ANNUAL REPORT & FINANCIAL STATEMENTS
For the year ended 28 February 2022
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22 June 2022
October 2022
May 2023
Table of Contents
Strategic Report
Performance Highlights
At a Glance
Group Stakeholders
Chairman’s Statement
Group Strategy
Key Performance Indicators
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 2022/23
Final Results 2022/23
Vertu Motors plc (Company Number: 05984855)
1
Performance Highlights
Operational Highlights
• Record trading results delivered with Adjusted1 profit before tax of £80.7m (FY21:
£24.6m, FY20: £23.0m), on revenues of £3.6bn
• Vehicle sales volumes ahead of market trends in all areas on a like-for-like basis
compared to FY20 (year ended 29 February 2020)
•
Increased gross margin of 12.0% (FY21: 11.8%, FY20: 10.9%) reflects supply
constraints and strong pricing disciplines
• Acquisitions successfully integrated and performing well
• Free Cash Flow of £44.2m in the year and Net cash2 of £16.2m as at 28 February
2022 (FY21 Net debt: £4.5m)
• Underlying corporate Tax charge of £16.1m (FY21: £5.2m)
• Net tangible assets per share of 66.8p (FY21: 50.2p) reflecting strong asset base, net
cash position and cashflow generation
• 11.6m shares repurchased at a value of £7.1m since 20 August 2021, buyback
programme continues
• Final Dividend of 1.05p per share recommended, payable in July
Outlook Highlights
• Strong trading performance delivered in key months of March and April with trading
profit of £19.1m (FY22: £19.2m)
• Management focus on operational excellence around costs, conversion and
customer experience
• New and used vehicle supply constraints continue and cost pressures are evident
• Consumer confidence in the face of rising domestic costs is a critical determinant to
continuing success in terms of demand
• Visible growth pipeline including expansion with the Toyota brand in the West of
Scotland and further multi-franchising opportunities
Financial Summary
Years ended 28 February
Revenue
Adjusted1 profit before tax
Basic Adjusted1 EPS
Dividends per share
Net Cash / (Debt)2
2022
£3,615.1m
£80.7m
17.92p
1.70p
£16.2m
2021
£2,547.7m
£24.6m
5.27p
-
(£4.5m)
2020
£3,064.5m
£23.0m
4.99p
0.60p
(£28.4m)
1 Adjusted to remove share-based payments charge, amortisation of intangible assets and impairment charges
2 Excludes lease liabilities, includes used vehicle stocking loans
Vertu Motors plc (Company Number: 05984855)
2
At a Glance
160 sales outlets
31 car, bike and commercial franchise partners
121 locations across the UK
6,184 colleagues
196,877
vehicles sold
£3.6bn revenue
86.5% Used Car Customer Experience
(Net Promoter Score)
88% 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.
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
colleague forums,
regular appraisals,
team meetings, full
team briefings and
through a number of
channels including our
intranet, employee
newsletters and regular
blogs from the CEO. 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 and annual
colleague awards.
Outcomes of
engagement:
• Ensuring the safety
and wellbeing of all
colleagues
• Pay and reward
review conducted and
enhanced benefits
delivered to
colleagues
• Regular video
communication to all
colleagues
• Colleague meetings
with the director for
colleague
engagement (P Best)
• Local and divisional
colleague satisfaction
action plans
How we engage:
Key interests raised:
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. The Group
engaged Mediacom to
provide feedback from
customers in FY22.
• Service delivery
• Ability to self-serve
online
• Product knowledge
including electric
vehicles and
alternative fuels
• Access to local
service
• Value for money
• Community
involvement
Outcomes of
engagement:
• Website and email
communications to
customers on the
Group’s database
• Improved sales
process giving
customers more
control over their
purchase including
the introduction of a
concierge service
• 14-day money back
guarantee established
Colleagues
Customers
Vertu Motors plc (Company Number: 05984855)
4
Group Stakeholders (continued)
Engaging with Stakeholders - section 172 statement (continued)
How we engage:
Key interests raised:
Investors
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 &
ESG
Outcomes of
engagement:
• Meetings held
throughout the year
• Analyst meeting on
Group Ancillary
businesses
• Dividend resumed in
FY22 and a share
buy-back programme
continues
• Webcast for retail
investors FY22 first
half results held
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
• Consultation on
potential move to an
agency distribution
model with certain
manufacturer partners
• 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
through contract
revisions
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 Group suppliers.
Key suppliers sponsor
and attend the Group’s
annual colleague
awards ceremony.
Manufacturer
Partners
Suppliers
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
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
• Renewal of annual
facilities
• Continued review of
retail finance
arrangements in
response to changes
in base rates
Outcomes of
engagement:
• Engagement with
schools
• 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
• ‘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
Franchised Dealers
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
• Donations to other
community initiatives
• Input to and member
of industry working
groups
• Responded to FRC
enquiries on their
review of the FY21
Report and Accounts,
assisting in closing
their enquiries
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
The Group executed exceptionally well during the year ended 28 February 2022, delivering a
record Adjusted1 profit before tax of £80.7m (FY21: £24.6m). There were significant
highlights in the Year:
• Delivery of enhancements to the in-house developed technological capabilities,
augmenting the Group’s omnichannel sales process (the Click2Drive tech platform),
supported by our growing nationwide dealership network from Scotland to Exeter and
Kent.
• Successful growth achieved, with all acquired businesses fully integrated into Group
systems and processes and delivering higher levels of profitability than anticipated.
• Strong people focus, with the delivery of enhanced benefits to colleagues, enrichment
of training opportunities and improved engagement through colleague forums. This
has resulted in an increase in the number of colleagues who consider the Group a
great place to work.
• Continued brand focus, with Bristol Street Motors now the top automotive retail brand
(including disrupters) in England and Wales. Improvements in awareness of the
Vertu Motors and Macklin Motors brands also delivered.
• Application of stringent capital allocation disciplines.
Acquisitions are only
undertaken if they meet required return levels. Dividends were re-established and
over 9.7m shares bought back in the Year, with the buyback programme continuing.
I am very proud to see how every colleague has contributed to the success of the Group and I
would like to thank them for this. The commitment that they have shown over the past year
has been exemplary.
As we enter the new financial year, the economic, social and health effects of the pandemic
are ongoing, and we are mindful of macroeconomic and geopolitical risks. The Group’s
excellent financial position, continued investment in its colleagues and systems and its
established track record of execution gives confidence that we will continue to deliver on our
strategic objectives.
Andrew Goss
Chairman
1 Adjusted to remove share-based payments charge, amortisation of intangible assets and impairment charges
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 ½ RESPECT ½ PROFESSIONALISM ½ INTEGRITY ½ RECOGNITION
OPPORTUNITY ½ 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
Growth
Digitalisation - cohesive “bricks and clicks” strategy
• Omni-channel development leveraging ‘Click2Drive’
technology and sub-brand
• Digitalise aftersales process
• Reduce cost base and deliver efficiency through use
of systems
• Utilise data driven decision making to deliver
enhanced returns
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
Digitalisation
Colleague & Customer focus
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)
Execution of Strategy
The Group’s key long-term strategic goal remains: To deliver growing, sustainable cashflows
from operational excellence in the franchise automotive retail sector. The strategic objectives
of the Group were updated following a Board review during the Year and are summarised
below:
• 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 digitalisation in the sector, delivering a cohesive ‘bricks and
clicks’ strategy:
o Optimise our omnichannel retail offering through leveraging the ‘Click2Drive’
technology and utilising this important sub-brand to promote its usage
o Digitalise aftersales processes to improve customer service
o Reduce the cost base of the Group by delivering efficiency using technology
o Utilise data driven decision making to generate enhanced returns
• To develop and motivate the Group’s colleagues to ensure operational excellence is
delivered constantly across the business.
• To develop ancillary businesses to add revenue and returns that complement the
core business.
An update on progress in executing these strategies is set out below:
Developing the Scale of the Group
The Group has an excellent platform allowing it to capitalise on opportunities:
•
Financial capacity
The Group’s balance sheet strength is underpinned by a significant freehold and long
leasehold property portfolio and a largely unencumbered inventory of used cars. This
strong asset base, together with a net cash position on 28 February 2022 means there
remains significant firepower available to facilitate the Group’s future growth ambitions.
This is estimated at around £90m. The Group will apply its very disciplined approach to
acquisitive growth to ensure that only the right opportunities to drive long term success
and shareholder value are executed.
• Management capacity
The Group has a stable and experienced senior management team, with an established
track record of execution and performance delivery. This team has very much an
“owner” mentality and sets the “tone from the top” to ensure that the business’s culture is
appropriate and consistent across all its operations. This ensures the 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”). These matters
are not considered just words but are vital to the Group’s success and this is evidenced
by strong awareness of the Values by colleagues.
In April 2022, the Group appointed Bruce Clark as its Chief Technology Officer, a new
position on the Operational CEO Committee of the Group. Bruce joined the Group in
2013 and will be responsible for IT infrastructure, data security, software development
and data analytics. This appointment will be augmented by further appointments in the
technology area and highlights the Group’s focus on this key area and increasing
bandwidth.
Vertu Motors plc (Company Number: 05984855)
10
Group Strategy (continued)
Execution of Strategy (continued)
Developing the Scale of the Group (continued)
• Operational Systems Platform
The Group’s in-house developed systems provide uniform processes and control, as well
as live management information and data to allow speedy and appropriate decision
making. Acquired businesses are quickly migrated onto this scalable technology and
process platform to ensure control is quickly established and performance improvement
opportunities are highlighted. The scale of the Group allows it to continue to increase
investment in the development of systems and operations to further augment the Group’s
customer offering and profitability. A 50 strong development team is now in place.
•
Brand Strength
The Group operates three major customer facing brands in the UK: Bristol Street Motors,
Macklin Motors and Vertu Motors. Bristol Street Motors remains one of the largest sector
brands, with a UK prompted brand awareness of approx. 48.7%, currently the third
highest ranking franchised automotive retail brand in the UK, with the brand ranked
number 1 on prompted brand awareness in England and Wales. In Scotland, the Group
operates under the Macklin Motors brand, which has a strong 40% brand awareness.
Vertu Motors is the Group’s premium focused brand, with a growing prompted
awareness of approx. 7%. Each of these brands is supported by extensive TV
campaigns, sports sponsorships and partnerships and digital marketing initiatives.
•
Execution of growth strategy in the Year
The Group has the brand strength and financial, operational, and management
capabilities to continue to add additional franchised outlets to the business.
On 10 December 2021 the Group acquired the entire issued share capital of Farmer &
Carlisle Holdings Limited, which operated two Toyota franchise freehold dealerships
located in Loughborough and Leicester. The share capital was acquired for cash
consideration of £8.7m (including £0.9m net cash acquired). Consideration included a
payment in respect of goodwill of £2.35m. The businesses have been fully integrated in
terms of the Group’s systems and processes.
The Group was delighted to announce further expansion with Toyota as Macklin Motors
was awarded the franchise in the West of Scotland from 1 April 2022. The Group
intends to develop a total of four dealerships in the coming periods to cover this
extensive territory. The first dealership opened in Darnley, South Glasgow on the 1 April
2022, in the freehold premises acquired in early 2021. An additional facility will be open
in the Autumn. These developments will augment the Group’s existing three Toyota
dealerships located in the East Midlands and create a scaled level of representation with
this much sought-after brand.
The Group also continues to evaluate and execute multi-franchising actions in its
locations to maximise the long-term profitability of each location, and position the Group
well for the EV transition, where we have gained market share. The Year saw the Group
execute on this strategy in several locations as set out below:
•
•
•
•
•
In June 2021 a new franchise outlet for Citroen was added alongside the Group’s
existing Vauxhall outlet in Northampton. This was the third Citroen outlet added in
the last 24 months.
As planned, the Vauxhall, Renault, Dacia and Hyundai franchises were added to the
Group’s existing dealership premises in Dunfermline, Fife with Ford sales operations
having ceased on 30 September 2021.
The Honda Bikes franchise was added to the Group’s existing Honda dealership in
Stockton bringing the total number of outlets in the Group’s Vertu Motorcycles
Division to four.
The Group opened new standalone Renault and Dacia franchise outlets in Leicester
and York.
The Group gained the MG franchise for the first time during the Year, and now
operates three outlets in Carlisle, Beaconsfield and Edinburgh. Two more MG
outlets are planned.
Vertu Motors plc (Company Number: 05984855)
11
Group Strategy (continued)
Execution of Strategy (continued)
Developing the Scale of the Group (continued)
•
Execution of growth strategy in the Year (continued)
•
•
•
The Group opened its first Stellantis multi-brand aftersales centre in Harlow in
November 2021, in premises located near the Group’s existing Peugeot dealership
in Harlow, Essex.
The Hyundai franchise was added to the Group’s existing Honda dealership in
Sunderland. In additio n, the Peugeot franchise has been added to the Group’s
Sunderland Vauxhall dealership.
In January 2022 a newly built freehold dealership opened in Newbridge, Edinburgh
representing Kia and Peugeot. These franchises relocated from leasehold premises
on the expiration of the lease. The MG franchise was also included in the new
development with this business having been acquired in December 2021.
• On 1 May 2022, the Group opened a further Bristol Street Motor Nation used car
outlet in newly acquired leasehold premises at Stockton, Teesside. This is a large
used car operation in a prime location in the town. The development extends the
Bristol Street Motors brand into the core of Teesside for the first time.
The Board continues to actively manage the Group’s portfolio of dealerships and assess
further growth opportunities, taking account of future trends in electric vehicles, whilst
utilising strict investment return metrics to ensure discipline in capital allocation.
Pruning activities were also undertaken during the Year. The Group’s single Mitsubishi
and Suzuki outlets in Edinburgh ceased operation during the Year. In addition, the
Group’s surplus properties held for resale were sold during the Year generating cash
proceeds of £1.4m.
Digitalisation Developments
• Omnichannel Retail Sales Developments
The Group was the first UK retailer in 2017 to offer full online retailing of used cars and
continues to be at the forefront of developments to provide customers with innovative
ways to purchase and interact online. The sub-brand ‘Click2Drive’ was established
during the Year to capitalise on online and omnichannel sales opportunities and to
ensure that customers had the requisite flexibility to purchase vehicles in the manner of
their choosing. This new brand was launched in October 2021 supported by TV
advertising campaigns under the Bristol Street Motors umbrella. The com prehensive
omni-channel Click2Drive offering is now available across the main three Group brand
websites, Bristol Street Motors, Vertu Motors and Macklin Motors.
At the same time as the ‘Click2Drive’ brand launch, the Group’s online retailing capability
was enhanced by the launch of a ‘concierge’ service, aiding customers who may need
help with their online vehicle purchase. Thi s service is provided by a new team within
the Sales Customer Experience Contact centre located in Gateshead. In the first four
months of operation, the concierge service has guided customers through the online
purchase journey taking over 400 vehicle orders and increasing sales conversion in
online and offline channels. The con cierge effectively acts as a personal shopper, co-
ordinating all interaction with the customer, including liaison with the Group’s 160 sales
outlets.
A migration of the infrastructure running the Group’s websites and intranet applications
from physical data centres to the Amazon Web Services (AWS) cloud was completed in
January 2022. This infrastructure has given the Group the ability to automatically scale
its website capacity and early results are very encouraging. An immediate improvement
of a 25% reduction in page load time was delivered. This led to a 35% increase in the
Group’s overall Google Insights score for mobile visitors. These improvements generate
an improved user experience to website users and contribute to longer term
improvements in search engine optimisation performance.
Vertu Motors plc (Company Number: 05984855)
12
Group Strategy (continued)
Execution of Strategy (continued)
Digitalisation Developments (continued)
• Omnichannel Retail Sales Developments (continued)
The Group has made a significant investment in cloud-based telephony systems and a
Customer Data Platform (CDP) during the Year. These technologies are currently in
their roll-out phase, and it is expected that it will take to the end of the calendar year to
fully roll these out across the Group’s extensive dealer network. The telephony system
will enable more effective tracking of enquiries and provide real time information to our
colleagues on both calls received and calls made, allowing management to respond
more quickly to ensure the Group delivers outstanding customer experiences. Data
contained in the CDP will be used to improve the effectiveness of marketing activities,
ensuring that we communicate with customers at the right time and with relevant
personalised offers. In addition, such first party data will improve the efficiency of digital
marketing activities. These initiatives will allow our colleagues to better serve our
customers and will help to drive improved conversion rates on enquiries.
• Digitalisation of Aftersales
The Group’s aftersales functions, which include vehicle service and mechanical repair,
accident repair and parts supply, represent a significant and important proportion of
overall profitability. There is an increasingly important role for digitalisation within the
Group’s aftersales operations. The Group’s customers can book a vehicle service
appointment fully online, 24 hours a day. The number of online bookings made in this
way continues to grow year-on-year, with over 73,000 made in FY22 (FY20: 36,000). In
addition, further development work is underway to deliver self-service and online
functionality to customers after the booking and during the visit. The aim is to create as
effortless a customer journey as possible to increase sales conversion of additional work
identified, average invoice value and future customer retention.
The Group seeks to capture new aftersales customers as they are looking for vehicle
repairs or service on-line through its digital conquest strategy. This successful strategy
has continued to augment our service operations with additional bookings from
customers who in the main have never used the Group’s aftersales services before. The
successful execution of this strategy has delivered a 143% growth in the number of
bookings via this strategy over the Year. The Group anticipates 28,000 such bookings in
the next 12 months. These bookings tended to be for older vehicles out of manufacturer
warranty periods which is a growing part of the aftersales market.
• Digitalisation to improve efficiency and reduce cost
The Group has always been very focused on the detailed management of its cost base
and has been successful in the digitalisation of processes to drive efficiency and
therefore reduce costs. Further digitalisation and robotic process automation has been
delivered by the in-house development team in the Year to improve efficiency in the
areas of vehicle administration, inventory control, smart repair ordering, customer
refunds and payment receipts. Another area identified for technology deployment is in
the vehicle valet arena. A new App to control the activity of the Group’s substantial
valeting resource is being developed and will be piloted in May 2022. This App will link
data from our sales and aftersales systems to instruct valet activity, measure productivity
and allow ease of cost allocation, facilitating efficiency savings and removal of duplicated
activity.
Vertu Motors plc (Company Number: 05984855)
13
Group Strategy (continued)
Execution of Strategy (continued)
Recruiting, Retaining and Developing Colleagues
It is a priority of the Group to develop and motivate the Group’s colleagues to ensure the
delivery of operational excellence and outstanding customer experiences. One of the most
significant current challenges in the business remains workforce recruitment and retention.
The number of UK job vacancies has continued to grow to record levels of 1.3 million (source:
ONS), with half of UK industry sectors showing record highs. The inevitable consequence of
these resource constraints has been wage inflation. The Group is not immune to these
effects and has consistently seen vacancy levels of approx. 500 vacancies over the second
half of the Year with recent reductions visible. A key objec tive for the Group remains to
significantly reduce the number of outstanding vacancies to ensure customer service levels
are met and revenue opportunities maximised.
A survey conducted in January 2022 saw 88% of colleagues ranking the Group as a great
place to work (up from 85.3% in July 2021). This improvement is in part due to the initiatives
delivered to ensure that the Group remains an employer of choice in the sector. For example,
the enhancement of maternity pay provisions in the Summer and pay reviews for the majority
of non-management colleagues which were actioned by 1 January 2022. In addition, in
March 2022 the Group announced an enhancement to holiday entitlement for all colleagues
from 23 to 25 days with up to four additional days available to longest serving colleagues.
These initiatives should aid colleague retention and attraction.
The Group launched dealership colleague forums during the Year, a formalised way in which
colleagues of all levels can provide their feedback on work matters. Forums have also had
the opportunity to access the non-executive director for colleague engagement, Pauline Best.
It was feedback from these forums that aided Group management on the need for actions in
respect of the colleague initiatives above.
The Group has long been committed to extensive investment in the development of all
colleagues to provide opportunity to those who are talented and driven to succeed.
Programmes include a degree apprentice scheme, technician apprentice schemes and
development programmes to facilitate progression to management roles in all areas. The
Group has also launched a new modern apprentice programme for service advisors and has
recruited 51 out of the targeted 112 positions to date. In addition, the Group deepened its
partnership with the Dale Carnegie Institute, increasing the scope of online and offline
personal and leadership development training across the Group. All colleagues now have
access to online personal development programmes based on the principles of Dale
Carnegie’s book, “How to Win Friends and Influence People”.
Ancillary Businesses
The Group’s growing ancillary business division has a dedicated divisional team to drive the
success of the businesses, which include Vansdirect, AceParts and TaxiCentre. The Group
has a strategy to develop such businesses to add revenue and returns that complement the
core businesses.
On 31 May 2021, the Group executed on this strategy to add complementary ancillary
businesses with the purchase of Powerbulbs Online Limited for £480,000. This business
complements the Group’s existing AceParts online parts sales operation, which currently sells
to consumers via Marketplaces. Powerbulbs represents an established ecommerce website,
with good reach and rankings, historically selling to customers both in the UK and
substantially overseas. The busi ness has been integrated into AceParts and has strong
growth prospects.
Vertu Motors plc (Company Number: 05984855)
14
Group Strategy (continued)
Strategic Summary
Our experienced management team, strong brands, digital prowess and financial strength
ensure the Group is well positioned to take advantage of the opportunities arising and the
team is ambitious to do so. The Group will continue to innovate and execute to ensure that it
excels in meeting customer needs and responds to the changing external environment in
which we operate. Capital is allocated to those activities, locations and franchises that are
best placed to meet the competitive challenges arising and to provide the best growth
opportunities and maximise long-term return on invested capital. The Group will leverage on
its proven strengths and execute on cost saving initiatives, continued development of
colleagues, accelerating brand growth and pursuing new business opportunities.
Other Sector Trends
In addition to the well-publicised digitalisation of sales transactions, the franchised Automotive
Retail sector continues to evolve in the areas of electrification and agency distribution.
