ANNUAL REPORT & FINANCIAL STATEMENTS
For the year ended 28 February 2023
1
Vertu Motors plc (Company Number: 05984855)
Table of Contents
Page
Strategic Report
Performance Highlights
2
At a Glance
3
Group Stakeholders
4
Chairman’s Statement
8
Group Strategy
9
Key Performance Indicators
18
Financial Review
19
Sustainability
29
Health and Safety
34
Colleagues
35
Risk Management
40
Viability and Going Concern
44
Corporate Governance Report
Chairman’s Corporate Governance Statement
46
Board Leadership
48
Division of Responsibilities
52
Nominations, Composition and Succession
54
Audit, Risk and Internal Control
55
Remuneration Committee Report
59
Directors’ Remuneration Report
66
Directors Report
72
Statement of Directors Responsibilities
75
Financial Statements
Independent Auditors’ Report
76
Consolidated Income Statement
84
Consolidated Statement of Comprehensive Income
85
Consolidated Balance Sheet
86
Consolidated Cash Flow Statement
87
Consolidated Statement of Changes in Equity
88
Notes to the Consolidated Financial Statements
90
Company Balance Sheet
132
Company Statement of Changes in Equity
133
Notes to the Company Financial Statements
135
Alternative Performance Measures
147
Company Information
150
Financial Diary
Annual General Meeting
28 June 2023
Interim Results 2023/24
October 2023
Final Results 2023/24
May 2024
Performance Highlights
2
Vertu Motors plc (Company Number: 05984855)
Operational Highlights
•
Adjusted1 profit before tax of £39.3m (FY22: £80.7m), on record revenues of £4.0bn.
Profit slightly ahead of market expectations.
•
Acquisitions successfully integrated onto Group systems and processes and on track
to deliver expected synergies and earnings enhancement.
•
Group portfolio grown by 31 sales outlets during the Year, including 27 from Helston
and 2 from BMW Motorrad acquisitions, contributing to scale benefit opportunities.
•
Free Cash Flow of £54.3m in the Year (FY22: £44.4m) reflecting excellent working
capital management.
•
Net debt2 of £75.3m as at 28 February 2023, significantly ahead of market
expectations (FY22: Net cash: £16.2m).
•
Expanded debt facilities agreed in December 2022, including a new £74.8m 20-year
mortgage, an upsized revolving credit facility of £93m with a third bank added to
syndicate, and an increased used vehicle stocking facility to £70m (from £35m).
•
Net tangible assets per share of 65.3p reflecting strong asset base.
•
Final Dividend of 1.45p per share recommended, bringing full year dividend to 2.15p
per share (FY22: 1.70p) an increase of 26.5%.
•
£5.9m returned to shareholders via repurchase of 10.5m shares during the Year.
Outlook Highlights
•
Trading performance in excess of last year delivered in key months of March and
April aided by the contribution from acquisitions.
•
Improvement in new vehicle supply evident with continued high Group order bank of
high margin new vehicle orders in place.
•
Used vehicle demand remains strong and continued used supply constraints
underpin residual values. Vertu Insights rollout underway to help optimise used car
gross margin.
•
Aftersales revenues and profits remain highly resilient aided by retention products
such as service plans and ageing of the vehicle parc.
•
Cost pressures, reflecting continued high inflation remain evident with strategies in
place to mitigate where possible.
•
Active portfolio management strategy expected to deliver a further c.£9.5m of assets
disposals in next 12 months, £3m above book value.
•
Net debt expected to reduce through ongoing strong Free Cash Flow generation.
1 Adjusted to remove share-based payments charge, amortisation of intangible assets, impairment charges and exceptional
acquisition costs.
2 Excludes lease liabilities, includes used vehicle stocking loans
Financial Summary
Years ended 28 February
2023
2022
2021
Revenue
£4,014.5m
£3,615.1m
£2,547.7m
Adjusted1 profit before tax
£39.3m
£80.7m
£24.6m
Basic Adjusted1 EPS
9.16p
17.92p
5.27p
Dividends per share
2.15p
1.70p
-
Free Cash Flow
£54.3m
£44.4m
£48.4m
Net (Debt)2/ Cash
(£75.3m)
£16.2m
(£4.5m)
1 Adjusted to remove share-based payments charge, amortisation of intangible assets and impairment charges
2 Excludes lease liabilities, includes used vehicle stocking loans
At a Glance
3
Vertu Motors plc (Company Number: 05984855)
189 sales outlets
32 car, bike and commercial franchise partners
149 locations across the UK
7,300 colleagues
195,578
vehicles sold
£4.0bn revenue
86.3% Used Car Customer Experience
(Net Promoter Score)
83% of Colleagues consider Group as a great
place to work
Car
Commercial
Bikes
Group Stakeholders
4
Vertu Motors plc (Company Number: 05984855)
Engaging with Stakeholders - section 172 statement
Positive relationships with the Group’s stakeholders are key to the long-term
success of the Group.
The Group engages with them to understand what matters to them and take this into account
when setting strategy and also in our day-to-day business operations. Our key stakeholder
groups are identified below. We have set out on these pages how the business engages with
these stakeholders, the key interests raised and the outcomes of that engagement.
Colleagues
How we engage:
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, 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.
Key interests raised:
• Pay and benefits
• Communication
• Wellbeing
• Training and
development
• Colleague recognition
• Business
performance
• Community
involvement and
fundraising
Outcomes of
engagement:
• Ensuring the safety
and wellbeing of all
colleagues
• Pay and reward
review enhanced
benefits and flexible
working patterns
delivered.
• Regular video
communication to all
colleagues
• Regular Dealership
colleague
engagement
meetings.
• Colleague meetings
with the director for
colleague
engagement (P Best)
• Local and divisional
colleague satisfaction
action plans
Customers
How we engage:
Customer satisfaction
surveys are regularly
undertaken through
both the Group’s
Manufacturer partners
and via Judge service
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.
Key interests raised:
•
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
chosen sales journey.
• 14-day money back
guarantee.
• Consistency of part
exchange and sell
your car valuation.
Group Stakeholders (continued)
5
Vertu Motors plc (Company Number: 05984855)
Engaging with Stakeholders - section 172 statement (continued)
Investors
How we engage:
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.
Key interests raised:
•
Financial
performance
•
Capital allocation
•
Execution of
strategy
•
Competition
•
Sustainability &
ESG
Outcomes of
engagement:
• Meetings held
throughout the year
• Dividend increased for
FY23 and share buy-
back programme
continued in the
financial year.
• Results webcast for
retail investors.
• Shareholder
communication
regarding Helston
acquisition.
Manufacturer
Partners
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.
Key interests raised:
•
Customer
satisfaction
•
Financial
performance
•
Volume of vehicles
sold
•
Quality of premises
and compliance with
standards
•
Portfolio
management and
representation
Outcomes of
engagement:
• Execution of franchise
developments
including multi-
franchising
• Expansion of the
Group
• Delivery of the move
to an agency
distribution model
Mercedes-Benz.
• Agreement of volume
targets
• Investment in
premises
Suppliers
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.
Key interests raised:
•
Group strategy
•
Collaborative
working
•
Integration of
systems
Outcomes of
engagement:
• Cost reductions
through contract
revisions
• Expansion of Group
arrangements to
Helston acquisition.
Group Stakeholders (continued)
6
Vertu Motors plc (Company Number: 05984855)
Engaging with Stakeholders - section 172 statement (continued)
Finance Providers
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.
Key interests raised:
•
Customer
satisfaction
•
Acquisition
financing
•
Financial
performance
•
Compliance with
regulations
•
Behaviour of the
credit book
•
Finance penetration
achieved
Outcomes of
engagement:
• Renewal of annual
facilities
• Re-finance of bank
facilities secured
December 2022.
• Secured 20-year
mortgage to help fund
expansion of the
Group.
• Continued review of
retail finance
arrangements in
response to changes
in base rates
Communities
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:
•
Funding of local
projects
•
Local sponsorship
•
Local operational
issues
•
Education and
employment
Outcomes of
engagement:
• Engagement with
schools
• Investment in
apprenticeship
programme to provide
youth employment
opportunities
• Ongoing and new
sponsorship
programmes
benefiting
communities local to
the Group’s
operations.
• ‘Driving
Sustainability’
programme
Group Stakeholders (continued)
7
Vertu Motors plc (Company Number: 05984855)
Engaging with Stakeholders - section 172 statement (continued)
Government and
Regulators
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:
•
Marketing and
Communication
•
Health and Safety
•
MOT compliance
•
Compliance with
laws and
regulations
•
Fair treatment of
customers
Outcomes of
engagement:
• Donations to other
community initiatives
• Input to and member
of industry working
groups
• Respond to FCA on
their sector review on
commission
disclosure.
• Well advanced on
implementing any
adjustments to comply
with the new FCA
Consumer Duty,
which comes into
effect on 31 July
2023.
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 stakeholders
Chairman’s Statement
8
Vertu Motors plc (Company Number: 05984855)
The Group again executed well during the year ended 28 February 2023, delivering an
Adjusted1 profit before tax of £39.3m, slightly ahead of analysts’ expectations which had
previously been raised on several occasions. There were noteworthy highlights in the Year:
• Successful and meaningful scale growth delivered, with an increase of 31 sales outlets in
the financial year and the planned integration progressing well. The Group’s strategic
objective to grow as a major scaled franchise automotive retail group is born from the
belief that scale benefits can be maximised in a larger group, which we are
demonstrating. Manufacturer relationships are key to the delivery of these benefits,
and I am proud that the Group has such good relationships with its chosen
manufacturer partners. This is due to operational delivery and a strong, mutual
respect.
• The delivery of operational excellence and digitalisation has seen further development of
the Group’s in-house analytics systems. A new ‘Vertu Insights’ used vehicle stock
management tool to ensure profit opportunities are maximised is being rolled out. In
addition, investment in self-service check-in technology has been made to enhance
customer choice, reduce friction in the customer journey and aid the productivity of
our colleagues. The Group’s scale justifies investment in the in-house development
of systems delivering both for customers and enhanced cost efficiency. These
scalable platforms have been quickly rolled into the acquired dealerships and further
work is now underway to maximise Group-wide efficiency benefits using technology.
• There has been continued application of stringent capital allocation disciplines:
o
Acquisitions targeting returns above cost of capital, have been delivered. The
Group has continued to apply a multi-franchising strategy to maximise the profit
opportunity in certain physical locations and to align with Manufacturer
representation plans. It is clear that consolidation will continue within the
automotive retail sector. The Group is in an excellent position to take advantage of
this. Our Manufacturer partners are keen for us to grow with them, the board has
the ambition to do so, and the Group has the financial firepower to expand with
appropriate opportunities.
o
The annual dividend, a vital element of shareholder return has been increased by
26.5% reflecting the continued strong free cash generation. Additionally, the Group
has also returned £5.9m to shareholders through the repurchase of over 10.0m
shares in the Year. A buyback authority for a further £3m of buybacks is in place.
The Group has continued to progress towards increasing its sustainability and to reduce its
environmental impact. £1.2m has been invested in green technologies such as solar panels
and LED lighting in the Year, with a remaining £3.2m planned for such installations in FY24.
The investment in solar panels has been made in connection with the Group’s energy
strategy which seeks to self-generate 10% of the Group’s energy needs via onsite solar
energy.
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 continued to show over the
past year has been exemplary.
As we enter the new financial year, 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 and deliver scale
benefits in the enlarged Group.
Andy Goss, Chairman
1 Adjusted to remove share-based payments charge, amortisation of intangible assets, impairment charges and exceptional
acquisitions costs.
Group Strategy
9
Vertu Motors plc (Company Number: 05984855)
Mission & Values
The aim for every dealership to
be the best retailer in their
respective town or city
To deliver an outstanding
customer motoring
experience through
honesty and trust
Vertu Motors to be the most
admired and respected dealer
group in the automotive
industry
PASSION RESPECT PROFESSIONALISM INTEGRITY RECOGNITION
OPPORTUNITY COMMITMENT
Strategic Goals
Growth
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
Digitalisation
Digitalisation - cohesive “bricks and clicks” strategy
• Omni-channel development
• Digitalise aftersales process
• Reduce cost base and deliver efficiency through use
of systems
• Utilise data driven decision making to deliver
enhanced returns
Colleague & Customer focus
To develop and motivate the Group’s colleagues to
ensure consistency of operational excellence and delivery
to customers across the business
Ancillary businesses
To develop ancillary businesses to add revenue and
returns which complement the core business
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
Group Strategy (continued)
10
Vertu Motors plc (Company Number: 05984855)
Strategy Summary
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 are summarised below:
•
To grow as a major scaled franchised dealership group and to develop our portfolio of
Manufacturer partners, while 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 and cost optimisation and efficiency:
o
Optimise our omnichannel retail offering and promote our brands to drive enquiry
levels.
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
automotive retail dealership business.
An update on progress in executing these strategies is set out later in this report.
Key Sector Trends
The franchised automotive retail sector continues to evolve in the areas of electrification and
agency distribution. Responding appropriately to these trends is top of mind for the Board.
1. Electrification
The UK Government has recently re-asserted its plan to ban the sale of new petrol
and diesel cars in the UK from 2030 despite the European Union introducing delays
to implementation of their ban and flexibility around synthetic fuel ICE vehicles.
