lease and non-lease components. The Group allocates the
consideration in the contract to the lease and non-lease components based on their relative
stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has
elected not to separate lease and non-lease components and instead accounts for these as a
single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms
and conditions. The lease agreements do not impose any covenants other than the security
interests in the leased assets that are held by the lessor.
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date
at which the leased asset is available for use by the Group. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period.
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
- Fixed payments, less any incentives receivable,
- Variable lease payments that are based on an index or a rate,
- Amounts expected to be payable by the lessee under residual value guarantees,
- The exercise price of a purchase option if the lessee is reasonably certain to exercise
that option; and
- Payment of penalties for terminating the lease, if the lease term reflects the lessee
exercising that option.
Lease payments to be made under reasonably certain extension options are also included in
the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in
a similar economic environment with similar terms and conditions.
To determine the incremental borrowing rate, the Group:
• where possible, uses recent third-party financing received by the individual lessee as
a starting point, adjusted to reflect changes in financing conditions since third party
financing was received, or
• uses a build-up approach that starts with a risk-free interest rate adjusted for credit
risk for leases held by Vertu Motors plc, which does not have recent third party
financing, and
• makes adjustments specific to the lease, e.g., term, country, currency and security.
The Group is exposed to potential future increases in variable lease payments based on an
index or rate, which are not included in the lease liability until they take effect. When
adjustments to lease payments based on an index or rate take effect, the lease liability is
reassessed and adjusted against the right-of-use asset.
Vertu Motors plc (Company Number: 05984855)
87
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Leases (continued)
Right-of-use assets are measured at cost comprising the following:
- The amount of the initial measurement of the lease liability,
- Any lease payments made at or before the commencement date, less any lease
incentives received,
- Any initial direct costs; and
- Restoration costs.
Payments associated with short-term leases of low-value assets are recognised on a straight-
line basis as an expense in profit or loss. Short-term leases are leases with a lease term of
less than 12 months.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and
the lease term on a straight-line basis. If the Group is reasonably certain to exercise a
purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Extension and termination options
Extension and termination options are included in a number of property leases across the
Group and are used to maximise flexibility to respond to the changing retail environment in
the years ahead. Approximately one fifth of the Group’s property leases have the benefit of a
tenant break clause.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Vertu Motors plc
and its subsidiary undertakings. Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are
consolidated from the date at which control is transferred to the Group and they are excluded
from the consolidated financial statements from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the accounting
policies adopted by the Group.
Business combinations and goodwill
Business combinations are accounted for using the purchase method of accounting. This
involves recognising identifiable assets (including intangible assets not previously recognised
by the acquiree) and liabilities (including contingent liabilities) of acquired businesses at fair
value. Goodwill acquired in a business combination is initially measured at cost being the
excess of the cost of the consideration over the Group’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities. Where the net fair value of
the acquired identifiable assets, liabilities and contingent liabilities exceeds the consideration,
the excess or “negative goodwill” is recognised immediately in the Consolidated Income
Statement. Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of annual impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the Group’s cash
generating units.
Each cash generating unit (“CGU”) or group of cash generating units to which the goodwill is
allocated represents the lowest level within the Group at which the goodwill is monitored for
internal management purposes. Gains and losses on the disposal of a business component
are calculated on a basis which incorporates the carrying amount of goodwill relating to the
business sold. Acquisition related costs are expensed to the Consolidated Income Statement
as incurred.
Vertu Motors plc (Company Number: 05984855)
88
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Other intangible assets
Intangible assets, when acquired separately from a business combination, comprise computer
software and are carried at cost less accumulated amortisation and any impairment losses.
Amortisation is provided on a straight-line basis to allocate the cost of the asset over its
estimated useful life, which in the case of computer software is between four and six years.
Intangible assets, for example, franchise relationships, brands and customer relationships
acquired as part of a business combination, are capitalised separately from goodwill if the
asset is separable and if the fair value can be measured reliably on initial recognition. Such
assets are stated at fair value less accumulated amortisation. Amortisation is provided on a
straight-line basis over their expected useful lives. Intangible assets with an indefinite useful
life, such as franchise relationships, are tested annually for impairment. Other intangible
assets arising as part of a business combination are typically allocated a useful life of
between 10 and 20 years.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any
impairment in value. Cost includes expenditure that is directly attributable to the acquisition of
the asset. Assets’ residual values, useful lives and methods of depreciation are reviewed,
and adjusted if appropriate, at each financial year end. Freehold land is not depreciated.
Depreciation is provided at rates calculated to write off the cost of property, plant and
equipment less their estimated residual values, on a straight-line basis over their estimated
useful lives, as follows:
Freehold buildings
Long leasehold buildings
Short leasehold buildings
Franchise standards property improvements
Vehicles and machinery
Furniture, fittings and equipment
2%
Shorter of lease term and 50 years
Lease term (under 25 years)
20%
10% - 20%
20% - 50%
An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses
on disposals are determined by comparing the proceeds with the carrying amount and are
recognised within ‘operating expenses’ in the consolidated income statement, except where
amounts are material and are disclosed separately in ‘non-underlying items’.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost for parts is
determined using the first-in, first-out (FIFO) method. Costs incurred in bringing each product
to its present location and condition are included and cost is based on price including delivery
costs less specific trade discounts. Net realisable value is based on estimated selling price
less further costs to be incurred on disposal. Provision is made for obsolete, slow-moving or
defective items where appropriate.
The timing of recognition of new vehicle inventory as an asset of the Group is dependent on
the terms of the purchase which vary by Manufacturer. Some Manufacturers invoice on
release from their factory, although the vehicle may not be physically present at a Group
location, title has passed and therefore the vehicle is recognised in inventory upon receipt of
the invoice. Some Manufacturers operate traditional consignment stock arrangements where
unpaid vehicles may be physically present at dealerships however title is retained by the
manufacturer. If the vehicle consignment is unsold after a period of time it begins to accrue
interest from the manufacturer and at the point interest starts to accrue, the vehicle is
recorded as an asset with a corresponding creditor, to reflect the asset and funding element
of the transaction. This is in order to record the economic substance of the transaction rather
than just the legal form. Other vehicle inventory is recognised upon title passing to the Group,
typically on physical receipt.
As part of its normal trading activities the Group has contracted to repurchase, at
predetermined values and dates, certain vehicles previously sold. The Group recognises its
residual interest in these vehicles through the inclusion of such vehicles within inventory, at
the lower of the repurchase price or estimated recoverable value, with a liability equal to the
repurchase price within trade payables.
Vertu Motors plc (Company Number: 05984855)
89
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. A provision
for impairment of trade receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30
days overdue) are considered indicators that the trade receivable is impaired. The amount of
the provision is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate. The carrying
amount of the asset is reduced through the use of an allowance account, and the amount of
the loss is recognised in the Consolidated Income Statement within operating expenses.
When a trade receivable is uncollectible, it is written off against the allowance account for
trade receivables. Subsequent recoveries of amounts previously written off are credited
against operating expenses in the income statement.
Trade payables
Trade payables are recognised at fair value initially and subsequently measured at amortised
cost using the effective interest method.
Impairment of financial and non-financial assets
The Group assesses at each balance sheet date whether a financial asset or group of
financial assets are impaired.
If there is objective evidence that an impairment loss on loans and receivables at amortised
cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows discounted at
the financial asset’s original effective interest rates. The amount of the loss is recognised in
the Consolidated Income Statement.
At each reporting date, the Group assesses whether there is an indication that a non-financial
asset may be impaired. If any such indication exists, or when annual impairment testing for
an asset is required, the Group makes an estimate of the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its
value in use. Where fair value cannot be determined then the recoverable amount will be
determined by reference to value in use. Value in use is determined for an individual asset,
unless the asset does not generate cash flows that are largely independent of those from
other assets or groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows of separately identifiable CGUs are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the CGU. In determining fair
value less costs to sell, an appropriate valuation model is used.
Impairment losses are recognised in the Consolidated Income Statement in the expense
category consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Group makes an estimate of any amount
recoverable. A previously recognised impairment loss is only reversed if there has been a
change in the estimates used to determine the asset’s recoverable amount since the
impairment loss was recognised.
Government grant income
Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the group will comply with all attached
conditions. Government grants received in the year ended 28 February 2021 have been
recognised within net operating expenses in the Consolidated Income Statement. Note 9
provides further information on government grants received in the year ended 28 February
2021.
Vertu Motors plc (Company Number: 05984855)
90
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Derivative financial instruments
The Group manages its interest rate risk through hedging instruments. The Group recognises
hedging instruments at fair value with any gain or loss on measurement recognised in the
Consolidated Income Statement. The Group does not hold or issue derivative financial
instruments for speculative purposes.
The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions. The Group also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in fair values or cash flows of
hedged items.
The only derivative financial instrument held by the Group throughout the year is a cash flow
hedge swapping floating for fixed interest rates. The effective portion of changes in the fair
value of derivatives that are designated and qualify as cash flow hedges is recognised in
equity in the hedging reserve. Any gain or loss relating to the ineffective portion is recognised
immediately in the Consolidated Income Statement within finance income or costs.
Amounts accumulated in equity are recycled in the Consolidated Income Statement in the
years when the hedged item affects profit and loss. The gain or loss relating to the effective
portion of interest rate swaps hedging variable rate borrowings is recognised in the
Consolidated Income Statement within ‘finance costs’. The fair values of derivative financial
instruments used for hedging purposes are disclosed in note 27.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss existing in equity at that time remains in
equity and is recognised when the forecast transaction is ultimately recognised in the
Consolidated Income Statement. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported within equity is immediately transferred to the
Consolidated Income Statement within finance income or costs.
Taxation
Current tax
Current income tax assets and liabilities are measured at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively enacted at
the balance sheet date.
Deferred tax
Deferred tax is provided using the liability method on temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts at the
balance sheet date for financial reporting purposes. Deferred tax liabilities are recognised for
all temporary differences, except:
a. where the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
b.
in respect of taxable temporary differences associated with investments in subsidiaries,
where the timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised except:
a. where the deferred tax asset relating to the deductible temporary differences arises from
the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
Vertu Motors plc (Company Number: 05984855)
91
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Taxation (continued)
Deferred tax (continued)
b.
in respect of deductible
in
subsidiaries, deferred tax assets are only recognised to the extent that it is probable that
the temporary difference will reverse in the foreseeable future and taxable profits will be
available against which the temporary differences can be utilised.
temporary differences associated with
investments
Deferred tax is calculated using the enacted or substantively enacted rates that are expected
to apply when the asset or liability is settled. Deferred tax is charged or credited to the
Consolidated Income Statement, except when it relates to items credited or charged direct to
equity in which case the deferred tax is also credited or charged to equity.
Revenue
Revenue for the sale of goods and services is measured at the fair value of consideration
receivable, net of value added tax and any discounts. It excludes sales related taxes and
intra group transactions. Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be reliably measured.
Sale of motor vehicles, parts and aftersales services
Sales of vehicles and parts are recognised when the customer has control of the goods. In
practice this means that revenue is recognised when vehicles or parts are invoiced and
physically despatched or when a service has been undertaken. Manufacturer incentives (e.g.
free service when purchasing a vehicle) do not impact the Group as the legal obligation lies
with the manufacturer.
Sale of warranty products
Revenue is recognised in line with the performance obligation, i.e. the period in which the
customer can exercise their rights under the warranty, and therefore recognised over the life
of the warranty.
Finance commissions
Finance commissions are received for the arrangement of vehicle financing and related
insurance products where the Group acts as agent on behalf of a principal. Commissions are
based on agreed rates and income is recognised when the finance and/or insurance package
that the customer has entered into commences. Typically, this is on delivery of the vehicle.
Where the commission received relates to a specific vehicle sale, it is recognised within
revenue. Where the commission received relates to a central rebate, it is recognised within
cost of sales.
Manufacturer rebates
Vehicle specific rebates from Manufacturers are recognised when it is probable that the
economic benefit will flow to the Group and the value can be reliably measured. In practice,
this means that vehicle specific Manufacturer rebates are recognised when the vehicle to
which the rebate relates, has been invoiced and physically despatched. In the case of non-
vehicle specific related rebates from suppliers, these are recognised in the Consolidated
Income Statement upon achievement of the specific agreed supplier criteria. Manufacturer
rebates are recognised within cost of sales.
Vertu Motors plc (Company Number: 05984855)
92
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Revenue (continued)
Disaggregation of revenue:
The table below shows revenue disaggregated by the Group’s main product/service lines:
Aftersales
Used cars
New car retail & Motability
New fleet & commercial
Total
Timing of revenue recognition:
Recognised at a point in time
Recognised over time
Total
2021
£’000
221,179
1,008,301
739,748
578,437
2,547,665
2020
£’000
258,104
1,235,381
862,517
708,528
3,064,530
2,540,648
7,017
2,547,665
3,057,126
7,404
3,064,530
All of the Group’s revenue was generated in the United Kingdom.
Contract liabilities
Where the Group receives consideration for a sale in advance of the performance obligation
being satisfied, the amount received is held on the balance sheet within contract liabilities and
released to the income statement in line with the relevant revenue recognition policy.
Pension costs
The Group operates a trust based defined benefit pension scheme, “Bristol Street Pension
Scheme”, which has three defined benefit sections which were closed to new entrants and
future accrual on 31 May 2003, with another section closed to new entrants in July 2003 and
future accrual in October 2013.
Typically, defined benefit schemes define an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age, years of
service and compensation.
The assets of the defined benefit scheme are held separately from the assets of the Group.
The asset or liability recognised in the balance sheet in respect of the defined benefit pension
scheme is the fair value of plan assets less the present value of the defined benefit
obligations at the balance sheet date. Defined benefit obligations are calculated annually by
independent actuaries using the projected unit credit method. The present value of defined
benefit obligations is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which
the benefits will be paid, and that have terms to maturity approximating to the terms of the
related pension liability.
Differences between the actual and expected return on assets, changes in retirement benefit
obligations due to experience and changes in actuarial assumptions are included in the
Statement of Comprehensive Income in full for the year in which they arise.
A Group personal pension arrangement under which the Group pays fixed contributions into
an individual’s funds, is also in place. The Group has no legal or constructive obligations to
pay further contributions if the fund does not hold sufficient assets to pay employees the
benefits relating to employee service in the current and prior years. Contributions into this
scheme are charged to the Consolidated Income Statement in the year in which they are
payable.
Vertu Motors plc (Company Number: 05984855)
93
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Share based payments
The Group allows employees to acquire shares of the Company through share option
schemes. The fair value of share options granted is recognised as an employee expense
with a corresponding increase in equity. The Group operates a number of equity-settled,
share-based compensation plans. The total amount to be expensed over the vesting period
is determined by reference to the fair value of the options granted, excluding the impact of
any non-market vesting conditions (for example, profitability and sales growth targets). Non-
market vesting conditions are included in assumptions about the number of options that are
expected to vest. At each balance sheet date, the entity revises its estimates of the number
of options that are expected to vest. It recognises the impact of the revision to original
estimates, if any, in the Consolidated Income Statement, with a corresponding adjustment to
equity.
The proceeds received net of any directly attributable transaction costs are credited to share
capital (nominal value) and share premium when the options are exercised.
Non-underlying items
Non-underlying items are presented separately in the Consolidated Income Statement to
enhance comparability of trading performance between periods. Details of the items included
as non-underlying are provided in note 8.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash in hand, deposits held at call
with banks and other short-term highly liquid investments with original maturities of three
months or less.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided
to the Chief Operating Decision Maker (“CODM”), Robert Forrester, Chief Executive Officer,
who is responsible for allocating resources and assessing performance of the operating
segment.
Share capital
Ordinary shares are classed as equity. Incremental costs directly attributable to the issue of
new shares are shown in equity as a deduction, net of tax, from the proceeds.
Dividend distribution
Final dividends to the Company’s shareholders are recognised as a liability in the Group’s
financial statements in the period in which the dividends are approved by the Company’s
shareholders. Interim dividends are recognised when they are paid.