Responding to these trends is clearly top of mind for the Board.
1. Electrification
Consumer appetite for electric vehicles is growing, aided by improvements in driving range
and by a significant increase in the choice of vehicles. Local and Central Government
environmental policies are playing a part in this sales growth. Despite overall supply
constraints in new vehicles throughout the period, electric and hybrid vehicle sales in the UK
saw growth of over 60% in calendar 2021 compared to 2020 representing a significant market
share increase. The Group delivered volume growth more than these market trends so
increasing its market share.
The Group has ensured that all colleagues are appropriately trained on electric vehicles, to
respond to customer enquiries and provide repair services. Training in this regard is provided
by both the Group’s own sales and aftersales training, with colleagues also attending
manufacturer training. The Group’s commitment to the electrification agenda is evidenced by
the fact that the Group has significantly more dealerships approved under the Government’s
EVA (Electric Vehicle Approved) scheme than any other UK retailer. This scheme sets out
minimum standards on operating electric vehicle sales and service outlets and is subject to
audit. 21 dealerships are currently approved, and the aim is to have every dealership
approved in short order to provide customer confidence.
Increased electrification of the vehicle parc requires ongoing investment in terms of EV
infrastructure such as in aftersales capabilities and charging. The Group invested £0.5m in
charging infrastructure in the Year with a further £1.0m planned in the next 12 months.
2. Agency Distribution
A number of Manufacturer partners in the UK are moving to an agency sales distribution
model. Under this model, in respect of new vehicle sales, the Manufacturer transacts with the
customer while the retailer remains the physical touchpoint with the customer and undertakes
the sales process as an agent. The dealer-turned-agent receives a commission on each new
vehicle sale, but will own no inventory and will no longer set prices or discounts. In turn, the
dealer is exempted from all significant commercial risks associated with the sale. There are
varying iterations of the agency model proposed and the picture is evolving.
The Group has long operated on an agency basis for a significant proportion of fleet and parts
sales. The first of the Group’s manufacturer partners to operate the agency model for new
retail sales will be Cupra electric vehicles later in 2022 with Mercedes-Benz passenger cars
following from 1 January 2023.
Vertu Motors plc (Company Number: 05984855)
15
Group Strategy (continued)
Current Business Priorities
There is no doubt that the Group is now operating in an inflationary cost environment which
has not been evident in its 15-year history to date. It is therefore more important than ever
that the Group ensures there is a focus on the basics of the business – that operational
excellence is pursued as market conditions may tighten. With this in mind, the Group has
established three immediate priorities in addition to its longer-term strategy:
1. Cost Management
Without curtailing investment in the delivery of the long-term strategic objectives of the Group,
control of costs is essential. The Group is seeking to avoid inflationary pressures leading to
an environment where costs are not appropriately controlled. The right mindset and culture of
cost management is vital.
The Group has recently relaunched its ‘war on waste’ initiative to drive behavioural change
amongst our colleagues to save cost, for example around energy use given escalating costs.
The Group’s fixed price energy contract for the supply of electricity ends on 1 October 2022.
Pricing in the energy market has meant that the Group can potentially expect higher than
budgeted increases on the renewal of these contracts increasing costs.
The Group has also identified appropriate capital investment to drive savings, for example in
the fitting of LED lighting in all of the Group’s vehicle repair workshops, an 18-month project
of approx. £1.2m capital investment, to save significant energy use going forward. Further
projects to reduce energy costs are being evaluated.
The Group continues to identify areas in the business where the Group’s 50 strong software
development team can be put to work to create efficiencies through use of technology.
2.
Maximisation of Conversion of enquiries to revenues
The Group has an objective to increase the conversion of opportunities to revenues in both
the sales and aftersales areas through a focus on process, measurement and use of
technology. Maximising the return from the Group’s marketing spend is a key priority.
The Year has seen the sales processes of the Group continue to evolve, with the objectives
of improving the customer journey and increasing the conversion of enquiries into sales. The
development of the Group’s Sales Customer Experience Centre has driven improved
conversion in several ways and the continued focus on this area will be vital in the months
ahead.
A project is now underway to digitise the aftersales service process to enhance sales
conversion and the customer experience.
3. Customer Experience to drive retention
Delivery of the Group’s Mission ‘to deliver an outstanding customer motoring experience
through honesty and trust’ remains vital to improving retention of customers into both the
Group’s service departments and for future vehicle sales. Great experiences boost retention,
recommendation rates and profit per transaction. In addition, positive online reviews provide
a fantastic and vital window into the Group’s service delivery for prospective customers.
40% of new retail vehicle customers and 19% of used vehicle customers currently return to
the Group within four years to purchase another vehicle. The Group is targeting a significant
improvement in these measures, through the execution of its digitalisation and customer
focused developments. This includes the recent establishment of ‘renewal hubs’ for both new
and used car sales. Colleagues in these hubs contact previous customers at the time they
are likely be in the market to change their vehicles.
Vertu Motors plc (Company Number: 05984855)
16
Group Strategy (continued)
Current trading and outlook
•
March & April 2022 Trading
The Group delivered a trading profit of £19.1m (FY22: £19.2m) in March and April 2022 (“the
post year end period”). This result was in line with prior year levels, which included business
rates support and significant pent-up consumer demand as the UK emerged from lockdown.
The Group’s trading performance in the post year end period is summarised below, with
comparisons shown against March and April 2021.
Group Total
Like-for-Like
SMMT Market
Variance
Variance
Variance
Like-for-like
variance to
SMMT
Market
Group Revenue
Service Revenues11
Volumes:
Used Retail Vehicles
New Retail Vehicles
Motability Vehicles
New Fleet Cars12
New Commercial Vehicles
11 Includes internal and external revenues
12 Includes agency volumes
5.1%
5.8%
4.3%
5.0%
(12.9%)
9.3%
(17.4%)
(22.0%)
(17.4%)
(13.2%)
7.4%
(17.2%)
(24.5%)
(20.0%)
7.1%
(27.0%)
(34.0%)
(28.1%)
0.3%
9.8%
9.5%
8.1%
Group revenue growth was delivered in the post year end period, due to continued strong
vehicle prices. Like-for-like new retail vehicle volumes grew 7.4% slightly ahead of the
market, despite ongoing supply constraints due to global supply chain shortages, noticeably
semiconductors. The Group significantly outperformed the wider market volume trends in the
fleet, commercial and Motability channels of new vehicle sales. Mar gins were robust,
benefitting from strong pricing disciplines and quarterly bonus in March which were absent in
the prior year due to the impact of lockdown. The bulk of the gross profit increase in the post
year end period, year-on-year arose, in the new retail vehicle channel.
The used vehicle market showed increased signs of normalisation in the post year end
period. Consumer demand in the prior year reflected pent-up demand post lockdowns and a
lack of alternative spending channels for consumers such as holidays. In addition, used
vehicle demand has also been impacted by the high rise year-on-year in used vehicle prices
and increased demand for electric vehicles, which are available in the new car channel rather
than used. Like-for-like volumes of used cars therefore continued to decline as in H2 FY22.
Constrained supply of used vehicles is set to continue and this has underpinned used values
in the post year end period. As a result, whilst gross profits per unit traded below FY22
levels, they remained significantly ahead of historic normalised levels. Higher sales prices
resulted in reduced and more normal gross profit margin percentages.
Like-for-like service activity improved compared to last year by 2.8%. Internal and retail
service work showed year-on-year growth with substantial shortfalls in warranty work, in part
due to declines in the 0–3 year vehicle parc. As anticipated, aftersales margins reduced due
to the impact of higher technician salary costs.
Vertu Motors plc (Company Number: 05984855)
17
Group Strategy (continued)
Current trading and outlook (continued)
•
Outlook
Shortfalls in the supply of both new and used vehicles in the UK are likely to continue for
some time because of the dislocation in global supply chains impacting on vehicle production.
Such supply constraints helped to underpin vehicle values and margins throughout March and
April. Consumer confidence in the face of rising domestic costs is a critical determinant to
continuing success, both in terms of demand and used vehicle pricing trends. Management is
focused on operational excellence around cost, conversion and customer experience and the
delivery of the Group’s strategic objectives.
The Board believes that the Group is strategically very well placed to capitalise on the
challenges and opportunities in the UK automotive retail sector and remains confident in the
prospects for the Group. Its strong balance sheet, management and technological capability
underpin this confidence. The Group’s excellent relationships with its chosen Manufacturer
partners underpin further growth opportunities, which are likely to accelerate.
Robert Forrester, CEO
Vertu Motors plc (Company Number: 05984855)
18
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
❷❸❹❺❻
❾⓮
❷❸❺❻❾
⓬⓭
❷❸❺❾⓬⓮
❷❻❽❾
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 20-25, 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)
FY22 – Underlying EPS of 17.92p
FY21 – Underlying EPS of 5.27p
I
s
P
K
Underlying
PBT
Profit before tax and non-underlying
items
FY22 – Underlying PBT £80.7m
FY21 – Underlying PBT £24.6m
Gross
Margin by channel
Gross profit divided by revenue by
channel
See page 20
Like-for-Like Used
Volume growth
Number of used vehicles sold in
dealerships with comparable trading
periods in two consecutive years
FY22 – growth of 28.6%
FY21 – decline of (26.6%)
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
FY22 – growth of 21.4%
FY21 – decline of (28.9%)
UK private registrations
FY22 – growth of 17.2%
FY21 – decline of (29.3%)
FY22 – growth 17.1%
FY21 – decline (15.0%)
l
i
a
c
n
a
n
F
i
s
I
P
K
l
a
n
o
i
t
a
r
e
p
O
/
c
i
g
e
t
a
r
t
S
Online
Growth
Website visits to all Group trading
websites
FY22 – 22.9m visitors
FY21 – 17.2m 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 net promoter score for
used vehicles
86.5% Net promoter score
(FY21 – 85.6%)
❹❼❽❾
Vertu Motors plc (Company Number: 05984855)
19
Financial Review
The lockdown restrictions throughout parts of FY21 and, to a lesser extent, the start of FY22
disrupted the Group’s operations significantly. The tables below include comparatives to both
the years ended 28 February 2021 (FY21) and 29 February 2020 (FY20) to help a better
understanding the Group’s performance. The Group’s income statement for the Year is
summarised below:
FY22
£'m
FY21
£'m
FY22 Var
to FY21
%
FY20
£'m
Revenue
3,615.1
2,547.7
41.9%
3,064.5
Gross profit
Operating expenses excluding
Government support
Government support5
Operating expenses reported
Adjusted Operating profit
Net Finance Charges
Adjusted Profit Before Tax
Non-Underlying items6
Profit Before Tax
Taxation
Profit After Tax
435.4
301.0
44.7%
334.1
(354.3)
6.6
(347.7)
87.7
(7.0)
80.7
(1.9)
78.8
(18.8)
60.0
(303.7)
36.5
(267.2)
33.8
(9.2)
24.6
(2.2)
22.4
(6.1)
16.3
(16.7%)
(81.9%)
(30.1%)
159.5%
23.9%
228.0%
13.6%
251.8%
(208.2%)
268.1%
(301.9)
-
(301.9)
32.2
(9.2)
23.0
(15.7)
7.3
(4.3)
3.0
FY22 Var
to FY20
%
18.0%
30.3%
(17.4%)
-
(15.2%)
172.4%
23.9%
250.9%
87.9%
979.5%
(337.2%)
1,900%
5 Includes receipts under the Coronavirus Job Retention Scheme and business rates relief
6 Non-underlying items represent share-based payment charge, amortisation of intangible assets and impairment charges
The Group delivered a record result in the Year, generating an adjusted profit before tax of
£80.7m. (FY21 £24.6m, FY20 £23.0m).
Revenue grew to £3.6bn, a growth of £550.6m (18.0%) compared to the pre-pandemic FY20.
Acquisitions completed after 1 March 2019 contributed additional revenues of £480.1m, whilst
the execution of pruning activities of disposals generated a revenue reduction of £48.1m.
Rising vehicle prices were largely responsible for the underlying £118.7m (3.9%) increase in
Core Group revenues.
Gross margins remained strong, aided by the sector tailwinds, at 12.0% (2021: 11.8%, 2020:
10.9%).
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
Revenue
New
Fleet & Commercial
Used
Aftersales
Total Group Revenue
Gross Profit
New
Fleet & Commercial
Used
Aftersales
Total Gross Profit
FY22
£'m
969.9
772.0
1,584.4
288.8
3,615.1
80.6
35.5
154.4
164.9
435.4
Gross Margin
New
Fleet & Commercial
Used
Aftersales7
Total Gross Margin
7 Aftersales margin expressed on internal and external revenues
8.3%
4.6%
9.7%
47.1%
12.0%
FY21
£'m
739.7
578.4
1,008.4
221.2
2,547.7
54.3
23.2
93.9
129.6
301.0
FY22
Var to
FY21
230.2
193.6
576.0
67.6
1,067.4
26.3
12.3
60.5
35.3
134.4
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%
4.0%
9.3%
49.3%
11.8%
1.0%
0.6%
0.4%
(2.2%)
0.2%
7.3%
3.6%
8.3%
46.9%
10.9%
FY22
Var to
FY20
107.4
63.5
349.0
30.7
550.6
17.9
9.7
52.3
21.4
101.3
1.0%
1.0%
1.4%
0.2%
1.1%
Vertu Motors plc (Company Number: 05984855)
20
Financial Review (continued)
Revenue and Gross Profit by Department (continued)
The total volumes of vehicles sold by the Group and like-for-like trends against market data
are set out below:
Used retail vehicles
New retail cars
Motability cars
Direct fleet cars
Agency fleet cars
Total fleet cars
Commercial vehicles
Total New vehicles
Total vehicles
FY22
Units
88,772
33,366
8,404
14,089
4,664
18,753
17,528
78,051
166,823
FY21
Like-for-like
FY22
FY20
Like-for-like
FY22
Units % Var to FY21
Units
% Var to FY20
65,847
25,437
8,806
9,917
4,693
14,610
15,618
64,471
130,318
FY22 v FY21
Group
Variance to
28.6%
21.4%
(6.9%)
33.7%
10.7%
26.9%
10.6%
16.1%
22.5%
84,771
32,701
9,722
17,053
5,704
22,757
17,596
82,776
167,547
(7.1%)
(14.6%)
(21.4%)
(34.9%)
(26.0%)
(28.0%)
(2.0%)
(16.2%)
(11.6%)
FY22 v FY20
Group
Variance to
market8
2.5%
3.1%
6.0%
3.2%
UK Market9
(17.1%)
(24.5%)
(34.0%)
(5.2%)
market8 UK Market
17.2%
(9.3%)
1.4%
17.4%
8 Represents the variance of like-for-like Group volumes to the UK trends reported by SMMT
9 Source SMMT
New Retail Car
Motability Car
Fleet Car
Commercial
4.2%
2.4%
25.5%
(6.8%)
Used retail vehicles
The used vehicle market in the UK has seen unprecedented market dynamics throughout the
Year. The pandemic reduced the new and used vehicle market due to lockdowns together
with creating new vehicle production disruption which impacted on the supply side.
Constrained supply of used vehicles has consequently been apparent driving increased
vehicle prices and margins and leading to record used vehicle profitability. Record retail
margins were boosted by strong profits on the disposal of trade vehicles.
A period of strong customer demand was seen as the UK emerged from lockdown in April
2021, aided by increased consumer savings rates, the absence of alternative spending
options and a shift away from public transport. This strong demand meant that the April to
June 2021 period was the best quarter on record for used vehicle transactions in the UK9,
growing 6.6% on pre-pandemic 2019. In all other months in calendar 2021, UK used vehicle
transactions fell year-on-year compared to pre-pandemic levels (2019). Used vehicle prices
rose very significantly against new vehicle values and this undoubtedly drove some used
vehicle customers to switch to new vehicles which they perceived to be better value. It is also
likely that the growth in popularity of electric vehicles with greater range is boosting new
vehicle demand at the expense of the used car market due to an almost complete dearth of
used electric vehicles. Overall, used vehicle transactions in the UK fell 5.1% in 2021
compared to pre-pandemic levels, reflecting these trends. Reduced demand has also seen
used vehicle prices start to soften, albeit this impact is muted given remaining supply
constraints.
The Group keeps the UK used vehicle demand, pricing and supply environment under
constant review. This focus ensures that an appropriate balance between volume and margin
is maintained. The Group utilised a mix of strategies to secure used vehicle inventory despite
shortages of supply, including direct purchases from consumers and utilising both central
purchasing capabilities and its extensive local dealership management to source supply.
A 40% rise in used vehicle prices over the Year has meant that overall used vehicle inventory
levels in the Core Group increased by £21.5m. Ensuring a good supply of used vehicle
inventory left the Group well placed to capitalise on the favourable market conditions,
resulting in a record profit performance both in used cars and for the Group as a whole.
Vertu Motors plc (Company Number: 05984855)
21
Financial Review (continued)
Used retail vehicles (continued)
Group gross profit from the sale of used vehicles totalled £154.4m for the Year (FY21:
£93.9m; FY20: £102.1m). When comparing to the more stable period of the year ended 29
February 2020 (FY20), the following like-for-like variances arose:
• £38.1m increase in gross profit generated from used vehicle sales
• 7.1% decrease in the number of used retail units sold
• Gross profit per unit of £1,763, a rise of 45.6% from £1,211
• Average selling price of £17,376 per unit, a 19.3% increase
• Gross margin rising substantially to 10.1% from 8.3%
9 Source: SMMT
New retail cars and Motability sales
UK retail registrations significantly improved, by 17.2%, over the FY21 comparative period
which was impacted by longer and more complete lockdowns. Compared to the pre-
pandemic year ended 29 February 2020 (FY20), UK new vehicle retail registrations actually
fell by 17.1%, reflecting reduced supply of new cars and March 2021 being a month where
showrooms were closed to customer visits. Well documented component shortages together
with disruption at factories and within the global supply chain have all adversely affected new
vehicle supply. A gainst this backdrop, the Group’s like-for-like new retail vehicle volumes
declined by 14.6% when compared to the year ended 29 February 2020. The Group
therefore outperformed the market decline of 17.1%. Despite supply constraints dampening
UK new vehicle registrations, sales of electric and hybrid vehicles have significantly increased
with the SMMT highlighting new retail registrations of these vehicles having increased by
101.3% in FY22 compared to FY21. The Group saw like-for-like sales of electric and hybrid
vehicles grow by over 170% in the Year and consequently grew its market share in this vital
and growing channel. Ordertake has been very strong and the Group’s order bank levels for
new retail vehicles remain at record levels, with over 16,000 new retail vehicles ordered in the
Year remaining undelivered as at 28 February 2022. This figure represents 48% of new retail
vehicles sold by the Group in the year ended 28 February 2022.
UK Motability registrations were also impacted by supply constraints and declined by 24.5%,
compared to FY20. The Group’s Motability volumes declined by 21.4% over the same period
on a like-for-like basis, slightly ahead of the market and representing a UK market share of
4.8%. The Group is Motability’s largest partner in the UK.
Issues in the supply chain meant that many of the Group’s Manufacturer partners reduced or
removed volume targets. The reduction in supply, in a period of robust demand and reduced
pressure to achieve volume targets, led to improved gross profit retention, aided by the
application of effective pricing disciplines. Consumers have been increasingly accepting of
long lead times, especially as the rise in used vehicle prices significantly reduced the cost to
change to a new vehicle. Compared to the year ended 29 February 2020, the following trends
were apparent on a like-for-like basis for the New Retail and Motability sales channel:
• A £7.2m increase in gross profit generated, despite a 14.6% reduction in the number
of new retail units sold
• Gross profit per unit of £1,921, a rise of 31.5% from £1,461
• An average selling price of £21,734 per unit, a 17.6% increase
• Gross margin rising to 8.4% from 7.3% despite the significant increase in average
selling price
Vertu Motors plc (Company Number: 05984855)
22
Financial Review (continued)
Fleet & Commercial vehicle sales
The UK car fleet market continues to see reduced activity as the restrictions in the supply of
new vehicles caused many Manufacturers to divert limited capacity to higher margin retail
channels. Retailers also benefit from this protection of their higher margin channels.
Registration volumes in the UK car fleet market declined 34.0% in the Year compared to the
year ended 29 February 2020. Like-for-like, the Group delivered 15,518 fleet cars in the
Year, representing a decline of 28.0% compared to FY20, which was ahead of the market
trends. Margins strengthened due to supply constraints, pricing mix changes and the Group
adopting strong pricing disciplines.
The light commercial vehicle market in the UK rebounded after the lockdown, due in part to
strong underlying demand from key sectors, notably construction and home deliveries.
Nevertheless, UK van registrations fell 5.2% in the year to 28 February 2022, when compared
to FY20 levels, as production and supply issues also impacted this sector. The Group saw a
2.0% fall in the like-for-like volume of new commercial vehicles sold, ahead of the market
trends, compared to FY20. This market outperformance by the Group was aided by a strong
performance from the Group’s Vansdirect business. The Group sold 5.0% of UK new light
commercial vehicles in the Year.
When compared to the year ended 29 February 2020, the following fleet and commercial
trends were seen on a like-for-like basis:
• A £6.7m increase in gross profit, despite a reduction in the number of units sold
• Record gross profit per unit of £957, a rise of 50.2% from £637
• Gross margin rising to a record 4.6% from 3.6%
Aftersales
The Group’s aftersales operations are a vital contributor to Group profitability, generating 38%
of total gross profit.