Despite overall supply constraints in new vehicles throughout 2022, electric and
hybrid vehicle registrations in the UK saw growth of over 20% in calendar 2022
compared to 2021, representing a 7% market share increase. Nevertheless, there
has been a cooling of demand for electric vehicles (BEV) from consumers in the last 6
months and this is reflected in ordertake, if not in registration data due to continued
long lead times. The rising cost of electricity increasing running costs and inadequate
UK public charging infrastructure have all had an impact on demand and public
perception.
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, and
colleagues attending Manufacturer training. The Group is investing in accreditation to
the national EV accreditation scheme promoting standards in electric vehicle retailing
and servicing. Moreover, electric vehicle mystery shops have taken place monthly
across the business where mystery shoppers visit dealerships to assess
effectiveness in retailing electric vehicles.
Increased electrification of the vehicle parc requires ongoing investment in terms of
EV infrastructure such as in aftersales capabilities and charging facilities. The Group
invested £0.4m in charging infrastructure in the Year with a further £1.6m planned in
the next 12 months.
Group Strategy (continued)
11
Vertu Motors plc (Company Number: 05984855)
Key Sector Trends (continued)
2. Agency Distribution
A number of Manufacturers in the UK have indicated they will move to an agency
sales distribution model over varying timescales. 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 and
customer contact as an agent. The retailer-turned-agent receives a commission on
each new vehicle sale but will own no inventory and will no longer set prices or
discounts. There are varying iterations of the agency model proposed and the picture
is evolving both legally and in detailed implementation.
The Group has long operated on an agency basis for a significant proportion of fleet
and parts sales. The first of the Group’s significant manufacturer partners to operate
the agency model for new retail sales was Mercedes-Benz passenger cars which
moved to a genuine agency model on 1 January 2023. The implementation has been
successful from a systems perspective and the Board will monitor how the change
impacts volume and profit levels, albeit remaining cognisant that the change to
agency is, of course, only one of a number of factors which impacts volume and
profit. The Volkswagen Group brands and Volvo are likely to be the next in line for
agency implementation.
Update on execution of Group Strategy
Developing the Scale of the Group
The Group has an excellent platform allowing it to capitalise on growth opportunities and
deliver scale benefits:
•
Financial capacity
The Group’s balance sheet strength is underpinned by an extensive freehold and long
leasehold property portfolio and a largely unencumbered inventory of used vehicles.
This strong asset base, together with a comparatively low level of debt including used
vehicle stocking loans, means there remains significant firepower available to
facilitate the Group’s further growth ambitions. The Group will continue to 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. The Group has
always invested in training programmes to ensure its talent pipeline is developed, and
many of the Group’s colleagues have benefitted from this training and have been
promoted into management roles as a result. A ‘Next Generation’ two-year talent
programme, to develop the next generation of the Group’s senior management, has
recently been launched to augment the Group’s existing training initiatives.
•
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 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 enhance profitability through
maximising margins and increasing productivity to reduce costs. The Group’s 54
colleague strong development team ensures continued improvement and scalability
of platforms.
Group Strategy (continued)
12
Vertu Motors plc (Company Number: 05984855)
Update on execution of Group Strategy (continued)
Developing the Scale of the Group (continued)
•
Brand Strength
The Group operates three major customer facing brands in the UK: Bristol Street
Motors, Macklin Motors and Vertu Motors. Bristol Street Motors represents the
franchise sectors leading brand in England and Wales in terms of prompted brand
awareness (54%: Source: YouGov). In Scotland, the Group operates under the
Macklin Motors brand, which has a strong 49% prompted brand awareness. Vertu
Motors is the Group’s premium focused brand, with a growing prompted awareness of
approx. 8%, in England. This is likely to be much boosted by the significant
expansion of the brand in the South West in 2023. Each of these brands is
supported by TV campaigns, sports sponsorships and partnerships and digital
marketing initiatives. Tangible scale benefits arise from this strategy.
Growth
The Group has the brand strength and financial, operational, and management capabilities to
continue to add additional franchised outlets to the business. The Board remain ambitious to
do so. The Group also continues to evaluate and execute multi-franchising actions in its
locations to maximise the long-term profitability of each location.
The Year saw the Group execute on this strategy, increasing its number of sales outlets by a
net 31 over the Year, as set out below:
•
Acquisitions
On 17 December 2022 the Group completed the acquisition of Helston Garages Group
Limited (‘Helston’) adding 28 predominantly premium franchised sales outlets in the
South West. This acquisition radically enhanced the Group’s scale and reach into the
South West of England. The integration of these acquired dealerships onto the
Group’s systems and processes is now complete, with the acquired Ferrari business
and a standalone accident repair centre operation, being the final businesses to have
transitioned in April 2023.
At the time of the Helston acquisition, the Group announced expected synergies of at
least £3.2m to be delivered for FY25. The Board believe that the Group is well on
track to deliver this outcome.
On 31 October 2022 the Group acquired the business and assets of two BMW
Motorrad outlets in Shipley, near Bradford, and Rotherham from Saltaire Motor
Company Limited subsequent to the acquisition, on 1 March 2023, the freehold
interest in the Rotherham dealership was purchased for £0.5m. These businesses
have been rebranded to trade under the Vertu brand and have been fully integrated
into the Group. The Group is now the largest UK partner of BMW Motorrad as it
continues to grow its motorcycle operations.
•
Multi-franchising and new outlets
On 1 April 2022 the Group opened Macklin Motors Toyota in Darnley, South Glasgow.
This dealership represented the first of several dealerships to be opened, following the
Group being awarded the Toyota franchise in the West of Scotland territory. The
second dealership, located in the Group’s former Ford premises in Hamilton, opened
on 21 October 2022 following a full refurbishment alongside the Mazda franchise.
These two outlets are expected to make a positive profit contribution to the Group in
FY24. A third representation point for Toyota in Scotland, which will be in Ayr, will be
developed as a new build dealership over the next financial year. It is currently
anticipated that the development will cost approximately £4.5m including the purchase
of land for the development. The development is currently subject to a planning
application.
On 1 May 2022, the Group opened a further Bristol Street Motor Nation used car outlet
in newly acquired leasehold premises at Stockton, Teesside.
Group Strategy (continued)
13
Vertu Motors plc (Company Number: 05984855)
Update on execution of Group Strategy (continued)
Growth (continued)
Work was finalised on the introduction of sales outlets for Vauxhall and Citroen
alongside the Group’s Peugeot operation in Harlow. The outlets opened in November
2022 following the move of the aftersales operation off site to a new larger dedicated
aftersales operation.
The LEVC franchise commenced covering Scotland and the North East of England as
part of the Group’s Taxi Centre operation.
Subsequent to the year end, on the 24 April 2023, the Group agreed a sub-lease of a
former Cazoo outlet in Tamworth, Staffordshire. The outlet will be operated as a
Bristol Street Motor Nation used car outlet and is anticipated to open in July 2023.
•
Active portfolio management and changes
The Board continues to actively manage the Group’s portfolio of properties and
dealerships and assess further growth opportunities, utilising strict investment return
metrics to ensure discipline in capital allocation.
During the course of the year, the Group took pruning actions to ensure business
fitness, appropriate capital allocation and creation of value. Since FY18, the Group
has received cash proceeds of £6.2m from the sale of surplus properties, £1.2m more
than book value.
Additional surplus properties are held by the Group and are expected to be disposed in
the next 12 months. Cash proceeds at £9.5m are anticipated in due course, circa £3m
in excess of book value.
The Group’s single Jeep sales outlet in Beaconsfield ceased operation and the Ford
outlet in Hamilton closed to allow for the redevelopment of the site for the Toyota
franchise alongside Mazda. In addition, the Group closed its accident repair centre in
Chesterfield in the Year to facilitate further multi-franchising including the addition of
the MG franchise expected to open in August 2023.
In January 2023, the Group disposed of a small Peugeot outlet in Honiton, acquired as
part of the Helston acquisition the month earlier. This business was sold to the Snows
Group, including responsibility for the property lease. This optimises the Group’s
Peugeot representation in the area, as Peugeot is also represented in nearby Exeter
and the franchise will not continue in Honiton.
The pruning process continued post the year end when on 31 March 2023, the Group
closed operations at its BMW/MINI outlet in Malton, Yorkshire. The Malton property
lease ceases shortly. This action will reduce operating expenses and limit future
capital expenditure as the Group seeks to retain sales and service customers in its
nearby York BMW and MINI dealerships.
On 30 April 2023, the Group sold the trade and assets of its standalone accident repair
operation in Newburn, Newcastle upon Tyne at above net book value. The business
did not make a sufficient financial return on invested capital. The sale included the
leasing of the long-leasehold property to the buyer. The Group has now agreed to sell
the long-leasehold interest for £1.4m to a property investor with completion expected
shortly. Cash proceeds are above net book value and are included in the £9.5m
referred to above.
Jaguar Land Rover have announced their Re-imagine strategy, which creates a House
of Brands: Range Rover, Defender, Discovery and Jaguar. Jaguar will be a luxury
electric vehicle brand with reduced points of sale reflecting its repositioning. The
Group currently operates six Jaguar outlets, alongside the Land Rover brand. From
November 2024, only the Group’s outlet in Leeds will continue to represent both
Jaguar and Land Rover brands. Intangible assets relating to the terminated Jaguar
operations of £1.5m have been written off as a non-underlying, non-cash impairment
charge in the Year.
Group Strategy (continued)
14
Vertu Motors plc (Company Number: 05984855)
Update on execution of Group Strategy (continued)
Digitalisation Developments
Omni-channel Retail Sales
We have seen no major increase in the propensity for customers to transact a vehicle
purchase purely on-line. This appears to be evidenced by the retrenchment of on-line
operators who had hoped to be sector disrupters.
Consumers continue to value a blended retail experience with a desire to complete tasks
digitally as well as visiting a dealership to touch, feel and test drive their new vehicle (‘’omni-
channel retailing’’). In FY23, we focused on increasing the number of on-line vehicle sales
reservations rather than driving pure on-line sales, as reservations convert to a sale at more
than twice the rate of a traditional vehicle sales enquiries. The Group took over 14,800 on-line
vehicle reservations in FY23, up 100% on the previous year.
We continue to reap the benefits of placing much of our customer facing technology
infrastructure into the cloud provided by Amazon Web Services. This has increased up-time
and resilience, as well as enabling further synergies between our outlets and digital
environments. We now offer consistent, automated vehicle valuations across all our outlets
and these are mirrored on both our “Sell My Car” and “Click 2 Drive” on-line customer
journeys. This provides transparency and promotes trust. During the Year we developed new
dealership sales experience/process software built on the same platform that underpins our
eCommerce journeys. The Group also developed a digital customer referral system and
process which has now been rolled out.
In FY24 we will roll out a further enhanced vehicle sales process which provides an updated
“Click2Drive” platform. This upgrade to our web platforms and dealerships will allow for on-
line customers to have an enhanced selection of additional products and risk based
personalised finance rates as well as a “Total Cost of Ownership” calculator. These
enhancements further align the on-line and in dealership sales processes so removing friction
and customer frustration. In addition, this will aid consumers in calculating the “true cost” of
changing their vehicle in a market with multiple and often complex drivetrain options,
enhancing customer experience particularly given customer concerns over the cost of living at
present.
Data Model and Customer Data Platform
During FY23 the Group continued to scale our data capability, augmenting our existing team
with an experienced Head of Data and Analytics. This new role, alongside other investments
in the data and business intelligence teams, now numbering seven colleagues, will enable the
launch of a comprehensive data warehouse in Q1 FY24. Utilising existing infrastructure, this
will provide a bedrock of data for the Group and the opportunity to drive further efficiencies
across our finance, dealership and marketing functions.
Initial use cases built upon the data warehouse include:
•
Feeding consistent and accurate data to our newly developed Customer Data
Platform, further increasing the personalisation, targeting and ROI of our
marketing spend.
•
Powering the “single version of truth” for our enhanced used car analytics
platform ‘’Vertu Insights’’ which is scheduled for first release in June. This will
build on the success of the Vertu Analytics tool launched in 2019, and further
enable us to maximise margin and speed of sale in used vehicles.
•
Improving sales conversion by providing real-time Customer Relationship
Marketing and vehicle information to colleagues interacting with customers
through the recently deployed Cloud Telephony platform.
Group Strategy (continued)
15
Vertu Motors plc (Company Number: 05984855)
Update on execution of Group Strategy (continued)
Digitalisation Developments (continued)
Data Model and Customer Data Platform (continued)
The business operates in an increasingly complex technology environment and the above
developments can only be undertaken by a business with scale. As with important cyber risk
investments, once the platform is developed, scale benefits accrue as more outlets are added
to the platform.
Digitalisation in Aftersales
The Year saw significant investment through the introduction of a third-party digital self-
service check-in system for customers to use in the Group’s service departments. Customers
can check in from home or use the instore kiosks where they can safely deposit their vehicle
keys. This provides increased choice and convenience for Customers and helps to reduce the
need to further resource our aftersales departments at busy “pinch point” periods at the start
and end of the day. Initial customer feedback has been excellent, and the Group has seen
increased penetration of add-on sales in service from customers using this facility.
The Group has historically used a third party to provide service customers with deferred
payment term of 3 months following a service visit where additional repair work is purchased.
We have started the roll out of an in-house developed deferred payment option for service
customers, which will substantially reduce the cost to the business of offering this service.