2. Financial risk management
The Group’s activities expose it to a variety of financial risks, including the effects of changes
in debt market prices and interest rates. The Group’s treasury management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group. The Group used derivative financial
instruments to reduce exposure to interest rate movements on drawn debt. The outstanding
derivative instruments held by the Group at the balance sheet date are set out in note 27.
The use of financial derivatives is governed by the Group’s policies approved by the Board of
Directors, which provide principles on interest rate risk, credit risk, the use of financial
derivatives and non-derivative financial instruments and the investment of excess liquidity.
The Board adopts an ongoing process for identifying, evaluating and managing the significant
risks faced by the Group.
Vertu Motors plc (Company Number: 05984855)
94
Notes to the Consolidated Financial Statements (continued)
2. Financial risk management (continued)
Market Risk – Cash Flow Interest Rate Risk
The Group’s interest rate risk arises from long-term borrowings, which are issued at variable
rates that expose the Group to cash flow interest rate risk. The Group’s borrowings are
denominated in sterling.
The interest rate exposure of the Group is managed within the constraints of the Group’s
business plan and the financial covenants under its facilities. The Group has performed
calculations to analyse its interest rate exposure taking into account refinancing, renewal of
existing positions, alternative financing and hedging. Based on these scenarios, the Group
calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run
only for liabilities that represent major interest-bearing positions.
Credit Risk
Credit risk arises from cash and deposits with banks as well as credit exposures to
customers. Individual customer risk limits are set based on external credit reference agency
ratings and the utilisation of these credit limits is regularly monitored. Further disclosure on
credit exposure is given in note 23.
Liquidity Risk
Ultimate responsibility for liquidity risk rests with the Board of Directors, which has built an
appropriate liquidity risk management framework for the management of the Group’s short,
medium and long-term funding and liquidity management requirements. The Group manages
liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
Disclosed within note 26 are the undrawn banking facilities that the Group has at its disposal.
The table below analyses the Group’s financial liabilities and derivative financial instruments
into relevant maturity groupings based on the remaining period at the balance sheet date to
contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows. All borrowings are denominated in sterling.
Bank borrowings
Mortgage
Other borrowings
Lease liabilities
Contract liabilities
Trade and other payables (excluding
social security and other taxes)
At 28 February 2021
Less than
one year
£’000
812
997
5,948
14,126
12,395
Between two
and five years
£’000
55,725
3,799
-
76,975
9,172
Over five
years
£’000
-
11,408
-
-
-
Total
£’000
56,537
16,204
5,948
91,101
21,567
682,711
716,989
-
145,671
- 682,711
11,408 874,068
Bank borrowings
Other borrowings
Lease liabilities
Contract liabilities
Trade and other payables (excluding
social security and other taxes)
At 29 February 2020
Less than
one year
£’000
904
25,547
14,071
10,974
Between two
and five years
£’000
45,908
-
82,823
10,294
Over five
years
£’000
-
-
-
-
Total
£’000
46,812
25,547
96,894
21,268
709,603
761,099
-
139,025
- 709,603
- 900,124
Other borrowings represent amounts repayable under used car stocking facilities.
Vertu Motors plc (Company Number: 05984855)
95
Notes to the Consolidated Financial Statements (continued)
3. Capital risk management
The Group’s primary objective when managing capital is to safeguard the Group’s ability to
continue as a going concern in order to provide returns for shareholders and benefits for other
stakeholders.
The Group must ensure that sufficient capital resources are available for working capital
requirements and meeting principal and interest payment obligations as they fall due.
Consistent with others in this industry, the Group monitors capital on the basis of the gearing
ratio, which is calculated as net debt divided by total capital. Net debt is calculated as total
borrowings (including current and non-current borrowings as shown in the Consolidated
Balance Sheet) less cash and cash equivalents. Total capital is calculated as total
shareholders’ equity.
The Group had net debt of £95,632,000 (including £91,101,000 lease liabilities) at 28
February 2021 as disclosed in note 33 to the consolidated financial statements (2020: net
debt of £125,259,000 including £96,894,000 lease liabilities).
Fair value estimation
The carrying value less impairment provision of trade receivables and payables are
considered to approximate their fair values. The fair value of long-term borrowings
approximates to the carrying value reported in the balance sheet, as the majority are variable
rate borrowings.
4. Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates, will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities are discussed below:
Valuation of goodwill
The valuation of goodwill acquired is performed in accordance with IFRS 3 and is therefore
based on provisional values ascribed within the measurement period subsequent to
acquisition. Management judgement has been used in determining the existence and value of
separately identifiable assets acquired as part of the business combination.
Valuation of other intangible assets
When a business combination takes place, the Group is required to assess whether there are
any additional intangible assets arising separately from goodwill. Management judgement is
required to determine whether an intangible asset can be separately identified, what fair value
should be ascribed to the asset and its attributable useful life.
Impairment of goodwill and other indefinite life assets
The Group tests annually, or whenever events or changes in circumstances occur, to
determine whether goodwill or other indefinite life assets have suffered any impairment, in
accordance with the accounting policy stated above and in note 15. The recoverable
amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of estimates. Details of the key assumptions used for the
impairment testing for the year ended 28 February 2021, as well as the results of sensitivity
analysis performed, are provided in note 15.
Estimated useful life of intangibles, property, plant and equipment and impairment testing
The Group estimates the useful life and residual values of intangible assets, property, plant
and equipment and reviews these estimates at each financial year end. The Group also tests
for impairment when a trigger event occurs, or annually, as appropriate.
Vertu Motors plc (Company Number: 05984855)
96
Notes to the Consolidated Financial Statements (continued)
4. Critical accounting estimates and judgements (continued)
Pension benefits
During the year ended 28 February 2021, the Group operated one defined benefit pension
scheme, the “Bristol Street Pension Scheme”. The obligations under this defined benefit
scheme are recognised in the Consolidated Balance Sheet and represent the present value of
the obligations calculated by independent actuaries, with input from management. These
actuarial valuations include assumptions such as discount rates, annual rates of return and
mortality rates. These assumptions vary from time to time according to prevailing economic
conditions. Details of the assumptions used for the scheme in the year ended 28 February
2021 are provided in note 30.
Revenue recognition
The Group’s main product/service lines are the sale of motor vehicles, parts and aftersales
services. The Group operates an income recognition policy that ensures that revenue is
recognised in line with satisfaction of the performance obligation, as set out in note 1.
Given the complexity of the initial sale of a vehicle which can represent several bundled
products, judgement is involved in isolating the component parts of the transaction and
ensuring revenue is recognised appropriately.
5. Segmental information
The Group adopts IFRS 8 “Operating Segments”, which determines and presents operating
segments based on information provided to the Group’s Chief Operating Decision Maker
(“CODM”), Robert Forrester, Chief Executive Officer. The CODM receives information about
the Group overall and therefore there is one operating segment.
The CODM assesses the performance of the operating segment based on a measure of both
revenue and gross margin. However, to increase transparency, the Group has included
below an additional voluntary disclosure analysing revenue and gross margin within the
reportable segment.
Year ended 28 February 2021
Aftersales
Used cars
New car retail and Motability
New fleet and commercial
Year ended 29 February 2020
Aftersales
Used cars
New car retail and Motability
Revenue
£’m
221.2
1,008.4
739.7
578.4
2,547.7
Revenue
£’m
258.1
1,235.4
862.5
Revenue
Mix
%
8.7
39.6
29.0
22.7
100.0
Revenue
Mix
%
8.4
40.3
28.1
Gross
Profit
£’m
129.6
93.9
54.3
23.2
301.0
Gross
Profit
£’m
143.5
102.1
62.7
Gross
Profit
Mix
%
43.1
31.2
18.0
7.7
100.0
Gross
Profit
Mix
%
43.0
30.6
18.8
Gross
Margin1
%
49.3
9.3
7.3
4.0
11.8
Gross
Margin1
%
46.9
8.3
7.3
New fleet and commercial
3.6
10.9
1Margin in aftersales expressed on internal and external turnover. A significant part of the role of the service department is to support
the vehicle sales department and therefore this is considered to be an important measure for the purpose of monitoring the
departmental performance
708.5
3,064.5
7.6
100.0
25.8
334.1
23.2
100.0
Vertu Motors plc (Company Number: 05984855)
97
Notes to the Consolidated Financial Statements (continued)
6. Operating expenses
Wages and salaries excluding share based payments
charge (note 9)
Depreciation on property, plant and equipment
(note 18)
Depreciation on right-of-use assets (note 19)
Profit on disposal of property, plant and equipment
Profit on lease modification (note 19)
Auditors’ remuneration (note 7)
Rental income
Share based payments charge
Amortisation (note 16)
Impairment charges (notes 15 & 18)
Change to fair value of contingent consideration
Other expenses
7. Auditors’ remuneration
Fees payable to the Company’s auditors for the
audit of the parent company and consolidated
financial statements
Fees payable to the Company’s auditors and its
associates for other services:
- audit of Group’s subsidiaries
- Other services
8. Non-underlying items
2021
£’000
2020
£’000
150,542
173,911
12,333
15,643
(432)
(234)
260
(218)
265
436
1,452
-
89,346
269,393
2021
£’000
245
5
10
260
11,309
14,065
(238)
-
240
(185)
733
595
16,878
(2,500)
102,776
317,584
2020
£’000
231
5
4
240
2020
£’000
(16,878)
Impairment charges (notes 15 & 18)
2,500
Change to fair value of contingent consideration
Net impairment charges 1
(14,378)
(733)
Share based payments charge (note 31)
(595)
Amortisation (note 16)
Non-underlying loss before tax
(15,706)
1£2,500,000 of the impairment charges in the year ended 29 February 2020 related to Vans Direct Limited. Contingent
consideration for a corresponding amount was also released.
2021
£’000
(1,452)
-
(1,452)
(265)
(436)
(2,153)
Non-underlying items are presented separately in the Consolidated Income Statement to enhance
comparability of trading performance between periods.
Details of current and deferred tax arising in respect of non-underlying items is shown in note 12.
Vertu Motors plc (Company Number: 05984855)
98
Notes to the Consolidated Financial Statements (continued)
9. Employee benefit expense
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share based payments charge (note 31)
Employee benefit expense included in:
Operating expenses
Cost of sales
Share based payments charge (note 31)
2021
£’000
154,268
17,350
4,688
176,306
265
176,571
2021
£’000
150,542
25,764
265
176,571
2020
£’000
176,421
19,013
4,733
200,167
733
200,900
2020
£’000
173,911
26,256
733
200,900
The above employee benefit expense for the year ended 28 February 2021 includes £27,845,000
of Government grant income in respect of the Coronavirus Job Retention Scheme.
Details of the remuneration of the Directors who served during the year from 1 March 2020 to 28
February 2021 and the year from 1 March 2019 to 29 February 2020 are given in the Directors’
Remuneration Report on pages 62 to 66.
10. Average monthly number of people employed (including Directors)
Sales and distribution
Service, parts and accident repair centres
Administration
11. Finance income and costs
Interest on short-term bank deposits
Net finance income relating to defined benefit
pension scheme (note 30)
Finance income
Bank loans and overdrafts
Vehicle stocking interest
Lease liability interest (note 19)
Finance costs
12. Taxation
Current tax
Current tax charge
Adjustment in respect of prior years
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior years
Rate differences
Total deferred tax (note 28)
Income tax expense
Vertu Motors plc (Company Number: 05984855)
99
2021
Number
1,941
2,656
1,126
5,723
2021
£’000
24
150
174
(1,874)
(3,899)
(3,632)
(9,405)
2021
£’000
5,279
(137)
5,142
76
(95)
961
942
6,084
2020
Number
2,055
2,235
1,413
5,703
2020
£’000
237
168
405
(1,418)
(4,548)
(3,595)
(9,561)
2020
£’000
4,495
(307)
4,188
181
(21)
(18)
142
4,330
Notes to the Consolidated Financial Statements (continued)
12. Taxation (continued)
Profit before taxation
Profit before taxation multiplied by the rate of
corporation tax in the UK of 19% (2020: 19%)
Non-qualifying depreciation
Non-deductible expenses
Change to fair value of contingent consideration
Goodwill impairment
Effect on deferred tax balances due to rate change
IFRS 16 adjustment
Property adjustment
Permanent benefits
Adjustments in respect of prior years
Total tax expense included in the income statement
2021
£’000
22,399
4,256
560
305
-
276
961
31
(30)
(43)
(232)
6,084
2020
£’000
7,317
1,390
944
68
(475)
2,770
(18)
91
10
(122)
(328)
4,330
A summary of the Group’s tax expense in respect of underlying and non-underlying items is as
follows:
Underlying
items 2021
£’000
Non-
underlying
items 2021
£’000
Total
2021
£’000
Underlying
items 2020
£’000
Non-
underlying
items 2020
£’000
Total
2020
£’000
Profit / (loss) before tax
Taxation
Profit / (loss) after tax
Effective tax rate
24,552
(5,217)
19,335
21.25%
(2,153)
22,399
(867)
(3,020)
(6,084)
16,315
27.17%
23,023
(4,523)
18,500
19.65%
(15,706)
7,317
193
(15,513)
(4,330)
2,987
59.18%
The Group’s underlying effective rate of tax is 21.25% (2020: 19.65%) which is higher than the
standard rate of corporation tax in the UK as a result of the impact of non-qualifying depreciation
and non-deductible expenses in the year ended 28 February 2021.
In March 2020 it was announced that the reduction in the UK rate of corporation tax to 17% would
not occur and the rate would be held at 19%. As this was substantively enacted during the year
ended 28 February 2021, the Group’s deferred tax obligations have been remeasured at 19%.
This resulted in a deferred tax charge of £961,000 being incurred in the year ended 28 February
2021 which has been presented within non-underlying items as a result of this being driven by a
non-recurring legislative change taking place in the year.
On 3 March 2021, the Chancellor announced that the headline UK corporation tax rate will rise to
25% from 1 April 2023. As this increase had not been enacted by the balance sheet date, the
further revaluation of the Group’s deferred tax obligations from 19% to 25% will be applied in the
financial year ending 28 February 2022 and is expected to increase the Group’s tax charge by
£2.9m in that year.
The overall effective tax rate of 27.17% includes tax on non-underlying items (2020: 59.18%).
13. Earnings per share
Basic and diluted earnings per share are calculated by dividing the earnings attributable to equity
shareholders by the weighted average number of ordinary shares during the year or the diluted
weighted average number of ordinary shares in issue in the year.
For the purposes of calculating the weighted average shares in issue, shares held by the Group’s
employee benefit trust are excluded as rights to dividends on such shares have been waived.
Details of the shares held in the Group’s employee benefit trust are provided on page 68.
The Group only has one category of potentially dilutive ordinary shares, which are share options.
A calculation has been undertaken to determine the number of shares that could have been
acquired at fair value (determined at the average annual market price of the Group’s shares)
based on the monetary value of the subscription rights attached to the outstanding share options.
Vertu Motors plc (Company Number: 05984855)
100
Notes to the Consolidated Financial Statements (continued)
13. Earnings per share (continued)
The number of shares calculated, as set out above, is compared with the number of shares that
would have been issued assuming the exercise of the share options.
Underlying earnings per share is calculated by dividing underlying earnings attributable to equity
shareholders by the weighted average number of ordinary shares in issue during the year.
Profit attributable to equity shareholders
Non-underlying loss after tax (note 12)
Underlying earnings attributable to equity
shareholders
Weighted average number of shares in issue (‘000s)
Potentially dilutive shares (‘000s)
Diluted weighted average number of shares in
issue (‘000s)
Basic earnings per share
Diluted earnings per share
Basic underlying earnings per share
Diluted underlying earnings per share
14. Dividends per share
2021
£’000
16,315
3,020
2020
£’000
2,987
15,513
19,335
18,500
367,092
7,134
370,470
4,348
374,226
374,818
4.44p
4.36p
5.27p
5.17p
0.81p
0.80p
4.99p
4.94p
As a result of the substantial amounts of Government support received and the need to protect
the Group’s liquidity in the year ended 28 February 2021, the Board did not declare a final
dividend for the year ended 29 February 2020, nor any dividend for the financial year ended 28
February 2021. Dividends of £6,122,000 were paid in the year ended 29 February 2020,
representing 1.65p per share.