Overall, compared to the Year ended 29 February 2020 (FY20), the following like-for-like
trends in aftersales performance were witnessed:
Revenue10
Revenue10 change
Revenue10 change (%)
Gross profit change
Gross margin11 FY22 (%)
Gross margin11 FY20 (%)
Service
£'m
131.0
(0.0)
0.0%
(0.4)
76.7%
77.0%
Parts
£’m
149.2
0.8
0.5%
1.7
22.5%
21.5%
Accident &
Smart Repair
£'m
22.5
3.9
21.2%
1.4
37.8%
38.4%
Total
£’m
302.7
4.7
1.6%
2.7
47.1%
46.9%
10 includes internal and external revenues
11 margins in aftersales expressed on internal and external revenues
• Service
The Group’s service performance has been impacted by higher-than-average levels of
technician vacancies and by covid related absences. As set out in the Strategy section, the
Group took action to address colleague recruitment and retention through a Group wide
salary review. This was implemented for technicians in November 2021 and technicians saw
the highest percentage increases.
Partly because of resource constraints including covid-related absences, like-for-like, the
Group sold 4.9% less service hours in the year to 28 February 2022 when compared to the
pre-pandemic year to 29 February 2020. Most of this shortfall in hours arose from a reduction
in warranty work undertaken by the Group on behalf of its Manufacturer partners. A decline in
the 0–3 year parc in the UK, due to reduced new vehicle registrations in the last two years,
along with fewer journeys being undertaken in the early part of FY22 due to lockdowns,
contributed to this decline in warranty work. Some weakness in internal hours sold was also
Vertu Motors plc (Company Number: 05984855)
23
Financial Review (continued)
Aftersales (continued)
• Service (continued)
apparent, driven by reduced volumes of vehicles sold in the core Group. The Group was
successful in maintaining core retail service hours sold at FY20 levels, through strong
execution of retention and aftersales processes and the active targeting of conquest
business, particularly of older vehicles.
The Group’s customer retention strategies focus on ensuring vehicle sales customers return
to the Group for their service, whether they have purchased a new or used vehicle. Service
plans, through which customers pay monthly or upfront for their annual service, are a vital
part of retention. The Group has been successful in improving the penetration of service plan
sales on used vehicles over the Year, selling over 31,000 plans, representing approx. 38% of
all retail used cars sold. The Group has over 160,000 live service plans including
manufacturer service plans. Excellence of customer service is vital to retention, with the
Group having a strong vehicle health check (“VHC”) process, where any items requiring
attention are highlighted in a video provided direct to the customer. The customer can then
give their approval for any repairs required. On average, the Group sells £86 of work
identified by this process to each customer.
Strong execution resulted in like-for-like service revenues being stable compared to FY20
despite the reduction in hours sold. Gross margin percentages on vehicle servicing declined
slightly to 76.7% (FY20: 77.0%) in the Core Group reflecting the remuneration action taken to
address technician resource constraints, which increased cost of sales in the service
department.
• Parts
Parts revenues in the Core Group grew £0.8m compared to FY20, as the Group gained
market share offset by increasing adoption of the agency distribution model in certain
franchises as previously reported.
As a new development in the Group’s Aftersales Customer Experience Centre, inbound parts
phone enquiries from retail customers are now being centralised with orders taken in
Gateshead for the Group’s dealerships. This unit started in early 2021, delivered revenues of
£2.9m in the Year and enhanced customer experiences, augmenting the Group’s high margin
parts sales. Rollout of this function to all Group dealerships is now nearing completion.
Gross margins in parts rose from 21.5% to 22.5% as the Group took market share in the
Group’s premium franchises, delivered excellent customer experiences and benefited from
agency parts operations being a higher proportion of the Group activities. In agency
operations, the Group records no revenues or cost of sales, except a handling fee
representing 100% gross margin.
• Accident and Smart Repair
The Group has significantly expanded its Smart Repair operations, which now has 88
colleagues providing mobile cosmetic, windscreen and alloy wheel repairs serving both the
Group’s dealerships and external customers across the UK. T he expansion of the Group’s
Smart Repair operations account for over 50% of the increase in revenues in this channel.
During the Year, the Group moved responsibility for all of the Group’s accident repair centres
out of the dealership divisional operations into a new standalone division, concentrating solely
on the management of this channel. In the first half of the Year, fewer journeys were made in
the UK due to pandemic restrictions and widespread home working, with the result that fewer
accidents were recorded and therefore this reduced activity in the Group’s accident repair
centres. Activity recovered in the latter part of the Year and this, coupled with the increased
management focus on this channel, meant that Core Group revenues grew slightly over the
Year.
Vertu Motors plc (Company Number: 05984855)
24
Financial Review (continued)
Aftersales (continued)
• Accident and Smart Repair(continued)
Margins of 37.8% were achieved (FY20 38.4%). The decline arose due to mix impact of
higher smart repair activities and technician salaries and material costs increasing, which
could not be passed onto insurance providers under fixed pricing arrangements.
Acquisitions, Disposals and Closures
Acquisitions made since 1 March 2019 have contributed an additional £4.5m of profit before
tax to the Group compared to FY20, summarised as follows:
BMW/MINI Acquisition (Dec 2020)
Yorkshire Volkswagen Acquisition (Jan 2020)
Other acquisitions
Total Acquisitions
Dealership sales or closure
Total Non-Core
FY22
FY20
Revenue
£m
302.8
101.7
85.3
489.8
2.4
492.2
PBT
£m
3.8
0.9
(0.7)
4.0
(0.1)
3.9
Revenue
£m
-
9.1
0.6
9.7
50.6
60.3
PBT
£m
-
(0.4)
(0.1)
(0.5)
(0.1)
(0.6)
FY22 Variance to
FY20
Revenue
£m
302.8
92.6
84.7
480.1
(48.2)
431.9
PBT
£m
3.8
1.3
(0.6)
4.5
-
4.5
The contribution from acquisitions is above the levels envisaged at the time of purchase,
reflecting market tailwinds and solid execution of the integration strategy.
The scaled BMW/MINI dealership acquisition reached its first anniversary as part of the
Group in December 2021. Prior to their acquisition by the Group, these 12 sales outlets were
heavily loss making. The Group successfully executed its plan to drive performance
improvements, aided by the immediate integration with Group systems and processes. A
first-class BMW/MINI experienced divisional team has been assembled. The acquisition was
expected to be loss making in FY22 and earnings neutral by the year ending 28 February
2023 (FY23). Aided by the Group’s actions and favourable market conditions, these outlets
have performed significantly in excess of these expectations, contributing a profit of £3.8m in
FY22.
The other significant acquisition in the period since 1 March 2019 was the purchase of four
Volkswagen Passenger car dealerships in West Yorkshire in January 2020. These
businesses contributed £0.9m to Group profitability in FY22.
Other acquisitions include the addition of a Honda outlet in Bradford, Kia in Bradford and a
multi-franchise site in Edinburgh, together with the acquisitions made in FY22 described in the
strategic update. Collectively these outlets contributed a loss of £0.7m with the timing of
acquisitions in FY22, in particular, having an impact on returns given the seasonality of
profitability in the automotive retail sector.
Vertu Motors plc (Company Number: 05984855)
25
Financial Review (continued)
Operating Expenses
A summary of Core Group operating expenses is set out below:
Salary costs
Marketing costs
Vehicle and valeting costs
Property, rates and energy costs
Other
Core Group operating expenses before
Government Support
Non Core operating expenses
Government support (CVJRS receipts and
rates relief)
Group Net Operating Expenses
FY22
£'m
176.7
31.6
29.7
38.4
28.5
304.9
49.4
354.3
(6.6)
347.7
FY21
£'m
165.0
22.5
25.3
36.0
30.1
278.9
24.8
303.7
(36.5)
267.2
FY22 Var to
FY21
£’m
11.7
9.1
4.4
2.4
(1.6)
26.0
24.6
50.6
29.9
80.5
FY20
£'m
168.5
27.7
32.0
36.9
28.8
293.9
8.0
301.9
-
301.9
FY22 Var to
FY20
£’m
8.2
3.9
(2.3)
1.5
(0.3)
11.0
41.4
52.4
(6.6)
45.8
Reported operating expenses of £347.8m increased by £45.9m compared to the year ended
29 February 2020. This increase was partially offset by Government support of £6.6m and as
a consequence the increase excluding this support was £52.4m. Dealerships acquired or
sold in the period since 1 March 2019 generated a net £41.4m of this increase. Underlying
Core Group operating expenses therefore grew by £11.0m when compared to FY20.
The Group received significant government support in the prior year due to the dealership
closures of the first national lockdowns. In the Year, support levels significantly reduced, with
just £0.2m of net receipts from the Coronavirus Job Retention Scheme, for which no claims
were submitted after the end of April 2021 when dealerships fully re-opened. In addition,
business rates support in the Year had a value of £6.4m. Under the business rates relief
scheme, business rates on English retail premises remained fully supported until 30 June
2021, with relief thereafter capped at £2m, whilst rates support continued at the Group’s
dealerships located in Scotland.
Salary costs in the Core Group increased by £8.2m compared to FY20, representing 75% of
the underlying increase in Core Group operating expenses. Variable pay and commission
levels represented most of this increase exceeding FY20 levels by £6.4m. This was the result
of the record profitability delivered, with many colleagues’ and management bonuses linked to
profitability achieving maximum capped levels. In addition, increases in sales commissions
were seen due to increased gross profit generation. The remaining increase in salary costs
relates to additional headcount in both the Group’s new Customer Experience Centre for
sales and expansion of the team of in-house developers, partially offset by the impact of
higher than historic vacancy levels across the Group. A Group wide pay review was rolled
out to non-management colleagues from January 2022 with only moderate financial impact in
FY22. The pay review for technicians occurred earlier in November 2021 but the impact of
this review is apparent in gross margin, as technician salary costs are included in cost of
sales.
The Group invested an additional £3.9m in television and other advertising in the Year as part
of the strategy to grow awareness of the Group’s three customer facing brands.
Other costs include the investment in digitalisation, in particular the enhancement to cloud-
based telephony and the development of the CDP and the investment in data security, which
increased Core Group costs by £1.8m compared to FY20. This remains a vital strategic area
of investment for the Group. Partially offsetting the impact of the above cost increases were
savings delivered in areas such as vehicle costs, as supply constrained the Group’s
demonstrator vehicle fleet, and travel, curtailed through working from home and the switch to
online delivery for many of the Group’s in-house training programmes.
Vertu Motors plc (Company Number: 05984855)
26
Financial Review (continued)
Net Finance Charges
Net finance charges fell by £2.3m year-on-year as analysed below:
New vehicle Manufacturer stocking interest
Interest on bank borrowings
Used vehicle stock funding interest
Interest on lease liabilities
Interest income
Net Finance Charges
FY22
£'000
1,702
1,701
142
3,581
(163)
6,963
FY21
£'000
3,582
1,874
317
3,632
(174)
9,231
FY22 Var
to FY21
£’000
(1,880)
(173)
(175)
(51)
11
(2,268)
FY20
£'000
3,918
1,418
630
3,595
(405)
9,156
FY22 Var
to FY20
£’000
(2,216)
283
(488)
(14)
242
(2,193)
The bulk of the reduction in net finance charges arose in interest charged by Manufacturers
on funded new vehicle inventory. This reduction is due to the continued issues in the supply
chain which have led to reduced new vehicle stock which require funding. Total new vehicle
stock as at 28 February 2022 was £275m (2021: £438m).
Interest on bank borrowings in the Year declined to £1.7m from £1.9m in FY21 as the Group
generated significant cash. This resulted in the repayment of £10m of the Revolving Credit
Facility in June 2021 and reduced utilisation of used vehicle stocking loans.
Pension Costs
The accounting surplus on the Group’s closed defined benefit pension scheme (Scheme)
increased to £9.1m as at 28 February 2022 (2021: £6.2m). Actual investment returns were
more favourable than previously assumed. In addition, the defined benefit obligation reduced
over the Year on changes in assumptions such as a higher discount rate being applied,
following a rise in corporate bond yields together with an increase in expected future inflation.
The Scheme invests in an LDI portfolio which aims to fully hedge the Scheme’s interest rate
(relative to gilts rather than corporate bonds) and inflation risk. Changes in the discount rate
and inflation would therefore be mostly offset by a change in the value of the Scheme’s
assets. A net actuarial gain of £ 2.8m was recognised in the Statement of Comprehensive
Income for the Year.
Tax Payments
In the June 2021 Finance Act, it was enacted that the rate of corporation tax in the UK will rise
from 19% to 25% on 1 April 2023. This has resulted in the Group’s deferred tax obligations
being measured at the higher rate of 25% in the Year. The impact of this change has
increased the Group’s tax charge in the Year by £2.9m.
The Group’s underlying effective rate of tax (ignoring the deferred tax adjustment above) for
the Period was 19.9% (FY21: 21.3%). The overall effective tax rate, impacted by the
revaluation of deferred tax obligations, increased to 23.8% (FY21: 27.2%). The total tax
charge for the Year rose from £6.1m to £18.8m reflecting these changes and the significant
increase in profitability. 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.
Cash Flows
Free cash flow of £44.2m (FY21: £48.4m) was generated in the Year. The Year saw a
£28.0m absorption of working capital.
The significant rise in used vehicle prices, led to a £31.5m increase in year-end used vehicle
inventory levels, despite a decline in the number of units held compared to 28 February 2021.
Constraints on new vehicle supply saw significant reductions in the level of both new vehicle
consignment inventory and the associated Manufacturer funding. These movements did
Vertu Motors plc (Company Number: 05984855)
27
Financial Review (continued)
Cash Flows (continued)
have a cash impact in so far as they led to a net cash outflow because of the unwind of the
VAT cash flow advantage on such funded vehicles of £32.0m. Working capital was also
absorbed as the Group’s demonstrator fleet started to return to more normal levels, absorbing
£3.3m.
Constrained new vehicle supply resulted in an £24.3m cash inflow from a reduction in the
level of fully paid new vehicle inventory held by the Group. The supply constraints have also
led to record order bank levels, leading to a £12.0m increase in the value of vehicle deposits
held against outstanding orders, a cash inflow in the Year.
Financing and Capital Structure
The Group has a balance sheet with shareholders’ funds of £331.9m (2021: £275.9m)
underpinned by a freehold and long leasehold portfolio of £236.4m (2021: £229.2m) and net
cash (excluding lease liabilities) of £16.2m as at 28 February 2022. The Group’s conservative
financing and capital structure resulted in a strong tangible net assets position of £237.5m as
at 28 February 2022, representing 66.8p per share.
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. £44m of this committed
facility was drawn as at 28 February 2022. The Group operated comfortably within all
covenants during the Year.
The Group periodically makes use of used vehicle stocking loans provided by third party
banks, subject to interest and secured on the related used vehicle inventories. At 28
February 2022, amounts utilised on such facilities totalled £11.6m. These balances are offset
against cash in the calculation of Net Cash/Debt. The Group has a £35m facility under these
arrangements and held £155m of used vehicle inventory at 28 February 2022 resulting in
used vehicle stock being largely unencumbered.
Capital Allocation
Consideration of capital allocation is central to the Board’s decision making. The Board
proactively believes that the Group’s funding structure should remain conservative and that
the application of the Group’s debt facilities to fund activities or acquisitions which meet the
Group’s hurdle rates for investment, will enhance return on equity and increase cash profits in
the future.
Cash returns to shareholders in the form of dividends are an important part of the Company’s
capital allocation decision making process and remain a priority for the Board. T he Group
applies a dividend policy of a cover of three to four times normalised adjusted earnings per
share, with the record results of FY22 leading to a much higher cover on earnings per share
than the stated strategy.
An interim dividend of 0.65p per share was paid in January 2022. The Board recommends a
final dividend in respect of the year ended 28 February 2022 of 1.05p per share to be
approved at the annual general meeting on 22 June 2022. This dividend will be paid, subject
to shareholder approval, on 29 July 2022. The ex-dividend date will be 30 June 2022 and the
associated record date 1 July 2022.
The Group also values the benefits of repurchasing shares where prices are trading below
intrinsic and net asset value.
the
recommencement of its Share Buyback Programme. From 26 August 2021 to 28 February
2022, the Group repurchased 9,751,009 shares representing 2.5% of shares in issue. This
buyback exercise utilised a total of £6.0m of cash in the Year with shares purchased at an
average price of 61.5p per share. A further £3m buyback programme was announced on 2
On 26 August 2021,
the Group announced
Vertu Motors plc (Company Number: 05984855)
28
Financial Review (continued)
Capital Allocation (continued)
March 2022. Since the year-end, 1,815,980 shares have been repurchased at an average
price of 59.0p per share, with £1.9m of this latest buyback programme remaining.
The Group also deploys capital in its extensive franchised dealership network. Subsequent to
the year end, the Group purchased the freehold and long leasehold interests in its extensive
multi-franchise site located in Derby for £7.1m. The Group has operated the 5.5-acre Derby
multi-site since September 2012 under short leasehold arrangements. There are four
separate buildings on the site, currently representing the Nissan, Skoda, Renault & Dacia and
Peugeot franchises, along with a standalone Bristol Street Motornation used vehicle outlet.
The purchase of the freehold and long leasehold interests secures the long-term future of this
strategically important location for the Group.
Karen Anderson, CFO
Vertu Motors plc (Company Number: 05984855)
29
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. The Group recognises
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 as a commitment to minimise cost and maximise
efficiency to ensure resources are not wasted. The Group launched its ‘Driving Sustainability’
strategy in April 2021, 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)
30
Sustainability (continued)
Progress toward Sustainability Goals
Work with our Manufacturer partners to provide increasingly sustainable choices for all
customers
Like-for-like the Group grew its sales of new retail battery electric (BEV)
vehicles by 168.9% in FY22, compared to FY21. This increase was more than
UK market trends, which saw growth in retail BEV registrations of 121.9% over
the same period. BEV sales represented 10% of the Group’s total new retail
vehicle sales in FY22.
The Group’s commitment to the electrification agenda is evidenced by the fact
that the Group has significantly more dealerships approved under the
Government’s EVA (Electric Vehicle Approved) scheme than any other UK
retailer. This scheme sets out minimum standards on operating electric
vehicle sales and service outlets and is subject to audit. 21 dealerships are
currently approved, and the aim is to have every dealership approved in short
order to provide customer confidence.
Like-for-like sales of all alternatively powered vehicles sold by the Group grew
by 173% and represented over 20% of FY22 total new retail vehicle sales.
The Group continues to operate the largest Motability fleet in the UK.
Reduce the environmental footprint of our business
The Group has a strong focus on the reduction of energy used in its
operations. External energy audits have been carried out at 37 of the Group’s
dealership locations and behavioural recommendations arising have been
implemented across the Group to reduce energy usage.
The audits also revealed potential savings which could be delivered following
investment in energy saving infrastructure. One such recommendation is the
replacement of older lighting with LED alternatives and consequently an 18-
month programme of upgrade, with an expected capital investment of £1.2m,
has now commenced.
Like-for-like the Group has consumed approximately 12% more energy in
FY22 compared to FY21, with this increase predominantly the result of the
impact of dealership closures due to lockdowns in the comparative year.
The Group recycled 60% of its dry waste in FY22 with a target to improve this
percentage to 70% by 2025.
The Group operates a substantial vehicle fleet of demonstrator and courtesy
vehicles in addition to colleague company vehicles. On 28 February 2022,
23.8% of this fleet were alternatively powered vehicles, such as battery
electric or hybrid vehicles.
Care for our colleagues and support our communities
In a recent pulse survey of all Group colleagues, 88% of respondents agreed
that the Group is a great place to work. The Group’s colleague engagement
strategy continues to provide opportunities for further improvement in this
score.
The Group centrally supported communities by over £350,000 in FY22 with
some of those benefitting from this support highlighted below.
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. Th e Group’s modern slavery
statement is published on the Group’s website, at https://investors.vertumotors.com/.
Vertu Motors plc (Company Number: 05984855)
31
Sustainability (continued)
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. Energy audits have been carried out in a sample of the Group’s
dealerships identifying potential savings.
Energy and Emissions Reporting
This section includes mandatory reporting of energy and greenhouse gas emissions for the
period 1 March 2021 to 28 February 2022, pursuant to the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, implementing
the Government’s Streamlined Energy and Carbon Reporting (SECR) policy.
The methodology to calculate our greenhouse gas emissions is based on the 'Environmental
Reporting Guidelines: Including streamlined energy and carbon reporting guidance (March
2019)’ issued by DEFRA, using DEFRA's 2020 and 2021 conversion factors as applicable. In
some cases, consumption has been extrapolated from available data or direct comparison
made to a comparable period.
Reporting uses using a financial control approach to define the Group’s organisational
boundary. All material emission sources required by the regulations for which the Group
deems itself to be responsible have been reported and records of all source data and
calculations have been maintained.
During the reporting period, £245.2k has been invested in EV charging points and associated
electrical upgrades. The Group continues to monitor and regularly review gas and electricity
consumption across the Group, with the majority of sites receiving targeted consumption
reports on a daily basis. In addition, 37 sites have been added to the energy management
program in this reporting period.
The table below includes total energy consumption (reported as kWh) and greenhouse gas
emissions for the sources required by the regulations, along with the Group’s intensity ratio.
UK & Offshore
01/03/2021 –
28/02/2022
01/03/2020 –
28/02/2021
Total Energy Consumption – Used for Emissions Calculation (kWh)
72,001,577
58,092,326
Oil & Gas Combustion Emissions, Scope 1 (tCO2e)
Purchased Electricity Emissions, Scope 2 (tCO2e)
Vehicle Fuel Combustion Emissions, Scope 1 (tCO2e)
Vehicle Fuel Combustion Emissions, Scope 3 (tCO2e)
Purchased Heat, Steam & Cooling Emissions, Scope 2 (tCO2e)
Refrigerant Emissions, Scope 1 (tCO2e)
5,283
5,525
4,169
-
-
-
4,574
4,923
2,898
-
-
-
Total Gross Reported Emissions (tCO2e)
14,977
12,395
Turnover (£m)
3,615
2,547
Intensity Ratio: Turnover (tCO2e / £m)
4.1
4.9
There is no additional global energy or emissions.