Working capital is expected to increase by c. £3m following the rollout, with a reduction in cost
evident and no material credit issues anticipated. The offering has a powerful impact on
converting work from Visual Health Check activity and drives higher average invoice values.
This functionality can be used instore or remotely by customers and is executed by the same
SMS signature technology already in use in the sales process. The roll out of this across all
Group sales outlets will be complete in the first half of FY24.
Digitalisation to improve efficiency and reduce cost
As the Group integrated the Helston acquired dealerships, some highly efficient finance
processes were identified that could improve the Group’s existing processes. Inspired by this,
a new project has commenced investing substantial development resource to improve the
productivity of the Group’s financial processing. This will mirror some of the approaches
taken in a project in the Group’s vehicle administration function three years ago, where
substantial efficiencies and cost savings of £2.5m were delivered.
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. Workforce
recruitment and retention remains a challenge for UK business, with the number of UK job
vacancies remaining above 1.0 million (source: ONS), throughout 2022. The inevitable
consequence of these resource constraints, especially when coupled with cost-of-living
pressures, has been wage inflation. The Group has been successful in reducing vacancy
levels from the highs of 500+ vacancies in FY22. Current vacancy levels are approximately
300 colleagues in the core Group, a level much closer to historic run rate of 5%.
A survey conducted in February 2023 saw 83% of colleagues ranking the Group as a great
place to work and this reflects well both on the Group’s culture and the strategies that have
been pursued. The Group targets an improvement in the score to 85% and will work through
dealership colleague forums, a formalised way in which colleagues of all levels can provide
their feedback locally, to drive an improvement in this score.
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.
Group Strategy (continued)
16
Vertu Motors plc (Company Number: 05984855)
Update on execution of Group Strategy (continued)
Ancillary Businesses
The Group’s ancillary business division has a dedicated divisional team to drive the success
of the businesses, which include Vertu Vehicle Accident Repair, Vertu Cosmetic Repair,
Vansdirect, AceParts and Taxi Centre. The Group has a strategy to develop such businesses
to add revenue and returns that complement the core dealership businesses.
Vansdirect had a strong year, underpinning the Group’s significant market share gain in the
Commercial vehicle market. Financial performance has been robust.
During this Year, the Group augmented its on-line parts sales business, Aceparts, with the
purchase of Wiper Blades Limited. This business was acquired for a net cash consideration
of £2.4m. Aceparts sells parts to customers via Marketplaces, with over a million listings on
eBay and makes on average 3000 despatches per day. Wiperblades.com augmented this
business with a direct sales platform with established reach and good rankings.
The Vertu Cosmetic Repair business delivered further growth in the Year. The majority of its
business remains servicing the Group dealership network, but some external work is
undertaken. Over 65,000 vehicles had bodywork repair and 56,000 wheels were repaired by
our fleet of 106 vans and a number of dedicated fixed sites. This business will continue to
grow in scale during the current year.
The Group added the LEVC franchise to its taxi sales business, the Taxi Centre. Aided by
this additional franchise the business, which has been in operation for over 20 years,
delivered over 800 taxis in the Year.
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, 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.
Group Strategy (continued)
17
Vertu Motors plc (Company Number: 05984855)
Current trading and outlook
•
March & April 2023 Trading
The Group delivered a trading profit above prior year levels in March and April 2023 (“the post
year end period”) despite the impact of significant cost headwinds driven by inflation, with
Core Group gross profit generated up by £4m compared to prior year. The overall
improvement in profitability was driven by the contribution from the Helston acquisition
completed in December 2022.
Like-for-Like revenue growth was delivered in the post year end period, predominantly due to
continued strong growth in Motability new vehicle sales volumes.
The UK new vehicle market saw a growth in total registrations in March and April in the fleet
and commercial and Motability channels. This improvement, driven from an easing of supply
chain challenges, has led the SMMT to upgrade its outlook for 2023 to 1.83m registrations
(previously 1.79m). New retail volumes have been stable.
Like-for-like total new vehicle volume growth of 5.1% was delivered on the back of continued
year-on-year strength in the Motability channel, with the Group’s Motability like-for-like
volumes up 64.6% in the post year end period. In a continuation of the trends seen
throughout FY23 outlined above, new vehicle margins remained robust. Overall, the Core
Group delivered increased gross profit from the sale of new vehicles in the post year end
period. New vehicle order banks remain at high levels with nearly 39,000 outstanding orders
to be delivered, compared to 35,000 at 28 February 2022.
The UK used vehicle market has remained resilient, whilst continued stability of used vehicle
prices is exhibited. Like-for-like volumes of used cars sold by the Group declined 8.4% with
gross profits per unit up. Volumes were down year-on-year due to timing of heavily marketed
Group used car events in the prior year period which drove volumes. The Group continues to
have a tight control of used vehicle inventory.
Like-for-like the Group delivered improved gross profit from all aftersales channels in the post
year end period compared to last year. Service revenues in the Core Group grew by 4.6%
with margins reduced as expected due to the impact of higher technician salary costs.
As anticipated, the Core Group saw an increase in operating expenses in the post year end
period, with energy costs, recent salary actions and the Group’s investment in IT
infrastructure all contributing to this rise in costs. Overall, Group operating expenses as a
percentage of revenue were at slightly higher levels than in FY23.
•
Outlook
The Board is very optimistic for the future, with confidence in the Group’s ability to deliver on
targeted acquisition synergies, a robust order bank, and encouraging trading results in the
first two months of FY24. There are signs of improving new vehicle supply whilst constraints
in used vehicle supply in the UK are likely to continue helping to underpin vehicle values and
margins. Against this backdrop, the Board remains mindful of the impact of inflationary
pressures and higher interest rates. Management is focused on operational excellence
around cost, conversion and customer experience and the delivery of the Group’s strategic
objectives through enhanced performance coming from scale. The Board anticipates that full
year results for FY24 will be in line with current market expectations.
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, scale, management and technological
capability underpin this confidence. The Group’s excellent relationships with its chosen
Manufacturer partners support further growth opportunities, which are likely to continue to
present themselves.
Robert Forrester, CEO
Key Performance Indicators
18
Vertu Motors plc (Company Number: 05984855)
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 19-28, together
with the below:
Financial KPIs
KPI
Definition
Performance
Risk Factor Link
Underlying EPS
Underlying profit after tax divided by
weighted average number of shares
(note 13)
FY23 – Underlying EPS of 9.16p
FY22 – Underlying EPS of 17.92p
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
Underlying
PBT
Profit before tax and non-underlying
items
FY23 – Underlying PBT £39.3m
FY22 – Underlying PBT £80.7m
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
Gross
Margin by channel
Gross profit divided by revenue by
channel
See page 19
❷❸❹❺❻
❾⓮
Strategic / Operational KPIs
Like-for-Like Used
Volume growth
Number of used vehicles sold in
dealerships with comparable trading
periods in two consecutive years
FY23 – decline of (10.1%)
FY22 – growth of 28.6%
❷❸❺❻❾
⓬⓭
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
Group
FY23 – decline of 3.6%
FY22 – growth of 21.4%
UK private registrations
FY23 – decline of 1.9%
FY22 – growth of 17.2%
❷❸❺❾⓬⓮
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
FY23 – growth of 5.9%
FY22 – growth of 17.1%
❷❻❽❾
Online
Growth
Website visits to all Group trading
websites (expected decrease due to
implementation of consent
management platform)
FY23 – 20.5m visitors
FY22 – 22.9m 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
86.3% Net promoter score
(FY22 – 86.5%)
❹❼❽❾
Financial Review
19
Vertu Motors plc (Company Number: 05984855)
The Group’s income statement for the Year is summarised below:
FY23
FY22
Variance
£'m
£'m
%
Revenue
4,014.5
3,615.1
11.0%
Gross profit
448.4
435.4
3.0%
Operating expenses excluding Government support
(399.6)
(354.3)
Government support5
-
6.6
Operating expenses reported
(399.6)
(347.7)
(14.9%)
Adjusted Operating profit
48.8
87.7
(44.4%)
Net Finance Charges
(9.5)
(7.0)
(35.7%)
Adjusted Profit Before Tax
39.3
80.7
(51.3%)
Non-Underlying items6
(6.8)
(1.9)
(257.9%)
Profit Before Tax
32.5
78.8
(58.8%)
Taxation
(6.9)
(18.8)
63.3%
Profit After Tax
25.6
60.0
(57.3%)
5 represents business rates relief
6 Non-underlying items represent acquisition costs, share-based payments charge, amortisation of intangible assets, impairment
charges and exceptional acquisition costs.
The Group generated an adjusted profit before tax of £39.3m (FY22 £80.7m).
Revenue grew to £4.0bn, a growth of £399.4m (11.0%) compared to the prior year.
Acquisitions completed after 1 March 2021 contributed additional revenues of £183.2m and
have contributed a loss before tax of £0.9m as new start-up operation and the seasonality of
losses in acquisitions undertaken post September led to losses as anticipated. Rising vehicle
prices were largely responsible for the underlying £233.8m (6.5%) increase in Core Group
revenues.
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
FY23
FY22
Variance
£'m
£'m
Revenue
New
1,121.9
969.9
152.0
Fleet & Commercial
897.6
772.0
125.6
Used
1,658.2
1,584.4
73.8
Aftersales
336.8
288.8
48.0
Total Group Revenue
4,014.5
3,615.1
399.4
Gross Profit
New
98.4
80.6
17.8
Fleet & Commercial
42.3
35.5
6.8
Used
125.2
154.4
(29.2)
Aftersales
182.5
164.9
17.6
Total Gross Profit
448.4
435.4
13.0
Gross Margin
New
8.8%
8.3%
0.5%
Fleet & Commercial
4.7%
4.6%
0.1%
Used
7.5%
9.7%
(2.2%)
Aftersales7
44.5%
47.1%
(2.6%)
Total Gross Margin
11.2%
12.0%
(0.8%)
7 Aftersales margin expressed on internal and external revenues
Financial Review (continued)
20
Vertu Motors plc (Company Number: 05984855)
Revenue and Gross Profit by Department (continued)
The total and like-for-like volumes of vehicles sold by the Group and trends against market
data are set out below:
Total Units Sold
%
Like-for-Like Units
Sold
%
FY23
FY22
Variance
FY23
FY22
Variance
Used retail vehicles
82,561
88,772
(7.0%)
78,208
86,949
(10.1%)
New retail cars
33,727
33,366
1.1%
31,484
32,644
(3.6%)
Motability cars
11,029
8,404
31.2%
10,507
8,184
28.4%
Direct fleet cars
18,259
16,015
14.0%
18,024
15,898
13.4%
Agency fleet cars
5,236
5,172
1.2%
4,349
5,095
(14.6%)
Total fleet cars
23,495
21,187
10.9%
22,373
20,993
6.6%
Commercial vehicles
17,710
17,528
1.0%
17,523
17,512
-%
Total New vehicles
85,961
80,485
6.8%
81,887
79,333
3.2%
Total vehicles
168,522
169,257
(0.4%) 160,095
166,282
(3.7%)
UK Market year-
on-year change9
Group year-on-
year change v
UK market8
New Retail Car
(1.9%)
(1.7%)
Motability Car
8.1%
20.3%
Fleet Car
(3.6%)
10.2%
Commercial
(17.2%)
17.2%
8 Represents the year-on-year variance of like-for-like Group volumes compared to the UK trends reported by SMMT
9 Source SMMT
Used retail vehicles
Three consecutive years of muted new vehicle registrations in the UK has led to a
constrained supply of used vehicles. Based on current registration predictions for 2023, the
number of sub 5 year old cars on the road in the UK is expected to fall further by 4% in 2023;
and be 27% below 2019 levels. Overall, over 2.0 million new car sales have been lost in the
last three years with an inevitable flow through into reduced used car supply. These supply
trends, suggest that in a stable demand environment, UK used car pricing dynamics are
unlikely to change in 2023, even though average prices remain high. Residual values have
seen an increase of 19% over 2022, and currently remain some £1,90010 ahead of ‘normal’.
An exception to this overall benign picture, however, is electric vehicles. Used EV supply is
growing rapidly, albeit from a very low base, and it is anticipated that, one in seven 1–3 year-
old cars in the UK parc will be electric by the end of 2023. Consequently, used EV supply is
now outstripping demand (which is impacted by the same dynamics discussed in the previous
section regarding new vehicles). As a result, used EV prices in the UK have now fallen for
seven consecutive months, and by approximately 30%, compared to a 1.4% fall in petrol
vehicle averages11. These falls are now likely to bottom out and a new, more affordable base
price established for used electric vehicles. EV sales in used cars represent c. 4% of Group
volumes.
The Group monitors the pricing and supply environment and has continued to develop its
used vehicle pricing and analytical tools to optimise gross profit generation and optimise stock
turn and control inventory. An enhanced version of this tool, Vertu Insights, is currently being
rolled out to assist the Group’s dealerships in inventory pricing and management disciplines.
Overall, the number of used retail vehicles in stock at 28 February 2023 compared to 28
February 2022 fell by 2.3% in the Core Group, whilst the overall value of Core used retail
inventory was £6.8m lower. The Group has been running stocks tighter with a view to
maximising margin, return on investment and to reduce exposure to any consumer downturn
impacts. The Group’s like-for-like used vehicle volumes were 10.1% lower in the Year
reflecting both the prevailing supply and demand dynamics in the market, and the exceptional
conditions of last year. Margin per unit did decline year on year from the exceptional levels of
last year but the Group is still achieving gross profits per unit significantly better than the pre-
pandemic norm.