15. Goodwill and other indefinite life assets
2021
Cost
At 1 March 2020
Acquisitions (note 17)
At 28 February 2021
Accumulated impairment charges
At 1 March 2020
Impairment charge
At 28 February 2021
Net Book Value
At 28 February 2021
At 29 February 2020
Goodwill
£’000
Franchise
relationships
£’000
87,096
834
87,930
14,868
1,452
16,320
71,610
72,228
27,087
495
27,582
-
-
-
27,582
27,087
Total
£’000
114,183
1,329
115,512
14,868
1,452
16,320
99,192
99,315
Vertu Motors plc (Company Number: 05984855)
101
Notes to the Consolidated Financial Statements (continued)
15. Goodwill and other indefinite life assets (continued)
2020
Cost
At 1 March 2019
Acquisitions
At 29 February 2020
Accumulated impairment charges
At 1 March 2019
Impairment charge
At 29 February 2020
Net Book Value
At 29 February 2020
At 28 February 2019
Impairment
Goodwill
£’000
Franchise
relationships
£’000
Total
£’000
112,392
1,791
114,183
114
14,754
14,868
26,410
677
27,087
-
-
-
27,087
26,410
99,315
112,278
85,982
1,114
87,096
114
14,754
14,868
72,228
85,868
In accordance with IAS 36, ‘Impairment of Assets’, the Group tests the following assets for
impairment annually:
• Goodwill and other indefinite life assets
• Other assets where there is any indication that the relevant asset may be impaired
In the years ended 28 February 2021 and 29 February 2020, the acquired goodwill and other
indefinite life assets were tested for impairment.
For the purposes of impairment testing of goodwill and other indefinite life assets, the
Directors recognise the Group’s Cash Generating Units (“CGU”s) to be connected groupings
of dealerships acquired together.
A summary of the goodwill purchased is presented below:
Bristol Street Group Limited
Albert Farnell Limited
Hillendale Group Limited
SHG Holdings Limited
Bury Land Rover
Sigma Holdings Limited and Hughes Group Limited
Gordon Lamb Group Limited
Vans Direct Limited
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
Other acquisitions
A summary of franchise relationships acquired is presented below:
Albert Farnell Limited
Hillendale Group Limited
Bury Land Rover
SHG Holdings Limited
Sigma Holdings Limited and Hughes Group Limited
Gordon Lamb Group Limited
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
Sunderland, Durham, Teesside, Malton and York BMW MINI
2021
£’000
13,860
13,279
5,159
7,842
4,415
5,874
5,754
4,475
1,114
9,838
71,610
2021
£’000
7,373
1,749
2,595
1,497
9,989
3,207
677
495
27,582
2020
£’000
13,860
13,279
5,159
7,842
4,415
5,874
5,754
4,475
1,114
10,456
72,228
2020
£’000
7,373
1,749
2,595
1,497
9,989
3,207
677
-
27,087
The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use pre-tax cash flow projections to perpetuity.
Vertu Motors plc (Company Number: 05984855)
102
Notes to the Consolidated Financial Statements (continued)
15. Goodwill and other indefinite life assets (continued)
The key assumptions for the value in use calculations are those regarding the discount rates,
growth rates and expected changes to gross profits and direct costs during the year:
• Management estimates discount rates using pre-tax rates that reflect current market
assessments and the time value of money and the risks specific to the CGUs.
• Growth rates are based upon industry forecasts and the past performance of the CGU.
• Changes in gross profits and direct costs are based on past practices and expectations of
future changes in the market.
Annual growth rates typically between 0% and 3% are assumed for years three to five
depending on the CGU, after which a growth rate of 0% is assumed to perpetuity. Cash flows
into perpetuity have been used to reflect the long-term and open-ended nature of the Group’s
business model. A risk adjusted pre-tax discount rate reflecting the Group’s Weighted
Average Cost of Capital (“WACC”) of 8% (2020: 8%) is applied.
As a consequence of the Group’s decision to restructure its sales operations in an outlet in
Dunfermline during the year ending 28 February 2022, the resultant calculations showed an
impairment charge of £1,452,000 in respect of the previous acquisition of Boydslaw 103
Limited, should be incurred. This charge has been included in non-underlying operating
expenses.
Sensitivity analysis has been performed on the value in use calculations based on three
potential scenarios with the following results:
•
•
•
If COVID-19 restrictions were to force further closures of non-essential retail for a
further 3 month period in the year ended 28 February 2022 on the same terms as the
restrictions seen between November 2020 and April 2021, it is not expected to
create an additional impairment charge.
If the growth rate in years three to five is reduced to -10%, an additional impairment
charge in respect of goodwill and other indefinite life assets of £1.8m would arise.
If the pre-tax WACC was increased to 12%, an additional impairment charge in
respect of goodwill and other indefinite life assets of £3.1m would arise.
16. Other intangible assets
2021
Cost
At 1 March 2020
Additions
Disposals
At 28 February 2021
Accumulated amortisation
At 1 March 2020
Charge for the year
Disposals
At 28 February 2021
Net book value at 28 February 2021
Net book value at 29 February 2020
Software
costs
£’000
Brand
£’000
Customer
relationships
£’000
2,386
264
(2)
2,648
1,955
242
(2)
2,195
453
431
541
-
-
541
54
54
-
108
433
487
1,985
-
-
1,985
783
140
-
923
1,062
1,202
Total
£’000
4,912
264
(2)
5,174
2,792
436
(2)
3,226
1,948
2,120
Vertu Motors plc (Company Number: 05984855)
103
Notes to the Consolidated Financial Statements (continued)
16. Other intangible assets (continued)
2020
Cost
At 1 March 2019
Additions
At 29 February 2020
Accumulated amortisation
At 1 March 2019
Charge for the year
At 29 February 2020
Net book value at 29 February 2020
Net book value at 28 February 2019
17. Business combinations
Acquisitions
a) Acquisition of Nottingham Kia
Software
costs
£’000
Brand
£’000
Customer
relationships
£’000
2,270
116
2,386
1,599
356
1,955
431
671
541
-
541
-
54
54
487
541
1,985
-
1,985
598
185
783
1,202
1,387
Total
£’000
4,796
116
4,912
2,197
595
2,792
2,120
2,599
On 1 October 2020, the Group acquired the trade and assets of Nottingham Kia from
Sandicliffe Limited. The consideration payable on completion amounted to £1,904,000 and
was settled from the Group’s existing cash resources.
Details of the fair value of the net assets acquired and goodwill arising are as follows:
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Net assets acquired
Goodwill
Consideration
Fair
Value
£’000
12
1,804
35
(21)
1,830
74
1,904
Acquisition related costs (included in the consolidated income statement for the year ended 28
February 2021) totalled £11,000 in respect of this acquisition.
The goodwill arising on acquisition is attributable to the anticipated profitability of the
distribution of vehicles through the acquired dealership.
b) Acquisition of BMW and MINI
On 6 December 2020, the Group acquired the business and assets of a market area of 12
sales outlets located in York, Sunderland, Teesside, Durham and Malton. These five locations
each represent the BMW and MINI franchises, in addition to a BMW Motorrad motorcycle
operation in Sunderland and a used car operation located in York. The Business was acquired
from The Cooper Group Limited, part of Inchcape plc for estimated total consideration of
£19,585,000. The consideration has been funded with a combination of a new £12,760,000
20-year mortgage facility from BMW Financial Services, secured on the acquired freehold and
long leasehold dealership properties at a fixed interest rate of 2.9% for the first 5 years,
together with a payment from the Group’s existing cash resources.
Vertu Motors plc (Company Number: 05984855)
104
Notes to the Consolidated Financial Statements (continued)
17. Business combinations (continued)
Acquisitions (continued)
b) Acquisition of BMW and MINI (continued)
Details of the fair value of the estimated net assets acquired and goodwill arising are as
follows:
Other indefinite life assets
Property, plant and equipment
Right-of-use asset
Inventories
Trade and other receivables
Trade and other payables
Lease liabilities
Deferred tax
Net assets acquired
Goodwill
Consideration
Settled by:
Mortgage funding
Existing cash resources
Fair
Value
£’000
495
17,521
6,725
21,887
107
(20,618)
(6,725)
(567)
18,825
760
19,585
12,760
6,825
19,585
Acquisition related costs (included in the consolidated income statement for the year ended
28 February 2021) totalled £423,000 in respect of this acquisition.
c) Summary of acquisitions’ cash consideration
Nottingham Kia
BMW and MINI
Cash outflow on acquisition of businesses
d) Summary of the fair value of net assets acquired
Other intangible assets
Property, plant and equipment
Right-of-use asset
Inventories
Trade and other receivables
Trade and other payables
Lease liabilities
Deferred tax
Net assets acquired
Total
£’000
1,904
19,585
21,489
Total
£’000
495
17,533
6,725
23,691
142
(20,639)
(6,725)
(567)
20,655
Nottingham
Kia
£’000
BMW and
MINI
£’000
-
12
-
1,804
35
(21)
-
-
1,830
495
17,521
6,725
21,887
107
(20,618)
(6,725)
(567)
18,825
Vertu Motors plc (Company Number: 05984855)
105
Notes to the Consolidated Financial Statements (continued)
17. Business combinations (continued)
Disposals
On 30 November 2020, the Group disposed of its ancillary wheelchair accessible vehicle
business, Versa, to Gowrings Mobility. Consideration of £1,698,000 was received in cash on
completion.
Details of the fair value of net assets disposed of are as follows:
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Cash inflow on disposal of businesses
Fair
Value
£’000
27
1,885
16
(230)
1,698
Disposal related costs (included in the consolidated income statement for the year ended 28
February 2021) totalled £24,000 in respect of this disposal.
18. Property, plant and equipment
2021
Cost
At 1 March 2020
Acquisitions (note 17)
Additions
Transfer to assets held for resale (note 22)
Reclassifications
Disposals
At 28 February 2021
Accumulated depreciation and impairment
At 1 March 2020
Depreciation charge
Transfer to assets held for resale (note 22)
Disposals
At 28 February 2021
Net Book Value
At 28 February 2021
Freehold
and long
leasehold
land and
buildings1
£’000
243,100
16,803
8,909
(1,630)
(1,190)
(1,241)
264,751
31,350
5,726
(261)
(1,232)
35,583
Short
leasehold
land and
buildings1
£’000
Vehicles
and
machinery
£’000
Furniture,
fittings
and
equipment
£’000
Total
£’000
5,363
-
487
-
1,190
(1,086)
5,954
3,243
727
-
(1,081)
2,889
12,537
371
1,535
-
-
(687)
13,756
6,313
2,190
-
(616)
7,887
19,733 280,733
17,533
13,836
(1,630)
-
(3,848)
22,163 306,624
359
2,905
-
-
(834)
10,679
3,690
-
(768)
13,601
51,585
12,333
(261)
(3,697)
59,960
229,168
3,065
5,869
8,562 246,664
At 29 February 2020
1 Includes leasehold improvements and franchise standards property improvements.
211,750
2,120
6,224
9,054 229,148
Depreciation expense of £12,333,000 has been charged in operating expenses (note 6).
In addition to the floating security provided for the Group’s bank borrowings, specific fixed
charges over freehold land and buildings with a cost of £10,900,000 (2020: £10,900,000) have
been granted to manufacturer partners as security against consignment stocking lines and
£15,950,000 in respect of the BMW Financial Services mortgage entered into during the year.
Vertu Motors plc (Company Number: 05984855)
106
Notes to the Consolidated Financial Statements (continued)
18. Property, plant and equipment (continued)
2020
Cost
At 1 March 2019
Acquisitions
Additions
Disposals
Reclassifications
Transfers to assets held for sale
At 29 February 2020
Accumulated depreciation and impairment
At 1 March 2019
Depreciation charge
Disposals
Reclassifications
Impairment
Transfer to assets held for sale
At 29 February 2020
Net Book Value
At 29 February 2020
Freehold
and long
leasehold
land and
buildings1
£’000
232,202
3,945
9,084
(1,712)
76
(495)
243,100
24,457
5,012
(228)
63
2,124
(78)
31,350
Short
leasehold
land and
buildings1
£’000
Vehicles
and
machinery
£’000
Furniture,
fittings
and
equipment
£’000
Total
£’000
5,378
-
84
(23)
(76)
-
5,363
2,667
641
(2)
(63)
-
-
3,243
10,436
514
2,351
(713)
(51)
-
12,537
4,905
1,988
(565)
(15)
-
-
6,313
16,498 264,514
4,706
15,177
(3,169)
-
(495)
19,733 280,733
247
3,658
(721)
51
-
7,667
3,668
(671)
15
-
-
10,679
39,696
11,309
(1,466)
-
2,124
(78)
51,585
211,750
2,120
6,224
9,054 229,148
At 28 February 2019
1 Includes leasehold improvements and franchise standards property improvements.
207,745
2,711
5,531
8,831 224,818
19. Leases
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Right-of-use assets
Property
Vehicles
Lease liabilities
Current
Non-current
2021
£’000
76,213
4,939
81,152
2020
£’000
80,801
6,212
87,013
(14,126)
(76,975)
(91,101)
(14,071)
(82,823)
(96,894)
Additions to the right-of-use assets and lease liabilities during the year ended 28 February
2021 were £12,098,000 (2020: £22,325,000).
During the year ended 28 February 2021, right-of-use assets with a net book value of
£2,315,000 were disposed of as a result of assignment, settlement or modification of various
leases. The corresponding lease liability disposed of was £2,549,000 generating a £234,000
profit recognised in the Consolidated Income Statement.
Vertu Motors plc (Company Number: 05984855)
107
Notes to the Consolidated Financial Statements (continued)
19. Leases (continued)
Amounts recognised in the Income Statement
The Income Statement shows the following amounts relating to leases:
Included in operating expenses
Depreciation charge in respect of right-of-use assets:
Property
Vehicles
2021
£’000
10,336
5,307
15,643
2020
£’000
8,704
5,361
14,065
Profit on lease modification
(234)
-
Included in finance costs
Interest expense
3,632
3,595
The total cash outflow in respect of lease payments in the year ended 28 February 2021 was
£18,974,000, of which £3,632,000 related to interest on lease liabilities (2020: £16,987,000
including £3,595,000 interest on lease liabilities).
20. Subsidiary undertakings
A list of subsidiary undertakings (ordinary shares 100% owned and incorporated within the
United Kingdom), as at 28 February 2021 and 29 February 2020 is given in note 7 of the
Vertu Motors plc company only financial statements (pages 131 to 133).
21. Inventories
New vehicle stock
Used vehicle stock
Demonstrator and courtesy vehicles
Parts and sundry stocks
2021
£’000
438,045
121,177
25,984
12,185
597,391
The total value of new vehicle stock is comprised of the following:
Interest bearing consignment stock
Stock invoiced not yet paid held by Manufacturers to the
order of the Group
Other new vehicle stock
2021
£’000
59,327
321,337
57,381
438,045
2020
£’000
475,427
121,252
29,457
13,041
639,177
2020
£’000
51,849
366,513
57,065
475,427
A corresponding liability is held in trade payables in respect of stock invoiced not yet paid held
by Manufacturers to the order of the Group and interest bearing consignment stock. The cost
of inventories recognised as expense and included within ‘cost of sales’ amounted to
£2,314,890,000 (2020: £2,815,187,000).