Vertu Motors plc (Company Number: 05984855)
32
Sustainability (continued)
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 2022 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 raising almost £42,000.
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 over £45,000.
Vertu Motors Arena naming rights:
Vertu Motors is proud to continue its support of 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.
Yorkshire Cricket Foundation:
The Group has supported this foundation which delivers a number of community projects
across the County with monetary support and provision of a 17-seater minibus. This support
will help the foundation deliver its vital work in the areas of education, health and wellbeing,
participation and Heritage.
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 people, learn about growing fruit and
vegetables and take produce home. The allo tment 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 Bristol Street Motors Halifax Nissan who provided Easter Eggs to
every child at a local school which saw four classrooms destroyed by an arson attack.
Macklin Motors Glasgow Ford used money provided for a Christmas party to make a donation
to Kilbryde Hospice. Vertu Teeside BMW kitted out the Eaglescliffe Elementis under 10’s
junior football team. These are just a few examples of the work by our dealerships in
providing support to their communities.
Vertu Motors plc (Company Number: 05984855)
33
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.
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.
Group locations receive 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)
34
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 produces 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.
This is supported by additional video updates on key colleague related matters by the Chief
Financial Officer and Group HR Director. Ea ch 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.
In the year ended 28 February 2022 the Group have appointed a non-executive member of
the Board (Pauline Best) to undertake the role of Workforce Engagement Director. Working
closely with the Group HR Director, Pauline leads our workforce engagement strategy to
ensure that the views and concerns of colleagues are adequately represented and considered
by the PLC Board and the senior executive management team, particularly when they are
making decisions that could affect the workforce and also that suitable and effective feedback
is provided to the workforce on what steps have been taken to implement ideas of address
and concerns. A key strand of the workforce engagement strategy involves bi-monthly
colleague engagement meetings which are held in every business across the Group. These
meetings are attended by elected colleague representatives and focus on how the group can
deliver colleagues a great place to work. The Groups workforce engagement strategy links
closely to the 'Driving Sustainability' ESG strategy to ensure that colleagues are engaged
with, and able to have an impact on, the wider Group strategy in these areas. The ESG
agenda is also covered in colleague engagement meetings. Colleague feedback is collected,
considered and progressed to the operational board and Board where specific time is
allocated to consider it. The Workforce Engagement Director also attends in-person meetings
with colleague representatives to discuss the consolidated Colleague feedback. We take
specific actions to engage colleagues with our ‘Driving sustainability’ programme in relation to
the following:
• Work with our Manufacturer partner to provide increasingly sustainable choices for
customers
• Reduce the environmental impact of our business
• Care for our colleagues and support communities
Another key strand of our workforce engagement strategy includes an annual comprehensive
Colleague Satisfaction Survey which takes place in October and provides colleague with the
ability to provide feedback on a wide range of subjects. The survey regularly achieves a
colleague participation rate in excess of 80%. This annual survey is followed-up with a shorter
pulse survey which takes place each quarter. Overall colleague engagement in this year’s
main survey increased to 85% in October 2021 (2020: 84%) with 85% of responding
colleagues stating that they would recommend the Group to someone they know as a great
place to work (2020: 87%). This increased to 88% in January 2022.
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. T he Group also
operates ‘The Masters Awards’, through which colleagues throughout the Group can
nominate their co-workers for awards linked to performance, demonstration of the Group’s
Vertu Motors plc (Company Number: 05984855)
35
Colleagues (continued)
Engaging our Colleagues (continued)
Values or for any other notable reason. These awards reinforce the Group’s culture through
the recognition of those behaviours which exemplify the Values and the colleagues who go
above and beyond to deliver an outstanding level of personal performance. The Masters
Awards also have a number of categories that cover individual performance based on
through
targets.
achievement of specific performance
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.
facilitates engagement
This
The Group also recognises colleagues with long service, with specific recognition for those
reaching 10, 15, 20 and 25 years within the Group. Thi s 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.
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. The motor retail sector in which the Group operates
has traditionally attracted higher proportions of male applicants. The Group’s colleagues are
comprised of 25% female and 75% male currently and therefore there is more to do in
achieving a greater balance in this area. T he Group has made a number of structural
changes to job design and remuneration strategy to support the attraction of a more gender
diverse workforce and these have improved the number of females applying and being
appointed to roles throughout the Group.
Vertu Motors plc (Company Number: 05984855)
36
Colleagues (continued)
Promoting Diversity and Inclusion (continued)
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.
Number of Group colleagues by gender:
At 28 February 2022
At 29 February 2021
Female
Male
Total
Female
Male
Total
Directors
Group Senior Managers
2
6
4
58
6
64
2
5
4
55
6
60
All Colleagues
1,540
4,647
6,187
1,350
4,401
5,751
Learning and Development
The Group invests in the personal development of every colleague. This i ncludes the
provision of a comprehensive online personal development programme for all colleague
which is operated in partnership with Dale Carnegie training.
The Group’s ‘Active Training’ team provide programmes ranging from sales and aftersales
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 the increasing prevalence of mental health issues in
society the Group has also invested in training for managers to identify and support
colleagues in their area.
A significant number of leadership development programmes are operated by the Group
including several in partnership with Dale Carnegie training. 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 colleague’s potential.
Over 10% of the Group’s management will progress through these programmes during FY23.
The Group also operates a substantial apprenticeship programme in partnership with the
Group’s Manufacturer partners, with over 250 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 has recently launched a 120 strong Customer Service Apprentice
programme aimed at attracting out of sector talent.
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. This programme has been operating for over 5-year and has developed
a pedigree of delivering management level appointees to support the Group’s growth
strategy.
Vertu Motors plc (Company Number: 05984855)
37
Colleagues (continued)
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 an 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 and any items recorded on this register are
investigated by the Group Head of Risk and reported to the Audit Committee.
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)
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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 72. The statement
by the auditors about their reporting responsibilities is given on pages 78 and 79.
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)
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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)
40
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 and
geopolitical impacts
Volume and margin are
affected particularly in
vehicle sales
Amendments to
franchise contracts,
embracing new
legislation
• Close monitoring of UK economic conditions
• Maintain close relationships with manufacturer partners
• Focus on retention initiatives particularly in aftersales
• Focus on cost control
❻ Market and
environmental
considerations impact
on vehicle supply and
values
Vehicle supply
constraints as a result of
vehicle component
shortages and new
entrants in the used
vehicle market
• 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
LEGAL AND REGULATORY
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
•
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
❽ Failure to comply with
Health and Safety
(H&S) Policy
Injury to customers or
colleagues
• Group has a dedicated H&S Manager
• Group H&S Committee monitors compliance and
recommends any corrective or preventative actions
• 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
Potential for wage
inflation
Colleagues who lack
motivation and
engagement
• Colleague engagement forums, driving actions
• 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)
41
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
developed
Data is compromised
• Policy prohibits installation of non-Group software
• 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)
42
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 2022 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 2025.
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 28 February 2025, 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 40 of the Strategic
Report.
• Prudent growth assumptions in both volume and margin, reflecting the risks set out
on pages 40 to 42 of the Strategic Report.
The Group’s current banking facility expires in February 2024. In the above forecasts and
assessment of viability, it has been assumed that any new facilities would have limits and
covenants which are consistent with the existing facility.
The Board carried out a robust assessment of the principal risks facing the Group and the
purpose of the principal risks on pages 40 to 42 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 40 to 42 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)
43
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 28 February 2025.
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
11 May 2022
Karen Anderson
Chief Financial Officer
11 May 2022
Vertu Motors plc (Company Number: 05984855)
44
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.
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 had a successful year, continuing to deliver on its strategy
and delivering record financial results. The Board continues to work and interact well
together through both its regular formal meetings and other ad-hoc contacts.
The Group published its first long-term Sustainability Strategy ‘Driving Sustainability’ in last
year’s annual report. The strategy builds on the Group’s long track record of making a positive
contribution to Colleagues and the communities it operates in, and outlined the Company’s
ambition to drive the sustainability agenda in the years ahead. The strategy included
ambitious targets and goals aligned to the strategic objectives of the Group. Updates on the
Group’s performance against these targets are given in the sustainability section of the
strategic report on pages 30 - 33.
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 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 Board composition during the year. However, the expected
term of Pauline Best’s Non-executive directorship has since been extended for a further 3
years to 2025 as she continues to make a significant and vital contribution.
Pauline Best took the role of designated Non-executive Director for effective engagement with
the Groups’ colleagues, and engagement and resulting actions are underway.
The Board undertook an annual board evaluation in February 2022 through an anonymous
survey by the Board. Results have been reviewed and actions for the coming year agreed.
As a result, particular focus will be given to the work of the Nominations Committee and the
future structure of the Board. Annual appraisals of the Executive Directors, with the CEO
appraised by the Chairman, have also been carried out.
This year’s Annual General Meeting (“AGM”) will be held on 22 June 2022.
Andrew Goss
Non-executive Chairman
11 May 2022
Vertu Motors plc (Company Number: 05984855)
45
Corporate Governance Report (continued)
QCA Code Principle
Where to find out more (page)
1. Establish a Strategy and business model which promotes long-
Group Strategy - pages 9 – 18
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 39 – 42
and threats, throughout the organisation.
5. Maintain the Board as a well-functioning balanced team led by the
Board Leadership - pages 47 – 50
Chair.
6. Ensure that, between them, the Directors have the necessary up-
Board Leadership - pages 47 – 50
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.
Chairman’s Corporate Governance Statement
page 45
Group Strategy - pages 9 – 18
Colleagues - pages 35 – 38
Roles and Responsibilities – page 52
Division of Responsibilities – page 51
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 51
Audit Report - pages 73 – 80
Remuneration Committee Report - pages 58 – 63
investors.vertumotors.com
Vertu Motors plc (Company Number: 05984855)
46
Board Leadership
Board of Directors
The Board has three Non-executive Directors including the Chairman, together with three
Executive Directors. T he 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 (64) 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 (68) 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 Rockwood Realisation 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 (58) 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. Pauline is also
the designated non-executive director for workforce engagement.
invaluable as Chair of
is
Vertu Motors plc (Company Number: 05984855)
47
Board Leadership (continued)
Board of Directors (continued)
Robert Forrester
Chief Executive Officer
Relevant Experience
Appointed 6 November 2006
Robert (52) 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 (54) 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 (50) 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)
48
Board Leadership (continued)
Board Meetings and Attendance (continued)
During the financial year the Board has met formally 6 times in person and 11 on other
occasions 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
17
17
17
17
17
17
16
17
17
17
17
17
3
3
3
3
3
3
3
-
-
-
3
3
1
1
1
1
1
1
1
-
-
-
1
1
7
7
7
7
7
7
7
-
-
-
7
7
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)
49
Board Leadership (continued)
Key Areas of Board Focus During the Year
STRATEGY
FINANCIAL
PERFORMANCE
GOVERNANCE
SHAREHOLDER
ENGAGEMENT
RISK
Annual review of key
Group risks and
mitigating controls
Approval of the
FY2021 full year
results and FY2022
interim results
Monthly
management
accounts and
comparison against
annual business plan
Long range forecast
and funding
requirement planning
Group strategy
review
Business
development
Reviewing M&A
opportunities
Approval of annual
business plan and
capital budget
Review of colleague
engagement survey
and colleague
engagement meeting
feedback
Re-appointment of
auditors
Annual General
Meeting
Meetings with key
shareholders on
results roadshows
Analyst meeting on
the ancillary
businesses operated
by the Group
Monitoring
Compliance and
Health and Safety
Committees
Monitoring Senior
Managers and
Certification Regime
by the FCA regulated
entities in the Group
Monitoring the
culture and Values
including colleague
survey feedback
Response to
enquiries from the
FRC following a
review of the FY2021
Group Financial
Statements
Vertu Motors plc (Company Number: 05984855)
50
Division of Responsibilities
The table below shows the key committees and their responsibilities.
AUDIT COMMITTEE REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
CEO COMMITTEE COMPLIANCE
COMMITTEE
HEALTH AND
SAFETY
COMMITTEE
Members
PLC BOARD COMMITTEES
• K Lever (Chair)
• P Best (Chair)
• A P Goss (Chair)
• A P Goss
• P Best
• K Lever
• A P Goss
• K Lever
• P Best
• R T Forrester
• D P Crane (Chair)
• 4 Senior
• K Anderson
• N Loose
• 4 Senior Managers
Managers
• H & S Manager
(Chair)
• D P Crane
• K Anderson
• N Loose
• 12 Senior
Managers
Delegated
authorities
Reviews
• Financial reporting
• Remuneration
• Balance of the
• Review,
• Compliance with
• Financial risk
management
policy
Board
• Incentive plans
• Leadership of the
• Internal control
• Performance
targets
Group
• Director
succession
planning
communication,
delivery and
management of
Group strategy
and day to day
operations
laws and
regulations
(excluding Health &
Safety and
environmental)
• Whistleblowing
procedures
• Communication
with regulators
where required
• Compliance with
Health & Safety
and
environmental
law and
regulations
• Developing
Group best
practices
• 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
Recommends
• Re-appointment of
• Level and
auditors
• Audit tender
• Auditors’
remuneration
structure of
Executive
remuneration
• Remuneration
policy
• Composition of
• Group HR and IT
• Adequacy and
• Health & Safety
the Board
strategy
• Skills, knowledge
& experience on
the Board
• Diversity
• Allocation of
resources
(financial and
colleague)
• Group
effectiveness of
Group policies in
response to current
law and regulation
• Licences and
consents required
performance
• Internal regulatory
audit
policies and
procedures
• Health & Safety
audits
• Accident
statistics and
causes
• Appointments to
the Board
• Annual business
plan to the Board
• Group Vision
• Training
• Training
• Policy change
• Policy change
• 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
• Accidents and
near misses
• Indicators of non-
compliance with
policy
• Any relevant
complaints
• Legal and
regulatory
developments
• 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
policy
• Remuneration
packages for
Executive
Directors
• Design of share
incentive plans
Executive
Directors
• Skills profile for
Non-Executive
Directors
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)
51
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 also acts as the nominated non-
executive director for workforce engagement.
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)
52
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 for 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 2021 Annual General Meeting will expire on the date of the 2022
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. 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)
53
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 49.
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 independent auditors) are able to attend by invitation.
The key responsibilities of the Committee are set out in the table on page 51.
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 independent
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 independent auditors.
The Committee concluded that the February 2022 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
2022 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 2022 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 2022 as shown in note 21 and concluded that
these were appropriate.
Vertu Motors plc (Company Number: 05984855)
54
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 independent auditors. The Committee concluded that the Board is able
to make the Viability and Going Concern statements on pages 43 and 44.
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 2022 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 independent 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 for which it is not unusual to have a
discount applied in a sales transaction which may or may not include multiple other
products, judgement is involved in determining the appropriate allocation of such a
discount between the products involved in the sale, particularly where there is a difference
between the products, in when the relevant performance obligations are satisfied.
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)
55
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 independent 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 73 to 80.
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, the Sales Director, the Chief
Technology Officer, the Group Strategy 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 2022, 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
During the year, the FRC’s Audit Quality Review (AQR) team selected for review the
PricewaterhouseCoopers LLP (“PwC”) audit of the Group’s 2021 financial statements as part
of its annual inspection of audit firms. On completion of the review, the AQR team wrote to the
Committee Chair and provided a copy of its final report. The Committee has discussed the
findings of the AQR with PwC and PwC have confirmed that, in the 2022 audit, it had
enhanced its audit procedures to address those areas that had been identified as requiring
improvement.
The Audit Committee has recommended to the Board that a resolution be put to shareholders
at the Annual General Meeting to reappoint PwC as auditors of the Company for a further
year. PwC 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 independent auditors and no matters of
concern were raised during the financial year to 28 February 2022. It will continue to monitor
this.
The independent auditors attend some of the Committee meetings and the Committee meets
with the independent auditors without management present.
Vertu Motors plc (Company Number: 05984855)
56
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
11 May 2022
Vertu Motors plc (Company Number: 05984855)
57
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 2022. 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 2022 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 2022 and is subject to an advisory shareholder vote at this
year’s AGM.
The information in the Directors’ Remuneration Report set out on pages 65 to 66, and
highlighted as being subject to audit, has been audited by the Group’s auditors.
Key remuneration decisions for the year to 28 February 2022
Following a review of Executive Director packages carried out in late 2021 alongside ongoing
sector benchmarking, the basic salaries for the Executive Directors (R Forrester, D Crane and
K Anderson) were increased by 5% with effect from 1 March 2022. This follows the
application of basic salary increases throughout the Group which were designed to ensure
that colleague remuneration keeps pace with inflation, and is comparable to the average
increase applied throughout the Group to non-management colleagues. The increased
salaries more closely match competitors in the sector and reflect the importance of retaining
the highly experienced Executive team in a very competitive market.
The Executive Director annual bonus structure remains unchanged from the scheme
operated in 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 between customer outcome and colleague
outcome measures. The maximum profit bonus earnings level of 135% of on-target earnings
equates to delivery of 135% of the business plan. The Executive Directors will receive
maximum levels of profit bonus for the year commencing 1 March 2021 reflecting a high level
of performance and an exceptional year in the sector due to external factors.
A Partnership Share Scheme was introduced for senior management colleagues in the Group
for the year commencing 1 March 2020 and then applied to Executive Directors for the first
time for the year beginning 1 March 2021. Under this Scheme, an award is 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 based on a fixed percentage of on-
target earnings). At the end of each financial year, vesting is 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 95% of the amount that would be earned at the on-target level, 95% of the nil-
cost option will be awarded. Performance is capped at the 100% level and the employee
must remain in employment for three further complete financial years before the nil-cost
options are awarded to them. This scheme has been very well received by the beneficiaries.
The award to Executive Directors was granted for a maximum of 30% of a beneficiary’s on-
target earnings for the year beginning 1 March 2021. The performance of the Group is such
that this Partnership Share award will vest to vest in full for the majority of beneficiaries,
including the Executive Directors. Beneficiaries will receive the vested shares 3 years from
the end of the financial year to which they relate if they remain employed by the Group.
Vertu Motors plc (Company Number: 05984855)
58
Remuneration Committee Report (continued)
Annual Statement from the Chair of the Remuneration Committee (continued)
Key remuneration decisions for the year to 28 February 2022 (continued)
A further Partnership Share Scheme annual award has been made for the year commencing
1 March 2022. The level of award for Executive Directors has been increased from 30% to
40% of on-target earnings for the year commencing 1 March 2022 to differentiate the
executive team from the rest of the senior management team and to ensure that the potential
value of this long-term incentive programme is more in line with the schemes operated by
listed competitors in the sector.
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 2022. 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
11 May 2022
Vertu Motors plc (Company Number: 05984855)
59
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.
Operation
Maximum potential value
Performance metrics
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
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 cover 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.
Vertu Motors plc (Company Number: 05984855)
60
Remuneration Committee Report (continued)
Remuneration Policy (continued)
Future Policy Table (continued)
Operation
Maximum potential value
Performance metrics
Paid in cash after the end of
the financial year to which it
relates.
It is the normal policy of the
Committee to cap maximum
annual bonuses. The levels
of such caps are reviewed
annually.
Purpose and link to
strategy
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 with exact
measures reviewed
annually.
LONG-TERM INCENTIVES
Alignment of interests
with shareholders by
providing long-term
incentives delivered in
the form of shares
through the Partnership
Share Scheme (part of
the Long Term Incentive
Plan (LTIP).
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
starting at the end of the
financial year to which the
bonus relates.
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.
Annual award of options to
Executive Directors is 40%
of on-target earnings for
FY23. 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 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
formulating the award value
of the partnership share
scheme.
Any new Directors would
receive a pension
contribution in line with the
majority of the workforce.
Targets are based on adjusted profit
before tax of the Group and customer
outcome and colleague satisfaction
measures.
The Committee sets performance
measures, threshold and maximum
targets on an annual basis.
A sliding scale operates between
threshold and maximum performance. No
company performance bonus is payable
where performance is below the threshold
of 85%. No colleague satisfaction bonus
is payable where performance is below an
annual target. No customer satisfaction
bonus is payable if minimum targets are
not met.
Payment of any bonus earned is subject to
overriding discretion of the Committee in
the event of gross misconduct.
Vesting is pro rata to achievement of the
participant’s bonus measures for the year.
None
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 and selected key employees who are crucial to the long-term success of the
Company.
Vertu Motors plc (Company Number: 05984855)
61
Remuneration Committee Report (continued)
Remuneration Policy (continued)
Notes to the Policy Table (continued)
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 also takes into account emerging best practice and guidance from major
institutional shareholders and advisors.
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
Details
Executive Directors may be
the
required
notice period.
to work during
leaver
Good
circumstances
comprise death, illness, injury,
disability, retirement, transfer of
employing
outside
Group
exceptional
circumstances at the discretion
of the Committee.
business
or
Provision
Policy
Notice periods in
Executive
Directors’ service
contracts
Compensation for
loss of office
Treatment of
annual bonus on
termination
Treatment of LTIP
and CSOP awards
and Partnership
Share Awards
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.
Partnership Share Awards for the current financial year (and other
unvested LTIP 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.
For the Partnership Share Scheme, the extent of vesting will be
determined by the Committee taking into account the amount of
time that the employee has worked in the financial year. Following
release, Good Leavers may exercise their options at any time after
cessation of employment.
Vertu Motors plc (Company Number: 05984855)
62
Remuneration Committee Report (continued)
Directors’ Service Contracts, Notice Periods and Termination Payments (continued)
Provision
Policy
Details
Treatment of LTIP
and CSOP awards
and Partnership
Share Awards
(continued)
For other LTIP awards, 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.
Good Leavers may exercise their options within 12 months (or
such a period as the Committee determines). Good Leaver LTIP
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. T he Committee
retains the discretion to release awards earlier.