Financial Review (continued)
21
Vertu Motors plc (Company Number: 05984855)
Used retail vehicles (continued)
Core Group gross profit from the sale of used vehicles totalled £120.2m for the Year.
Excluding the exceptional result delivered in FY22 of £153.1m, this represents the highest
level of Core Group annual used vehicle gross profit delivered. The following like-for-like
variances compared to last year arose:
•
£32.9m decrease in gross profit generated from used vehicle sales compared to the
exceptional level of profit achieved last year.
•
10.1% decrease in the number of used retail units sold, reflecting the reduced supply
in the market and rebalancing of volume and margin.
•
Gross profit per unit of £1,530, down from the exceptional £1,748 achieved in FY22.
This remains above historical norms for the Group.
•
Average selling price of £19,987 per unit, a 11.9% increase.
•
Gross margin of 7.7% (FY22: 9.8%) reflective of higher sales prices and more
normalised gross profit per unit.
The Group measures customer experience on used cars via the JudgeService third party
platform. The Net Promoter Scores throughout the period have been very strong at c.85%,
which is sector leading amongst major market players. Great service goes hand-in-hand with
profitability and future retention, which is so vital in creating a sustainable business.
10 Source: Autotrader
11 Source: CAPHPI :April 2023 Car market overview
New retail cars and Motability sales
UK retail car registrations declined 1.9% in the year to 28 February 2023, marking a third
consecutive year of muted registrations, linked to well documented production and logistics
challenges for global vehicle Manufacturers. Against this backdrop, the Group’s like-for-like
new retail vehicle volumes declined by 3.6% when compared to the prior year, slightly behind
the market. This was driven in part by strong comparatives in FY22 where the Group strongly
outperformed the market trends coming out of lockdowns. Overall, the Group marginally
increased UK retail market share to 4.1% (FY22: 4.0%) aided by acquisitions. The Group’s
order bank levels for new retail vehicles remain high but have reduced over the Year as would
be expected as production issues slowly unwind. New retail vehicles ordered but remaining
undelivered as at 28 February 2023 totalled approximately 12,900 units (28 February 2022:
16,000).
UK Motability registrations benefitted from pent up demand, as already extended contracts
came to an end and supply came through from Manufacturers, rising 8.1%, compared to
FY22. The Group’s Motability volumes significantly outperformed the market, growing 28.4%
on a like-for-like basis and representing an increasing UK market share of 5.9% (FY22:
4.8%). The Group is Motability’s largest partner in the UK with over 34,500 vehicles on the
fleet. These vehicles require an annual service funded by Motability in the Group’s service
departments.
The continued supply constraints and consequently reduced pressure to achieve volume
targets, led to improved gross profit retention, aided by the application of effective pricing
disciplines. It was this improved gross margin that drove a year-on-year improvement in core
retained gross profit in new vehicle sales. The following trends were apparent on a like-for-
like basis for the New Retail and Motability sales channel:
• A £13.7m increase in gross profit generated, aided by stronger margins.
• Gross profit per unit of £2,182, a rise of 13.2% from £1,928 representing a record for
the Group despite the higher mix of lower margin Motability volumes.
• An average selling price of £24,128 per unit, a 9.8% increase.
• Gross margin rising to 8.8% from 8.3%.
In new vehicles, sales customer experience is measured by the Group’s Manufacturer
partners. Approximately 70% of the Group’s Core sales outlets delivered experience levels
above national average levels.
Financial Review (continued)
22
Vertu Motors plc (Company Number: 05984855)
Fleet & Commercial vehicle sales
The UK car fleet market saw reduced activity compared to historic levels for much of the Year
as Manufacturers prioritised constrained supply to higher margin retail channels. However, in
latter months, fleet supply has significantly improved and has been growing faster than retail
registrations. Registration volumes in the UK car fleet market declined 3.6% in the Year as a
whole. In contrast to a market decline, the Group delivered 22,373 fleet cars on a like-for-like
basis, in the Year, representing a growth of 6.6% compared to FY22. As with new cars, fleet
and commercial margins strengthened due to the ongoing supply constraints, pricing mix
changes and the Group adopting strong pricing disciplines. Overall, the Group has a 3.0%
share of the UK fleet car market.
UK van registrations fell 17.2% in the year to 28 February 2023, as production and supply
issues also impacted this channel and the prior year had been strong, aided by strong pent-
up demand for home delivery and construction coming out of lockdowns. In stark contrast to
these national, negative trends, the Group maintained its like-for-like volumes of new
commercial vehicles sold. This considerable market outperformance by the Group reflected
the strong market position of the Group and the investment in teams to sell into different
market channels. Reflecting this, the Group sold 6.1% of UK new light commercial vehicles in
the Year (FY22: 5.0%).
•
When compared the year ended 28 February 2022, the following fleet and
commercial trends were seen on a like-for-like basis:
•
A £5.0m increase in gross profit.
•
Record gross profit per unit of £1,027, a rise of 12.0% from £917.
•
Gross margin rising to a record 4.7% from 4.6%.
Aftersales
The Group’s aftersales operations are a vital contributor to Group profitability, generating over
40% of total gross profit. The Group pleasingly saw growth in revenues and gross profit
generation in all channels of aftersales on a like-for-like basis as set out below.
Service
Parts
Accident &
Smart
Repair
Fuel
Forecourt
Total
£’m
£’m
£’m
£’m
£’m
Revenue7
159.5
189.2
20.1
13.9
382.7
Revenue7 change
8.9
17.3
3.8
6.0
36.0
Revenue7 change (%)
5.9%
10.0%
24.1%
75.7%
10.4%
Gross profit
117.8
42.3
10.7
0.9
171.7
Gross profit change
3.0
3.9
1.8
0.3
9.0
Gross margin8 FY23 (%)
73.8%
22.4%
53.3%
6.4%
44.9%
Gross margin8 FY22 (%)
76.2%
22.3%
55.3%
7.5%
46.9%
Margin change (%)
(2.4%)
0.1%
(2.0%)
(1.1%)
(2.0%)
7 includes internal and external revenues
8 Aftersales margin expressed on internal and external revenues
•
Service
The UK has a vehicle parc of approximately 32.0 million cars plus commercial vehicles
requiring access to maintenance and repair services and this is now ageing due to lack of
recent new vehicle activity.
Vehicle service and repair is a key and resilient profit source for the Group. Through strong
execution of retention and aftersales processes and the active targeting of conquest
business, the Group has grown like-for-like service revenues by 5.9% over the Year. Each
retail invoice raised by the Group’s service operations averages £281 (FY22: £259), and over
half the invoices raised in FY23 were in respect of over 3 year old vehicles. The average age
of a retail vehicle seen by the Group is 4.7 years with the Group’s average invoice value for
vehicles in the 4-5 year old category at £306, the highest average value of each age category.
The Group therefore gains a revenue benefit as the parc ages.
Financial Review (continued)
23
Vertu Motors plc (Company Number: 05984855)
Aftersales (continued)
•
Service (continued)
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 the retention strategy. The Group has over 167,000 live service plans, including
manufacturer service plans, which creates significant resilience. Excellence of customer
service is vital to retention with over 62% of service departments over national average on the
Manufacturer customer experience measurements.
Gross margin percentages on vehicle servicing declined to 73.8% (FY22: 76.2%) in the Core
Group reflecting increased remuneration to address technician resource constraints,
particularly in early FY23, which increased cost of sales in the service department. This pay
action aided the stability levels amongst technicians and reduced the level of vacancies,
aiding service department performance. Higher technician numbers drove the increased
revenues, up 5.9%, and gross profit generation achieved, with like-for-like gross profit in
service up £3m. There remains considerable competition for skilled technicians in the UK.
•
Parts
The Group’s substantial parts operations include traditional wholesale operations, agency
distribution and on-line parts retailing. These operations supply parts to the Group’s service
and accident repair operations as well as to other businesses and retail customers in the UK
and across the world. Parts revenues in the Core Group grew £17.3m compared to last year,
as price rises, increased vehicle service and repair activity and an increase in sales in
wholesale parts operations all contributed to growth.
•
Accident and Smart Repair
The Group continues to expand its substantial Smart Repair operations through adding
additional vans to the core cosmetic business as well as introducing new streams including
vans specialising in wheel repairs and glass replacement. In addition, enhanced smart repair
fixed facilities are being created, such as in Exeter to serve the substantial dealership
operations there. The Group now has a fleet of 106 (2022: 88) vans with plans for further
expansion to maximise the opportunity. This fleet largely serves the Group’s dealerships, but
also does carry out some limited sales to external customers across the UK. There is
considerable scope for continued expansion of this business.
During FY22, 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 accident repair operations. This management dedication has driven the
increase in gross profit, with specific KPI improvement targets and focus on a consolidation of
work providers, all driving enhanced profit generation.
Collectively, accident and smart repair services saw revenue growth of 24.1% in the core
group with £1.8m more gross profit generated. Margins of 53.3% (FY22 55.3%), reflected
increased pay levels put in place in the Year.
•
Fuel Forecourt
The Group’s fuel forecourt at Widnes saw increased activity as pricing strategies led to a
considerable increase in market share. Revenues rose 75.7% to over £13m. A second
forecourt has been acquired in Yeovil as part of the Helston Group, which will be redeveloped
in the coming months to enhance the retail offering.
Financial Review (continued)
24
Vertu Motors plc (Company Number: 05984855)
Operating Expenses
A summary of Core Group operating expenses is set out below:
FY23
FY22
FY23 Var to FY22
£'m
£'m
£’m
%
Salary costs
214.0
199.9
14.1
7.1%
Vehicle and valeting costs
38.6
35.3
3.3
9.3%
Marketing costs
36.2
36.0
0.2
0.6%
Property costs and rates
39.3
40.7
(1.4)
(3.4%)
IT expenditure
11.6
9.1
2.5
27.5%
Energy costs
7.9
4.6
3.3
71.7%
Other
28.7
23.7
5.0
21.1%
Core Group operating expenses
before Government support
376.3
349.3
27.0
7.7%
Acquisitions
23.2
2.7
20.5
759.3%
Disposals
0.1
2.3
(2.2)
(95.7%)
399.6
354.3
45.3
12.8%
Government support (CVJRS receipts
and rates relief)
-
(6.6)
6.6
-
Group Net Underlying Operating
Expenses
399.6
347.7
51.9
14.9%
Reported operating expenses of £399.6m, increased by £51.9m compared to the year ended
28 February 2022. This increase includes the impact of Government support of £6.6m
(largely business rates relief) in the prior year. Dealerships acquired or sold in the period
since 1 March 2020 generated a net £18.3m increase. Underlying Core Group operating
expenses therefore grew, by 7.7%, (£27.0m) compared to last year.
The largest operating cost of the Group is salaries, which have increased by £14.1m in the
Core Group, compared to last year. The Group reported high vacancy levels throughout the
second half of FY22 and adjusted salaries to aid the recruitment and retention of colleagues.
This action has delivered a reduction in vacancy levels, which, together with investment in
central functions, such as in digital development, Concierge and customer retention
accounted for £9.1m of the uplift in salary costs in the Core Group. Pay awards, including the
impact of the rise in National Minimum Wage, generated a further £9.3m increase. This
increase in salaries also includes the Group’s changes to its sales roles. Sales advisors have
been introduced to the dealerships sales teams and these new roles have higher basics but
lower commissions than traditional sales executives. This change, along with the reduced
level of Group profitability generated a £4.3m reduction in commissions and bonus earnings.
The Group has continued to respond to high inflation levels, increased National Minimum
Wage awards and tight labour markets by ensuring pay levels are competitive and
motivational. A further pay rise largely to colleagues earning less than £35,000 per annum
was made on 1 March 2023 following a review. This will aid retention of colleagues.
Vehicle costs increased because of rising vehicle prices, which drove up lease costs and
depreciation charges on the higher values. An improving supply position also meant a return
to full demonstrator requirements by many Manufacturers, which was not the case during and
following the lockdown periods. Rising fuel prices have also had an impact on vehicle running
costs.
The Group maintained its core marketing costs at broadly FY22 levels while further enhancing
the awareness of the Group’s brands. Return on investment is a priority for all marketing
spend with a focus on increasing its effectiveness, especially in the digital space, maximising
conversion, and a renewed focus on retention rather than just conquest activity. This helped
keep spend stable despite inflationary pressures.
IT expenditure rose by £2.5m compared to the prior year. This cost increase represents the
further investment in digitalisation, the roll out of self-check-in capability, together with
investments in the Group’s IT and telephony network, data and cyber security. The increase
also includes costs of integration of the Helston businesses onto Group networks and
Financial Review (continued)
25
Vertu Motors plc (Company Number: 05984855)
Operating Expenses (continued)
systems. The incremental element of which has been included in the synergy target as a
negative synergy.
The Group benefitted from a below market rate fixed contract on electricity up to September
2022. The contract expiry has led to a £3.3m increase in energy cost in the Year, despite the
Group delivering a reduction in energy use. The Group reduced gas consumption by 25.7%
and electricity consumption by 5.8% on a like-for-like basis compared to FY22. Most of this
saving was achieved by the Group’s colleagues having a refreshed and disciplined focus on
energy consumption. Weekly league tables are distributed, and dealerships given on-site
support in the form of energy management reviews.