Vertu Motors plc (Company Number: 05984855)
108
Notes to the Consolidated Financial Statements (continued)
22. Property assets held for resale
At beginning of year
Transfers in from freehold property (note 18)
Property sold during the year
At end of year
2021
£’000
417
1,369
(417)
1,369
2020
£’000
1,324
417
(1,324)
417
Freehold property transferred in to assets held for resale during the year include:
• A former SEAT dealership in Darlington, following the relocation of the Group’s SEAT
business to a larger premises adjacent to the Group’s Nissan and Skoda businesses in
Darlington.
• A Volkswagen dealership in Whitchurch which was closed on 26 April 2021 with the
resultant surplus property sold on 7 May 2021. More information is given in note 39.
• A former bodyshop premises in Sunderland after the Group combined the operations of
this business with the bodyshop located at the Group’s BMW dealership in Sunderland,
acquired during the year ended 28 February 2021.
The property sold during the year relates to a freehold property in Retford which was previously a
Honda dealership operated by the Group. The property was sold on 21 August 2020 realising cash
proceeds of £840,000 and a profit on disposal of £423,000 included in underlying operating
expenses.
23. Trade and other receivables
Trade receivables
Less provision for impairment of trade receivables
Trade receivables (net)
Other receivables
Prepayments and accrued income
2021
£’000
43,980
(1,967)
42,013
10,973
6,389
59,375
2020
£’000
52,136
(1,557)
50,579
10,197
10,944
71,720
The Group measures the loss allowance for trade receivables at an amount equal to the lifetime
expected credit losses (“ECL”). The ECL on trade receivables are measured using a provision
matrix by reference to past default experience, current financial position of the debtors and any
known specific factors.
There has been no change in significant assumptions or the method of estimation of ECL during
the current financial year.
The following table shows the profile of the Group’s trade receivables.
Current
£’000
36,714
42,889
31-60
£’000
5,332
5,878
61-90
£’000
728
741
2021
2020
>90
£’000
1,206
2,628
Trade
Receivables
£’000
43,980
52,136
Loss
Allowance
£’000
(1,967)
(1,557)
Trade
Receivables
(net)
£’000
42,013
50,579
As at 28 February 2021, trade receivables of £2,536,000 (2020: £4,108,000) were past due
but not impaired. The ageing of these receivables are all within 3 months overdue.
Vertu Motors plc (Company Number: 05984855)
109
Notes to the Consolidated Financial Statements (continued)
23. Trade and other receivables (continued)
Movements in the Group’s provision for impairment of trade receivables are as follows:
At beginning of year
Net remeasurement of loss allowance
Receivables written off during the year as uncollectible
At end of year
2021
£’000
1,557
1,464
(1,054)
1,967
2020
£’000
1,272
505
(220)
1,557
The net remeasurement of the loss allowance has been included in ‘other expenses’ within
‘operating expenses’ in the income statement (note 6). Amounts charged to the loss
allowance account are generally written off when there is no expectation of recovering
additional cash.
The Group considers there to be no material difference between the fair value of trade and
other receivables and their carrying amount in the balance sheet.
The other asset classes within trade and other receivables do not contain impaired assets.
Credit Risk Management
It is the Group’s policy to invest cash and assets safely and profitably. To control credit risk,
counterparty credit limits are set by reference to published credit ratings. The Group
considers the risk of material loss in the event of non-performance by a financial
counterparty to be low. The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivable mentioned above.
24. Cash and cash equivalents
Cash in bank and in hand
25. Trade and other payables
Current
Trade payables
Social security and other taxes
Accruals
Other payables
2021
£’000
67,828
2021
£’000
602,780
6,237
53,931
26,000
688,948
2020
£’000
40,839
2020
£’000
632,911
6,667
50,692
26,000
716,270
Other payables comprise non-interest bearing advance payments from the Group’s finance
company partners.
Trade and other payables, excluding social security and other taxes and deferred income, are
designated as financial liabilities carried at amortised cost. Their fair value is considered to
be equal to their carrying value.
Accruals includes £10,740,000 (2020: £12,767,000) in respect of outstanding service plans.
Vertu Motors plc (Company Number: 05984855)
110
Notes to the Consolidated Financial Statements (continued)
26. Borrowings
Current
Other borrowings
Mortgage
Non-current
Mortgage
Bank borrowings
Borrowings are repayable as follows:
6 months or less
6-12 months
1-5 years
Over 5 years
2021
£’000
5,948
634
6,582
11,945
53,832
65,777
72,359
2021
£’000
6,265
317
56,369
9,408
72,359
2020
£’000
25,547
-
25,547
-
43,657
43,657
69,204
2020
£’000
25,547
-
43,657
-
69,204
The fair value of borrowings equals their carrying amount, as the impact of discounting is not
significant. Borrowings are designated as financial liabilities carried at amortised cost.
a) Bank borrowings
The Group’s Revolving Credit Facility (“RCF”) was available throughout the year ended 28
February 2021 and is in place until 27 February 2024. At 1 March 2020 the Group had a
committed RCF available of £62,000,000. This facility currently bears an interest rate of
between 1.3% and 2.1% above LIBOR depending on the value of the Group’s net debt to
EBITDA ratio. On 5 March 2021 the Financial Conduct Authority (FCA) announced the
cessation of LIBOR on 31 December 2021. The Group is currently working with its banks,
Barclays and Nat West to ensure a smooth transition to the Sterling Overnight Index Average
(SONIA) index before 31 December 2021.
£44,100,000 of the RCF was drawn at 1 March 2020 with a further £10,000,000 being drawn
on 17 March 2021 in respect of the acquisitions of 4 Volkswagen dealership in Yorkshire and
a Honda and Kia dealership in Bradford which completed in January and February 2021,
bringing the total drawn balance for the remainder of the year ended 28 February 2021 to
£54,100,000.
As a result of the uncertainty surrounding the COVID-19 pandemic at the start of the year
ended 28 February 2021, the Group’s banks agreed to a waiver of financial covenants for the
May 2020 and August 2020 measurement periods. In consideration for this interest rates at
2.1% above LIBOR were applied to drawings under the RCF facility from 1 June 2020 to 30
November 2020. Interest from 1 March 2020 to 31 May 2020 and from 1 December 2020 to
28 February 2021 were charged at 1.3% above LIBOR.
On 31 July 2017, the Group entered into a three year interest rate swap in respect of the first
£10,000,000 of the RCF facility, at a fixed interest rate of 0.675%, this interest rate swap
expired on 31 July 2020. On 6 August 2018, the Group entered into a five year interest rate
swap in respect of a further £7,000,000 of this facility, swapping to a fixed interest rate of
1.424%. On 31 July 2019, the Group entered into a further interest rate swap in respect of
£5,000,000 of the Group’s borrowings, swapping to a fixed interest rate of 1.214%. This
interest rate swap increased to £15,000,000 on 31 July 2020, coterminous with the expiry of
the £10,000,000 swap referred to above. As a result, the value of hedged borrowings during
the year ended 28 February 2021 was maintained at £22,000,000 overall.
A rate of 1.10% above base rate has been applied in relation to overdrafts during the year
ended 28 February 2021. The interest rate that applied to the Group’s Committed Money
Market Loan (“CMML”) facility was between 1.10% and 1.75% above LIBOR depending on
the Group’s net debt to EBITDA ratio. As a result of the covenant waiver referred to above,
interest was charged on any drawings on this facility between 1 June 2020 and 30 November
2020 at 1.75% above LIBOR.
Vertu Motors plc (Company Number: 05984855)
111
Notes to the Consolidated Financial Statements (continued)
26. Borrowings (continued)
a) Bank borrowings (continued)
The overdraft and CMML facilities were renewed on 22 April 2021 until 31 May 2022. During
the year ended 29 February 2020 the facilities applicable during peak months was
£68,000,000. On renewal of the facility, this peak has reduced to £48,000,000 as a result of
the low level of historic usage of the facility. The applicable margin rate on the overdraft
facility increased to 1.45% above base rate, with the margin on the CMML facility increasing
to between 1.35% and 2.00% above SONIA depending on the Group’s net debt to EBITDA
ratio.
The Group had the following undrawn borrowing and overdraft facilities at 28 February 2021:
Floating rate
- Overdraft (uncommitted) expiring in one year
- CMML (committed) facility expiring in one year
- RCF facility expiring in greater than one year 1
- Other borrowings
1Excludes the uncommitted “accordion” facility referred to above.
b) Mortgage
2021
£’000
5,000
48,000
7,900
39,052
99,952
2020
£’000
5,000
68,000
17,900
9,453
100,353
On 6 December 2020, the Group drew down funding under a 20 year mortgage facility to
partially finance the BMW MINI acquisition in the North East and Yorkshire on the same date.
The mortgage is secured against the freehold and long leasehold properties in Sunderland,
Durham and Teesside which were acquired as part of this business acquisition. The mortgage
is repayable in equal monthly instalments over the 20 year term and interest is charged on
this facility at the fixed rate of 2.9% per annum for the first 5 years.
c) Other borrowings
Other borrowings represent amounts repayable under used vehicle stocking facilities. These
loans are subject to interest at 1.5% above base rate and are secured against the related
vehicles.
At 28 February 2021 the total used vehicle stocking facility available to the Group was
£45,000,000 (2020: £35,000,000).
d) Financial assets
The Group’s financial assets on which floating interest is receivable comprise cash deposits
and cash in hand of £67,828,000 (2020: £40,839,000). The cash deposits comprise deposits
placed on money market at call, seven day and cash deposited with counterparty banks at
commercially negotiated interest rates.
The IFRS 9 classification for trade and other receivables and cash and cash equivalents is
amortised cost. Their fair value is deemed to be equal to their carrying value.
27. Derivative financial instruments
Interest rate swap contracts
The fair values of derivative financial instruments used for hedging purposes are disclosed
below:
£10m Interest rate swap – cash flow hedges
£7m Interest rate swap – cash flow hedges
£5m Interest rate swap – cash flow hedges
£15m Interest rate swap – cash flow hedges
Total derivates designated as hedging instruments
2021
£’000
-
(183)
-
(314)
(497)
2020
£’000
(1)
(198)
(294)
-
(493)
Vertu Motors plc (Company Number: 05984855)
112
Notes to the Consolidated Financial Statements (continued)
27. Derivative financial instruments (continued)
The £5m interest rate swap in place at 29 February 2020 increased to £15m on 31 July 2020
on the same terms, coterminous with the expiry of the £10m interest rate swap.
Non-current borrowings subject to hedging instruments
Total derivative financial liabilities
2021
£’000
22,000
22,000
2020
£’000
22,000
22,000
The Group manages its cash-flow interest rate risk by using floating-to-fixed interest rate
swaps. Normally the Group raises long-term borrowings at floating rates and swaps them into
fixed rates.
The notional principal amounts of outstanding floating to fixed interest rate swap contracts
designated as hedging instruments in cash flow interest rate hedges of variable rate debt at
28 February 2021 totalled £22,000,000 (2020: £22,000,000). Their combined fair value was a
liability of £497,000 (2020: £493,000).
At 28 February 2021, the main floating rate was LIBOR. Gains and losses recognised in the
cash flow hedging reserve in equity on interest rate swap contracts as at 28 February 2021
will be released to the consolidated statement of comprehensive income as the related
interest expense is recognised.
28. Deferred income tax liabilities
Deferred income tax assets and liabilities are offset when there is a legally enforceable right
to offset current tax assets against current tax liabilities and when the deferred income taxes
relate to the same fiscal authority. The amounts offset are as follows:
Deferred tax asset to be recovered after more than 12 months
Deferred tax liabilities to be recovered after more than 12
months
Deferred tax liabilities (net)
2021
£’000
(3,065)
12,245
9,180
2020
£’000
(2,152)
10,331
8,179
The gross movement on the Group’s deferred income tax account is as follows:
2021
At 1 March 2020
Charged / (credited) to income statement
(note 12)
Credited directly to equity
Acquisitions (note 17)
At 28 February 2021
2020
At 1 March 2019
Charged / (credited) to income statement
Charged / (credited) directly to equity
Acquisitions
At 29 February 2020
Deferred tax
liabilities
£’000
10,331
Deferred tax
assets
£’000
(2,152)
1,845
(498)
567
12,245
(903)
(10)
-
(3,065)
Deferred tax
liabilities
£’000
9,476
332
408
115
10,331
Deferred tax
assets
£’000
(1,882)
(190)
(80)
-
(2,152)
Net
£’000
8,179
942
(508)
567
9,180
Net
£’000
7,594
142
328
115
8,179
Vertu Motors plc (Company Number: 05984855)
113
Notes to the Consolidated Financial Statements (continued)
28. Deferred income tax liabilities (continued)
2021
At 1 March 2020
Charged / (credited) to
income statement (note 12)
Acquisitions (note 17)
Credited directly to equity
At 28 February 2021
2020
At 1 March 2019
Charged / (credited) to
income statement
Acquisitions
Credited directly to equity
At 20 February 2020
Accelerated
tax
depreciation
£’000
2,377
Share
based
payments
£’000
(807)
Pensions
£’000
1,507
Other timing
differences
£’000
5,102
Total
£’000
8,179
491
473
-
3,341
(171)
-
-
(978)
177
-
(498)
1,186
445
94
(10)
5,631
942
567
(508)
9,180
Accelerated
tax
depreciation
£’000
1,977
Share
based
payments
£’000
(735)
Pensions
£’000
1,093
Other timing
differences
£’000
5,259
400
-
-
2,377
(72)
-
-
(807)
6
-
408
1,507
(192)
115
(80)
5,102
Total
£’000
7,594
142
115
328
8,179
In March 2021 it was announced that the UK Corporation Tax rate will increase to 25% with
effect from 1 April 2023. As the substantive enactment was after the balance sheet date the
deferred tax balances as at 29 February 2021 have continued to be measured at a rate of
19%.
29. Contract liabilities
At 1 March 2020
Created in the year
Recognised as income during the year
At 28 February 2021
Current
Non-current
Warranty policies
Warranty
policies
£’000
19,209
7,138
(7,881)
18,466
Free
servicing
£’000
2,059
1,663
(621)
3,101
Total
£’000
21,268
8,801
(8,502)
21,567
9,294
9,172
18,466
3,101
-
3,101
12,395
9,172
21,567
The Group sells used vehicle warranty policies which are in-house products that can be taken
out over 12, 24 or 36 months with income received on inception of the policy. The policy
covers replacement of mechanical and electrical parts which have suffered a mechanical
breakdown, the cost of labour to fit failed parts and breakdown assistance for the period of the
warranty.
When the income is received it is recognised initially as a contract liability at the fair value
allocated to the warranty product at the point of sale and is released to the income statement
on a straight-line basis over the life of each warranty policy.
Free servicing
The Group recognises a contract liability in respect of a “free servicing” arrangement whereby
the first or subsequent service of a vehicle post sale is provided free of charge to a customer,
as part of the initial consideration for the vehicle sale. An element of the initial consideration
which is estimated to relate to the service is recognised as a contract liability and is released
to the income statement when the service has been undertaken.
Vertu Motors plc (Company Number: 05984855)
114
Notes to the Consolidated Financial Statements (continued)
30. Retirement benefit asset
The Group operates a trust based defined benefit pension scheme, “Bristol Street Pension
Scheme”, which has three defined benefit sections which were closed to new entrants and
future accrual on 31 May 2003, with another section closed to new entrants in July 2003 and
future accrual in October 2013. The assets of the scheme are held separately from those of
the Group, being held in separate funds by the Trustee of the Bristol Street Pension Scheme.
The Group has applied IAS 19 (Revised) to the scheme and the following disclosures relate to
this standard. The Group recognises any actuarial gains and losses in each year in the
Statement of Comprehensive Income.
Regular employer contributions to the scheme (including contributions paid in respect of
scheme expenses) for the year commencing 1 March 2021 are estimated to be £Nil.
The last actuarial valuation upon which the IAS 19 (Revised) figures and disclosures have
been based was as at 5 April 2018. The actuarial valuation as at 5 April 2021 will be available
by 5 July 2022. Changes in the present value of the defined benefit obligation resulting from
plan amendments or curtailments are recognised immediately in profit or loss as past service
costs.