Unvested CSOP Awards will normally lapse on cessation of
employment but, for Good Leavers, may vest in full or part as
determined by the Remuneration Committee. Vested CSOP
options can be executed for up to 6 months (or 12 months in the
case of death) except following summary dismissal, when they
lapse.
Exercise of
discretion
Intended only to be relied upon to provide flexibility in exceptional
or inequitable circumstances.
Outside
appointments
Non-Executive
Directors
Subject to approval
Re-election
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
Committee
Remuneration
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.
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 ma y 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
following
current year and
year. No prescribed maximum
annual increase.
the
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
the
and skills
implementation
our
strategy.
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.
to oversee
of
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)
63
Directors’ Remuneration Report
Total 2022/23 Remuneration Opportunity
The chart below illustrates the remuneration that would be paid to each of the Executive
Directors in the 2022/23 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 Partnership Share Scheme options which are capable of vesting in the financial year to 28
February 2023 and is based on the closing share price on 1 March 2022.
Each element of remuneration is defined in the table below:
Element
Fixed
Annual Bonus
Multiple Year (FY22
Partnership Share Award)
Description
Base salary for the 2022/2023 financial year plus pension and benefits.
Annual bonus awards based on adjusted profit before tax, customer
outcome measures and colleague satisfaction targets.
Value of Partnership Share Scheme Awards which vest in the year ended
28 February 2023 but are subject to a three-year holding period thereafter.
Value is based on the number of shares awarded at the share price on 1
March 2022.
The on-target scenario assumes that for the annual bonus, adjusted profit is in line with
financial targets.
Vertu Motors plc (Company Number: 05984855)
64
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
2023 are set out in the table below, together with any increase expressed as a percentage.
R T Forrester
K Anderson
D P Crane
K Lever
P Best
A P Goss
28 February
2023
£’000
415
263
263
62
52
130
28 February
2022
£’000
395
250
250
62
52
130
Increase
%
5
5
5
-
-
-
Information subject to audit
Single Total Figure of Remuneration
The remuneration of the Directors who served during the period from 1 March 2021 to 28
February 2022 is as follows:
Salary or fees
£’000
Taxable
Benefits1
£’000
Pension
£’000
Bonus
£000
Long Term
Incentive Plan
£’000
Single total
figure
£’000
2022
2021
2022
2021
2022
2021
2022
2021
20222
2021
2022
2021
596
380
380
96
52
39
Executive Directors
R T Forrester
K Anderson
D P Crane
395
250
250
337
238
238
3
3
3
3
3
3
65
41
41
56
39
39
525
272
272
200
100
100
-
40
40
-
-
-
988
606
606
A P Goss
K Lever
P Best
1 Taxable benefits include vehicle insurance, together with medical and life assurance premiums
2 Represents CSOP options granted in July and November 2018 which vested during the financial year ended 28 February 2022, the value
130
62
52
95
52
38
1
1
1
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131
63
53
has been calculated by reference to the average share price of the Company over the financial year (53.06p) and the exercise price
applicable to each of the grants.
Annual Bonuses
The Executive Directors have been awarded Company profit performance bonus at the
maximum level of 135% of on-target earnings, customer outcome bonus at the level of 70.8%
and colleague satisfaction bonus at the level of 50% - having achieved a colleague great
place to work result above 85% (the 50% target) but below 90% (the 100% target), to be paid
in May 2022.
Pensions
The Group operates a group personal pension plan for eligible colleagues. R T Forrester, K
Anderson and D P Crane have elected to cease active membership of the plan and receive a
payment of 16.5% of current basic salary rather than Company pension contributions.
Directors' Share Options
The movement in share options held by the Directors during the year ended 28 February 2022
is as follows:
R T Forrester
K Anderson
D P Crane
1 These Partnership Share Scheme awards vested in March 2022 and are subject to a holding period of three years prior to being
Number at 1
March 2021
262,208
930,000
1,013,583
Exercised in
Year
-
(400,000)
(430,000)
Lapsed in
Year
(262,208)
-
-
Granted in
Year1
443,451
249,480
249,480
Number at 28
February 2022
443,451
779,480
833,063
exercised.
Partnership Share Award vesting criteria:
Vesting is directly linked to the individual beneficiary’s percentage achievement of bonus
earnings for each financial year with this capped at 100% of total award. For example, if an
individual earns 95% of bonus 95% of the award vests.
Vertu Motors plc (Company Number: 05984855)
65
Directors’ Remuneration Report (continued)
Statement of Directors’ Shareholding
The Directors who held office on 28 February 2022 and their connected persons had interests
in the issued share capital of the Company as at 28 February 2022 as follows:
Number of shares held (including
by connected persons)
28 February
2022
7,444,181
1,130,597
404,036
100,800
-
62,083
28 February
2021
7,225,215
901,074
195,705
100,800
-
62,083
Vested unexercised share
options
Unvested share options subject
to performance conditions
28 February
2022
-
530,000
583,583
-
-
-
28 February 28 February
2022
443,4511
249,4801
249,4801
-
-
-
2021
-
430,000
513,583
-
-
-
28 February
2021
262,208
500,000
500,000
-
-
-
R T Forrester
K Anderson
D P Crane
K Lever
P Best
A P Goss
1 Represents Partnership Share Awards granted in respect of the year commencing 1 March 2021, after 28
February 2022 these awards vested in full and are subject to a three-year holding period before they can be
exercised.
Vertu Motors plc (Company Number: 05984855)
66
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 2022 was 60.0p (28 February 2021:
39.3p) and the range during the financial year was 36.0p to 75.8p (2021: 17.3p to 40.2p).
Changes in remuneration of Chief Executive Officer
Ordinarily, the Company includes a table in this section of the Remuneration Committee
report showing the comparison of basic salary and bonus between the CEO and other
employees over the last two financial years. This year’s report would normally have compared
these values for the financial year ended 28th February 2021 with the year ended 28th
February 2022. Given the significant impact of the UK Government’s Coronavirus Job
Retention Scheme payments on the calculation of payroll during the year ended 28th
February 2021, which resulted in a significant proportion of the Group’s employees being paid
at an earnings level determined by this scheme (generally 80% of average pay up to £2,500
per month), and the Company’s decision not to apply the stated £2,500 cap in the early
months of the pandemic to many employees, it is not possible to produce accurate and
relevant comparative figures for the bonus element of this normal disclosure. We intend to
include this information again in the next annual remuneration report.
For the year ended 28th February 2021, the CEO received basic salary only (which was
reduced to the level of 70% for the months of April and May 2020) and received no
contractual bonus payments. At the end of this financial year the CEO was awarded a
discretionary year-end bonus of £100,000 by the Remuneration Committee. This discretionary
year-end bonus value represented 33% of the on-target bonus available to the CEO. Given
the high performance of the Group in the latter part of the same year the majority of bonus
earning colleagues and managers achieved 100% of their on-target earnings for the period
from 1st July 2020 to 28th February 2021.
Vertu Motors plc (Company Number: 05984855)
67
Directors’ Remuneration Report (continued)
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.
Relative Importance of Spend on Pay
The table below sets out the total spend on remuneration in the Group in the years ended 28
February 2021 and 28 February 2022 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 2022
£’000
233,818
2,327
Spend in the
year ended 28
February 2021
£’000
176,306
-
Shareholders’ Vote on Remuneration at the 2021 AGM
2021 Directors’ Remuneration Report
Votes cast in favour
Votes cast against
Total votes cast in favour or against
Votes withheld
The Committee
Number
89,414,235
42,791,337
132,205,572
24,343,293
% change
32.6%
n/a
Proportion of
votes cast (%)
67.63
32.37
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 and details of meetings held are shown on page 49.
Vertu Motors plc (Company Number: 05984855)
68
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 2-44) and other sections of this Annual
Report and audited consolidated financial statements. 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
2-44
2-44
45-72
2-44
45-72
64-68
2-44
2-44
2-44
2-44
2-44
2-44
81
2-44
2-44
45-72
2-44
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.
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 £357,000 were made by the Group during the year ended 28
February 2022 (2021: £60,000).
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. This was re-tendered in 2021 with the
contract re awarded to SWRnewstar Limited. Mr Lever was not involved in the renewal or
review of the Group’s contract.
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 2022.
Vertu Motors plc (Company Number: 05984855)
69
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. Di rectors’ 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
The dividend paid in the year to 28 February 2022 was £2,327,000 (0.65p per share) (2021:
£nil). A final dividend in respect of the year ended 28 February 2022 of 1.05p per share, is to
be proposed at the annual general meeting on 22 June 2022. The ex dividend date will be 30
June 2022 and the associated record date 1 July 2022. The dividend will be paid on 29 July
2022, and the financial statements do not reflect this final dividend payable.
Independent 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 independent 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 2022 are disclosed in note 39 of the Financial Statements.
Powers for the issuance or repurchase of Shares
At 1 March 2021, 7,287,304 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 2022, 2,715,927 shares held by the trust were transferred
to individuals pursuant to exercises of options (or sold to satisfy the exercise price or resulting
tax). 430,105 shares held by the Trust were transferred to the executive directors in
satisfaction of the FY2021 discretionary bonus. 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. 4,141,272 ordinary shares in the Company were held by
the Trustee at 28 February 2022.
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 2021 AGM.
Vertu Motors plc (Company Number: 05984855)
70
Directors Report (continued)
Share Capital
As at 28 February 2022, the Company’s issued share capital comprised a single class:
ordinary shares of 10 pence each of which 359,422,972 were in issue. The Articl es 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
11 May 2022
Vertu Motors plc (Company Number: 05984855)
71
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
UK – adopted international accounting standards 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 UK – adopted international accounting standards 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
11 May 2022
Vertu Motors plc (Company Number: 05984855)
72
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 2022 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
UK-adopted international accounting standards;
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, which comprise: the consolidated and company balance sheets as at
28 February 2022; the consolidated income statement, the 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.
Vertu Motors plc (Company Number: 05984855)
73
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Our audit approach (continued)
Key audit matters
Carrying value of intangible assets including goodwill (Group)
Valuation of pension scheme liabilities (Group)
Carrying value of investments in subsidiaries (parent)
•
•
•
Materiality
•
•
•
Overall Group materiality: £3,200,000 (2021: £2,200,000) based on 0.09% of
revenue.
Overall company materiality: £2,750,000 (2021: £2,090,000) based on 1% of total
assets (capped for Group materiality).
Performance materiality: £2,400,000 (2021: £1,650,000) (Group) and £2,062,500
(2021: £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.
Accounting for manufacturer bonuses, valuation of used inventory and going concern as a
result of COVID-19, which were key audit matters last year, are no longer included because
of low level of judgement and estimate involved in manufacturer bonuses and in respect of
valuation of used inventory a reduced level of risk arising from market conditions. The risks
associated with COVID-19 impacting on going concern have reduced as demonstrated by the
Group's performance through this year. Otherwise, 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 th is 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. Management have prepared a
value in use assessment to consider the carrying value
of the CGUs. There is inherent uncertainty and
judgement in forecasting future cash flows and therefore
this is a judgemental area of the audit.
Further details found in note 15.
Vertu Motors plc (Company Number: 05984855)
74
following:
To address this risk, we have performed
the Group’s
Assessed
the
budgeting procedures as a basis for value
in use calculations;
Compared current year performance to
historical forecasts to assess accuracy in
the budget process;
Assessed the appropriateness of CGUs
used for Goodwill and other intangible
assets;
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Key audit matters (continued)
Key audit matter (continued)
How our audit addressed the key audit
matter (continued)
Carrying value of intangible assets including goodwill
(Group) (continued)
rates,
inflation and
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.
We are satisfied with management’s
conclusion on
the carrying value of
goodwill and other intangibles.
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
that small
movements in key assumptions could have a significant
effect on the pension obligations. In addition, factors
impacting
liability can be outside of
management’s control. Further details found in note 30.
the calculation means
the pension
To address this risk in respect of valuation
of pension scheme liabilities, we have:
Used our actuarial specialists to review the
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.
We concluded that the key inputs used in
calculating the pension liability were within
an acceptable range when compared with
market data.
Carrying value of investments in subsidiaries (parent)
The Company has significant investments in respect of
acquisitions made across various subsidiaries. The
recoverable amount of 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. Fur ther details found in note 7 of the Company
financial statements.
To address this risk, we have done the
following: Assessed the Group’s budgeting
procedures as a basis for value in use
calculations;
Compared current year performance to
historical forecasts to assess accuracy in
the budget process;
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
investments.
Vertu Motors plc (Company Number: 05984855)
75
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 resu lt 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 Vertu Motors Continental
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
£3,200,000 (2021: £2,200,000).
£2,750,000 (2021: £2,090,000).
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
the
primary measure used by
shareholders
the
assessing
performance of the entity, and is a
generally
auditing
accepted
benchmark.
in
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
£2,100,000 and £2,750,000.
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% (2021: 75%)
Vertu Motors plc (Company Number: 05984855)
76
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Key audit matters (continued)
Materiality (continued)
of overall materiality, amounting to £2,400,000 (2021: £1,650,000) for the Group financial
statements and £2,062,500 (2021: £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.
We agreed with those charged with governance that we would report to them misstatements
identified during our audit above £160,000 (Group audit) (2021: £110,000) and £137,500
(company audit) (2021: £105,000) 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.
Vertu Motors plc (Company Number: 05984855)
77
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Reporting on other information (continued)
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.
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 2022 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.
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 UK 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 and the Listing
Rules. We evaluated management’s incentives and opportunities for fraudulent manipulation
Vertu Motors plc (Company Number: 05984855)
78
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
Responsibilities for the financial statements and the audit (continued)
Auditors’ responsibilities for the audit of the financial statements (continued)
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 and the Audit Committee, 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.
• 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.
Vertu Motors plc (Company Number: 05984855)
79
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
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 are not in agreement with the accounting records
and returns.
We have no exceptions to report arising from this responsibility.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and
Transparency Rule 4.1.14R, these financial statements will form part of the ESEF-prepared
annual financial report filed on the National Storage Mechanism of the Financial Conduct
Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This
auditors’ report provides no assurance over whether the annual financial report will be
prepared using the single electronic format specified in the ESEF RTS.
Other voluntary reporting
Directors’ remuneration
The company voluntarily prepares a directors’ remuneration report in accordance with the
provisions of the Companies Act 2006. The directors requested that we audit the part of the
Directors’ Remuneration Report specified by the Companies Act 2006 to be audited as if the
Company were a quoted Company.
Jonathan Greenaway (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle
11 May 2022
Vertu Motors plc (Company Number: 05984855)
80
Consolidated Income Statement
For the year ended 28 February 2022
Underlying
items 2022
Non-
underlying
items 2022
(Note 8)
Total 2022 Underlying
items 2021
Total 2021
Non-
underlying
items 2021
(Note 8)
Note
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
Cost of sales
Gross profit
Operating expenses
Operating profit / (loss)
Finance income
Finance costs
Profit / (loss) before
tax
5
6
11
11
5
3,615,052
(3,179,632)
435,420
-
-
-
3,615,052
2,547,665
(3,179,632)
(2,246,642)
435,420
301,023
-
-
-
2,547,665
(2,246,642)
301,023
(347,753)
(1,934)
(349,687)
(267,240)
(2,153)
(269,393)
87,667
(1,934)
85,733
33,783
(2,153)
31,630
163
(7,126)
-
-
163
174
(7,126)
(9,405)
-
-
174
(9,405)
80,704
(1,934)
78,770
24,552
(2,153)
22,399
Taxation
12
(16,062)
(2,708)
(18,770)
(5,217)
(867)
(6,084)
Profit / (loss) for the
year attributable to
equity holders
Basic earnings per
share (p)
Diluted earnings per
share (p)
13
13
64,642
(4,642)
60,000
19,335
(3,020)
16,315
16.64
15.96
4.44
4.36
Vertu Motors plc (Company Number: 05984855)
81
Consolidated Statement of Comprehensive Income
For the year ended 28 February 2022
Profit for the year
60,000
16,315
Note
2022
£’000
2021
£’000
Other comprehensive income / (expenses)
Items that will not be reclassified to profit or loss:
Actuarial gains / (losses) on retirement benefit
obligations
Deferred tax relating to actuarial (gains) / losses 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 income / (expense) for the
year, net of tax
30
30
32
32
Total comprehensive income for the year
attributable to equity holders
2,801
(700)
503
(96)
(2,619)
498
(6)
10
2,508
(2,117)
62,508
14,198
Vertu Motors plc (Company Number: 05984855)
82
Consolidated Balance Sheet
As at 28 February 2022
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
Derivative financial instruments
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
27
29
26
19
26
19
27
28
29
31
31
31
32
31
31
2022
£’000
103,470
1,797
9,055
254,133
78,278
446,733
475,027
51,839
83,793
610,659
-
610,659
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
1,057,392
1,161,165
(529,086)
(3,734)
(13)
(11,752)
(12,283)
(14,132)
(571,000)
(55,343)
(74,698)
-
(13,023)
(11,447)
(154,511)
(688,948)
(1,573)
-
(12,395)
(6,582)
(14,126)
(723,624)
(65,777)
(76,975)
(497)
(9,180)
(9,172)
(161,601)
(725,511)
(885,225)
331,881
275,940
35,942
124,939
10,645
4
(1,586)
3,785
158,152
36,917
124,939
10,645
(403)
(2,791)
2,810
103,823
Total equity
331,881
275,940
These consolidated financial statements on pages 81 to 127 have been approved for issue by
the Board of Directors on 11 May 2022 and signed on its behalf by:
Robert Forrester
Chief Executive
Karen Anderson
Chief Financial Officer
Vertu Motors plc (Company Number: 05984855)
83
Consolidated Cash Flow Statement
For the year ended 28 February 2022
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
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
Sale/(purchase) of treasury shares
Cash settled share options
Repurchase of own shares
Dividends paid to equity holders
Net cash outflow from financing activities
Net increase 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
15
34
2022
£’000
85,733
(9)
(269)
407
14,365
16,658
131
(27,973)
1,061
90,104
135
(14,479)
39
(6,798)
69,001
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
17
(9,508)
(21,489)
-
-
(44)
(16,571)
1,605
(24,518)
5,699
(10,638)
(15,786)
951
(403)
(6,014)
(2,327)
(28,518)
15,965
67,828
83,793
(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
33
33
19
33
24
Vertu Motors plc
84
Consolidated Statement of Changes in Equity
For the year ended 28 February 2022
Ordinary
share
capital
£’000
Share
premium
£’000
Other
reserve
£’000
Hedging
reserve
£’000
Treasury
share
reserve
£’000
Capital
redemption
reserve
£’000
Retained
earnings
£’000
36,917
-
124,939
-
10,645
-
(403)
-
(2,791)
-
2,810
-
103,823
60,000
Total
equity
£’000
275,940
60,000
-
-
-
-
-
-
-
(975)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(96)
503
407
-
-
-
-
-
-
4
-
-
-
-
1,025
180
-
-
-
-
-
-
-
-
-
-
-
975
-
-
2,801
2,801
(700)
-
62,101
(74)
(796)
503
62,508
951
(15)
165
(6,014)
-
(2,327)
658
(6,014)
-
(2,327)
658
(1,586)
3,785
158,152
331,881
As at 1 March 2021
Profit for the year
Actuarial gains on
retirement benefit
obligations
Tax on items taken
directly to equity
Fair value gains
Total comprehensive
income for the year
Sale of treasury shares
Issuance of treasury
shares
Repurchase of own
shares
Cancellation of
repurchased shares
Dividends paid
Share based payments
charge
As at 28 February 2022
35,942
124,939
10,645
The other reserve is a merger reserve, arising from shares issued as consideration to the
former shareholders of acquired companies.
The treasury share reserve relates to shares acquired in previous financial years 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”), the Company Share Option Plan (“CSOP”) 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, 2,715,927 shares were transferred from the EBT on exercise of vested
CSOP and LTIP awards and a further 430,105 shares were transferred to the Executive
Directors in satisfaction of 50% of the annual bonuses awarded in respect of the year ended
28 February 2021. 4,141,272 shares remain in the EBT at 28 February 2022.
Vertu Motors plc
85
Consolidated Statement of Changes in Equity (continued)
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
36,917
124,939
10,645
(407)
(803)
2,810
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
(6)
4
-
-
-
-
-
-
-
-
16
(2,004)
-
-
-
-
-
-
-
-
-
Retained
earnings
£’000
89,272
16,315
Total
equity
£’000
263,373
16,315
(2,619)
(2,619)
498
-
14,194
(16)
-
373
508
(6)
14,198
-
(2,004)
373
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
As at 28 February 2021
36,917
124,939
10,645
(403)
(2,791)
2,810
103,823
275,940
Vertu Motors plc
86
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 UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
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 2023 as well as the known financial
performance of the Group in the period subsequent to 28 February 2022, projected forward to
cover the Review Period (“Base Case”). 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 various severe but plausible downside scenarios including
continued restricted supply of new and used cars or reduced demand for service work as a
consequence of a reduced vehicle parc, in excess of that already allowed for in the Base
Case scenario planning. 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 136 to 137 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 2022 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 2022 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 2022 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 2022 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
Farmer & Carlisle Holdings Limited
Farmer & Carlisle Limited
Farmer & Carlisle Leicester Limited
F.C. Business Operations Limited
Grantham Motor Company Limited
Macklin Property Limited
South Hereford Garages Limited
South Hereford Garages Trade Parts LLP
Tyne Tees Finance Limited
Vans Direct Limited
Vertu Accident Repair 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)
87
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 2022 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
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
Hughes of Beaconsfield Limited
International Concessionaires Limited
Merifield Properties Limited
Motor Nation Cars Limited (formerly Vertu
Motors (Retail) Limited)
National Allparts Limited
Newbolds Garage (Mansfield) Limited
Nottingham TPS LLP
Peter Blake (Chatsworth) Limited
Peter Blake Limited
Power Bulbs Ltd
Power Bulbs Online Limited
SHG Holdings Limited
Sigma Holdings Limited
The Taxi Centre Limited
Typocar Limited
VanMan Limited
Vertu Fleet Limited
Vertu Motors (AMC) Limited
Vertu Motors Car Limited (formerly Motor
Nation Car Hypermarkets Limited)
Vertu Motors (Durham) Limited
Vertu Motors (Finance) Limited
Vertu Motors (Pity Me) Limited
Vertu Motors Property 2 Holdings Limited
Vertu Ventures 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
2022
The Group has applied the following standards and amendments for the first time for their
annual reporting period commencing 1 March 2021:
• Definition of Material – amendments to IAS 1 and IAS 8; and
• Revised Conceptual Framework for Financial Reporting.