In FY23 the Board approved an investment into LED Lighting and solar panel installation with
costs totalling £4.4m to be incurred across FY23 and FY24 in the core business. LED lighting
has replaced older lighting technology across the majority of the Group’s workshops and nine
roof solar installations were complete and producing onsite electricity by the end of the Year.
A further 25 roof solar installations are underway for completion in FY24 in the Core Group.
When these projects are complete at least 10% of the Group’s total electricity requirements
will be generated by this onsite clean solar energy. A review has recently been undertaken of
the former Helston businesses to identify opportunities for further beneficial investment in
solar panels and LED lighting to impact future energy costs. The Board have approved an
additional £1m of capital expenditure in solar panels for these Group locations over the
remainder of FY24.
Other costs have also seen an increase of £5.0m. This includes an increase in respect of
colleague training, as Manufacturers returned to full training schedules after restrictions
curtailed activity. Other costs in the category also increased due to inflationary pressures.
Non-underlying operating expenses
FY23
FY22
FY23 Var
to FY22
£'m
£'m
£’m
Impairment charges
1.5
0.1
1.4
Share based payments charge
2.1
1.4
0.7
Amortisation
0.5
0.4
0.1
Acquisition fees
2.7
-
2.7
6.8
1.9
4.9
Impairment charges of £1.5m relate to the write-off of intangible assets attributable to certain
of the Group’s Jaguar franchise outlets, which will cease operations in FY25.
The Group’s Partnership share option (PSO) scheme was introduced in FY21. Under the
scheme, colleagues receive nil cost options in the Company, pro-rata to their On Target
Earnings. Vesting is determined by the proportion of the colleagues’ annual bonus earned,
compared to their on-target bonus, up to a maximum of 100%. Vested options are capable of
exercise at the end of a three-year holding period. FY23 was the third year that such awards
were made to colleagues, with the increase in the share-based payment charge reflective of
this third grant and an increase in the scale of the Group. Under the PSO scheme, charges in
respect of the grants are spread over the 4-year period from award to the end of the holding
period. As such, FY24 should represent the final year of increased charges with the
expectation that annual costs will level off after this.
Acquisition fees represent legal and other due diligence professional fees in respect of the
substantial Helston acquisition, completed in December 2022.
Financial Review (continued)
26
Vertu Motors plc (Company Number: 05984855)
Net Finance Charges
Net finance charges are analysed below:
FY23
FY22
FY23 Var
to FY22
£’m
£’m
£’m
New vehicle Manufacturer stocking interest
3.4
1.7
1.7
Interest on bank borrowings
3.1
1.7
1.4
Used vehicle stock funding interest
0.8
0.1
0.7
Interest on lease liabilities
3.5
3.6
(0.1)
Interest income
(1.3)
(0.1)
(1.2)
Net Finance Charges
9.5
7.0
2.5
The Group saw an increase in interest charged by Manufacturers on funded new vehicle
inventory. This increase was due to increased interest rates being charged as successive
base rate rises took effect, the increased average price of new vehicles in the pipeline and an
easing of supply of new vehicles in some franchises so extending the pipeline consigned.
Total Group new vehicle stock as at 28 February 2023 was £427m (2022: £275m), up 55.3%.
Interest on bank borrowings increased due to the additional facilities drawn for the acquisition
of Helston Garages in December 2022.
To minimise the interest rate risk to the Group, derivative contracts have been entered into.
The Group has secured an interest rate cap contract over £50m of mortgage borrowing
capping the underlying rate to a maximum of 4.50%. In addition, in respect of the RCF, an
interest rate swap over £30m of borrowing has been entered into, fixing the underlying SONIA
rate charged at 4.42% until March 2025. This replaced an existing Swap agreement over
£22m of borrowings, which expired 27 February 2023.
Pension Costs
The Group has a closed defined benefit scheme which remains fully funded and requires no
ongoing cash contribution from the Company.
The Scheme invests in an LDI portfolio which aims to fully hedge the Scheme’s interest rate
and inflation risk to maintain this fully funded position.
On the accounting valuation basis the scheme is in surplus. Different valuation assumptions
apply to the accounting and actuarial valuations such as the use of corporate bond yields
rather than gilt yields to discount liabilities. The impact of the Scheme’s hedge being related
to the actuarial position rather than accounting value generated a reduction in the accounting
surplus of approximately £4m over the Year. A further reduction in surplus arose relating to
movements in the applicable inflation assumptions. Overall, a net actuarial loss of £6.0m was
recognised in the Statement of Comprehensive Income for the Year. The accounting surplus
on the scheme decreased to £3.2m as at 28 February 2023 (2022: £9.1m).
Tax Payments
The Group’s underlying effective rate of tax for the Period was 19.5% (FY22: 19.9%). The
overall effective tax rate, decreased to 21.3% (FY22: 23.8%) as a result of FY22 being
impacted by the revaluation of deferred tax obligations. The total tax charge for the Year fell
to £6.9m from £18.8m. 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 £54.3m (FY22: £44.4m) was generated in the Year. The Year saw a
£23.7m reduction in working capital.
A reduction in the Group’s used vehicle inventory, led to an £11.9m cash inflow. Improving
new vehicle supply saw a significant increase in the level of both new vehicle consignment
inventory and the associated Manufacturer funding. These movements did have a cash
impact in so far as they led to a net cash inflow because of the VAT cash flow advantage on
such funded vehicles of £21.0m.
Financial Review (continued)
27
Vertu Motors plc (Company Number: 05984855)
Cash Flows (continued)
Improved new vehicle supply resulted in an £20.8m cash outflow from an increase in the level
of fully paid new vehicle inventory held by the Group. The Group continues to have a strong
forward order bank and the increase in fleet activity year on year has led to a £12.4m
increase in the value of vehicle deposits and advance payments held against outstanding
orders, a cash inflow in the Year.
Financing and Capital Structure
The Group has a balance sheet with shareholders’ funds of £341.4m (2022: £331.9m)
underpinned by a freehold and long leasehold portfolio of £306.6m (2022: £236.4m) and net
debt (excluding lease liabilities) of £75.3m as at 28 February 2023. The Group’s conservative
financing and capital structure resulted in a strong tangible net assets position of £224.1m as
at 28 February 2023, representing 65.3p per share.
The Group has a committed acquisition debt facility of £93m. This facility was re-financed
during the year with the Group’s two existing lending banks plus a third lending bank added at
re-financing. This refinanced facility matures in December 2025, with the potential to extend
for a further two years to December 2027. £44m of this committed facility was drawn as at 28
February 2023. The Group operated comfortably within all covenants during the Year.
The Group also has long term debt funding in the form of a 20-year mortgages totalling
£85.5m provided by BMW Financial Services (‘BMW FS’).
The Group 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 2023, amounts
utilised on such facilities totalled £25.4m. These balances are included as debt in the
calculation of Net Debt/Cash. The Group has a £70m facility under these arrangements and
held £173m of used vehicle inventory at 28 February 2023 resulting in used vehicle stock
being largely unencumbered.
Capital Allocation
Consideration of capital allocation is central to the Board’s decision making. The Board
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.
The Group spent £122.1m on acquisitions during the year, in line with its strategy to drive
consolidation where acquisitions meet hurdle rates. The Group continues to monitor post-
acquisition returns and remains confident hurdle rates are being achieved.
The Helston acquisition on 17 December 2022 utilised £115.2m of cash and debt. This net
consideration paid reflected the net asset position at 31 August 2022 of the acquired
businesses. Cash of £6.9m from profits of the business acquired generated after this date to
completion accrued to the Group. This offset the headline goodwill number paid of £28.6m.
Finalised goodwill and other intangibles relating to this transaction, after other adjustments,
totalled £23.4m.
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. The Group
applies a dividend policy of dividends being covered three to four times by adjusted diluted
earnings per share. An interim dividend of 0.70p per share was paid in January 2023. The
Board recommends a final dividend in respect of the year ended 28 February 2023 of 1.45p
per share to be approved at the Annual General Meeting on 28 June 2023. This dividend will
be paid, subject to shareholder approval, on 28 July 2023. The ex-dividend date will be 29
June 2023 and the associated record date 30 June 2023. This final dividend brings the total
dividend in respect of FY23 to 2.15p per share (FY22: 1.70p), an increase of 26.5%. Against
adjusted, fully diluted EPS of 8.69p this dividend is covered 4.0 times in line with the Group’s
stated policy.
Financial Review (continued)
28
Vertu Motors plc (Company Number: 05984855)
Capital Allocation (continued)
During the Year, the Group purchased 10,477,450 shares for cancellation, representing 2.9%
of opening total issued share capital, for £5.9m. The Board believes that this is an
appropriate use of capital and will continue a programme of Buybacks as a relevant element
of returns to shareholders, alongside dividend payments. Authority is held for a further £3m
buyback programme to be appropriately deployed. A further £2m was spent in the Year on
the acquisition of shares into the Group’s Employee Benefit Trust (“EBT”) to be used for the
satisfaction of colleague share incentive programmes. £6.0m was spent on dividends paid
representing the final dividend in respect of the year ended 28 February 2022 and interim
dividend in respect of the Year.
The Group also deploys capital on its extensive franchised dealership network, with fixed
asset additions totalling £23.8m in FY23. This included £12.0m on freehold purchases or
projects which increased the Group’s brand representation or augmented productive capacity
(‘’Expansion capex’’). The balance of £11.8m is considered replacement capital expenditure.
For FY24, replacement capital expenditure is anticipated to be approximately £16.0m, which
includes large scale redevelopment projects to meet revised Manufacturer standards which
do not necessarily increase Group capacity. In addition, £5.0m of investments in FY24 of
green technology such as solar, EV charging points and LED lighting will be undertaken. A
further £17.0m of expenditure is anticipated in respect of Expansion capex. This high level of
activity includes the land purchase and build cost of the Ayr Toyota dealership, the
redevelopment and expansion of Exeter BMW/Mini, the expansion of the Group’s Toyota
dealership in Chesterfield as well as the continued investment in multi-franchising by the
Group. The Group has surplus property assets which are expected to be disposed over the
next 12 months for anticipated proceeds of c.£9.5m.
Karen Anderson, CFO
Sustainability
29
Vertu Motors plc (Company Number: 05984855)
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
Work with our Manufacturer
partners to provide
increasingly sustainable
choices for all customers
Goals
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
Link to SDG
Reduce the environmental
footprint of our business
Goals
Deliver an annual 10% like-for-
like reduction in the energy the
Group draws from the national
grid
70% of all dry waste to be
recycled by 2025
25% of the corporate fleet to be
alternatively powered by 2025
Link to SDG
Care for our colleagues and
support our communities
Goals
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
Link to SDG
Sustainability (continued)
30
Vertu Motors plc (Company Number: 05984855)
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) and
hybrid vehicles by 5.6% in FY23. BEV and hybrid vehicle sales represented
27.7% of the Group’s total new retail vehicle sales in FY23 compared to
24.3% in FY22.
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.
In FY23 the Group took several steps to reduce its carbon footprint and also
made progress towards relying less on the National Grid for the supply of its
energy. Firstly, gas consumption was reduced by 25.7% and electricity
consumption by 5.8% on a like-for-like basis compared to FY22. The majority
of this saving was achieved by the Group’s colleagues having a refreshed and
disciplined focus on energy consumption. Weekly league tables were
distributed and the dealerships towards the bottom of the tables were given
on-site support in the form of energy management reviews, which were
followed up until the key opportunities for reduction had been achieved.
In FY23 the Board approved a significant investment into LED Lighting and
Roof Solar Panel Project totalling £3.9M with the spend to be spread across
FY23 and FY24. LED lighting has replaced older lighting technology across
the majority of the Group’s workshops and nine roof solar installations were
complete and producing onsite electricity by the end of the financial year. A
further 25 Roof solar installations are planned in FY24 with the aim of
producing at least 10% of the Group’s total electricity requirements via onsite
clean solar energy.
The Group recycled 80% of its dry waste in FY23, delivering against its target
of 70% by 2025, early.
Care for our colleagues and support our communities
In a recent pulse survey of all Group colleagues, 82% 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 £300,000 in FY23 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. The Group’s modern slavery
statement is published on the Group’s website, at https://investors.vertumotors.com/.
Sustainability (continued)
31
Vertu Motors plc (Company Number: 05984855)
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 2022 to 28 February 2023, 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.
Government Emissions Factor Database 2022 version 1 has been used in the FY23
calculation below, utilising the published kWh gross calorific value (CV) and kgCO2e
emissions factors.
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, £404k 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.
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
01/03/2022 –
28/02/2023
01/03/2021 –
28/02/2022
Total Energy Consumption – Used for Emissions Calculation (kWh)
96,215,406
72,001,577
Oil & Gas Combustion Emissions, Scope 1 (tCO2e)
5,303
5,283
Purchased Electricity Emissions, Scope 2 (tCO2e)
5,614
5,525
Vehicle Fuel Combustion Emissions, Scope 1 (tCO2e)
8,897
4,169
Vehicle Fuel Combustion Emissions, Scope 3 (tCO2e)
-
-
Purchased Heat, Steam & Cooling Emissions, Scope 2 (tCO2e)
-
-
Refrigerant Emissions, Scope 1 (tCO2e)
-
-
Total Gross Reported Emissions (tCO2e)
19,814
14,977
Turnover (£m)
4,015
3,615
Intensity Ratio: Turnover (tCO2e / £m)
4.9
4.1
There is no additional global energy or emissions.