The fair value of the assets of the scheme are:
Liability driven Investment Funds
Diversified growth funds
Secured finance
Other
Market Value Market Value
29 February
28 February
2020
2021
£’000
£’000
12,742
8,690
43,483
41,362
-
5,134
2,972
985
59,197
56,171
None of the assets listed above have a quoted market price in an active market as they are
pooled investment funds specifically designed for occupational pension schemes. A value is
placed on the Scheme’s unit holdings in the funds by the funds’ investment managers /
custodians.
The Liability Driven Investments (“LDI”) Funds that the Scheme is invested in is an investment
tool used to reduce the investment risk and therefore volatility in the Scheme’s funding
position. Changes in interest rates and inflation rates will result in these assets moving in the
same way as the liabilities. The LDI portfolio is primarily formed of derivatives, such as swaps,
which are leveraged meaning that less LDI assets have to be held to match the same
movement in the Scheme’s liabilities.
The expected return on the assets as at 29 February 2020 was 1.70%. This is equal to the
discount rate used in the calculation of the net interest income for the year ended 28 February
2021.
The overall net surplus between the assets of the Bristol Street Group defined benefit scheme
and the actuarial liabilities of the scheme which have been recognised on the balance sheet is
as follows:
Fair value of scheme assets
Present value of funded obligations
Asset on the balance sheet
2021
£’000
56,171
(49,925)
6,246
2020
£’000
59,197
(50,330)
8,867
A surplus may be recognised if the economic benefits are available in the form of a refund or
reduction in future contributions. Clause 5.6.2 of the Scheme Rules enables the Scheme to
refund surplus assets to the employer. Surpluses are therefore recognised in full.
Vertu Motors plc (Company Number: 05984855)
115
Notes to the Consolidated Financial Statements (continued)
30. Retirement benefit asset (continued)
The movements in the fair value of scheme assets in the year are as follows:
Opening fair value of scheme assets
Interest income
Actuarial (losses) / gains
Benefits paid
Expenses recognised in the income statement
Closing fair value of scheme assets
2021
£’000
59,197
990
(2,030)
(1,834)
(152)
56,171
2020
£’000
52,407
1,367
7,047
(1,493)
(131)
59,197
The movement in the present value of the defined benefit obligations of the scheme in the year
are as follows:
Opening fair value of scheme liabilities
Interest cost
Actuarial losses
Benefits paid
Closing fair value of scheme liabilities
2021
£’000
50,330
840
589
(1,834)
49,925
The amounts recognised in the income statement in the year are as follows:
Expenses
Net interest income (note 11)
Total expense / (income) included in income statement
The actual returns on Scheme assets in the year are as follows:
Expected return on scheme assets
Actuarial (losses) / gains
2021
£’000
152
(150)
2
2021
£’000
990
(2,030)
(1,040)
2020
£’000
45,977
1,199
4,647
(1,493)
50,330
2020
£’000
131
(168)
(37)
2020
£’000
1,367
7,047
8,414
The principal assumptions used by the independent qualified actuaries to calculate the
liabilities under IAS 19 are set out below:
Discount rate
Limited Price Indexation (“LPI”) pension increases before 2030
Limited Price Indexation (“LPI”) pension increases after 2030
Inflation rate before 2030
Inflation rate after 2030
2021
2.00%
3.10%
3.00%
2.10%
3.00%
2020
1.70%
2.90%
2.40%
1.90%
1.90%
Assumptions regarding future mortality experience are set based on mortality tables which
allow for future mortality improvements.
The average life expectancy in years of a pensioner retiring at age 65 at the balance sheet
date is as follows:
Male
Female
2021
22
24
2020
22
24
Vertu Motors plc (Company Number: 05984855)
116
Notes to the Consolidated Financial Statements (continued)
30. Retirement benefit asset (continued)
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the
balance sheet date is as follows:
Male
Female
2021
23
25
2020
23
25
Amounts recognised in the Consolidated Statement of Comprehensive Income in the year are
as follows:
Actuarial (losses) / gains
Related deferred tax liability (note 28)
Total, included within retained earnings
Cumulative actuarial (losses) / gains
Sensitivity analysis
2021
£’000
(2,619)
498
(2,121)
(1,581)
2020
£’000
2,400
(408)
1,992
540
The table below gives an indication of the impact on the IAS 19 valuation as a result of
changes to the principal assumptions:
Change in assumption:
0.25% increase in discount rate
0.25% decrease in discount rate
0.25% increase in price inflation (and associated assumptions)
0.25% decrease in price inflation (and associated assumptions)
1 year increase in life expectancy at age 65
1 year decrease in life expectancy at age 65
Approximate impact on
current surplus:
£’000
1,863
(1,972)
(1,496)
1,238
(2,071)
2,027
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve
2021
At 1 March 2020
Issuance of treasury shares
in satisfaction of exercised
share options
Purchase of treasury shares
At 28 February 2021
Ordinary
shares of
10p each
Number of
shares
(‘000)
Ordinary
share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Total
£’000
367,120
36,917
124,939
10,645
(803)
2,810 174,508
40
(5,274)
361,886
-
-
36,917
-
-
124,939
-
-
10,645
16
(2,004)
(2,791)
-
-
16
(2,004)
2,810 172,520
Vertu Motors plc (Company Number: 05984855)
117
Notes to the Consolidated Financial Statements (continued)
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve (continued)
The other reserve is a merger reserve, arising from shares issued for shares, as
consideration to the former shareholders of acquired businesses.
2020
At 1 March 2019
Issuance of treasury shares
in satisfaction of exercised
share options
Cancellation of repurchased
shares
Purchase of treasury shares
At 29 February 2020
Ordinary
shares of
10p each
Number of
shares
(‘000)
Ordinary
share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Total
£’000
375,023
37,661
124,939
10,645
(602)
2,066 174,709
529
-
-
-
200
-
200
(7,432)
(1,000)
367,120
(744)
-
36,917
-
-
124,939
-
-
10,645
-
(401)
(803)
744
-
-
(401)
2,810 174,508
Share Option Schemes
Under the Group’s equity-settled share option schemes, share options are granted to
Executive Directors and to selected employees. The exercise price of the granted CSOP
options is equal to the market price of the shares on the date of the grant and is £Nil in the
case of options issued under the long term incentive plan (“LTIP”) Scheme. Options are
conditional on the employee completing three years’ service (the vesting period). The options
are exercisable starting three years from grant date, subject to the performance criteria set
out below. The Group has no legal or constructive obligation to repurchase or settle the
options in cash.
As disclosed in note 8, a share based payments charge of £265,000 (2020: £733,000) has
been recognised during the year, in relation to the schemes as described below.
Movements in the number of share options in issue during the year are as follows:
Award Date
28 Nov 20111
12 Jun 20121
24 Oct 20121
20 Aug 20131
5 Sep 2016
13 Oct 2016
23 Jun 20172
6 Nov 2017
2 Jul 2018
17 Jul 20183
8 Nov 2018
3 Sep 20194
1 Mar 2020
Type
CSOP
CSOP
CSOP
LTIP
LTIP
CSOP
LTIP
CSOP
CSOP
LTIP
CSOP
LTIP
PSO
Granted /
Outstanding at 28
February 2021
No of shares
569,230
2,000,000
2,010,000
53,583
80,674
-
-
2,530,000
3,600,000
458,864
5,070,000
-
5,390,381
21,762,732
Granted /
Outstanding at 29
February 2020
No of shares
569,230
2,000,000
2,010,000
53,583
121,011
1,880,000
1,893,940
2,640,000
3,600,000
458,864
5,170,000
1,168,417
-
21,565,045
Exercise
price
26.00p
27.50p
39.25p
0.00p
0.00p
45.38p
0.00p
45.00p
49.60p
0.00p
38.00p
0.00p
0.00p
Date from
which
exercisable
28 Nov 2014
30 Aug 2015
30 Aug 2015
20 Aug 2016
5 Sep 2019
13 Oct 2018
23 Jun 2020
7 Nov 2020
2 Jul 2021
17 Jul 2021
8 Nov 2021
3 Sep 2022
1 Mar 2024
Expiry date
28 Nov 2021
12 Jun 2022
24 Oct 2022
20 Aug 2023
5 Sep 2026
13 Oct 2026
23 Jun 2027
7 Nov 2027
2 Jul 2028
17 Jul 2028
8 Nov 2028
3 Sep 2029
1 Mar 2030
1 Vested.
2 Lapsed during the period ended 28 February 2021 in full as a result of not satisfying the relevant performance criteria.
3 Lapsed in full subsequent to 28 February 2021 as a result of not satisfying the relevant performance criteria.
4 Cancelled during the year ended 28 February 2021.
Vertu Motors plc (Company Number: 05984855)
118
Notes to the Consolidated Financial Statements (continued)
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve (continued)
Share Option Schemes (continued)
Movements in the number of share options outstanding are as follows:
At beginning of year
Granted
Forfeited
Lapsed
Exercised
At end of year
2021
No of share
options
21,565,045
8,355,086
(389,677)
(7,727,385)
(40,337)
21,762,732
2020
No of share
options
25,087,211
1,168,417
(940,000)
(2,811,618)
(938,965)
21,565,045
The weighted average share price during the year was 27.6p (2020: 36.3p). The weighted
average fair value of PSO options granted during the year, determined using the Black-
Scholes model was 27.0p per option.
Movements in the number of share options outstanding and their related exercise prices are
as follows:
CSOP
LTIP
PSO
Total
Options
No of
shares
20,869,229
-
(940,000)
(410,000)
(1,650,000)
17,869,229
-
(210,000)
-
(1,880,000)
Weighted
average
exercise
price
43.64p
-
49.60p
27.50p
74.50p
40.85p
Options
No of
shares
4,217,982
1,168,417
-
(528,965)
(1,161,618)
3,695,816
Weighted
average
exercise
price
0.00p
0.00p
-
0.00p
0.00p
0.00p
Options
No of
shares
-
-
-
-
-
-
Weighted
average
exercise
price
-
-
-
-
-
-
-
41.67p
-
45.38p
-
-
(40,337)
(3,062,356)
-
-
0.00p
0.00p
8,355,086
(179,677)
-
(2,785,029)
0.00p
0.00p
-
0.00p
Options
No of
shares
25,087,211
1,168,417
(940,000)
(938,965)
(2,811,618)
21,565,045
8,355,086
(389,677)
(40,337)
(7,727,385)
15,779,229
40.16p
593,123
0.00p
5,390,380
0.00p
21,762,732
At 1 March 2019
Granted
Forfeited
Exercised
Lapsed
At 29 February
2020
Granted
Forfeited
Exercised
Lapsed
At 28 February
2021
Significant inputs into the Black-Scholes model for the PSO option awards above are set out
below:
Vesting period
Expected volatility
Option life
Expected life
Annual risk-free interest rate
Dividend yield
3 years
15%
7 years
3 years
0.3%
5%
Expected volatility is based on statistical analysis of daily share prices since the admission of
Vertu Motors plc to AiM. This is then adjusted for events not considered to be reflective of the
volatility of the share price going forward.
Vertu Motors plc (Company Number: 05984855)
119
Notes to the Consolidated Financial Statements (continued)
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve (continued)
Share Option Schemes (continued)
The performance conditions attaching to any share options issued to Executive Directors,
Senior Management or colleagues of the Company are considered and set by the
Remuneration Committee. The following share incentive schemes are operated by the
Company:
a) Share Incentive Plan (“SIP”)
The SIP was introduced in accordance with appropriate legislation and it allows colleagues to
invest in partnership shares out of gross salary. A participant may withdraw from the SIP at
any time but if he or she does so before the partnership shares have been held in trust for five
years (except in certain specified circumstances such as redundancy or disability) he or she
will incur an income tax liability. The Company currently does not supplement or match the
partnership shares acquired by colleagues.
b) Company Share Option Plan (“CSOP”) Approved and Unapproved Share Option
Schemes
The number of vested options issued up to and including 24 October 2012, which remain
outstanding are shown in the table on page 118.
The CSOP options issued on 13 October 2016 may only be exercised if the average share
price of the Company over at least one continuous period of 30 days between 1 August 2019
and 31 July 2020 is above 75p and then 100% of the options vest. At an average share price
of below 75p none of the options are exercisable, these options therefore lapsed during the
year.
The CSOP options issued on 6 November 2017 may only be exercised if the average share
price of the Company over at least one continuous period of 30 days between 1 August 2020
and 31 July 2021 is above 62.5p and then 100% of the options vest. At an average share
price of 57.5p 50% of the options are exercisable. At prices between 57.5p and 62.5p, options
will vest on a straight-line basis between 50% and 100%. At a share price below 57.5p none
of the options are exercisable.
The CSOP options issued on 2 July 2018 may only be exercised if the average share price of
the Company over at least one continuous period of 30 days between 1 August 2021 and 31
July 2022 is above 62.5p and then 100% of the options vest. At an average share price of
57.5p 50% of the options are exercisable. At prices between 57.5p and 62.5p, options will
vest on a straight-line basis between 50% and 100%. At a share price below 57.5p none of
the options are exercisable.
The CSOP options issued on 8 November 2018 may only be exercised if the average share
price of the Company over at least one continuous period of 30 days between 1 August 2021
and 31 July 2022 is above 50.9p and then 100% of the options vest. At an average share
price of 44.6p 50% of the options are exercisable. At prices between 44.6p and 50.9p, options
will vest on a straight-line basis between 50% and 100%. At a share price below 44.6p none
of the options are exercisable.
There were no CSOP share options issued during the financial year to 28 February 2021.
c) Long Term Incentive Plan (“LTIP”)
Vesting of LTIP awards issued subsequent to June 2015 is subject to targets based on the
achievement of absolute growth in the Company’s total shareholder return (“TSR”) and the
Group’s target return on shareholders’ equity. The vesting of such awards is measured over a
three year period, but the awards are subject to an additional two year holding period before
they can be exercised.
On 17 July 2018, 458,864 LTIP share awards were made to Executive Directors. These
awards lapsed in full subsequent to 28 February 2021 as a result of not satisfying the relevant
performance criteria.
Vertu Motors plc (Company Number: 05984855)
120
Notes to the Consolidated Financial Statements (continued)
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve (continued)
Share Option Schemes (continued)
d) Partnership Share Options (“PSO”)
A new share incentive (Partnership Share Options) for certain of the Group’s senior
management colleagues was introduced in the financial year commencing 1 March 2020.
Under this scheme colleagues received nil cost share options in the Company pro-rata to their
basic salary.
Vesting of PSO awards are then determined by the proportion of each colleague’s annual on-
target bonuses earned for the financial year in which they are awarded, up to a maximum of
100% of the awards granted. Any vested options will then be capable of exercise at the end of
a three-year holding period.
On 1 March 2020, 8,355,086 PSO awards were made to certain senior managers. As a result
of the impact of COVID-19 on the first quarter of the financial year ended 28 February 2021, 4
months’ worth of the PSO awards, i.e. 2,785,029 options lapsed with the remaining 8 months’
worth of options, i.e. 5,570,057 options, being capable of vesting in proportion to the actual
achievement of on-target bonuses between 1 July 2020 and 28 February 2021.
On 1 March 2021 7,558,488 PSO awards have been made in respect of the financial year
commencing on that date.