The amendments listed above did not have any impact on the amounts recognised in prior
periods and are not expected to significantly affect the current or future periods.
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 2022 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.
Vertu Motors plc (Company Number: 05984855)
88
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Leases
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)
89
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.
Vertu Motors plc (Company Number: 05984855)
90
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Business combinations and goodwill (continued)
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.
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 arise from contractual or other legal rights. 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. Franchise relationships are considered to
have an indefinite useful life as, whilst franchise contracts do have expiration dates, they are
anticipated to be renewed at each expiration in line with past experience. Non-renewal would
constitute a trigger 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. Freehol d 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.
Vertu Motors plc (Company Number: 05984855)
91
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Inventories (continued)
The timing of recognition of new vehicle inventory as an asset of the Group is dependent on
the terms of the purchase which vary between each of the Group’s Manufacturer Partners
(“OEM”). Each OEM has its own arrangements for the supply, invoicing and funding of new
vehicle inventory to the Group, however, these arrangements can be summarised largely into
three different types:
1.
2.
3.
‘Invoiced’ arrangements
‘Consignment’ arrangements
‘Interest bearing’ arrangements which can relate to vehicles in either category 1 or 2
above, but where the funding of the vehicle attracts an interest cost from the
Manufacturer.
‘Invoiced’ arrangements
These are where the Group receives an invoice for a vehicle which the OEM has agreed to
supply, regardless of where the vehicle is physically located within the supply chain, not
necessarily on Group premises. The earliest point at which we have control of the asset under
this scenario is when the OEM has a right to payment for the asset, which the Group consider
to be the point at which the vehicle is invoiced. Therefore, the Group recognises such
invoiced vehicles in inventory and trade payables.
‘Consignment’ arrangements
These are where the Group would be allocated a vehicle by the OEM but for which no invoice
is received, and no funding costs are applied. Such vehicles may be physically present in the
Group’s dealerships or elsewhere within the supply chain at the point of consignment. Such
vehicles are not recorded as an asset while on consignment due to the Group not having
control of the asset at this point, as title is retained by the OEM until the vehicle is invoiced to
the Group. This would typically coincide with either the vehicle being sold by the Group to a
third party or after a pre-determined period of time has elapsed (varies by OEM but may be
up to 365 days) at which point full payment for the vehicle is required.
‘Interest bearing’ arrangements
Under both ‘invoiced’ and ‘consignment’ arrangements, if the vehicle remains unsold after a
certain amount of time, it may start to accrue interest, resulting in an interest charge from the
manufacturer. At this point, for ‘consignment’ arrangements, even though legal title has not
passed, the vehicle is recognised in inventory at the consigned price. This is because the
Group has significant risks and rewards of ownership at the point interest starts to accrue as a
result of not having sold the vehicle, and therefore control is deemed to have passed.
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 it has previously supplied. 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)
92
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. S ubsequent 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 post-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.
Vertu Motors plc (Company Number: 05984855)
93
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:
Vertu Motors plc (Company Number: 05984855)
94
Notes to the Consolidated Financial Statements (continued)
1. Accounting Policies (continued)
Taxation (continued)
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
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)
95
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
2022
£’000
288,819
1,584,378
969,846
772,009
3,615,052
2021
£’000
221,179
1,008,301
739,748
578,437
2,547,665
3,607,039
8,013
3,615,052
2,540,648
7,017
2,547,665
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)
96
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.
Vertu Motors plc (Company Number: 05984855)
97
Notes to the Consolidated Financial Statements (continued)
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.
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.
Vertu Motors plc (Company Number: 05984855)
98
Notes to the Consolidated Financial Statements (continued)
2. Financial risk management (continued)
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 2022
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
904
978
11,647
18,046
11,752
Between one
and two years
£’000
45,007
960
-
15,795
7,220
Between two
and five years
£’000
-
2,751
-
35,531
4,201
Between five
and ten years
£’000
-
4,190
-
27,783
26
Over ten
years
£’000
-
6,329
-
10,384
-
Total
£’000
45,911
15,208
11,647
107,539
23,199
511,422
554,749
-
68,982
-
42,483
-
31,999
-
16,713
511,422
714,926
Less than
one year
£’000
812
997
5,948
17,784
12,445
Between one
and two years
£’000
812
978
-
15,041
5,704
Between two
and five years
£’000
54,913
2,821
-
36,414
3,418
Between five
and ten years
£’000
-
4,277
-
31,777
-
Over ten
years
£’000
-
7,131
-
10,635
-
Total
£’000
56,537
16,204
5,948
111,651
21,567
682,711
720,697
-
22,535
-
97,566
-
36,054
-
17,766
682,711
894,618
Other borrowings represent amounts repayable under used car stocking facilities.
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. T otal capital is calculated as total
shareholders’ equity.
The Group had net debt of £72,663,000 (including £88,830,000 lease liabilities) at 28
February 2022 as disclosed in note 33 to the consolidated financial statements (2021: net
debt of £95,632,000 including £91,101,000 lease liabilities).
Vertu Motors plc (Company Number: 05984855)
99
Notes to the Consolidated Financial Statements (continued)
3. Capital risk management (continued)
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:
Critical accounting estimates
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. Estimates are used in determining the existence and value of separately
identifiable assets acquired as part of a business combination, further details are given in
Note 17.
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 use estimates,
such as royalty rates, weighted average cost of capital, growth rates and customer retention
rates to determine whether an intangible asset can be separately identified, what fair value
should be ascribed to the asset and its attributable useful life. Other intangible assets are set
out in Notes 15 and 16.
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 2022, 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. The depreciation
rates applied are set out in Note 1.
Pension benefits
During the year ended 28 February 2022, 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
2022 are provided in note 30.
Vertu Motors plc (Company Number: 05984855)
100
Notes to the Consolidated Financial Statements (continued)
4. Critical accounting estimates and judgements (continued)
Critical accounting judgements
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.
A transaction price allocation for a sale, which may include more than one product, is
straightforward as it is based on distinct items, each with a separate sales value, which are
separately identifiable. It is not unusual, however, for a discount to be applied to a vehicle
sale, in a sale transaction which may or may not include multiple other products. Therefore,
there is judgement involved in determining the appropriate allocation of such a discount
between the products involved in the sale, particularly where there is a difference in when the
relevant performance obligations are satisfied, between the relevant products.
Valuation of inventory
Judgement is applied in the assessment of used vehicle inventory carrying values at 28
February 2022. Assessment of market conditions, latest industry guidance and the length of
time vehicles have been held in inventory are all considered in the application of this
judgement.
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 2022
Aftersales
Used cars
New car retail and Motability
New fleet and commercial
Year ended 28 February 2021
Aftersales
Used cars
New car retail and Motability
Revenue
£’m
288.8
1,584.4
969.9
772.0
3,615.1
Revenue
£’m
221.2
1,008.4
739.7
Revenue
Mix
%
8.0
43.8
26.8
21.4
100.0
Revenue
Mix
%
8.7
39.6
29.0
Gross
Profit
£’m
164.9
154.4
80.6
35.5
435.4
Gross
Profit
£’m
129.6
93.9
54.3
Gross
Profit
Mix
%
37.9
35.5
18.5
8.1
100.0
Gross
Profit
Mix
%
43.1
31.2
18.0
Gross
Margin1
%
47.1
9.7
8.3
4.6
12.0
Gross
Margin1
%
49.3
9.3
7.3
New fleet and commercial
4.0
11.8
1 Margin in aftersales expressed on internal and external revenue. 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 departmental
performance
578.4
2,547.7
7.7
100.0
22.7
100.0
23.2
301.0
Vertu Motors plc (Company Number: 05984855)
101
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 (note 15)
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
Impairment charges (notes 15)
Share based payments charge (note 31)
Amortisation (note 16)
Non-underlying loss before tax
2022
£’000
199,855
14,365
16,658
(9)
(269)
263
(291)
1,396
407
131
117,181
349,687
2022
£’000
258
5
-
263
2022
£’000
(131)
(1,396)
(407)
(1,934)
2021
£’000
150,542
12,333
15,643
(432)
(234)
260
(218)
265
436
1,452
89,346
269,393
2021
£’000
245
5
10
260
2021
£’000
(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.
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)
Vertu Motors plc (Company Number: 05984855)
102
2022
£’000
205,774
22,362
5,682
233,818
1,396
235,214
2022
£’000
199,855
33,963
1,396
235,214
2021
£’000
154,268
17,350
4,688
176,306
265
176,571
2021
£’000
150,542
25,764
265
176,571
Notes to the Consolidated Financial Statements (continued)
9. Employee benefit expense (continued)
The above employee benefit expense for the year ended 28 February 2022 includes £214,000 of
Government grant income in respect of the Coronavirus Job Retention Scheme (2021:
£27,845,000).
Details of the remuneration of the Directors who served during the year from 1 March 2021 to 28
February 2022 and the year from 1 March 2020 to 28 February 2021 are given in the Directors’
Remuneration Report on pages 64 to 68.
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
Profit before taxation
Profit before taxation multiplied by the rate of
corporation tax in the UK of 19% (2021: 19%)
Non-qualifying depreciation
Non-deductible expenses
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
Vertu Motors plc (Company Number: 05984855)
103
2022
Number
1,979
2,718
1,173
5,870
2022
£’000
39
124
163
(1,701)
(1,844)
(3,581)
(7,126)
2022
£’000
16,350
14
16,364
(245)
(147)
2,798
2,406
18,770
2022
£’000
78,770
14,966
638
432
-
2,798
77
41
(49)
(133)
18,770
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
2021
£’000
22,399
4,256
560
305
276
961
31
(30)
(43)
(232)
6,084
Notes to the Consolidated Financial Statements (continued)
12. Taxation (continued)
A summary of the Group’s tax expense in respect of underlying and non-underlying items is as
follows:
Underlying
items 2022
£’000
Non-
underlying
items 2022
£’000
Total
2022
£’000
Underlying
items 2021
£’000
Profit / (loss) before tax
Taxation
Profit / (loss) after tax
Effective tax rate
80,704
(16,062)
64,642
19.90%
(1,934)
(2,708)
(4,642)
78,770
(18,770)
60,000
23.83%
24,552
(5,217)
19,335
21.25%
Non-
underlying
items 2021
£’000
(2,153)
(867)
(3,020)
Total
2021
£’000
22,399
(6,084)
16,315
27.17%
The Group’s underlying effective rate of tax is 19.90% (2021: 21.25%) 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 2022.
In the June 2021 Finance Act it was enacted that the rate of corporation tax in the UK would rise
from 19% to 25% on 1 April 2023. This has resulted in the Group’s opening deferred tax
obligations being remeasured at 25% in the year. The impact of this change has increased the
Group’s charge by £2,885,000.
The overall effective tax rate of 23.83% includes tax on non-underlying items (2021: 27.17%).
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 70.
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.
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
Vertu Motors plc (Company Number: 05984855)
104
2022
£’000
60,000
4,642
2021
£’000
16,315
3,020
64,642
19,335
360,651
15,222
367,092
7,134
375,873
374,226
16.64p
15.96p
17.92p
17.20p
4.44p
4.36p
5.27p
5.17p
Notes to the Consolidated Financial Statements (continued)
14. Dividends per share
An interim dividend of £2,327,000 (0.65p per share) in respect of the year ended 28 February
2022 was paid in January 2022.
A final dividend of 1.05p per share is to be proposed at the Annual General Meeting on 22
June 2022. The ex-dividend date will be 30 June 2022 and the associated record date 1 July
2022. The dividend will be paid, subject to shareholder approval, on 29 July 2022 and these
financial statements do not reflect this final dividend payable.
15. Goodwill and other indefinite life assets
2022
Cost
At 1 March 2021
Acquisitions (note 17)
At 28 February 2022
Accumulated impairment charges
At 1 March 2021
Impairment charge
At 28 February 2022
Net Book Value
At 28 February 2022
At 28 February 2021
2021
Cost
At 1 March 2020
Acquisitions
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
Impairment
87,930
3,096
91,026
16,320
131
16,451
74,575
71,610
Goodwill
£’000
Franchise
relationships
£’000
Total
£’000
115,512
4,409
119,921
16,320
131
16,451
27,582
1,313
28,895
-
-
-
28,895
27,582
103,470
99,192
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
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 2022 and 28 February 2021, 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.
Vertu Motors plc (Company Number: 05984855)
105
Notes to the Consolidated Financial Statements (continued)
15. Goodwill and other indefinite life assets (continued)
A summary of the goodwill purchased is presented below:
Bristol Street Group Limited
Albert Farnell Limited
SHG Holdings Limited
Hillendale Group Limited
Sigma Holdings Limited and Hughes Group Limited
Gordon Lamb Group Limited
Vans Direct Limited
Bolton Land Rover
Farmer & Carlisle Holdings Limited
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
Other acquisitions
A summary of franchise relationships acquired is presented below:
Sigma Holdings Limited and Hughes Group Limited
Albert Farnell Limited
Gordon Lamb Group Limited
Bolton Land Rover
Hillendale Group Limited
SHG Holdings Limited
Farmer & Carlisle Holdings Limited
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
Sunderland, Durham, Teesside, Malton and York BMW MINI
2022
£’000
13,860
13,279
7,842
5,159
5,874
5,754
4,475
4,415
2,769
1,114
10,034
74,575
2022
£’000
9,989
7,373
3,207
2,595
1,749
1,497
1,313
677
495
28,895
2021
£’000
13,860
13,279
7,842
5,159
5,874
5,754
4,475
4,415
-
1,114
9,838
71,610
2021
£’000
9,989
7,373
3,207
2,595
1,749
1,497
-
677
495
27,582
The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use post-tax cash flow projections to perpetuity.
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 post-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 post-tax discount rate reflecting the Group’s Weighted
Average Cost of Capital (“WACC”) of 8% (2021: 8%) is applied.
Sensitivity analysis has been performed on the value in use calculations based on three
potential scenarios with the following results:
•
If restricted supply of new and used cars or reduced demand for service work as a
consequence of a reduced vehicle parc significantly reduced the Group’s earnings in
the year ending 28 February 2023, with a return to normalised trading in the year
ending 29 February 2024, it is not expected to create an additional impairment
charge.
Vertu Motors plc (Company Number: 05984855)
106
Notes to the Consolidated Financial Statements (continued)
15. Goodwill and other indefinite life assets (continued)
•
•
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 £5.3m would arise.
If the post-tax WACC was increased to 12%, an additional impairment charge in
respect of goodwill and other indefinite life assets of £4.4m would arise.
16. Other intangible assets
2022
Cost
At 1 March 2021
Additions
Disposals
At 28 February 2022
Accumulated amortisation
At 1 March 2021
Charge for the year
Disposals
At 28 February 2022
Net book value at 28 February 2022
Net book value at 29 February 2021
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
2,648
45
(62)
2,631
2,195
175
(19)
2,351
280
453
541
254
-
795
108
92
-
200
595
433
1,985
-
-
1,985
923
140
-
1,063
922
1,062
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
5,174
299
(62)
5,411
3,226
407
(19)
3,614
1,797
1,948
Total
£’000
4,912
264
(2)
5,174
2,792
436
(2)
3,226
1,948
2,120
Vertu Motors plc (Company Number: 05984855)
107
Notes to the Consolidated Financial Statements (continued)
17. Business combinations
a) Acquisition of Farmer & Carlisle Holdings Limited
On 10 December 2021, the Group acquired the entire issued share capital of Farmer &
Carlisle Holdings Limited and its subsidiary companies Farmer & Carlisle Limited and Farmer
& Carlisle (Leicester) Limited (together “Farmer & Carlisle”) which operated Toyota
dealerships in Loughborough and Leicester. Estimated total consideration of £8,724,000 was
settled from the Group’s existing cash resources, with a further £538,000 paid on completion
to settle Company borrowings.
Details of the draft fair value of the net assets acquired and goodwill arising are as follows:
Other indefinite life assets
Property, plant and equipment
Right of use assets
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Lease liabilities
Corporation tax
Deferred tax
Borrowings
Net assets acquired
Goodwill
Consideration
Fair
Value
£’000
1,313
5,127
50
4,489
1,122
1,388
(6,165)
(50)
(140)
(641)
(538)
5,955
2,769
8,724
Acquisition related costs (included in the consolidated income statement for the year ended 28
February 2022) totalled £125,000 in respect of this acquisition.
The goodwill arising on acquisition is attributable to the anticipated profitability of the
distribution of vehicles through the acquired dealerships.
If the acquisition of Farmer & Carlisle Holdings Limited had occurred on 1 March 2021, Group
revenues would have been £34,004,000 higher and Group profit attributable to equity holders
would have been £630,000 higher.
b) Other acquisitions
On 12 March 2021, the Group acquired the trade and assets of a Honda dealership in
Huddersfield, West Yorkshire, which also holds an authorised repair contract for Mitsubishi,
from Hepworth Motor Group. Total consideration of £739,000 was settled from the Group’s
existing resources.
On 31 May 2021, the Group acquired the entire issued share capital of Power Bulbs Online
Ltd, a global vehicle lighting business, as well as Power Bulbs Ltd, a dormant company. Total
consideration of £481,000 was settled from the Group’s existing cash resources.
On 30 June 2021, the Group acquired the trade and assets of a Renault Dacia business in
Leicester from Renault Retail Group UK Limited to operate from the Group’s existing
leasehold premises in Leicester, following the sale of the Group’s Citroen business from the
same location in the previous financial year. Total consideration of £347,000 was settled
from the Group’s existing cash resources.
On 23 December 2021, The Group acquired the trade and assets of an MG business in
Edinburgh from Frasers of Falkirk Limited, to operate from the Group’s newly built multi-
franchise dealership in Edinburgh. Total consideration of £67,000 was settled from the
Group’s existing cash resources.
Vertu Motors plc (Company Number: 05984855)
108
Notes to the Consolidated Financial Statements (continued)
17. Business combinations (continued)
Acquisitions (continued)
b) Other acquisitions (continued)
Details of the combined fair value of net assets acquired and goodwill arising are as follows:
Other intangibles
Property, plant and equipment
Inventories
Trade and other receivables
Trade and other payables
Net assets acquired
Goodwill
Consideration
Fair
Value
£’000
254
36
686
347
(16)
1,307
327
1,634
Acquisition related costs (included in the consolidated income statement for the year ended 28
February 2022) in respect of these acquisitions totalled £39,000 in respect of this acquisition.
c) Summary of acquisitions’ cash consideration
Farmer & Carlisle Holdings Limited
Other acquisitions
Cash
consideration
£’000
8,724
1,634
10,358
(Cash)/
Borrowings
acquired
£’000
(850)
-
(850)
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
Cash and cash equivalents
Trade and other payables
Lease liabilities
Corporation tax
Deferred tax
Borrowings
Net assets acquired
Farmer &
Carlisle
£’000
1,313
5,127
50
4,489
1,122
1,388
(6,165)
(50)
(140)
(641)
(538)
5,955
Other
acquisitions
£’000
254
36
-
686
347
-
(16)
-
-
-
-
1,307
Total
£’000
7,874
1,634
9,508
Total
£’000
1,567
5,163
50
5,175
1,469
1,388
(6,181)
(50)
(140)
(641)
(538)
7,262
Vertu Motors plc (Company Number: 05984855)
109
Notes to the Consolidated Financial Statements (continued)
18. Property, plant and equipment
2022
Cost
At 1 March 2021
Acquisitions (note 17)
Additions
Reclassifications
Disposals
At 28 February 2022
Accumulated depreciation and impairment
At 1 March 2021
Depreciation charge
Reclassifications
Disposals
At 28 February 2022
Net Book Value
At 28 February 2022
Freehold
and long
leasehold
land and
buildings1
£’000
264,751
5,005
8,699
338
(1,039)
277,754
35,583
6,592
215
(1,038)
41,352
Short
leasehold
land and
buildings1
£’000
Vehicles
and
machinery
£’000
Furniture,
fittings
and
equipment
£’000
Total
£’000
5,954
-
373
(307)
(83)
5,937
2,889
726
(215)
(83)
3,317
13,756
24
3,112
185
(1,508)
15,569
7,887
2,466
74
(1,400)
9,027
22,163 306,624
5,163
134
16,850
4,666
-
(216)
(2,217)
(4,847)
24,530 323,790
13,601
4,581
(74)
(2,147)
15,961
59,960
14,365
-
(4,668)
69,657
236,402
2,620
6,542
8,569 254,133
At 28 February 2021
1 Includes leasehold improvements and franchise standards property improvements.
229,168
3,065
5,869
8,562 246,664
Depreciation expense of £14,365,000 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 (2021: £10,900,000) have
been granted to manufacturer partners as security against consignment stocking lines and
£15,950,000 (2021: £15,950,000) in respect of mortgage funding for freehold and long leasehold
properties.
2021
Cost
At 1 March 2020
Acquisitions
Additions
Transfer to assets held for resale
Reclassifications
Disposals
At 28 February 2021
Accumulated depreciation and impairment
At 1 March 2020
Depreciation charge
Transfer to assets held for resale
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
Vertu Motors plc (Company Number: 05984855)
110
Notes to the Consolidated Financial Statements (continued)
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
2022
£’000
73,019
5,259
78,278
2021
£’000
76,213
4,939
81,152
(14,132)
(74,698)
(88,830)
(14,126)
(76,975)
(91,101)
Additions to the right-of-use assets and lease liabilities during the year ended 28 February
2022 were £14,132,000 (2021: £12,098,000).