Sustainability (continued)
32
Vertu Motors plc (Company Number: 05984855)
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 2023, the Group’s community activities have
included:
Great Christmas Raffle:
The Group supported the Great Christmas Raffle, which raised funds for over 72 different
charities across the UK. The many worthy causes included in the raffle had seen fundraising
depleted as a consequence of the pandemic, in addition to them now combatting inflation and
the rising cost of living. The Group donated a 72-Reg Volkswagen Polo, raising over £93,000
in the space of two months.
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 of a 72-Reg Hyundai i10 helped to raise over
£40,000.
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 local 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 the Yorkshire Cricket Foundation, which delivers a number of
community projects across the County with monetary support and provision of a 17-seater
minibus. The Group’s support this year also enabled the expansion of the Club’s college
facilities, with the installation of an on-site gym for students. Vertu Motors helps 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 Back to Eden Community Project, founded by
the organisation ‘Churches 4 Positive Change’, based in the Wolverhampton area. The
Project includes more than ten allotments that serve to combat health inequalities and support
mental wellbeing, particularly for members of the local African Caribbean community. The
Group has supported the initiative since it started and continues to work closely with the
leaders of the project. The allotments are frequently used by a local primary school.
Additionally, anyone from the local community can visit the Project to meet people, learn
about growing fruit and vegetables and take produce home.
Junction 42:
The Group contributed £140,000 to Junction 42, based at Brunswick Methodist Church, in
Newcastle, which supports the welfare of prisoners while they are serving their sentences, as
well as helping them reintegrate back into society on their release. Junction 42 is dedicated to
transforming the lives of offenders, their families, and their communities. A large portion of the
Group’s donation facilitated the charity’s Stories of Hope packs scheme, which aims to reach
out to prisoners in their cells, to keep them spiritually sustained, engaged, and to help
minimise frustration, anxiety, and depression.
Sustainability (continued)
33
Vertu Motors plc (Company Number: 05984855)
Burnley FC in the Community:
The Group supports Whitehough Outdoor Centre, which is operated by charity Burnley FC in
the Community. The Centre offers outdoor education opportunities for young people from
local disadvantaged communities and young people with special educational needs, as well
groups like the Burnley Veterans. With energy bills rising steeply in recent months, the
running costs of the Centre have almost doubled. The Group supports operational costs of
the Centre and the general maintenance of the facility so it may continue to benefit its visitors.
Sunderland AFC Mental Health Hub:
Vertu Motors supports Sunderland AFC’s Mental Health Hub, the first of its kind in the UK,
provided by Sunderland’s Branch Liaison Council and Washington Mind. The Mental Health
Hub offers a free, informal and confidential drop-in service for home and away supporters on
SAFC home matchday. Based at the club’s Beacon of Light, the service is hosted by
trained counsellors to support fans in a relaxed and welcoming environment.
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 Worcester Ford and Worcester Citroen providing
chocolate selection boxes, each Christmas, for children part of Worcestershire Acute Hospital
charity. Vertu Slough Mercedes-Benz donated a Mercedes eVito van to help keep the charity
NishkamSWAT, serving up to 5,000 meals a week across 22 locations in and around London
and the South of England, in addition to the team donating their time deliver food around their
local community. Bristol Street Motors West Bromwich Ford supports New Park Village
Football Development, which combines football and learning programmes catering for boys
and girls aged four to 16. These are just a few examples of the work by our dealerships in
providing support to their communities.
Health and Safety
34
Vertu Motors plc (Company Number: 05984855)
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.
Colleagues
35
Vertu Motors plc (Company Number: 05984855)
Engaging our Colleagues
The development and engagement of our colleagues is one of the Group’s core strategic
objectives and a significant amount of focus is placed on this subject across the business at
all levels, including at both operational and PLC Board level. The Group seeks to create a
culture and environment within which colleagues are able to fulfil their potential and provides
structured development pathways to allow them to do so. Talent development programmes
feed into the growth strategy of the Group and have prominence in our people agenda.
Colleague engagement and feedback programmes are in-place and working well ensuring
that colleague have a voice and this it is heard at the most senior level.
The Board seeks to create an environment in which every colleague understands the impact
they can have on the business, feels valued and knows that they will be rewarded and
recognised for their contributions. The enthusiasm and dedication of our colleagues is a vital
factor in the Group’s success.
Colleague Communications
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 updates are emailed to colleagues relating to
Group initiatives, benefits and news. These are posted onto the Group wide intranet site
and/or included in monthly Team Briefs which are held in each of our businesses. Each
General Manager undertakes this monthly Team Brief, updating colleagues in 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. This is supported by additional video updates on key colleague related matters by
other senior directors.
Colleague Satisfaction Surveys
Another key strand of our workforce engagement strategy includes an annual comprehensive
Colleague Satisfaction Survey which takes place in October each year and provides
colleagues with the ability to provide feedback on a wide range of subjects. This annual
survey is followed-up with a shorter pulse survey which takes place each quarter. In October
2022 the Group adjusted its approach to the promotion of the survey to limit management
involvement in the surveys promotion. This was to ensure that colleagues were able to
choose freely whether or not to participate in the survey and ensure that they felt able to
provide feedback anonymously. 73% of colleagues participated in the October 2022 survey
with 86.2% stating that they would recommend the Group to someone they know as a great
place to work (up from 84.9% in 2021). Colleagues answer a comprehensive list of questions
that allow us to identify areas of strength and areas for development across every aspect of
the business from their understanding of the Group Vision and objectives, to how they feel
about their pay and reward level to how well we and train and develop the and whether or not
management live the Values. Colleagues can also provide free text feedback which is
exceptionally valuable in helping us improve their experience.
Colleague Engagement Meetings
A non-executive member of the Board (Pauline Best) undertakes the role of Workforce
Engagement Director. Working closely with the Group HR Director, Pauline guides 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 quarterly colleague engagement
meetings which are held in every business across the Group.
Colleagues (continued)
36
Vertu Motors plc (Company Number: 05984855)
Engaging our Colleagues (continued)
Colleague Engagement Meetings (continued)
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.
Colleague Recognition Programmes
The Group operates several recognition programmes covering all colleagues across the
Group. These schemes are intended to recognise and reward talented and committed
individuals who deliver results and support the Values and culture of the business.
One of the cornerstones of this strategy is our a non-management recognition programme,
‘The Masters Awards, through which colleagues throughout the Group can nominate their
non-management co-workers for awards linked to performance, demonstration of the Group’s
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 are designed to identify and recognise colleagues for their exceptional
personal contribution and are our way of hand-picking colleagues from across the Group and
celebrating their success. Our Divisional Colleague of the Year category identifies one
winning colleague from each of our operating divisions based on nominations from
colleagues. This approach generates a dealership of year winner and one of these colleagues
wins the divisional award. This generates a bottom-up nomination process that engages
colleagues throughout the business. The Masters Awards also have a number of award
categories that cover individual performance based on achievement of specific performance
targets which facilitates engagement through competition, as the associated league tables of
performance are communicated throughout the Group. The recipients range from sales
executives, service advisors and technicians to drivers, cleaners, valeters and receptionists.
Another scheme is the CEO Management Awards, which are announced each December and
recognise a number of managers for their outstanding performance. These are top down and
involve the Operational Board identifying who has excelled against the measures in the
Group’s annual vision.
The Group also recognises colleagues with long service, with specific recognition for those
reaching key milestones such as 10, 15, 20 and even 60 years within the Group. This
recognition programme includes celebratory social events, which bring together long-serving
colleagues and the Group’s senior management team as a thank you for their commitment.
These colleague award programmes are designed to reward and reinforce behaviours
underpinning both Group financial performance and other strategic objectives including the
delivery of an outstanding customer experience.
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.
Colleagues (continued)
37
Vertu Motors plc (Company Number: 05984855)
Values (Continued)
• 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.
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 2023
At 28 February 2022
Female
Male
Total
Female
Male
Total
Directors
2
4
6
2
4
6
Group Senior Managers
8
65
73
6
58
64
All Colleagues
1,813
5,510
7,323
1,540
4,647
6,187
Colleagues (continued)
38
Vertu Motors plc (Company Number: 05984855)
Learning and Development
The Group invests in the personal development of every colleague. This includes 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 all managers to identify and support
colleagues in this area.
A significant number of leadership development programmes are operated by the Group
including several in partnership with Dale Carnegie training. Over 80 managers will progress
through structured management development programmes over the next 12 months. Over
10% of the Group’s management will progress through these programmes during FY24.
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.
The Group also operates a substantial apprenticeship programme in partnership with the
Group’s Manufacturer partners, with over 350 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 also launched a 120 strong Customer Service Apprentice
programme in FY23 aimed at attracting out of sector talent. This has been very successful
and is providing a pipeline of talented individuals into entry level roles with a very balanced
gender mix.
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 6-year and has developed
a pedigree of delivering management level appointees to support the Group’s growth
strategy. Over 100 non-management colleagues will progress through this programme in
FY24.
Finally, a new programme has been developed for the most senior colleagues the ‘Net
Generation’ project will further develop senior managers to the potential of operational or
divisional Director level.
Colleagues (continued)
39
Vertu Motors plc (Company Number: 05984855)
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.
Risk Management
40
Vertu Motors plc (Company Number: 05984855)
Process
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 75. The statement
by the auditors about their reporting responsibilities is given on pages 81 and 83.
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.
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
INTERNAL AUDIT
Responsibility for reviewing financial and operational controls, monitoring risk capture and mitigating actions,
reporting to the Audit Committee
HEALTH AND SAFETY
COMMITTEE
Delegated responsibilities for
compliance with Health & Safety
and Environmental law and
regulations
COMPLIANCE COMMITTEE
Delegated responsibility from the
Board for Compliance and
Whistleblowing
AUDIT COMMITTEE
Delegated responsibility from
the Board for risk management
and Internal Controls
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
Risk Management (continued)
41
Vertu Motors plc (Company Number: 05984855)
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
•
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
❷ Failure to meet
competitive challenges
to our business model
or sector
Loss of customers to
competitors
Reduced profitability
•
The Group’s scale, technological capability and
diversification creates the ability to capitalise on
market opportunities
•
Omni-channel development / digital prowess
•
Customer experience focus of the Group attracts
customer loyalty
•
Ongoing monitoring to identify emerging competitive
threats and act on these quickly
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 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
Risk Management (continued)
42
Vertu Motors plc (Company Number: 05984855)
Principal Risks and Uncertainties (continued)
ECONOMIC, POLITICAL AND ENVIRONMENTAL
Description of risk
Impact
Mitigation
❺
Economic conditions,
including 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, government
regulation 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
Risk Management (continued)
43
Vertu Motors plc (Company Number: 05984855)
Principal Risks and Uncertainties (continued)
SYSTEMS AND TECHNOLOGY
Description of risk
Impact
Mitigation
❿
Failure of Group
information or
telecommunication
systems
Business is interrupted •
Robust business continuity process has been
developed
•
Operation of this process is regularly tested, reviewed
and updated as necessary
⓫
Group or key system
provider is targeted for
malicious cyber attack
Business is interrupted
Data is compromised
•
Robust business continuity process has been
developed
•
Upgraded all devices and users with endpoint and web
security.
•
Managed Detect and Response service initiated with
NCC Group provides 24/7 monitoring 365 days a year.
•
‘Be Aware’ cyber risk training completed by all
colleagues.
•
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
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
⓭ Use of estimates
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
⓮ Currency risk
Fluctuation in exchange
rates impact the
profitability of our
manufacturer partners
which may change their
prices or support
packages to the dealer
network
•
Portfolio of manufacturer partners spreads potential
risk
•
No material foreign exchange transactions are
undertaken directly by the Group
.
Viability and Going Concern
44
Vertu Motors plc (Company Number: 05984855)
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 2023 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 2026.
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 2026, 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 41 of the Strategic
Report.
•
Prudent growth assumptions in both volume and margin, reflecting the risks set out
on pages 41 to 43 of the Strategic Report.
The Group’s banking facilities were renewed in FY23, and now expire in December 2025, with
an option to extend out to December 2027.
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 41 to 43 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.
Viability and Going Concern (continued)
45
Vertu Motors plc (Company Number: 05984855)
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 2026.
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
Karen Anderson
Chief Executive Officer
Chief Financial Officer
10 May 2023
10 May 2023
Corporate Governance Report
46
Vertu Motors plc (Company Number: 05984855)
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 second Sustainability Strategy ‘Driving Sustainability’ in this 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 outlines the Company’s
ambition to drive the sustainability agenda in the years ahead. The strategy includes updates
on the targets and goals aligned to the strategic objectives of the Group.
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.
The Board undertook an annual board evaluation in March-April 2023 through an anonymous
survey by the Board. Results have been reviewed and actions for the coming year agreed.
As a result, particular focus will continue to 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 28 June 2023.
Andrew Goss
Non-executive Chairman
10 May 2023
Corporate Governance Report (continued)
47
Vertu Motors plc (Company Number: 05984855)
QCA Code Principle
Where to find out more (page)
1. Establish a Strategy and business model which promotes long-
term value for shareholders.