32. Hedging reserve
The hedging reserve arises as a result of cash flow hedges in relation to interest rate swap
derivatives. The movements on the hedging reserve are as follows:
At beginning of year
Fair value losses on derivative financial instruments
during the year
Deferred taxation on fair value losses during year
At end of year
33. Reconciliation of net cash flow to movement in net debt
Net increase / (decrease) in cash and cash equivalents
Cash inflow from proceeds of borrowings
Cash outflow from repayment of borrowings
Cash movement in net debt
Capitalisation of loan arrangement fees
Amortisation of loan arrangement fees
Non-cash movement in net debt
Movement in net debt (excluding lease liabilities)
Opening net debt (excluding lease liabilities)
Closing net debt (excluding lease liabilities)
Lease liabilities at 1 March
Capitalisation of new leases (Note 19)
Disposal of lease liabilities (Note 19)
Interest element of lease repayments (Note 11)
Cash outflow from lease repayments (Note 19)
Lease liabilities at 28 February
2021
£’000
(407)
(6)
10
(403)
2020
£’000
(19)
(468)
80
(407)
2021
£’000
2020
£’000
26,989
(22,760)
19,705
23,934
75
(175)
(100)
23,834
(28,365)
(4,531)
(96,894)
(12,098)
2,549
(3,632)
18,974
(91,101)
(25,680)
(2,381)
-
(28,061)
118
(175)
(57)
(28,118)
(247)
(28,365)
(87,961)
(22,325)
-
(3,595)
16,987
(96,894)
Closing net debt (including lease liabilities)
(95,632)
(125,259)
Vertu Motors plc (Company Number: 05984855)
121
Notes to the Consolidated Financial Statements (continued)
34. Cash flow from movement in working capital
The following adjustments have been made to reconcile from the movement in balance sheet
heading to the amount presented in the cash flow from the movement in working capital. This
is in order to more appropriately reflect the cash impact of the underlying transactions.
2021
Trade and other payables (Note 25)
Contract liabilities (Note 29)
At 28 February 2021
At 29 February 2020
Balance sheet movement
Acquisitions (Note 17)
Disposals (Note 17)
Movement excluding business
combinations
Pension related balances
Decrease in capital creditors
Decrease in interest accrual
Movement as shown in Consolidated
Cash Flow Statement
2020
Trade and other payables
Contract liabilities
At 29 February 2020
At 28 February 2019
Balance sheet movement
Acquisitions
Deferred consideration on acquisitions
Movement excluding business
combinations
Pension related balances
Decrease in capital creditors
Increase in interest accrual
Movement as shown in Consolidated
Cash Flow Statement
Inventories
(Note 21)
£’000
597,391
639,177
41,786
23,691
(1,885)
Current trade
and other
receivables
(Note 23)
£’000
59,375
71,720
12,345
142
(16)
Trade and
other
payables
£’000
(688,948)
(21,567)
(710,515)
(737,538)
(27,023)
(20,639)
230
63,592
12,471
(47,432)
Inventories
£’000
Current trade
and other
receivables
£’000
639,177
618,675
(20,502)
6,563
-
71,720
62,893
(8,827)
286
-
Trade and
other
payables
£’000
(716,270)
(21,268)
(737,538)
(740,777)
(3,239)
(2,380)
4,100
Total working
capital
movement
£’000
28,631
152
722
135
29,640
Total working
capital
movement
£’000
(13,939)
(8,541)
(1,519)
(23,999)
131
422
(117)
(23,563)
Vertu Motors plc (Company Number: 05984855)
122
Notes to the Consolidated Financial Statements (continued)
35. Reconciliation of movement in liabilities to cash arising from financing activities
Borrowings
£’000
Lease
liabilities
£’000
Treasury
share
reserve
£’000
Retained
earnings
£’000
Total
£’000
69,204
96,894
(803)
89,272
254,567
-
-
22,760
(19,705)
-
3,055
-
-
-
-
(15,342)
(15,342)
16
(2,004)
-
-
-
(1,988)
(16)
-
-
-
-
(16)
-
(2,004)
22,760
(19,705)
(15,342)
(14,291)
100
-
-
-
100
-
-
-
72,359
12,098
(2,549)
-
91,101
-
-
-
(2,791)
-
-
14,567
103,823
12,098
(2,549)
14,567
264,492
As at 1 March 2020
Cash flows from financing activities:
Issue of treasury shares
Purchase of treasury shares
Proceeds from issue of loan
Repayment of borrowings
Lease repayments
Net cash outflow from financing activities
Other changes:
Liability related: capitalisation and
amortisation of loan fees and expenses
Liability related: capitalisation of lease
liabilities
Liability related: disposal of lease liabilities
Equity related: other movements
As at 28 February 2021
36. Contingencies
Contingent liabilities
Under sections 394A and 479A of the Companies Act 2006, the parent company Vertu
Motors plc has guaranteed all outstanding liabilities to which the subsidiaries listed on pages
85 to 86 were subject to at the end of 28 February 2021 until they are satisfied in full. These
liabilities
loans of
£320,589,000 (2020: £143,344,000). Such guarantees are enforceable against Vertu Motors
plc by any person to whom any such liability is due.
total £969,920,000 (2020: £822,279,000),
intercompany
including
37. Capital commitments
Capital commitments in respect of property, plant and equipment amounting to £379,000
were outstanding as at 28 February 2021 (2020: £3,127,000).
38. Related party transactions
Key management personnel are defined as the Directors of the Company. The remuneration
of the Directors who served during the year ended 28 February 2021 is set out in the
Directors’ Remuneration Report on pages 62 to 66.
Ken Lever, a Director of the Company, also sits on the board of Biffa plc. A subsidiary
company of Biffa plc provides waste disposal services to the Group on normal commercial
terms. In the year ended 28 February 2021, the value of such services provided was
£491,010 (2020: £425,473). £45,421 was unpaid at 28 February 2021 in respect of these
services (2020: £43,348). In the year ended 28 February 2021, sales of £15,492 (2020:
£43,674) were made to Biffa plc, of which £1,178 was outstanding at the year end (2020:
£1,646).
Vertu Motors plc (Company Number: 05984855)
123
Notes to the Consolidated Financial Statements (continued)
38. Related party transactions (continued)
During the year to 28 February 2021, Robert Forrester, David Crane, Karen Anderson,
Andrew Goss and Pauline Best bought and sold vehicles from and to the Group. The value of
these transactions for the year ended 28 February 2021 and the year ended 29 February
2020 is presented below. No profit or loss was made in respect of these transactions in the
year ended 28 February 2021 or the year ended 29 February 2020. All of these transactions
were pursuant to an employee vehicle ownership plan available to Executive Directors and
certain Senior Managers. No outstanding balances were due to or from the Group in respect
of these transactions at 28 February 2021 (2020: £Nil).
2021
Robert Forrester
David Crane
Karen Anderson
Andrew Goss
Pauline Best
2020
Robert Forrester
David Crane
Peter Jones1
Pauline Best
Andrew Goss
Karen Anderson2
1 resigned on 24 July 2019
2 appointed on 1 March 2019
Bought from the Group
Sold to the Group
Number of
vehicles
4
3
2
1
2
Purchase
price
£’000
323
211
122
60
109
Number of
vehicles
4
3
2
1
2
Sale price
£’000
325
240
124
73
105
Bought from the Group
Sold to the Group
Number of
vehicles
5
6
1
3
2
5
Purchase
price
£’000
402
354
97
201
145
284
Number of
vehicles
5
6
2
2
2
5
Sale price
£’000
415
308
173
147
119
259
39. Post balance sheet events
On 12 March 2021, the Group acquired the trade and assets of a Honda car dealership in
Huddersfield, West Yorkshire, which also holds an authorised repair contract for Mitsubishi,
from Hepworth Motor Group. Total consideration of £0.8m was settled from the Group’s cash
resources.
On 7 May 2021, the Group disposed of a surplus property in Whitchurch following the closure
of its Volkswagen dealership on 26 April 2021, which previously operated from these
premises. Sale proceeds of £430,000 were received generating a profit on disposal of
£55,000.
Vertu Motors plc (Company Number: 05984855)
124
Company Balance Sheet
As at 28 February 2021
Fixed assets
Intangible assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Total current assets
Note
5
6
7
8
2021
£’000
445
2,983
166,722
170,150
153,932
67,654
221,586
2020
£’000
421
3,222
166,722
170,365
171,452
33,616
205,068
Creditors: amounts falling due within
one year
10
(81,227)
(78,202)
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after
more than one year
140,359
310,509
126,866
297,231
11
(63,004)
(53,960)
Net assets
247,505
243,271
Capital and reserves
Called up share capital
Share premium account
Other reserve
Hedging reserve
Treasury share reserve
Capital redemption reserve
Profit and loss account:
At start of year
Profit/(loss) for the year
Other changes in retained earnings
13
13
13
14
13
13
15
36,917
124,939
10,645
(403)
(2,791)
2,810
69,170
5,861
357
75,388
36,917
124,939
10,645
(407)
(803)
2,810
82,724
(5,102)
(8,452)
69,170
Total shareholders’ funds
247,505
243,271
These financial statements, on pages 125 to 137, have been approved for issue by the Board
of Directors on 12 May 2021 and signed by:
Robert Forrester
Chief Executive
Karen Anderson
Chief Financial Officer
Vertu Motors plc (Company Number: 05984855)
125
Company Statement of Changes in Equity
For the year ended 28 February 2021
Ordinary
share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Hedging
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Profit and
loss account
£’000
Total
Equity
£’000
36,917
124,939
10,645
(407)
(803)
2,810
69,170
243,271
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
(6)
4
-
-
-
-
-
-
-
16
(2,004)
-
-
-
-
-
-
-
-
5,861
5,861
-
-
10
(6)
5,861
(16)
5,865
-
-
(2,004)
373
373
36,917
124,939
10,645
(403)
(2,791)
2,810
75,388
247,505
As at 1 March 2020
Profit for the year
Tax on items taken
directly to equity
Fair value losses
Total comprehensive
income for the year
Sale of treasury shares
Purchase of treasury
shares
Share based payments
charge
As at 28 February
2021
The other reserve is a merger reserve, arising from shares issued for shares as consideration,
to the former shareholders of acquired companies.
For the year ended 29 February 2020
Ordinary
share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Hedging
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Profit and
loss account
£’000
Total
Equity
£’000
As at 1 March 2019
Loss for the year
Tax on items taken
directly to equity
Fair value losses
Total comprehensive
expense for the year
Sale of treasury shares
Purchase of treasury
shares
Repurchase of own
shares
Cancellation of
repurchased shares
Dividend paid
Share based payments
charge
37,661
124,939
10,645
-
-
-
-
-
-
-
(744)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(19)
-
80
(468)
(388)
-
-
-
-
-
-
(602)
2,066
82,724
257,414
-
-
-
-
200
(401)
-
-
-
-
-
-
-
-
-
-
-
744
-
-
(5,102)
(5,102)
-
-
80
(468)
(5,102)
(200)
(5,490)
-
-
(401)
(2,749)
(2,749)
-
(6,122)
-
(6,122)
619
619
As at 29 February 2020
36,917
124,939
10,645
(407)
(803)
2,810
69,170
243,271
Vertu Motors plc (Company Number: 05984855)
126
Notes to the Company Financial Statements
1. Accounting Policies
Statement of compliance
The separate financial statements of Vertu Motors plc, the parent undertaking, have been
prepared in compliance with United Kingdom Accounting Standards, including Financial
Reporting Standard 102, “The Financial Reporting Standard applicable in the United Kingdom
and the Republic of Ireland” (“FRS 102”) and the Companies Act 2006.
Exemptions for qualifying entities under FRS 102
FRS 102 allows a qualifying entity certain disclosure exemptions, subject to certain
conditions, which have been complied with.
The Company has taken advantage of the following exemptions in paragraph 1.12 of FRS
102:
-
-
-
-
from preparing a statement of cash flows and related notes, on the basis that it is a
qualifying entity and the consolidated statement of cash flows of Vertu Motors plc
includes the Company’s cash flows,
certain disclosures in relation to financial instruments,
certain disclosures in relation to share based payments; and
from disclosing the Company key management personnel compensation.
Basis of preparation
Vertu Motors plc is a Public Limited Company which is listed on the Alternative Investment
Market (AiM) and is incorporated and domiciled in England.
The financial statements have been prepared on the going concern basis under the historical
cost convention as modified by the revaluation of derivative financial instruments to fair value.
Note 1 of the consolidated financial statements provides further details on the Directors’
conclusions regarding the going concern basis of preparation.
The principal accounting policies, which have been consistently applied throughout the year,
are set out below.
No profit and loss account is presented by the Company, as permitted under section 408 of
the Companies Act 2006. The profit of the Company for the year ended 28 February 2021
was £5,861,000 (2020: loss of £5,102,000).
The consolidated financial statements include the results of all subsidiaries owned by Vertu
Motors plc listed on pages 131 to 133 of these financial statements. Certain of these
subsidiaries, which are listed below, have taken the exemption from an audit for the year
ended 28 February 2021 by virtue of s479A of Companies Act 2006. Certain other
subsidiaries, which are also listed below, have taken the exemption from preparing individual
accounts for the year ended 28 February 2021 by virtue of s394A of Companies Act 2006. In
order to allow these subsidiaries to take the audit exemption or exemption from the
preparation of individual accounts (as appropriate), the Company has given a statutory
guarantee of all the outstanding liabilities as at 28 February 2021 of the subsidiaries listed
below, further detail of which is provided in note 36 to the consolidated financial statements
on page 123.
The subsidiaries which have taken an exemption from an audit for the year ended 28
February 2021 by virtue of s479A Companies Act 2006 are:
Albert Farnell Limited
All Car Parts Limited
Bristol Street First Investments Limited
Bristol Street Fourth Investments Limited
Grantham Motor Company Limited
Hughes of Beaconsfield Limited
Macklin Property Limited
Sigma Holdings Limited
South Hereford Garages Limited
South Hereford Garages Trade Parts LLP
Tyne Tees Finance Limited
Vans Direct Limited
Vertu Motors (Chingford) Limited
Vertu Motors (Continental) Limited
Vertu Motors (Knaresborough) Limited
Vertu Motors (Property) Limited
Vertu Motors (Property 2) Limited
Vertu Motors (VMC) Limited
Vertu Motors plc (Company Number: 05984855)
127
Notes to the Company Financial Statements (continued)
1. Accounting Policies (continued)
Basis of preparation (continued)
The subsidiaries which have taken an exemption from the preparation of individual accounts
in respect of the year ended 28 February 2021 by virtue of s394A of Companies Act 2006 are:
Aceparts Limited
Best4Vans Limited
Blacks Autos Limited
Blake Holdings Limited
Boydslaw 103 Limited
Bristol Street (No.1) Limited
Bristol Street (No.2) Limited
Bristol Street Commercials (Italia) Limited
Bristol Street Fifth Investments Limited
Bristol Street Fleet Services Limited
Bristol Street Group Limited
Bristol Street Limited
Brookside (1998) Limited
BSH Pension Trustee Limited
Carsandvansdirect Limited
Compare Click Call Limited
Dobies (Carlisle) Limited
Dunfermline Autocentre Limited
Easy Vehicle Finance Limited
Gordon Lamb Group Limited
Gordon Lamb Limited
Gordon Lamb Holdings Limited
Hillendale Group Limited
Hillendale LR Limited
Horseshoe Vehicle Contracts Limited
Hughes Group Holdings Limited
International Concessionaires Limited
K C Motability Solutions Limited
Merifield Properties Limited
Motor Nation Car Hypermarkets Limited
National Allparts Limited
Newbolds Garage (Mansfield) Limited
Nottingham TPS LLP
Peter Blake (Chatsworth) Limited
Peter Blake (Clumber) Limited
Peter Blake Limited
SHG Holdings Limited
The Taxi Centre Limited
Typocar Limited
Vertu Fleet Limited
Vertu Motors (AMC) Limited
Vertu Motors (Durham) Limited
Vertu Motors (Finance) Limited
VanMan Limited
Vertu Motors (Retail) Limited
Vertu Motors (Pity Me) Limited
Vertu Motors Property 2 Holdings Limited
Vertu Ventures Limited
Why Pay More For Cars Limited
Widnes Car Centre Limited
Widnes Car Centre (1994) Limited
The auditors’ remuneration for audit and other services was £25,000 (2020: £25,000).