During the year ended 28 February 2022, right-of-use assets with a net book value of
£348,000 (2021: £2,315,000) were disposed of as a result of assignment, settlement or
modification of various leases. The corresponding lease liability disposed of was £617,000
(2021: £2,549,000) generating a £269,000 profit recognised in the Consolidated Income
Statement (2021: £234,000).
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
2022
£’000
10,984
5,674
16,658
2021
£’000
10,336
5,307
15,643
Profit on lease modification
(269)
(234)
Included in finance costs
Interest expense
3,581
3,632
The total cash outflow in respect of lease payments in the year ended 28 February 2022 was
£19,367,000, of which £3,581,000 related to interest on lease liabilities (2021: £18,974,000
including £3,632,000 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 2022 and 28 February 2021 is given in note 7 of the
Vertu Motors plc company only financial statements (pages 136 to 138).
Vertu Motors plc (Company Number: 05984855)
111
Notes to the Consolidated Financial Statements (continued)
21. Inventories
New vehicle stock
Used vehicle stock
Demonstrator and courtesy vehicles
Parts and sundry stocks
2022
£’000
274,873
155,000
30,938
14,216
475,027
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
2022
£’000
23,387
217,617
33,869
274,873
2021
£’000
438,045
121,177
25,984
12,185
597,391
2021
£’000
59,327
321,337
57,381
438,045
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
£3,273,963,000 (2021: £2,314,890,000).
22. Property assets held for resale
At beginning of year
Transfers in from freehold property
Property sold during the year
At end of year
2022
£’000
1,369
-
(1,369)
-
2021
£’000
417
1,369
(417)
1,369
The following three freehold properties were sold during the year ended 28 February 2022:
• A Volkswagen dealership in Whitchurch which was closed on 26 April 2021 with the
resultant surplus property sold on 7 May 2021.
• 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. This property was sold on 24 January 2022.
• 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. This property was
sold on 7 February 2022.
All properties generated cash proceeds equal or in excess of their carry value.
23. Trade and other receivables
Trade receivables
Less provision for impairment of trade receivables
Trade receivables (net)
Other receivables
Prepayments and accrued income
Vertu Motors plc (Company Number: 05984855)
112
2022
£’000
42,262
(2,062)
40,200
428
11,211
51,839
2021
£’000
43,980
(1,967)
42,013
10,973
6,389
59,375
Notes to the Consolidated Financial Statements (continued)
23. Trade and other receivables (continued)
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
37,240
36,714
31-60
£’000
3,454
5,332
61-90
£’000
531
728
2022
2021
>90
£’000
1,037
1,206
Trade
Receivables
£’000
42,262
43,980
Loss
Allowance
£’000
(2,062)
(1,967)
Trade
Receivables
(net)
£’000
40,200
42,013
As at 28 February 2022, trade receivables of £886,000 (2021: £2,536,000) were past due but
not impaired. The ageing of these receivables are all within 3 months overdue.
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
2022
£’000
1,967
980
(885)
2,062
2021
£’000
1,557
1,464
(1,054)
1,967
The net remeasurement of the loss allowance has been included in ‘other expenses’ within
‘operating expenses’ in the income statement (note 6). A mounts 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. Credit risk associated
with the Group’s sales is limited to certain revenue streams as the majority of vehicle sales
are either cash sales to retail customers (whereby the vehicle would not be delivered to the
customer, and therefore recognised in revenue, without cleared funds) or a sale on finance
invoiced to the Group’s retail finance partners (whereby the vehicle would not be delivered
unless the Group was in receipt of a confirmation of payout with cleared funds typically
received within three days of such confirmation). Business to business sales may be offered
credit terms, subject to credit application and review of limits against published credit rating
information. Credit terms average 7-14 days for vehicle sales and 30-45 days for aftersales.
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.
Vertu Motors plc (Company Number: 05984855)
113
Notes to the Consolidated Financial Statements (continued)
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
2022
£’000
83,793
2022
£’000
415,011
17,664
70,411
26,000
529,086
2021
£’000
67,828
2021
£’000
602,780
6,237
53,931
26,000
688,948
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 £11,894,000 (2021: £10,740,000) in respect of outstanding service plans.
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
2022
£’000
11,647
636
12,283
11,337
44,006
55,343
67,626
2022
£’000
11,962
321
46,549
8,794
67,626
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
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 2022 and is in place until 27 February 2024. At 1 March 2021 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 the Sterling Overnight Index Average (“SONIA”) depending
on the value of the Group’s net debt to EBITDA ratio, following the transition from LIBOR
which completed during the year ended 28 February 2022.
£54,100,000 of the RCF was drawn at 1 March 2021. In July 2021, £10,000,000 of this
balance, which had been drawn in March 2021 in respect of acquisitions which completed
during the previous financial year, was repaid, bringing the total drawn balance for the
remainder of the year ended 28 February 2022 down to £44,100,000. Interest was charged
Vertu Motors plc (Company Number: 05984855)
114
Notes to the Consolidated Financial Statements (continued)
26. Borrowings (continued)
a) Bank borrowings (continued)
on this facility at 1.3% above LIBOR until January 2022 and SONIA for the remainder of the
year.
On 6 August 2018, the Group entered into a five year interest rate swap in respect of
£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 £15,000,000 of the Group’s
borrowings, swapping to a fixed interest rate of 1.214%. As a result, the value of hedged
borrowings during the year ended 28 February 2022 was maintained at £22,000,000 overall.
A rate of 1.45% above base rate has been applied in relation to overdrafts during the year
ended 28 February 2022. The interest rate that applied to the Group’s Committed Money
Market Loan (“CMML”) facility was between 1.35% and 2.00% above SONIA depending on
the Group’s net debt to EBITDA ratio.
The overdraft and CMML facilities were renewed on 28 April 2022 until 31 May 2023 with the
same limits as were in place at 28 February 2022.
The Group had the following undrawn borrowing and overdraft facilities at 28 February 2022:
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
2022
£’000
5,000
48,000
17,900
23,353
94,253
2021
£’000
5,000
48,000
7,900
39,052
99,952
During the year ended 28 February 2021, the Group drew down funding under a 20 year
mortgage facility to partially finance the BMW MINI acquisition in the North East and
Yorkshire. 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. Due to low historic usage of this facility, the limit available on the facility was
reduced by £10,000,000 during the year ended 28 February 2022.
At 28 February 2022 the total used vehicle stocking facility available to the Group was
£35,000,000 (2021: £45,000,000).
d) Financial assets
The Group’s financial assets on which floating interest is receivable comprise cash deposits
and cash in hand of £83,793,000 (2021: £67,828,000). 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.
Vertu Motors plc (Company Number: 05984855)
115
Notes to the Consolidated Financial Statements (continued)
27. Derivative financial instruments
Interest rate swap contracts
The fair values of derivative financial instruments used for hedging purposes are disclosed
below:
£7m Interest rate swap – cash flow hedges
£15m Interest rate swap – cash flow hedges
Total derivates designated as hedging instruments
Non-current borrowings subject to hedging instruments
Total derivative financial liabilities
2022
£’000
(13)
18
5
2021
£’000
(183)
(314)
(497)
2022
£’000
22,000
22,000
2021
£’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 2022 totalled £22,000,000 (2021: £22,000,000). Their combined fair value was
an asset of £5,000 (2021: £497,000). The £18,000 asset in respect of the £15m swap is
included within prepayments in note 23.
At 28 February 2022, the main floating rate was SONIA, following transition from LIBOR
during the year ended 28 February 2022. Gains and losses recognised in the cash flow
hedging reserve in equity on interest rate swap contracts as at 28 February 2022 will be
released to the consolidated statement of comprehensive income as the related interest
expense is recognised.
Vertu Motors plc (Company Number: 05984855)
116
Notes to the Consolidated Financial Statements (continued)
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)
2022
£’000
(4,825)
17,848
13,023
2021
£’000
(3,065)
12,245
9,180
The gross movement on the Group’s deferred income tax account is as follows:
2022
At 1 March 2021
Charged / (credited) to income statement
(note 12)
Charged directly to equity
Acquisitions (note 17)
At 28 February 2022
2021
At 1 March 2020
Charged / (credited) to income statement
Credited directly to equity
Acquisitions
At 28 February 2021
Deferred tax
liabilities
£’000
12,245
Deferred tax
assets
£’000
(3,065)
4,262
700
641
17,848
(1,856)
96
-
(4,825)
Deferred tax
liabilities
£’000
10,331
1,845
(498)
567
12,245
Deferred tax
assets
£’000
(2,152)
(903)
(10)
-
(3,065)
Net
£’000
9,180
2,406
796
641
13,023
Net
£’000
8,179
942
(508)
567
9,180
2022
At 1 March 2021
Charged / (credited) to
income statement (note 12)
Acquisitions (note 17)
Charged directly to equity
At 28 February 2022
2021
At 1 March 2020
Charged / (credited) to
income statement
Acquisitions
Credited directly to equity
At 28 February 2021
Accelerated
tax
depreciation
£’000
3,341
Share
based
payments
£’000
(978)
Pensions
£’000
1,186
Other timing
differences
£’000
5,631
Total
£’000
9,180
808
313
-
4,462
(401)
-
-
(1,379)
378
-
700
2,264
1,621
328
96
2,406
641
796
7,676 13,023
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
Deferred tax balances as at 28 February 2022 have been measured at a rate of 25%.
Vertu Motors plc (Company Number: 05984855)
117
Notes to the Consolidated Financial Statements (continued)
29. Contract liabilities
At 1 March 2021
Created in the year
Recognised as income during the year
At 28 February 2022
Current
Non-current
Warranty policies
Warranty
policies
£’000
18,466
10,833
(8,013)
21,286
Free
servicing
£’000
3,101
776
(1,964)
1,913
Total
£’000
21,567
11,609
(9,977)
23,199
10,299
10,987
21,286
1,453
460
1,913
11,752
11,447
23,199
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.
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. T he 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 2022 are estimated to be £Nil.
The IAS 19 (Revised) figures and disclosures have been based on the provisional triennial
valuation as at 5 April 2021. 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.
Vertu Motors plc (Company Number: 05984855)
118
Notes to the Consolidated Financial Statements (continued)
30. Retirement benefit asset (continued)
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
2021
2022
£’000
£’000
8,690
10,091
41,362
38,782
5,134
5,453
985
1,131
56,171
55,457
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 2021 was 2.00%. This is equal to the
discount rate used in the calculation of the net interest income for the year ended 28 February
2022.
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
2022
£’000
55,457
(46,402)
9,055
2021
£’000
56,171
(49,925)
6,246
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.
The movements in the fair value of scheme assets in the year are as follows:
Opening fair value of scheme assets
Interest income
Actuarial gains/(losses)
Benefits paid
Expenses recognised in the income statement
Closing fair value of scheme assets
2022
£’000
56,171
1,100
541
(2,239)
(116)
55,457
2021
£’000
59,197
990
(2,030)
(1,834)
(152)
56,171
Vertu Motors plc (Company Number: 05984855)
119
Notes to the Consolidated Financial Statements (continued)
30. Retirement benefit asset (continued)
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 (gains)/losses
Benefits paid
Closing fair value of scheme liabilities
2022
£’000
49,925
976
(2,260)
(2,239)
46,402
The amounts recognised in the income statement in the year are as follows:
Expenses
Net interest income (note 11)
Total (income)/expense included in income statement
The actual returns on Scheme assets in the year are as follows:
Expected return on scheme assets
Actuarial gains/(losses)
2022
£’000
116
(124)
(8)
2022
£’000
1,100
541
1,641
2021
£’000
50,330
840
589
(1,834)
49,925
2021
£’000
152
(150)
2
2021
£’000
990
(2,030)
(1,040)
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
2022
2.75%
4.00%
3.20%
3.00%
3.20%
2021
2.00%
3.10%
3.00%
2.10%
3.00%
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
2022
22
24
2021
22
24
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
2022
23
26
2021
23
25
Amounts recognised in the Consolidated Statement of Comprehensive Income in the year are
as follows:
Actuarial gains/(losses)
Related deferred tax (charge)/credit (note 28)
Total, included within retained earnings
2022
£’000
2,801
(700)
2,101
2021
£’000
(2,619)
498
(2,121)
Cumulative actuarial gains/(losses)
520
(1,581)
Vertu Motors plc (Company Number: 05984855)
120
Notes to the Consolidated Financial Statements (continued)
30. Retirement benefit asset (continued)
Sensitivity analysis
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
1,639
(1,731)
(1,115)
1,087
(1,835)
1,802
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve
2022
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
At 1 March 2021
Issuance and sale of
treasury shares
Repurchase of own shares
Cancellation of repurchased
shares
At 28 February 2022
361,886
36,917
124,939
10,645
(2,791)
2,810 172,520
3,146
(9,751)
-
-
-
-
-
-
1,205
-
-
-
1,205
-
-
355,281
(975)
35,942
-
124,939
-
10,645
-
(1,586)
975
-
3,785 173,725
The other reserve is a merger reserve, arising from shares issued for shares, as
consideration to the former shareholders of acquired businesses.
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
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.
Vertu Motors plc (Company Number: 05984855)
121
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)
As disclosed in note 8, a share based payments charge of £1,396,000 (2021: £265,000) 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 20161
6 Nov 20172
2 Jul 20181
17 Jul 20182
8 Nov 20181
1 Mar 20201
1 Mar 2021
24 Jun 2021
Type
CSOP
CSOP
CSOP
LTIP
LTIP
CSOP
CSOP
LTIP
CSOP
PSO
PSO
PSO
Granted /
Outstanding at 28
February 2022
No of shares
-
800,000
1,130,000
53,583
40,337
-
3,000,000
-
3,747,500
5,074,569
7,223,847
942,411
22,012,247
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
Exercise
price
26.00p
27.50p
39.25p
0.00p
0.00p
45.00p
49.60p
0.00p
38.25p
0.00p
0.00p
0.00p
Date from
which
exercisable
28 Nov 2014
30 Aug 2015
30 Aug 2015
20 Aug 2016
5 Sep 2019
7 Nov 2020
2 Jul 2021
17 Jul 2021
8 Nov 2021
1 Mar 2024
1 Mar 2025
1 Mar 2025
Expiry date
28 Nov 2021
12 Jun 2022
24 Oct 2022
20 Aug 2023
5 Sep 2026
7 Nov 2027
2 Jul 2028
17 Jul 2028
8 Nov 2028
1 Mar 2030
1 Mar 2031
1 Mar 2031
1 Vested.
2 Lapsed in full during the year ended 28 February 2022 as a result of not satisfying the relevant performance criteria.
Movements in the number of share options outstanding are as follows:
At beginning of year
Granted
Forfeited
Exercised
Lapsed
At end of year
2022
No of share
options
21,762,732
8,500,899
(716,024)
(4,511,242)
(3,024,118)
22,012,247
2021
No of share
options
21,565,045
8,355,086
(389,677)
(40,337)
(7,727,385)
21,762,732
The weighted average share price during the year was 52.3p (2021: 27.6p). The weighted
average fair value of PSO options granted during the year, determined using the Black-
Scholes model was 33.8p per option.
Movements in the number of share options outstanding and their related exercise prices are
as follows:
CSOP
LTIP
PSO
Total
At 1 March 2020
Granted
Forfeited
Exercised
Lapsed
At 28 February 2021
Granted
Forfeited
Exercised
Lapsed
At 28 February 2022
Options
No of
shares
17,869,229
-
(210,000)
-
(1,880,000)
15,779,229
-
(199,998)
(4,436,731)
(2,465,000)
8,677,500
Weighted
average
exercise
price
40.85p
-
41.67p
-
45.38p
40.16p
-
40.68p
35.55p
45.00p
41.31p
Options
No of
shares
3,695,816
-
-
(40,337)
(3,062,356)
593,123
-
-
(40,337)
(458,866)
93,920
122
Weighted
Options
average
No of
exercise
shares
price
-
0.00p
8,355,086
-
(179,677)
-
-
0.00p
(2,785,029)
0.00p
5,390,380
0.00p
8,500,899
-
(516,026)
-
(34,174)
0.00p
0.00p
(100,252)
0.00p 13,240,827
Weighted
average
exercise
price
-
0.00p
0.00p
-
0.00p
0.00p
0.00p
0.00p
0.00p
0.00p
0.00p
Options
No of
shares
21,565,045
8,355,086
(389,677)
(40,337)
(7,727,385)
21,762,732
8,500,899
(716,024)
(4,511,242)
(3,024,118)
22,012,247
Vertu Motors plc (Company Number: 05984855)
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)
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
4 years
19%
10 years
7 years
0.2%
4%
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.
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 122.
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, these options therefore lapsed during the year.
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. Therefore, 100% of these options vested during the year.
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. Therefore, 100% of these options vested during the year.
There were no CSOP share options issued during the financial year to 28 February 2022.
Vertu Motors plc (Company Number: 05984855)
123
Notes to the Consolidated Financial Statements (continued)
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve (continued)
c) Long Term Incentive Plan (“LTIP”)
Outstanding LTIP awards relate to remaining awards which vested in previous financial years
and are within their exercisable period. No LTIP awards were issued during the year.
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 2021, 7,558,488 PSO awards were made to certain senior managers and a
further 942,411 PSO awards were made to the Executive Directors on 24 June 2021. 334,641
of these awards were forfeited as a result of leavers during the year, with the remaining
awards vesting in proportion to achievement of on-target bonus earnings by the relevant
colleagues in the year ended 28 February 2022.
On 1 March 2022, 6,453,290 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 gains/(losses) on derivative financial
instruments during the year
Deferred taxation on fair value (gains)/losses during year
At end of year
2022
£’000
(403)
503
(96)
4
2021
£’000
(407)
(6)
10
(403)
Vertu Motors plc (Company Number: 05984855)
124
Notes to the Consolidated Financial Statements (continued)
33. Reconciliation of net cash flow to movement in net debt
Net increase 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 cash/(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
2022
£’000
15,965
(5,699)
10,638
20,904
-
(206)
(206)
20,698
(4,531)
16,167
(91,101)
(14,132)
617
(3,581)
19,367
(88,830)
2021
£’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)
Closing net debt (including lease liabilities)
(72,663)
(95,632)
34. Cash flow from movement in working capital
The following table reconciles the movement in balance sheet headings to the movement in
working capital as presented in the consolidated cash flow statement.
2022
Inventories
(Note 21)
£’000
Current trade
and other
receivables
(Note 23)
£’000
Total working
capital
movement
£’000
Trade and
other
payables
£’000
(529,086)
(23,199)
(552,285)
(710,515)
(158,230)
(6,181)
51,839
59,375
7,536
1,469
9,005
(164,411)
(27,867)
116
(286)
(100)
164
(27,973)
Trade and other payables (Note 25)
Contract liabilities (Note 29)
At 29 February 2022
At 28 February 2021
Balance sheet movement
Acquisitions (Note 17)
Movement excluding business
combinations
Pension related balances
Increase in capital creditor
Increase in interest accrual
Bonus accrual settled in shares
Movement as shown in Consolidated
Cash Flow Statement
475,027
597,391
122,364
5,175
127,539
Vertu Motors plc (Company Number: 05984855)
125
Notes to the Consolidated Financial Statements (continued)
34. Cash flow from movement in working capital (continued)
2021
Trade and other payables
Contract liabilities
At 28 February 2021
At 29 February 2020
Balance sheet movement
Acquisitions
Disposals
Movement excluding business
combinations
Pension related balances
Decrease in capital creditors
Decrease in interest accrual
Movement as shown in Consolidated
Cash Flow Statement
Inventories
£’000
Current trade
and other
receivables
£’000
597,391
639,177
41,786
23,691
(1,885)
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)
Total working
capital
movement
£’000
28,631
152
722
135
29,640
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
72,359
91,101
(2,791)
103,823
264,492
-
-
5,699
(10,638)
-
-
-
(4,939)
205
-
-
-
-
67,625
-
-
-
-
(15,786)
-
-
(15,786)
-
14,132
(617)
-
-
88,830
1,040
-
-
-
-
-
-
1,040
(89)
(6,014)
-
-
-
(2,327)
(403)
(8,833)
951
(6,014)
5,699
(10,638)
(15,786)
(2,327)
(403)
(28,518)
-
-
-
165
-
(1,586)
-
-
-
-
63,162
158,152
205
14,132
(617)
165
63,162
313,021
As at 1 March 2021
Cash flows from financing activities:
Issue of treasury shares
Repurchase of own shares
Proceeds from issue of loan
Repayment of borrowings
Lease repayments
Dividends paid
Cash settled share options
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
Liability related: bonus accrual settled in shares
Equity related: other movements
As at 28 February 2022
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
87 to 88 were subject to at the end of 28 February 2022 until they are satisfied in full. These
liabilities
loans of
£329,074,000 (2021: £320,589,000). Such guarantees are enforceable against Vertu Motors
plc by any person to whom any such liability is due.
total £823,915,000 (2021: £969,920,000),
intercompany
including
Vertu Motors plc (Company Number: 05984855)
126
Notes to the Consolidated Financial Statements (continued)
37. Capital commitments
Capital commitments in respect of property, plant and equipment amounting to £415,000
were outstanding as at 28 February 2022 (2021: £379,000).
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 2022 is set out in the
Directors’ Remuneration Report on pages 64 to 68.
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 2022, the value of such services provided was
£584,757 (2021: £491,010). £ 62,379 was unpaid at 28 February 2022 in respect of these
services (2021: £45,421). In the year ended 28 February 2022, sales of £14,071 (2021:
£15,492) were made to Biffa plc, of which £Nil was outstanding at the year end (2021:
£1,178).