Group Strategy - pages 9-17
2. Seek to understand and meet shareholder needs and
expectations.
investors.vertumotors.com
3. Take into account wider stakeholder and social responsibilities
and their implications for long-term success.
s172 statement - pages 4-7
4. Embed effective risk management, considering both opportunities
and threats, throughout the organisation.
Risk Management - pages 40-43
5. Maintain the Board as a well-functioning balanced team led by the
Chair.
Board Leadership - pages 48-51
6. Ensure that, between them, the Directors have the necessary up-
to-date experience, skills and capabilities.
Board Leadership - pages 48-51
7. Evaluate Board performance based on clear and relevant
objectives seeking continuous improvement.
Chairman’s Corporate Governance Statement
page 46
8. Promote a corporate culture that is based on ethical values and
behaviours.
Group Strategy - pages 9-17
Colleagues - pages 35-39
9. Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board.
Roles and Responsibilities – page 53
Division of Responsibilities – page 52
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 52
Audit Report - pages 76-83
Remuneration Committee Report - pages 59-65
investors.vertumotors.com
Board Leadership
48
Vertu Motors plc (Company Number: 05984855)
Board of Directors
The Board has three Non-executive Directors including the Chairman, together with three
Executive Directors. The Chairman was considered independent on appointment and the
other Non-executive Directors are considered to be independent.
Andrew Goss
Non-Executive Chairman
Appointed
3 September 2018 as director
24 July 2019 as Chairman
Committee Membership
Audit Committee, Remuneration Committee, and
Chair of the Nominations Committee
Relevant Experience
Andrew (65) brings to the Group over 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
Appointed
1 June 2015
Committee Membership
Remuneration Committee, Nominations
Committee and Chair of the Audit Committee
Relevant Experience
Ken (69) is a former partner of Arthur Andersen and has held senior executive director roles
in many listed companies including RPS Group plc, 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 WANdisco plc and a Non-executive Director of Rockwood
Strategic Plc.
Pauline Best
Non-Executive Director
Appointed
31 May 2016
Committee Membership
Audit Committee, Nominations Committee and
Chair of the Remuneration Committee
Relevant Experience
Pauline (59) is an experienced Human Resources professional who is Chief People Officer 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 is invaluable as Chair of the
Remuneration Committee and she also brings that perspective to the Board. Pauline is also
the designated non-executive director for workforce engagement.
Board Leadership (continued)
49
Vertu Motors plc (Company Number: 05984855)
Board of Directors (continued)
Robert Forrester
Chief Executive Officer
Appointed
6 November 2006
Relevant Experience
Robert (53) 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
Appointed
26 July 2018
Relevant Experience
David (55) 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
Appointed
1 March 2019
Relevant Experience
Karen (51) 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
Board Leadership (continued)
50
Vertu Motors plc (Company Number: 05984855)
Board Meetings and Attendance (continued)
During the financial year the Board has met formally 5 times in person and 11 times 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
A P Goss
16
16
3
3
2
1
3
3
R T Forrester
16
16
-
-
-
-
-
-
D P Crane
16
16
-
-
-
-
-
-
K Anderson
16
16
-
-
-
-
-
-
K Lever
16
16
3
3
2
1
3
3
P Best
16
15
3
3
2
1
3
3
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.
Board Leadership (continued)
51
Vertu Motors plc (Company Number: 05984855)
Key Areas of Board Focus During the Year
STRATEGY
FINANCIAL
PERFORMANCE
GOVERNANCE
SHAREHOLDER
ENGAGEMENT
RISK
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
Approval of the re-
financed loan
facilities of the Group
Approval of the
FY2023 full year
results and FY2023
interim results
Monthly
management
accounts and
comparison against
annual business plan
Long range forecast
and funding
requirement planning
Re-appointment of
auditors
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
Annual General
Meeting
Meetings with key
shareholders on
results roadshows
Communication
around the
substantial
acquisition of Helston
completed in FY23
Annual review of key
Group risks and
mitigating controls
Approval of the
Groups energy
purchase policy
Approval of the
Groups hedging
strategy
Division of Responsibilities
52
Vertu Motors plc (Company Number: 05984855)
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
• R T Forrester
(Chair)
• D P Crane
• K Anderson
• N Loose
• 12 Senior
Managers
• D P Crane (Chair)
• K Anderson
• N Loose
• 4 Senior Managers
• 4 Senior
Managers
• H & S Manager
• K Lever (Chair)
• A P Goss
• P Best
• P Best (Chair)
• K Lever
• A P Goss
• A P Goss (Chair)
• K Lever
• P Best
Delegated
authorities
• Financial reporting
• Financial risk
management
• Internal control
• Remuneration
policy
• Incentive plans
• Performance
targets
• Balance of the
Board
• Leadership of the
Group
• Director
succession
planning
• Review,
communication,
delivery and
management of
Group strategy
and day to day
operations
• Compliance with
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
Reviews
• Full year and half
year results
• Accounting policies
• Terms of
engagement of
auditors
• Internal audit
• Achievement of
performance
targets for short
and long term
incentives
• Senior
management pay
structure
• Composition of
the Board
• Skills, knowledge
& experience on
the Board
• Diversity
• Group HR and IT
strategy
• Allocation of
resources
(financial and
colleague)
• Group
performance
• Adequacy and
effectiveness of
Group policies in
response to current
law and regulation
• Licences and
consents required
• Internal regulatory
audit
• Health & Safety
policies and
procedures
• Health & Safety
audits
• Accident
statistics and
causes
Recommends
• Re-appointment of
auditors
• Audit tender
• Auditors’
remuneration
• Level and
structure of
Executive
remuneration
• Remuneration
policy
• Appointments to
the Board
• Annual business
plan to the Board
• Group Vision
• Training
• Policy change
• Remedial or pre-
emptive action
• Training
• Policy change
• 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
• Appropriateness
of Remuneration
policy
• Independence of
Non-Executive
Directors
• Succession
planning
• Performance
against key
performance
indicators, plans
and prior year
• Compliance with
Group risk
management
strategy, policy
and procedures
• Appropriate retail
finance metrics
• Indicators of non-
compliance with
policy
• Any relevant
complaints
• Legal and
regulatory
developments
• Accidents and
near misses
• Changes to law
and regulations
• New sites to the
Group and
redevelopments
• Other changes in
working practice
Approves
• Statements in
Annual Report
concerning internal
controls and risk
management
• Remuneration
policy
• Remuneration
packages for
Executive
Directors
• Design of share
incentive plans
• Appointments for
Executive
Directors
• Skills profile for
Non-Executive
Directors
• Appointments to
dealership
management
positions
• Performance
related
remuneration of
dealership
colleagues
• Operational
process and
changes
• Reports to the
Board
• Submissions to
relevant authorities
• Changes to
relevant policies
and processes
• Training
programmes
• Whistleblowing
procedures
• Reports to the
Board
• Changes to
relevant policies
• Training
programmes
Division of Responsibilities (continued)
53
Vertu Motors plc (Company Number: 05984855)
Roles and Responsibilities
Chairman –
Andrew Goss
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.
Senior Independent Director –
Ken Lever
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.
Non-executive Director –
Pauline Best
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.
Chief Executive Officer –
Robert Forrester
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.
Nominations, Composition and Succession
54
Vertu Motors plc (Company Number: 05984855)
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 but the terms of Pauline
Best and Kenneth Lever have been extended up to nine 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 2022 Annual General Meeting will expire on the date of the 2023
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
Audit, Risk and Internal Control
55
Vertu Motors plc (Company Number: 05984855)
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 50.
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 52.
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
Recognition
and
measurement
of assets and
liabilities in a
business
combination
The Group completed the acquisition of Helston Garages Group Limited on 17
December 2022 for total consideration of £181,914,000, representing the largest
acquisition in the Group’s history.
Management undertook an exercise to identify and value the assets and liabilities that
had been acquired as part of this business combination, including identification and
measurement of any intangible assets arising as a result of the acquisition.
Valuations from external experts were obtained where necessary, to aid determination
of the fair value of assets and liabilities acquired.
The Committee reviewed the assumptions applied in this assessment and concluded
that the fair values disclosed in note 17 of the consolidated financial statements were
appropriate.
Carrying value
of goodwill,
other
intangibles and
tangible assets
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 2023 carrying amounts shown in notes
15, 16 and 18 of the consolidated financial statements were appropriate and approved
the disclosures.
Valuation of
inventory
The Group’s assessment of the valuation of used vehicle inventory at 28 February
2023 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 2023 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 2023 as shown in note 21 and concluded that
these were appropriate.
Audit, Risk and Internal Control (continued)
56
Vertu Motors plc (Company Number: 05984855)
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 44 and 45.
Pension
benefits
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 2023 and confirmed that these were
appropriate.
Manufacturer
bonus income
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.
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 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.
Audit, Risk and Internal Control (continued)
57
Vertu Motors plc (Company Number: 05984855)
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 76 to 83.
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 2023, 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
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 fifteen 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 2023. 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.
Audit, Risk and Internal Control (continued)
58
Vertu Motors plc (Company Number: 05984855)
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 this to the Board. The disclosure of non-audit fees paid to
PricewaterhouseCoopers LLP during the year is included in note 7 to the consolidated
financial statements.
K Lever
Chairman of Audit Committee
10 May 2023
Remuneration Committee Report
59
Vertu Motors plc (Company Number: 05984855)
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 2023. 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 2023 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 2023 and is subject to an advisory shareholder vote at this
year’s AGM.
The information in the Directors’ Remuneration Report set out on pages 66 to 71, and
highlighted as being subject to audit, has been audited by the Group’s auditors.
Key remuneration decisions for the year to 28 February 2023
In October 2022 the Group undertook a comprehensive review of its remuneration strategy in
light of the general economic backdrop, cost of living pressures and high vacancy levels in the
UK. This review included consideration of the impact of the 2023 National Minimum Wage
rates on the Group's colleague pay spectrum. Given this backdrop, the Group's pay review
strategy for 2023 (effective 1st March 2023) focused spend where it would yield the most
positive impact. Generally, the Group delivered a basic salary increase of between 3% and
6% for its lowest paid colleagues earning less than £35,000. The decision to maintain the
Executive directors existing remuneration levels into FY24 is consistent with this wider Group
approach. The Groups strategy was agreed by its Executive directors and its operational
board as the correct approach to support colleagues in line with the Group Values whilst also
being mindful of controlling its cost base over the longer term.
The Executive Director annual bonus structure remains unchanged from the scheme
operated in the year commencing 1 March 2022. 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 profit
bonus paid at the rate of 109% for the year commencing 1 March 2022 reflecting the above
target performance.
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. This Scheme continued in the year ended 28
February 2023 and will also apply in the year commencing 1 March 2023. 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
continues to be very well received by the beneficiaries.
The performance of the Group is such that the Partnership Share award made in the year
ended 28 February 2023 will vest in full for the majority of beneficiaries, including the
Executive Directors. Beneficiaries will receive the vested shares three years from the end of
the financial year to which they relate if they remain employed by the Group.
Remuneration Committee Report (continued)
60
Vertu Motors plc (Company Number: 05984855)
Annual Statement from the Chair of the Remuneration Committee (continued)
Key remuneration decisions for the year to 28 February 2023 (continued)
A Partnership Share Scheme annual award to the executive directors has been made for the
year commencing 1 March 2023. This award was made at at 40% of on-target earnings
consistent with the level made in the year commencing 1 March 2022.
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 2023. 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
10 May 2023
Remuneration Committee Report (continued)
61
Vertu Motors plc (Company Number: 05984855)
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
Operation
Maximum potential value
Performance metrics
BASIC SALARY
Attract and retain high
calibre Executive
Directors to deliver
strategy.
Paid in 12 equal monthly
instalments during the year.
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.
None
BENEFITS
Provide benefits
consistent with role.
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.
The cost of providing
benefits is borne by the
Company and varies from
time to time.
None
Remuneration Committee Report (continued)
62
Vertu Motors plc (Company Number: 05984855)
Remuneration Policy (continued)
Future Policy Table (continued)
Purpose and link to
strategy
Operation
Maximum potential value
Performance metrics
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.
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.
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.
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.
Annual award of options to
Executive Directors is 40%
of on-target earnings for
FY24. The Remuneration
Committee will determine at
the beginning of future
financial years, the
maximum value of shares
over which an award can be
granted.
Vesting is pro rata to achievement of the
participant’s bonus measures for the year.
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.
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.
None
Remuneration Committee Report (continued)
63
Vertu Motors plc (Company Number: 05984855)
Remuneration Policy (continued)
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.
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.
Remuneration Committee Report (continued)
64
Vertu Motors plc (Company Number: 05984855)
Directors’ Service Contracts, Notice Periods and Termination Payments
Provision
Policy
Details
Notice periods in
Executive
Directors’ service
contracts
12 months by Company or Executive Director
Executive
Directors may
be
required to work during the
notice period.
Compensation for
loss of office
No more than 12 months’ basic salary and benefits (including
company pension contributions).
Treatment of
annual bonus on
termination
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.
Treatment of LTIP
and CSOP awards
and Partnership
Share Awards
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.
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. The 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.
Good
leaver
circumstances
comprise death, illness, injury,
disability, retirement, transfer of
employing
business
outside
Group
or
exceptional
circumstances at the discretion
of the Committee.