Intangible assets
Intangible assets comprise computer software and are carried at cost less accumulated
amortisation and any impairment losses. Amortisation is provided on a straight-line basis to
allocate the cost of the asset over its estimated useful life, which in the case of computer
software is between four and six years.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and any impairment in
value. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Depreciation is provided at rates calculated to write off the cost of tangible fixed assets less
their estimated residual values, on a straight-line basis over their estimated useful lives as
follows:
Computer equipment
Office equipment
16.6% - 50%
25%
Investments
Investments in subsidiary undertakings are stated at cost, less provision for impairment.
Deferred taxation
Deferred tax is recognised in respect of all timing differences that have originated but not
reversed at the balance sheet date where transactions or events that result in an obligation to
pay more tax in the future or a right to pay less tax in the future have occurred at the balance
sheet date. Timing differences are differences between the Company’s taxable profits and its
results as stated in the financial statements that arise from the inclusion of gains and losses in
tax assessments in years different from those in which they are recognised in the financial
statements.
Vertu Motors plc (Company Number: 05984855)
128
Notes to the Company Financial Statements (continued)
1. Accounting Policies (continued)
Deferred taxation (continued)
A deferred tax asset is regarded as recoverable and therefore recognised only to the extent
that, on the basis of all available evidence, it can be regarded as more likely than not that
there will be sufficient taxable profits from which the future reversal of the underlying timing
differences can be deducted.
Deferred tax is measured at the tax rates that are expected to apply in the years in which the
timing differences are expected to reverse based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred income
Deferred income is in relation to vehicle warranty product income. The Group sells used
vehicle warranty policies which are in house products that can be taken out over 12, 24 or 36
months with income received on inception of the policy. The policy covers replacement of
mechanical and electrical parts which have suffered a mechanical breakdown, the cost of
labour to fit failed parts and breakdown assistance for the period of the warranty.
When the income is received it is recognised initially as deferred income and is released to
the income statement on a straight-line basis over the life of each warranty policy.
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to
the Company and the revenue can be reliably measured. In practice this means that revenue
is recognised when a service has been undertaken.
Share based payments
The Company allows employees to acquire shares of the Company through share option
schemes. The fair value of share options granted is recognised as an employee expense
with a corresponding increase in equity. The Company operates a number of equity-settled,
share-based compensation plans. The total amount to be expensed over the vesting period
is determined by reference to the fair value of the options granted, excluding the impact of
any non-market vesting conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the number of options that
are expected to vest. At each balance sheet date, the entity revises its estimates of the
number of options that are expected to vest. It recognises the impact of the revision to
original estimates, if any, in the profit and loss account, with a corresponding adjustment to
equity.
The proceeds received net of any directly attributable transaction costs are credited to share
capital (nominal value) and share premium when the options are exercised.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the profit and loss account on a straight-
line basis over the period of the lease.
2. Critical accounting estimates and judgements
The Company makes estimates and assumptions concerning the future. The resulting
accounting estimates, will, by definition, seldom equal the related actual results. The
estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities are discussed below:
Impairment of fixed asset investments
The Company tests annually, or whenever events or changes in circumstances occur, to
determine whether the fixed asset investments held have suffered any impairment. The
recoverable amounts of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of estimates. Details of the key assumptions
used for the impairment testing for the year ended 28 February 2021, as well as the results of
sensitivity analysis performed, are provided in note 7.
Vertu Motors plc (Company Number: 05984855)
129
Notes to the Company Financial Statements (continued)
2. Critical accounting estimates and judgements (continued)
Share based payments
Share options issued to certain employees are measured at fair value at the grant date using
a fair value model, and are expensed on a straight-line basis over the vesting period based on
an estimate of the number of options which will vest. The key assumptions of this model are
disclosed in note 31 of the Vertu Motors plc consolidated financial statements.
3. Employee benefit expense
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Share based payments charge (note 17)
2021
£’000
11,452
4,381
2,022
17,855
265
18,120
2020
£’000
15,313
1,341
1,922
18,576
733
19,309
The above employee benefit expense for the year ended 28 February 2021 includes
£1,946,000 of Government grant income in respect of the Coronavirus Job Retention
Scheme.
4. Average monthly number of people employed (including Directors)
Sales
Service
Administration
5.
Intangible assets
Cost
At 1 March 2020
Additions
Disposals
At 28 February 2021
Accumulated Amortisation
At 1 March 2020
Amortisation charge
Disposals
At 28 February 2021
Net Book Value
At 28 February 2021
At 29 February 2020
2021
Number
133
23
445
601
2020
Number
124
23
416
563
Computer
Software
£’000
2,382
266
(2)
2,646
1,961
242
(2)
2,201
445
421
Vertu Motors plc (Company Number: 05984855)
130
Notes to the Company Financial Statements (continued)
6. Tangible assets
Cost
At 1 March 2020
Additions
Disposals
At 28 February 2021
Accumulated Depreciation
At 1 March 2020
Depreciation charge
Disposals
At 28 February 2021
Net Book Value
At 28 February 2021
At 29 February 2020
7. Fixed asset investments
Computer
equipment
£’000
Office
equipment
£’000
9,184
1,333
(141)
10,376
6,026
1,596
(126)
7,496
2,880
3,158
549
85
-
634
485
46
-
531
103
64
Cost
At 1 March 2020 and 28 February 2021
Accumulated impairment charges
At 1 March 2020 and 28 February 2021
Net Book Value
At 29 February 2020 and 28 February 2021
Total
£’000
9,733
1,418
(141)
11,010
6,511
1,642
(126)
8,027
2,983
3,222
2020
£’000
179,993
13,271
166,722
Vertu Motors plc, the Company, as at 28 February 2021 and 29 February 2020, invested in
100% of the ordinary share capital of the following subsidiary undertakings, incorporated in the
United Kingdom:
Principal activity
Company
The registered office address of the following companies is Vertu House, Fifth Avenue
Business Park, Team Valley, Gateshead, Tyne & Wear, NE11 0XA:
Motor retailer
Bristol Street First Investments Limited
Motor retailer
Bristol Street Fourth Investments Limited
Motor retailer
Vertu Motors (VMC) Limited
Motor retailer
Grantham Motor Company Limited
Motor retailer
Vertu Motors (Chingford) Limited
Motor retailer
Albert Farnell Limited
Motor retailer
South Hereford Garages Limited 4
Motor retailer
Tyne Tees Finance Limited 1
Motor retailer
Vertu Motors (Continental) Limited 1
Motor retailer
Hughes of Beaconsfield Limited 2
Parts retailer
South Hereford Garages Trade Parts LLP 1
Online van retailer
Vans Direct Limited 1
Online advertising
Vertu Motors Third Limited
Online parts retailer
All Car Parts Limited 1
Property company
Macklin Property Limited3
Property company
Vertu Motors (Property) Limited
Property company
Vertu Motors (Knaresborough) Limited3
Property company
Vertu Motors (Property 2) Limited 1
Pension scheme trustee
BSH Pension Trustee Limited 1
Holding company (dormant subsidiaries)
Vertu Motors (Durham) Limited 1
Holding company (dormant subsidiaries)
Bristol Street Fifth Investments Limited 1
Holding company (dormant subsidiaries)
Blake Holdings Limited 1
Vertu Motors plc (Company Number: 05984855)
131
Notes to the Company Financial Statements (continued)
7. Fixed asset investments (continued)
Company
Widnes Car Centre (1994) Limited 1
Brookside (1998) Limited 1
Hillendale Group Limited
Gordon Lamb Group Limited
Gordon Lamb Holdings Limited 1
Bristol Street Group Limited 1
Vertu Motors Property 2 Holdings Limited
Sigma Holdings Limited
Hughes Group Holdings Limited
Vertu Ventures Limited
Aceparts Limited
SHG Holdings Limited
Why Pay More For Cars Limited 1
International Concessionaires Limited 1
Vertu Motors (AMC) Limited
Motor Nation Car Hypermarkets Limited
Bristol Street Limited 1
Bristol Street (No. 1) Limited 1
Bristol Street (No. 2) Limited 1
National Allparts Limited 1
Merifield Properties Limited 1
Peter Blake Limited 1
Peter Blake (Chatsworth) Limited 1
Peter Blake (Clumber) Limited 1
Typocar Limited
Widnes Car Centre Limited 1
KC Mobility Solutions Limited 1
Compare Click Call Limited
Dobies (Carlisle) Limited 1
Newbolds Garages (Mansfield) Limited 1
Hillendale LR Limited 1
Blacks Autos Limited 1
Gordon Lamb Limited 1
Vertu Motors (Finance) Limited
Vertu Motors (Pity Me) Limited 1
Bristol Street Commercials (Italia) Limited
Vertu Fleet Limited
Vertu Motors (Retail) Limited
Bristol Street Fleet Services Limited 1
VanMan Limited 1
Best4Vans Limited 1
Horseshoe Vehicle Contracts Limited 1
Carsandvansdirect Limited 1
Nottingham TPS LLP 1
The registered address of the following companies is Dunfermline Autocentre, Halbeath Road,
Dunfermline, Fife, KY12 7RD
Boydslaw 103 Limited 1
Dunfermline Autocentre Limited 1
Principal activity
Holding company (dormant subsidiaries)
Holding company (dormant subsidiaries)
Holding company (dormant subsidiaries)
Holding company (dormant subsidiaries)
Holding company (dormant subsidiaries)
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Dormant LLP
Holding company
Dormant company
The registered address of the following companies is Peugeot Paisley, Saturn Avenue,
Phoenix Retail Park, Paisley, PA1 2BH
The Taxi Centre Limited
Easy Vehicle Finance Limited
1 Held indirectly by the Company.
2 On 1 April 2020, the trade and assets of this subsidiary were transferred to other wholly owned subsidiaries of the
Group, thereafter this subsidiary ceased to trade.
3On 16 September 2020, the freehold and long leasehold properties held by these companies were transferred to
another wholly owned subsidiary of the Group, thereafter this subsidiary cased to trade.
4On 1 May 2021, the trade and assets of this subsidiary were transferred to another wholly owned subsidiary of the
Group, thereafter this subsidiary ceased to trade.
Dormant company
Dormant company
Vertu Motors plc (Company Number: 05984855)
132
Notes to the Company Financial Statements (continued)
7. Fixed asset investments (continued)
Furthermore, the following subsidiary undertaking (ordinary shares 100% owned and
incorporated within the United Kingdom) was incorporated in the year ended 28 February
2021:
Company
Vertu Accident Repair Limited
Principal activity
Maintenance and repair of motor vehicles
The registered address of Vertu Accident Repair Limited is Vertu House, Fifth Avenue
Business Park, Team Valley, Gateshead, Tyne & Wear NE11 0XA.
The Directors believe that the carrying value of the investments is supported by their
underlying net assets.
The Company tests annually, or whenever events or changes in circumstances occur, to
determine whether the fixed asset investments held have suffered any impairment. The
recoverable amounts of cash-generating units (“CGUs”) have been determined based on
value-in-use calculations.
The key assumptions for the value in use calculations are those regarding the discount rates,
growth rates and expected changes to gross profits and direct costs during the year in respect
of the Company’s trading subsidiaries:
• Management estimates discount rates using pre-tax rates that reflect current market
assessments and the time value of money and the risks specific to the CGUs.
• Growth rates are based upon industry forecasts and the past performance of the CGU.
• Changes in gross profits and direct costs are based on past practices and expectations of
future changes in the market.
Annual growth rates typically between 0% and 3% are assumed for years three to five
depending on the CGU, after which a growth rate of 0% is assumed to perpetuity. Cash flows
into perpetuity have been used to reflect the long-term and open-ended nature of the Group’s
business model.
A risk adjusted pre-tax discount rate reflecting the Group’s Weighted Average Cost of Capital
(“WACC”) of 8% (2020: 8%) is applied.
Sensitivity analysis has been performed on the impairment test based on three potential
scenarios with the following results:
•
•
•
If COVID-19 restrictions were to force further closures of non-essential retail were to
take place for a 3 month period in the year ended 28 February 2022 on the same
terms as the restrictions seen between November 2020 and April 2021, it is not
expected to create an additional impairment charge.
If the growth rate in years three to five is reduced to -10%, the Company would incur
an additional impairment charge in respect of fixed asset investments of £1.8m.
If the pre-tax WACC was increased to 12%, the Company would incur an additional
impairment charge in respect of fixed asset investments of £3.1m.
8. Debtors
Trade debtors
Amounts owed by Group undertakings
Deferred tax asset (note 9)
Value Added Tax
Prepayments and accrued income
2021
£’000
1,828
141,989
2,416
2,525
5,174
153,932
2020
£’000
1,401
157,478
1,733
3,586
7,254
171,452
Amounts owed by Group undertakings are unsecured, bear no interest and have no fixed
repayment date.
Vertu Motors plc (Company Number: 05984855)
133
Notes to the Company Financial Statements (continued)
9. Deferred tax asset
At beginning of year
Credited to the profit and loss account
Credited directly to equity
At end of year
2021
£’000
1,733
673
10
2,416
2020
£’000
1,467
186
80
1,733
The amounts recognised for deferred tax assets, calculated under the liability method at 19%
(2020: 17%) are set out below:
Depreciation in excess of capital allowances
Other short-term timing differences
Total
2021
£’000
731
1,685
2,416
2020
£’000
601
1,132
1,733
During the year ending 28 February 2022, the reversal of deferred tax assets is expected to
decrease the corporation tax charge for the year by £896,000. This is primarily due to timing
differences in relation to depreciation in excess of capital allowances.
10. Creditors: amounts falling due within one year
Trade creditors
Other creditors
Corporation tax
Other taxation and social security
Accruals
Deferred income
2021
£’000
6,377
26,000
732
5,579
30,144
12,395
81,227
2020
£’000
8,421
26,000
2,094
5,180
25,533
10,974
78,202
Other creditors comprise non-interest bearing advance payments from the Group’s finance
company partners.
Accruals includes £10,740,000 (2020: £12,767,000) in respect of outstanding service plans.
11. Creditors: amounts falling due after more than one year
Bank borrowings
Deferred income (note 12)
Borrowings are repayable as follows:
Under 1 year
1-2 years
2-5 years
2021
£’000
53,832
9,172
63,004
2021
£’000
-
-
53,832
53,832
2020
£’000
43,657
10,303
53,960
2020
£’000
-
-
43,657
43,657
The bank borrowings are secured on the assets of the Company and the Group. The table
below analyses the Company’s financial liabilities into relevant maturity groupings based on
the remaining period at the balance sheet date to contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying amounts as the impact of discounting is not significant.
Vertu Motors plc (Company Number: 05984855)
134
Notes to the Company Financial Statements (continued)
11. Creditors: amounts falling due after more than one year (continued)
Bank borrowings
Trade and other creditors
At 28 February 2021
Bank borrowings
Trade and other creditors
At 29 February 2020
12. Deferred income
Within one
year
Within two
to five years
£’000
-
81,227
81,227
£’000
53,832
9,172
63,004
Within one
year
Within two
to five years
£’000
-
78,202
78,202
£’000
43,657
10,303
53,960
Total
£’000
53,832
90,399
144,231
Total
£’000
43,657
88,505
132,162
Deferred income due in greater than one year comprises:
Warranty income
2021
£’000
9,172
9,172
2020
£’000
10,303
10,303
Deferred income relates to used car warranty products sold by the Group. These warranty
policies can be taken out over 12, 24 or 36 months with income received in advance of this
period being released on a straight-line basis over the life of the policies. There is an additional
£9,294,000 included in ‘Deferred income’ in creditors: amounts falling due within one year, in
respect of such warranties recognising the amount to be released over the next 12 months
(2020: £8,915,000).