During the year to 28 February 2022, Robert Forrester, David Crane, Karen Anderson,
Andrew Goss, Pauline Best and Ken Lever bought and sold vehicles from and to the Group.
The value of these transactions for the year ended 28 February 2022 and the year ended 28
February 2021 is presented below. No profit or loss was made in respect of these
transactions in the year ended 28 February 2022 or the year ended 28 February 2021. 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 2022 (2021: £Nil).
2022
Robert Forrester
David Crane
Karen Anderson
Andrew Goss
Pauline Best
Ken Lever
2021
Robert Forrester
David Crane
Karen Anderson
Andrew Goss
Pauline Best
Bought from the Group
Sold to the Group
Number of
vehicles
4
4
4
2
2
2
Purchase
price
£’000
367
234
262
121
124
122
Number of
vehicles
4
5
4
2
2
1
Sale price
£’000
350
281
247
119
118
58
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
39. Post balance sheet events
On 6 April 2022, the Group acquired the freehold and long leasehold interests in its extensive
multi-franchise site located in Derby, for consideration of £7,100,000.
Vertu Motors plc (Company Number: 05984855)
127
Company Balance Sheet
As at 28 February 2022
Fixed assets
Intangible assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Total current assets
Note
5
6
7
8
2022
£’000
274
2,953
166,722
169,949
185,504
83,633
269,137
2021
£’000
445
2,983
166,722
170,150
153,932
67,654
221,586
Creditors: amounts falling due within
one year
10
(95,301)
(81,227)
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after
more than one year
173,836
343,785
140,359
310,509
11
(55,453)
(63,004)
Net assets
288,332
247,505
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 for the year
Other changes in retained earnings
Total shareholders’ funds
13
13
13
14
13
13
15
35,942
124,939
10,645
4
(1,586)
3,785
75,388
46,987
(7,772)
114,603
288,332
36,917
124,939
10,645
(403)
(2,791)
2,810
69,170
5,861
357
75,388
247,505
These financial statements, on pages 128 to 142, have been approved for issue by the Board
of Directors on 11 May 2022 and signed by:
Robert Forrester
Chief Executive
Karen Anderson
Chief Financial Officer
Vertu Motors plc (Company Number: 05984855)
128
Company Statement of Changes in Equity
For the year ended 28 February 2022
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
-
(403)
-
(2,791)
-
2,810
-
75,388
46,987
247,505
46,987
-
-
-
-
-
(975)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(96)
503
407
-
-
-
-
-
-
-
-
1,025
180
-
-
-
-
-
-
-
-
-
975
-
-
-
-
(96)
503
46,987
(74)
47,394
951
(15)
165
(6,014)
(6,014)
-
(2,327)
-
(2,327)
658
658
35,942
124,939
10,645
4
(1,586)
3,785
114,603
288,332
As at 1 March 2021
Profit for the year
Tax on items taken
directly to equity
Fair value gains
Total comprehensive
income for the year
Sale of treasury shares
Issuance of treasury
shares
Repurchase of own
shares
Cancellation of
repurchased shares
Dividends paid
Share based payments
charge
As at 28 February
2022
The other reserve is a merger reserve, arising from shares issued for shares as consideration,
to the former shareholders of acquired companies.
Vertu Motors plc (Company Number: 05984855)
129
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)
-
10
(6)
4
-
-
-
(803)
-
2,810
-
69,170
5,861
243,271
5,861
-
-
-
16
(2,004)
-
-
-
-
-
-
-
-
-
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
Vertu Motors plc (Company Number: 05984855)
130
Notes to the Company Financial Statements
1. Accounting Policies
Statement of compliance
The separate financial statements of Vertu Motors plc (“the Company”), 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 registered office address of
the Company is Vertu House, Fifth Avenue Business Park, Team Valley, Gateshead, Tyne &
Wear, NE11 0XA.
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 2022 was
£46,987,000 (2021: £5,861,000).
The consolidated financial statements include the results of all subsidiaries owned by Vertu
Motors plc listed on pages 136 to 137 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 2022 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 2022 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 2022 of the subsidiaries listed below, further detail of
which is provided in note 36 to the consolidated financial statements on page 126.
Vertu Motors plc (Company Number: 05984855)
131
Notes to the Company Financial Statements (continued)
1. Accounting Policies (continued)
Basis of preparation (continued)
The subsidiaries which have taken an exemption from an audit for the year ended 28 February
2022 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
Farmer & Carlisle Holdings Limited
Farmer & Carlisle Limited
Farmer & Carlisle Leicester Limited
F.C. Business Operations Limited
Grantham Motor Company Limited
Macklin Property Limited
South Hereford Garages Limited
South Hereford Garages Trade Parts LLP
Tyne Tees Finance Limited
Vans Direct Limited
Vertu Accident Repair 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
The subsidiaries which have taken an exemption from the preparation of individual accounts in
respect of the year ended 28 February 2022 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
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
Hughes of Beaconsfield Limited
International Concessionaires Limited
Merifield Properties Limited
Motor Nation Cars Limited (formerly Vertu
Motors (Retail) Limited
National Allparts Limited
Newbolds Garage (Mansfield) Limited
Nottingham TPS LLP
Peter Blake (Chatsworth) Limited
Peter Blake Limited
Power Bulbs Ltd
Power Bulbs Online Limited
SHG Holdings Limited
Sigma Holdings Limited
The Taxi Centre Limited
Typocar Limited
VanMan Limited
Vertu Fleet Limited
Vertu Motors (AMC) Limited
Vertu Motors Car Limited (formerly Motor
Nation Car Hypermarkets Limited)
Vertu Motors (Durham) Limited
Vertu Motors (Finance) Limited
Vertu Motors (Pity Me) Limited
Vertu Motors Property 2 Holdings Limited
Vertu Ventures Limited
Widnes Car Centre Limited
Widnes Car Centre (1994) Limited
The auditors’ remuneration for audit and other services was £25,000 (2021: £25,000).
Vertu Motors plc (Company Number: 05984855)
132
Notes to the Company Financial Statements (continued)
1. Accounting Policies (continued)
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.
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.
Vertu Motors plc (Company Number: 05984855)
133
Notes to the Company Financial Statements (continued)
1. Accounting Policies (continued)
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
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 2022, as well as the results of
sensitivity analysis performed, are provided in note 7.
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)
2022
£’000
18,005
6,061
2,360
26,426
1,396
27,822
2021
£’000
11,452
4,381
2,022
17,855
265
18,120
The above employee benefit expense for the year ended 28 February 2021 included
£1,946,000 of Government grant income in respect of the Coronavirus Job Retention
Scheme.
Vertu Motors plc (Company Number: 05984855)
134
Notes to the Company Financial Statements (continued)
3. Employee benefit expense (continued)
Details of the emoluments of the Directors who served during the years ended 28 February
2022 and 28 February 2021, which are included in the table above, are provided in the
Directors’ Remuneration Report on page 64 to 68.
4. Average monthly number of people employed (including Directors)
Sales
Service
Administration
5.
Intangible assets
Cost
At 1 March 2021
Additions
Disposals
At 28 February 2022
Accumulated Amortisation
At 1 March 2021
Amortisation charge
Disposals
At 28 February 2022
Net Book Value
At 28 February 2022
At 28 February 2021
6. Tangible assets
Cost
At 1 March 2021
Additions
Intercompany transfers
Disposals
At 28 February 2022
Accumulated Depreciation
At 1 March 2021
Depreciation charge
Disposals
At 28 February 2022
Net Book Value
At 28 February 2022
At 28 February 2021
2022
Number
144
22
485
651
Computer
equipment
£’000
Office
equipment
£’000
10,376
2,341
-
(1,582)
11,135
7,496
1,776
(928)
8,344
2,791
2,880
634
104
8
(4)
742
531
49
-
580
162
103
2021
Number
133
23
445
601
Computer
Software
£’000
2,646
45
(62)
2,629
2,201
175
(21)
2,355
274
445
Total
£’000
11,010
2,445
8
(1,586)
11,877
8,027
1,825
(928)
8,924
2,953
2,983
Vertu Motors plc (Company Number: 05984855)
135
Notes to the Company Financial Statements (continued)
7.
Investments
Cost
At 1 March 2021 and 28 February 2022
Accumulated impairment charges
At 1 March 2021 and 28 February 2022
Net Book Value
At 28 February 2021 and 28 February 2022
£’000
179,993
13,271
166,722
Vertu Motors plc, the Company, as at 28 February 2022 and 28 February 2021, 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 2
Motor retailer
Tyne Tees Finance Limited 1
Motor retailer
Vertu Motors (Continental) Limited 1
Maintenance and repair of motor vehicles
Vertu Accident Repair Limited
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 Limited
Property company
Vertu Motors (Property) Limited
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
Holding company (dormant subsidiaries)
Widnes Car Centre (1994) Limited 1
Holding company (dormant subsidiaries)
Brookside (1998) Limited 1
Holding company (dormant subsidiaries)
Hillendale Group Limited
Holding company (dormant subsidiaries)
Gordon Lamb Group Limited
Holding company (dormant subsidiaries)
Gordon Lamb Holdings Limited 1
Holding company (dormant subsidiaries)
Hughes Group Holdings Limited
Holding company
Bristol Street Group Limited 1
Holding company
Vertu Motors Property 2 Holdings Limited
Holding company
Sigma Holdings Limited
Holding company
Vertu Ventures Limited
Holding company
Aceparts Limited
Holding company
SHG Holdings Limited
Dormant company
Hughes of Beaconsfield Limited 1
Dormant company
Vertu Motors (Knaresborough) Limited
Dormant company
Why Pay More For Cars Limited 1 3
Dormant company
International Concessionaires Limited 1
Dormant company
Vertu Motors (AMC) Limited
Dormant company
Vertu Motors Car Limited (formerly Motor Nation
Car Hypermarkets Limited)
Bristol Street Limited 1
Bristol Street (No. 1) Limited 1
Bristol Street (No. 2) Limited 1
Dormant company
Dormant company
Dormant company
Vertu Motors plc (Company Number: 05984855)
136
Notes to the Company Financial Statements (continued)
7.
Investments (continued)
Company
National Allparts Limited 1
Merifield Properties Limited 1
Peter Blake Limited 1
Peter Blake (Chatsworth) Limited 1
Peter Blake (Clumber) Limited 1, 3
Typocar Limited
Widnes Car Centre Limited 1
KC Mobility Solutions Limited 1, 3
Compare Click Call Limited 3
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
Motor Nation Cars Limited (formerly 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
Principal activity
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
The registered address of the following companies is Dunfermline Autocentre, Halbeath Road,
Dunfermline, Fife, KY12 7RD
Boydslaw 103 Limited 1
Dunfermline Autocentre Limited 1
Holding company (dormant subsidiaries)
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 May 2021, the trade and assets of this subsidiary were transferred to other wholly owned subsidiaries of the
Dormant company
Dormant company
Group, thereafter this subsidiary ceased to trade.
3 Application to strike this company off the register was submit subsequent to the year end.
Furthermore, the following subsidiary undertaking (ordinary shares 100% owned and
incorporated within the United Kingdom) were acquired by subsidiaries of the Company, and
are therefore held indirectly by the Company, during the year ended 28 February 2022:
Company
Power Bulbs Online Ltd 4, 5
Power Bulbs Ltd 4
Farmer & Carlisle Holdings Limited 4
Farmer & Carlisle Limited 4, 6
Farmer & Carlisle Leicester Limited 4, 6
F.C. Business Operations Limited 4
4 Held indirectly by the Company
5 On 28 May 2021, this company was acquired by All Car Parts Limited, a subsidiary of the Group. On the same date,
the trade and assets of this subsidiary were transferred to All Car Parts Limited, thereafter this subsidiary ceased to
trade.
Principal activity
Online vehicle lighting retailer
Dormant company
Holding company
Motor retailer
Motor retailer
Dormant company
6 On 10 December 2021, this company was acquired by Grantham Motor Company Limited, a subsidiary of the
Group. On the same date, the trade and assets of this subsidiary were transferred to other wholly owned
subsidiaries of the Group, thereafter this subsidiary ceased to trade.
Vertu Motors plc (Company Number: 05984855)
137
Notes to the Company Financial Statements (continued)
7.
Investments (continued)
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 post-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 post-tax discount rate reflecting the Group’s Weighted Average Cost of Capital
(“WACC”) of 8% (2021: 8%) is applied.
Sensitivity analysis has been performed on the impairment test based on three potential
scenarios with the following results:
If restricted supply of new and used cars or reduced demand for service work as a
consequence of a reduced vehicle parc significantly reduced the Group’s earnings in the year
ending 28 February 2023, with a return to normalised trading in the year ending 29 February
2024, an additional impairment charge of £1.0m would arise in respect of the Company’s
investments.
If the growth rate in years three to five is reduced to -10%, an additional impairment charge of
£5.9m would arise in respect of the Company’s investments.
If the post-tax WACC was increased to 12%, an additional impairment charge of £5.5m would
arise in respect of the Company’s investments.
8. Debtors
Trade debtors
Amounts owed by Group undertakings
Deferred tax asset (note 9)
Value Added Tax
Prepayments and accrued income
2022
£’000
2,189
163,006
3,535
8,693
8,081
185,504
2021
£’000
1,828
141,989
2,416
2,525
5,174
153,932
Amounts owed by Group undertakings are unsecured, bear no interest and have no fixed
repayment date.
Vertu Motors plc (Company Number: 05984855)
138
Notes to the Company Financial Statements (continued)
9. Deferred tax asset
At beginning of year
Credited to the profit and loss account
(Charged)/credited directly to equity
At end of year
2022
£’000
2,416
1,215
(96)
3,535
2021
£’000
1,733
673
10
2,416
The amounts recognised for deferred tax assets, calculated under the liability method at 25%
(2021: 19%) are set out below:
Depreciation in excess of capital allowances
Other short-term timing differences
Total
2022
£’000
1,116
2,419
3,535
2021
£’000
731
1,685
2,416
During the year ending 28 February 2023, the reversal of deferred tax assets is expected to
decrease the corporation tax charge for the year by £149,000. 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
2022
£’000
10,633
26,000
2,589
6,180
38,147
11,752
95,301
2021
£’000
6,377
26,000
732
5,579
30,144
12,395
81,227
Other creditors comprise non-interest bearing advance payments from the Group’s finance
company partners.
Accruals includes £11,894,000 (2021: £10,740,000) 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:
1-2 years
2-5 years
2022
£’000
44,006
11,447
55,453
2022
£’000
44,006
-
44,006
2021
£’000
53,832
9,172
63,004
2021
£’000
-
53,832
53,832
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 amoun ts
disclosed in the table are the contractual undiscounted cash flows. Bal ances due within 12
months equal their carrying amounts as the impact of discounting is not significant.
Vertu Motors plc (Company Number: 05984855)
139
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 2022
Bank borrowings
Trade and other creditors
At 28 February 2021
12. Deferred income
Within one
year
£’000
-
95,301
95,301
Within two
to five years
£’000
44,006
11,447
55,453
Within one
year
Within two
to five years
£’000
-
81,227
81,227
£’000
53,832
9,172
63,004
Total
£’000
44,006
106,748
150,754
Total
£’000
53,832
90,399
144,231
Deferred income due in greater than one year comprises:
Warranty policies
Free servicing
Warranty policies
2022
£’000
10,987
460
11,447
2021
£’000
9,172
-
9,172
The Group sells used vehicle warranty policies which are in-house products that can be taken
out over 21, 24 or 36 months with income received on inception of the policy and released on a
straight-line basis over the life of the policies. There is an additional £10,299,000 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 (2021: £9,294,000).
Free servicing
The Group recognises deferred income 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 deferred income and is released to
the income statement when the service has been undertaken. There is an additional
£1,453,000 included in ‘Deferred income’ in creditors: amounts falling due within one year, in
respect of such service work to be completed in the next 12 months (2021: £3,101,000).
Vertu Motors plc (Company Number: 05984855)
140
Notes to the Company Financial Statements (continued)
13. Called up share capital, share premium, other reserve, treasury share reserve and
capital redemption reserve
2022
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 2021
Issuance and sale of
treasury shares
Repurchase of own
shares
Cancellation of
repurchased shares
At 28 February 2022
361,886
36,917
124,939
10,645
(2,791)
2,810
172,520
3,146
(9,751)
-
-
-
-
-
-
1,205
-
-
-
1,205
-
-
355,281
(975)
35,942
-
124,939
-
10,645
-
(1,586)
975
3,785
-
173,725
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.
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
14. Hedging reserve
Cash flow hedges:
At beginning of year
Fair value gains/(losses) on derivative financial
instruments during the year
Deferred taxation on fair value (gains)/losses during year
At end of year
15. Profit and loss account
As at beginning of year
Profit for the financial year
Dividend paid
Share based payments charge
Repurchase of own shares
Treasury shares issued
As at end of year
Vertu Motors plc (Company Number: 05984855)
141
2022
£’000
(403)
503
(96)
4
2022
£’000
75,388
46,987
(2,327)
658
(6,014)
(89)
114,603
2021
£’000
(407)
(6)
10
(403)
2021
£’000
69,170
5,861
-
373
-
(16)
75,388
Notes to the Company Financial Statements (continued)
16. Dividends per share
An interim dividend of £2,327,000 (0.65p per share) in respect of the year ended 28 February
2022 was paid in January 2022.
A final dividend of 1.05p per share is to be proposed at the Annual General Meeting on 22
June 2022. The ex-dividend date will be 30 June 2022 and the associated record date 1 July
2022. The dividend will be paid, subject to shareholder approval, on 29 July 2022 and these
financial statements do not reflect this final dividend payable.
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 £1,396,000 (2021: £265,000).
18. Contingencies
See note 36 to the consolidated financial statements for details of contingent liabilities as at the
balance sheet date.
19. Directors’ remuneration
The remuneration of the Directors who served during the year from 1 March 2021 to 28
February 2022 is set out within the Directors’ Remuneration Report on pages 64 to 68.
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
21. Related party transactions
2022
£’000
557
283
-
840
2021
£’000
463
421
-
884
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)
142
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
FY22
FY21
FY20
Adjusted
Dealerships
consecutive financial years.
that have comparable
trading periods
in
two
The twelve month period ended 28 February 2022.
The twelve month period ended 28 February 2021.
The twelve month period ended 29 February 2020.
Adjusted for amortisation of intangible assets, share based
payments and impairment charges, 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):
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
Free Cash Flow
Net cash inflow from operating activities
Amortisation of loan arrangement fees
Purchase of other property, plant and equipment
Enhancement capital expenditure included in
above
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)
143
2022
£’000
85,733
131
407
1,396
87,667
2022
£’000
83,793
(67,626)
16,167
11,647
27,814
2022
£’000
69,001
(178)
(16,571)
6,180
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)
-
(44)
(264)
1,605
(15,786)
44,207
972
(15,342)
48,442
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
2022
£’000
78,770
131
407
1,396
80,704
2022
£’000
331,881
(103,470)
(1,797)
10,856
237,470
66.8p
2021
£’000
22,399
1,452
436
265
24,552
2021
£’000
275,940
(99,192)
(1,948)
6,764
181,564
50.2p
At 28 February 2022, there were 359,422,972 shares in issue (2021: 369,173,981) of which,
4,141,272 were held by the Group’s employee benefit trust (2021: 7,287,304). 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:
Revenues by department
2022
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total revenue
FY22
Group
revenue
£’m
969.9
772.0
1,584.4
288.8
3,615.1
FY22
Acquisition
revenue
£’m
(154.4)
(74.4)
(221.1)
(40.0)
(489.9)
FY22
Disposals
revenue
£’m
(0.4)
-
(1.8)
(0.2)
(2.4)
FY22
Like-for-like
revenue
£’m
815.1
697.6
1,361.5
248.6
3,122.8
2020
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total revenue
FY20
Group
revenue
£’m
862.5
708.5
1,235.4
258.1
3,064.5
FY20
Acquisition
revenue
£’m
(3.9)
-
(4.4)
(1.3)
(9.6)
FY20
Disposals
revenue
£’m
(17.2)
(1.0)
(27.4)
(5.0)
(50.6)
FY20
Like-for-like
revenue
£’m
841.4
707.5
1,203.6
251.8
3,004.3
Vertu Motors plc (Company Number: 05984855)
144
Alternative Performance Measures (continued)
Like-for-like reconciliations (continued):
Gross profit (“GP”) by department
2022
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total GP
FY22
Group
GP
£’m
80.6
35.5
154.4
164.9
435.4
FY22
Acquisition
GP
£’m
(12.3)
(3.1)
(16.2)
(22.2)
(53.8)
FY22
Disposals
GP
£’m
-
-
(0.1)
(0.1)
(0.2)
FY22
Like-for-like
GP
£’m
68.3
32.4
138.1
142.6
381.4
2020
New car retail and Motability
New fleet and commercial
Used cars
Aftersales
Total GP
FY20
Group
GP
£’m
62.7
25.8
102.1
143.5
334.1
FY20
Acquisition
GP
£’m
(0.1)
-
(0.4)
(0.7)
(1.2)
FY20
Disposals
GP
£’m
(1.5)
(0.1)
(1.7)
(3.0)
(6.3)
FY20
Like-for-like
GP
£’m
61.1
25.7
100.0
139.8
326.6
Vertu Motors plc (Company Number: 05984855)
145
Company Information
Nominated Advisor and Broker
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
Solicitors
Muckle LLP
32 Gallowgate
Newcastle upon Tyne
NE1 4BF
Independent Auditors
Ashurst LLP
London Fruit & Wool Exchange
1 Duval Square
London E1 6PW
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Level 5 and 6
Central Square South
Orchard Street
Newcastle upon Tyne
NE1 3AZ
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)
146
Registered Office:
Vertu House,
Fifth Avenue Business Park,
Team Valley, Gateshead,
Tyne and Wear, NE11 0XA
Company Number: 05984855
www.vertumotors.com