13. Called up share capital, share premium, other reserve, treasury share reserve and
capital redemption reserve
2021
Ordinary
shares of
10p each
Number of
shares
(‘000)
Called up
Share
Share premium
account
capital
£’000
£’000
Other
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Total
£’000
At 1 March 2020
Issuance of treasury
shares in satisfaction
of exercised share
options
Purchase of treasury
shares
At 28 February 2021
367,120
36,917
124,939
10,645
(803)
2,810
174,508
40
-
-
-
16
-
16
(5,274)
361,886
-
36,917
-
124,939
-
10,645
(2,004)
(2,791)
-
2,810
(2,004)
172,520
All issued shares are fully paid-up.
The other reserve is a merger reserve, arising from shares issued for shares as consideration
to the former shareholders of acquired businesses.
Vertu Motors plc (Company Number: 05984855)
135
Notes to the Company Financial Statements (continued)
13. Called up share capital, share premium, other reserve, treasury share reserve and
capital redemption reserve (continued)
2020
Ordinary
shares of
10p each
Number of
shares
(‘000)
Called up
Share
Share premium
account
capital
£’000
£’000
Other
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Total
£’000
375,023
37,661
124,939
10,645
(602)
2,066 174,709
At 1 March 2019
Sale of treasury
shares
Issuance of treasury
shares in satisfaction
of exercised share
options
Purchase of treasury
shares
Cancellation of
repurchased shares
At 29 February 2020
-
529
(1,000)
-
-
-
-
-
-
-
-
-
(7,432)
367,120
(744)
36,917
-
124,939
-
10,645
200
-
(401)
-
(803)
2021
£’000
(407)
(6)
10
(403)
2021
£’000
69,170
5,861
-
373
-
(16)
75,388
-
-
-
200
-
(401)
744
-
2,810 174,508
2020
£’000
(19)
(468)
80
(407)
2020
£’000
82,724
(5,102)
(6,122)
619
(2,749)
(200)
69,170
14. Hedging reserve
Cash flow hedges:
At beginning of year
Fair value losses on derivative financial instruments
during the year
Deferred taxation on fair value losses during year
At end of year
15. Profit and loss account
As at beginning of year
Profit/(loss) for the financial year
Dividend paid
Share based payments charge
Repurchase of own shares
Treasury shares issued
As at end of year
16. Dividends per share
As a result of the substantial amounts of Government support received and the need to protect the
Group’s liquidity in the first quarter of the year ended 28 February 2021, the Board did not declare
a final dividend for the year ended 29 February 2020, nor any dividend for the financial year ended
28 February 2021. Dividends of £6,122,000 were paid in the year ended 29 February 2020,
representing 1.65p per share.
17. Share based payments
For details of share based payment awards and fair values, see note 31 to the consolidated
financial statements. The Company financial statements include a share based payments
charge for the year of £265,000 (2020: £733,000).
18. Contingencies
See note 36 to the consolidated financial statements for details of contingent liabilities as at the
balance sheet date.
Vertu Motors plc (Company Number: 05984855)
136
Notes to the Company Financial Statements (continued)
19. Directors’ remuneration
The remuneration of the Directors who served during the year from 1 March 2020 to 28
February 2021 is set out within the Directors’ Remuneration Report on pages 62 to 66.
20. Commitments
The Company leases vehicles under non-cancellable operating lease agreements.
The future aggregate minimum lease payments under non-cancellable operating leases is set
out below:
Commitments under non-cancellable operating leases
payable:
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
2021
£’000
463
421
-
884
2020
£’000
142
318
-
460
21. Related party transactions
The Company has related party relationships with its subsidiaries and with key management
personnel.
Transactions with the Directors of the Company are disclosed in note 38 of the consolidated
financial statements.
Vertu Motors plc (Company Number: 05984855)
137
Alternative Performance Measures
Set out below are the definitions and sources of various alternative performance measures
which are referred to throughout the Annual Report. All financial information provided is in
respect of the Vertu Motors plc Group.
Definitions
Like-for-like
FY21
FY20
Q1 FY21
Q1 FY20
Dealerships
consecutive financial years.
that have comparable
trading periods
in
two
The twelve month period ended 28 February 2021.
The twelve month period ended 29 February 2020.
The three month period ended 31 May 2020.
The three month period ended 31 May 2019.
Q2 – 4 FY21
The nine month period ended 28 February 2021.
Q2 – 4 FY20
The nine month period ended 29 February 2020.
Adjusted
Adjusted for amortisation of intangible assets and share based
payments, as these are unconnected with the ordinary business of
the Group.
Aftersales gross margin Aftersales gross margin compares the gross profit earned from
aftersales activities to the total aftersales revenues, including
internal revenue relating to service and vehicle preparation work
performed on the Group’s own vehicles. This is to properly reflect
the real activity of the Group’s aftersales department.
Alternative Performance Measures
Adjusted Operating Profit
Operating profit
Non-underlying items (note 8):
Net impairment charges
Amortisation (note 16)
Share based payment charge (note 31)
Adjusted operating profit
Adjusted Net Cash / (Debt)
Cash and cash equivalents
Borrowings (note 26)
Net debt (excluding lease liabilities) (note 33)
Used car stocking loans – other borrowings (note 26)
Adjusted net cash / (debt)
Free Cash Flow
Net cash inflow from operating activities
Purchase of other property, plant and equipment
Purchase of intangible assets
Proceeds from disposal of property, plant and
equipment
Principal elements of lease repayments
Free cash flow
Vertu Motors plc (Company Number: 05984855)
138
2021
£’000
31,630
1,452
436
265
33,783
2021
£’000
67,828
(72,359)
(4,531)
5,948
1,417
2021
£’000
74,920
(11,844)
(264)
972
(15,342)
48,442
2020
£’000
16,473
14,378
595
733
32,179
2020
£’000
40,839
(69,204)
(28,365)
25,547
(2,818)
2020
£’000
19,502
(14,180)
(155)
3,255
(13,392)
(4,970)
Alternative Performance Measures (continued)
Adjusted Profit Before Tax (PBT)
Profit before tax
Non-underlying items (note 8):
Impairment charges
Amortisation
Share based payment charge
Adjusted PBT
Tangible net assets per share
Net assets
Less:
Goodwill and other indefinite life assets
Other intangible assets
Add:
Deferred tax on above adjustments
Tangible net assets
Tangible net assets per share
2021
£’000
22,399
1,452
436
265
24,552
2021
£’000
275,940
(99,192)
(1,948)
6,764
181,564
50.2p
2020
£’000
7,317
14,378
595
733
23,023
2020
£’000
263,373
(99,315)
(2,120)
6,821
168,759
46.0p
At 29 February 2020, there were 369,173,981 shares in issue (2020: 369,173,981) of which,
7,287,304 were held by the Group’s employee benefit trust (2019: 2,053,821). Rights to
dividends on shares held in the Group’s employee benefit trust have been waived and
therefore such shares are not included in the tangible net asset per share calculation.
Like-for-like reconciliations:
Revenue
Revenue
Acquisitions
Disposals
Like-for-like revenue
Revenues by department
2021
£’m
2,547.7
(177.9)
(7.0)
2,362.8
2020
£’m
3,064.5
(12.1)
(39.1)
3,013.3
2021
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total revenue
2020
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total revenue
FY21
Group
revenue
£’m
739.7
578.4
1,008.4
221.2
2,547.7
FY20
Group
revenue
£’m
862.5
708.5
1,235.4
258.1
3,064.5
Q1 FY21
Group
revenue
£’m
132.2
77.1
92.6
30.4
332.3
Q1 FY20
Group
revenue
£’m
299.3
225.7
335.2
66.7
926.9
Q2 – 4 FY21 like-for-like
Q2 – 4 FY21
Group
revenue
£’m
607.5
501.3
915.8
190.8
2,215.4
Q2 – 4 FY21
Acquisitions
revenue
£’m
(56.0)
(17.9)
(72.9)
(16.1)
(162.9)
Q2 – 4 FY21
Disposals
revenue
£’m
(4.1)
-
(1.8)
(0.5)
(6.4)
Q2 – 4 FY21
Like-for-like
revenue
£’m
547.4
483.4
841.1
174.2
2,046.1
Q2 – 4 FY20 like-for-like
Q2 – 4 FY20
Group
revenue
£’m
563.2
482.8
900.2
191.4
2,137.6
Q2 – 4 FY20
Acquisitions
revenue
£’m
(4.4)
-
(6.3)
(1.4)
(12.1)
Q2 – 4 FY20
Disposals
revenue
£’m
(6.4)
(0.2)
(16.5)
(2.2)
(25.3)
Q2 – 4 FY20
Like-for-like
revenue
£’m
552.4
482.6
877.4
187.8
2,100.2
Vertu Motors plc (Company Number: 05984855)
139
Alternative Performance Measures (continued)
Like-for-like reconciliations (continued):
Aftersales revenue by department
2021
Parts
Accident repair
Parts and accident repair
Service
Total aftersales revenue1
2020
Parts
Accident repair
Parts and accident repair
Service
Total aftersales revenue1
1 Inclusive of both internal and external revenue
Q2 – 4 FY21 like-for-like
FY21
Group
revenue
£’m
134.5
5.8
140.3
122.6
262.9
Q1 FY21
Group
revenue
£’m
18.9
0.5
19.4
15.7
35.1
Q2 – 4 FY21
Group
revenue
£’m
115.6
5.3
120.9
106.9
227.8
Q2 – 4 FY21
Acquisitions
revenue
£’m
(8.3)
(1.2)
(9.5)
(9.1)
(18.6)
Q2 – 4 FY21
Disposals
revenue
£’m
(0.6)
-
(0.6)
(0.2)
(0.8)
Q2 – 4 FY21
Like-for-like
revenue
£’m
106.7
4.1
110.8
97.6
208.4
FY20
Group
revenue
£’m
164.8
6.4
171.2
134.7
305.9
Q2 – 4 FY20 like-for-like
Q1 FY20
Group
revenue
£’m
42.4
1.5
43.9
35.8
79.7
Q2 – 4 FY20
Group
revenue
£’m
122.4
4.9
127.3
98.9
226.2
Q2 – 4 FY20
Acquisitions
revenue
£’m
(0.6)
(0.2)
(0.8)
(0.8)
(1.6)
Q2 – 4 FY20
Disposals
revenue
£’m
(2.0)
-
(2.0)
(1.1)
(3.1)
Q2 – 4 FY20
Like-for-like
revenue
£’m
119.8
4.7
124.5
97.0
221.5
Gross profit (“GP”) by department
2021
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total GP
2020
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total GP
FY21
Group GP
£’m
54.3
23.2
93.9
129.6
301.0
Q1 FY21
Group GP
£’m
11.7
3.6
7.7
16.5
39.5
Q2 – 4 FY21
Group GP
£’m
42.6
19.6
86.2
113.1
261.5
FY20
Group GP
£’m
62.7
25.8
102.1
143.5
334.1
Q1 FY20
Group GP
£’m
19.4
7.1
27.8
37.1
91.4
Q2 – 4 FY20
Group GP
£’m
43.3
18.7
74.3
106.4
242.7
Q2 – 4 FY21 like-for-like
Q2 – 4 FY21
Acquisitions
GP
£’m
(3.8)
(0.8)
(5.0)
(9.4)
(19.0)
Q2 – 4 FY21
Disposals
GP
£’m
(0.3)
-
(0.1)
(0.3)
(0.7)
Q2 – 4 FY21
Like-for-like
GP
£’m
38.5
18.8
81.1
103.4
241.8
Q2 – 4 FY20 like-for-like
Q2 – 4 FY20
Acquisitions
GP
£’m
(0.2)
-
(0.5)
(0.8)
(1.5)
Q2 – 4 FY20
Disposals
GP
£’m
(0.5)
-
(1.0)
(1.2)
(2.7)
Q2 – 4 FY20
Like-for-like
GP
£’m
42.6
18.7
72.8
104.4
238.5
Vertu Motors plc (Company Number: 05984855)
140
Alternative Performance Measures (continued)
Like-for-like reconciliations (continued):
Aftersales gross profit by department
2021
Parts
Accident repair
Parts and accident repair
Service
Total aftersales GP
2020
Parts
Accident repair
Parts and accident repair
Service
Total aftersales GP
FY21
Aftersales
GP
£’m
30.3
3.8
34.1
95.5
129.6
Q1 FY21
Aftersales
GP
£’m
4.3
0.4
4.7
11.8
16.5
Q2 – 4 FY21
Aftersales
GP
£’m
26.0
3.4
29.4
83.7
113.1
Q2 – 4 FY21 like-for-like
Q2 – 4 FY21
Acquisitions
GP
£’m
(1.7)
(0.7)
(2.4)
(7.0)
(9.4)
Q2 – 4 FY21
Disposals
GP
£’m
(0.2)
-
(0.2)
(0.1)
(0.3)
Q2 – 4 FY20 like-for-like
FY20
Aftersales
GP
£’m
35.7
4.4
40.1
103.4
143.5
Q1 FY20
Aftersales
GP
£’m
9.0
1.1
10.1
27.0
37.1
Q2 – 4 FY20
Aftersales
GP
£’m
26.7
3.3
30.0
76.4
106.4
Q2 – 4 FY20
Acquisitions
GP
Q2 – 4 FY20
Disposals
GP
£’m
(0.1)
(0.1)
(0.2)
(0.6)
(0.8)
£’m
(0.5)
-
(0.5)
(0.7)
(1.2)
Q2 – 4 FY21
Like-for-like
GP
£’m
24.1
2.7
26.8
76.6
103.4
Q2 – 4 FY20
Like-for-like
GP
£’m
26.1
3.2
29.3
75.1
104.4
Operating expenses
Underlying operating expenses (net)
Job Retention Scheme Grant (“JRS Grant”)
Underlying operating expenses (gross)
Q1
£’m
51.2
17.7
68.9
FY21
Q2 – 4
£’m
216.0
10.1
226.1
FY21
£’m
267.2
27.8
295.0
Q1
£’m
76.2
-
76.2
FY20
Q2 – 4
£’m
225.7
-
225.7
FY20
£’m
301.9
-
301.9
Q1 FY21
Q1 FY20
Total
£’m
51.2
17.7
Acquisitions
£’m
(3.6)
-
Disposals
£’m
(0.3)
-
Like-
for-like
£’m
47.3
17.7
Total
£’m
76.2
-
Acquisitions
£’m
-
-
Disposals
£’m
(1.3)
-
Like-for-
like
£’m
74.9
-
68.9
(3.6)
(0.3)
65.0
76.2
-
(1.3)
74.9
Operating expenses (net)
JRS Grant
Underlying operating
expenses (gross)
Q2 – 4 FY21
Q2 – 4 FY20
Operating expenses (net)
JRS Grant
Underlying operating
expenses (gross)
Total
£’m
216.0
10.1
Acquisitions
£’m
(20.6)
-
Disposals
£’m
(0.5)
-
Like-for-
like
£’m
194.9
10.1
Total
£’m
225.7
-
Acquisitions
£’m
(2.0)
-
Disposals
£’m
(2.7)
-
Like-for-
like
£’m
221.0
-
226.1
(20.6)
(0.5)
205.0
225.7
(2.0)
(2.7)
221.0
Vertu Motors plc (Company Number: 05984855)
141
Company Information
Nominated Advisor and Broker
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
Solicitors
Womble Bond Dickinson (UK) LLP
St Ann’s Wharf
112 Quayside
Newcastle upon Tyne
NE1 3DX
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Central Square South
Orchard Street
Newcastle upon Tyne
NE1 4AZ
Tax Advisors
Deloitte LLP
One Trinity Gardens
Broad Chare
Newcastle upon Tyne
NE1 2HF
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Financial PR Advisors
Camarco
107 Cheapside
London
EC2V 6DN
Company Secretary
Nicola Loose
cosec@vertumotors.com
Registered office
Vertu Motors plc
Vertu House
Fifth Avenue Business Park
Team Valley
Gateshead
Tyne & Wear
NE11 0XA
Vertu Motors plc (Company Number: 05984855)
142
Registered Office:
Vertu House,
Fifth Avenue Business Park,
Team Valley, Gateshead,
Tyne and Wear, NE11 0XA
Company Number: 05984855
www.vertumotors.com