Exercise of
discretion
Intended only to be relied upon to provide flexibility in exceptional
or inequitable circumstances.
The Committee’s determination
will
take
into
account
the
particular circumstances of the
Executive Director’s departure
and the recent performance of
the
Company
and
will
be
detailed in the next published
Remuneration
Committee
Report.
Outside
appointments
Subject to approval
Board approval must be sought.
Non-Executive
Directors
Re-election
All Non-Executives are subject
to re-election every three years.
No compensation payable if
required to stand down.
Remuneration Committee Report (continued)
65
Vertu Motors plc (Company Number: 05984855)
Directors’ Service Contracts, Notice Periods and Termination Payments (continued)
In the event of the negotiation of a settlement agreement between the Company and a
departing Director, the Committee may make payments it considers reasonable in settlement
of potential legal claims. Such payments may also include reasonable reimbursement of
professional fees in connection with such agreements.
The Committee may also include the reimbursement of fees for professional or outplacement
advice in the termination package, if it considers it reasonable to do so. It may also allow the
continuation of benefits for a limited period.
Non-Executive Directors’ Fee Policy
The policy for the remuneration of the Non-Executive Directors is as set out below. Non-
Executive Directors are not entitled to a bonus, they cannot participate in the Company’s
share option scheme and they are not eligible for pension arrangements.
Purpose and link to strategy
Operation
Maximum potential value
Performance
metrics
NON-EXECUTIVE DIRECTOR (‘NED’) FEES
To attract NEDs who have a
broad range of experience
and skills to oversee the
implementation
of
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.
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.
Annual rate set out in the annual
report on remuneration for the
current year and the following
year. No prescribed maximum
annual increase.
The cost of providing benefits is
borne by the Company and varies
from time to time.
None
Directors’ Remuneration Report
66
Vertu Motors plc (Company Number: 05984855)
Total 2023/24 Remuneration Opportunity
The chart below illustrates the remuneration that would be paid to each of the Executive
Directors in the 2023/24 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 29
February 2024 and is based on the closing share price on 1 March 2023.
Directors’ Remuneration Report (continued)
67
Vertu Motors plc (Company Number: 05984855)
Total 2023/24 Remuneration Opportunity (continued)
Each element of remuneration is defined in the table below:
Element
Description
Fixed
Base salary for the 2023/2024 financial year plus pension and benefits.
Annual Bonus
Annual bonus awards based on adjusted profit before tax, customer
outcome measures and colleague satisfaction targets.
Multiple Year (FY23
Partnership Share Award)
Value of Partnership Share Scheme Awards which vest in the year ended
29 February 2024 but are subject to a three-year holding period thereafter.
Value is based on the number of shares awarded at the closing share price
on 1 March 2023.
The on-target scenario assumes that for the annual bonus, adjusted profit is in line with
financial targets.
Annual report on remuneration
The annual basic salaries and fees to be paid to Directors in the year ending 29 February
2024 are set out in the table below, together with any increase expressed as a percentage.
28 February
28 February
2024
£’000
2023
£’000
Increase
%
R T Forrester
415
415
-
K Anderson
263
263
-
D P Crane
263
263
-
K Lever
62
62
-
P Best
52
52
-
A P Goss
130
130
-
Directors’ Remuneration Report (continued)
68
Vertu Motors plc (Company Number: 05984855)
Information subject to audit
Single Total Figure of Remuneration
The remuneration of the Directors who served during the period from 1 March 2022 to 28
February 2023 is as follows:
Salary or fees
Taxable
Benefits2
Pension
Bonus
Long Term
Incentive
Plan
Single total
figure
£’000
£’000
£’000
£’000
£’000
£’000
20231
2022
2023
2022
2023
2022
2023
2022
20234
20223
2023
2022
Executive Directors
R T Forrester
415
395
3
3
68
65
355
525
247
-
1,088
988
K Anderson
263
250
3
3
43
41
174
272
139
40
622
606
D P Crane
263
250
3
3
43
41
174
272
139
40
622
606
Non-Executive Directors
A P Goss
130
130
1
1
-
-
-
-
-
-
131
131
K Lever
62
62
1
1
-
-
-
-
-
-
63
63
P Best
52
52
1
1
-
-
-
-
-
-
53
53
1 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
2 Taxable benefits include vehicle insurance, together with medical and life assurance premiums.
3 Represents CSOP options granted in July and November 2018 which vested during the financial year ended 28 February 2022,
the value has been calculated by reference to the average share price of the Company over the financial year and the exercise
price applicable to each of the grants.
4 Represents PSO nil cost awards granted in March 2021 which vested in March 2022. The value has been calculated by reference
to the closing share price of the Company on 1 March 2022. These vested awards are subject to a 3 year holding period.
Annual Bonuses
The Executive Directors have been awarded Company profit performance bonus at a level
commensurate with 109% performance against the profit target, customer outcome bonus at
the level of 62% and colleague satisfaction bonus at the level of 50% - having achieved a
colleague great place to work result in the full annual survey above 85% (the 50% target) but
below 90% (the 100% target), to be paid in May 2023.
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 2023
is as follows:
Number at 1
March 2022
Exercised in
Year
Lapsed in
Year
Granted in
Year1
Number at 28
February 2023
R T Forrester
443,451
-
-
518,438
961,889
K Anderson
779,480
(30,000)
-
291,667
1,041,147
D P Crane
833,063
(83,583)
-
291,667
1,041,147
1 These Partnership Share Scheme awards vested in March 2023 and are subject to a holding period of three years prior to being
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.
Directors’ Remuneration Report (continued)
69
Vertu Motors plc (Company Number: 05984855)
Statement of Directors’ Shareholding
The Directors who held office on 28 February 2023 and their connected persons had interests
in the issued share capital of the Company as at 28 February 2023 as follows:
Number of shares held
(including by connected
persons)
Vested unexercised share
options
Vested share options
subject to 3 year holding
period
Unvested share options
subject to performance
conditions
28 February
28 February
28 February
28 February 28 February
28 February
28 February
28 February
2023
2022
2023
2022
2023
2022
2023 1
2022
R T Forrester
7,486,575
7,444,181
-
-
443,451
-
518,438
443,451
K Anderson
1,163,694
1,130,597
500,000
530,000
249,480
-
291,667
249,480
D P Crane
465,479
404,036
500,000
583,583
249,480
-
291,667
249,480
K Lever
100,800
100,800
-
-
-
-
-
-
P Best
-
-
-
-
-
-
-
-
A P Goss
62,083
62,083
-
-
-
-
-
-
1 These options vested post year end and are now subject to a 3 year holding period.
Directors’ Remuneration Report (continued)
70
Vertu Motors plc (Company Number: 05984855)
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 2023 was 61.0p (28 February 2022:
60.0p) and the range during the financial year was 38.9p to 68.6p (2022: 36.0p to 75.8p).
Changes in remuneration of Chief Executive Officer
The following table sets out the change in the Chief Executive’s salary, benefits and bonus
between the years ended 28 February 2022 and 28 February 2023 compared with the
average percentage change in each of those components for the employees of the Group.
Increase in base
salary
Change in
benefits
Change in
bonus
CEO
5.0%
0%
(32.4%)
Employees
4.3%
0%
(5.1%)
Directors’ Remuneration Report (continued)
71
Vertu Motors plc (Company Number: 05984855)
Date of Service Contracts/Letters of Appointment
DIRECTOR
Date of service contract/
letter of appointment
R T Forrester
20 December 2006
K Anderson
1 March 2019
D P Crane
25 July 2018
A P Goss
19 July 2019
K Lever
25 February 2021
P Best
5 May 2022
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 2022 and 28 February 2023 compared with other disbursements from profit (i.e. the
distributions to shareholders).
Spend in the
year ended 28
February 2023
£’000
Spend in the
year ended 28
February 2022
£’000
% change
Spend on remuneration (including Directors)
266,423
233,818
13.9%
Profit distributed by way of dividend
6,003
2,327
258.0%1
1 Dividends paid in the year ended 28 February 2022 represent an interim dividend only. There was no final dividend paid in respect of
the year ended 28 February 2021.
Shareholders’ Vote on Remuneration at the 2022 AGM
2022 Directors’ Remuneration Report
Number
Proportion of
votes cast (%)
Votes cast in favour
151,328,925
93.80
Votes cast against
10,000,414
6.20
Total votes cast in favour or against
161,329,339
100.00
Votes withheld
3,953
The Committee
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 52.
Directors Report
72
Vertu Motors plc (Company Number: 05984855)
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 2-45) and other sections of this Annual
Report and audited consolidated financial statements. The below requirements are covered
by reference as set out below:
Information
Reported within
Pages
Acquisitions and disposals
Strategic Report
2-45
Business model
Strategic Report
2-45
Corporate Governance Framework
Corporate Governance Report
46-75
Community and charitable giving
Strategic Report
2-45
Details of Directors
Corporate Governance Report
46-75
Directors’ share interests and remuneration
Directors Remuneration Report
66-71
Diversity, equality and inclusion
Strategic Report
2-45
Employee engagement
Strategic Report
2-45
Financial Instruments
Financial Statements (Note 27)
Future developments and strategic priorities
Strategic Report
2-45
Going concern statement
Strategic Report
2-45
Principal risks and risk management
Strategic Report
2-45
Modern Slavery Statement
Strategic Report
2-45
Results
Consolidated Income Statement
84
Section 172 Statement
Strategic Report
2-45
Stakeholder engagement
Strategic Report
2-45
Statement of Directors Responsibilities
Corporate Governance Report
46-75
Viability Statement
Strategic Report
2-45
Annual General Meeting (“AGM”)
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 £318,000 were made by the Group during the year ended 28
February 2023 (2022: £357,000).
Contracts
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 2023.
Directors Report (continued)
73
Vertu Motors plc (Company Number: 05984855)
Directors Indemnities and Insurance
In line with market practice and the Company’s Articles, each Director has the benefit of an
ongoing deed of indemnity from the Company, which includes provisions in relation to duties
as a Director of the Company or an associated company, qualifying third party indemnity
provisions and protection against derivative actions. Copies of these are available for
shareholders’ inspection at the AGM. Directors’ and Officers’ insurance has also been
established for all Directors and Officers to provide cover for their reasonable actions on
behalf of the Group.
Dividend
The dividend paid in the year to 28 February 2023 was £6,003,000 (1.75p per share) (2022:
£2,327,000 (0.65p per share)). A final dividend in respect of the year ended 28 February
2023 of 1.45p per share, is to be proposed at the annual general meeting on 28 June 2023.
The ex dividend date will be 29 June 2023 and the associated record date 30 June 2023.
The dividend will be paid on 28 July 2023, 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
(2022: Nil).
Post Balance Sheet Events
Details of events after 28 February 2023 are disclosed in note 39 of the Financial Statements.
Powers for the issuance or repurchase of Shares
At 1 March 2022, 4,141,272 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 2023, 2,436,251 shares held by the trust were transferred
to individuals pursuant to exercises of options (or sold to satisfy the exercise price or resulting
tax). 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. 5,665,352
ordinary shares in the Company were held by the Trustee at 28 February 2023.
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 2022 AGM.
Directors Report (continued)
74
Vertu Motors plc (Company Number: 05984855)
Share Capital
As at 28 February 2023, the Company’s issued share capital comprised a single class:
ordinary shares of 10 pence each of which 348,945,522 were in issue. The Articles permit
the creation of more than one class of share, but there is currently none other than ordinary
shares. Details of the Company’s share capital are set out in note 31 to the consolidated
financial statement. All issued shares are fully paid.
Shareholders (other than any who, under the Articles or the terms of the shares they hold, are
not entitled to receive such notices) have the right to receive notice of, and to attend and to
vote at, all general and (if any) applicable class meetings of the Company. A resolution put to
the vote at any general or class meeting is decided on a show of hands unless (before or on
the declaration of the result of the show of hands or on the withdrawal of any other demand
for a poll) a poll is properly demanded. At a general meeting, every member present in
person has, upon a show of hands, one vote, and on a poll, every member has one vote for
every 10 pence nominal amount of share capital of which they are the holder. In the case of
joint holders of a share, the vote of the member whose name stands first in the register of
members is accepted to the exclusion of any vote tendered by any other joint holder. Unless
the Board decides otherwise, a shareholder may not vote at any general or class meeting or
exercise any rights in relation to meetings whilst any amount of money relating to his shares
remains outstanding. A member is entitled to appoint a proxy to exercise all or any of their
rights to attend, speak and vote on their behalf at a general meeting. Further details
regarding voting can be found in the notes to the notice of the AGM. To be effective,
electronic and paper proxy appointments and voting instructions must be received by the
Company’s registrars not later than 48 hours before a general meeting. The Articles may be
obtained from Companies House in the UK or upon application to the Company Secretary.
Other than those prescribed by applicable law and the Company’s procedures for ensuring
compliance with it, there are no specific restrictions on the size of a holding nor on the
transfer of shares, which are governed by the Articles and prevailing legislation. The
Directors are not aware of any agreement between holders of the Company’s shares that may
result in restrictions on the transfer of securities or the exercise of voting rights. No person
has any special rights of control over the Company’s share capital.
By order of the Board
Nicola Loose
Company Secretary
10 May 2023
Statement of Directors Responsibilities
75
Vertu Motors plc (Company Number: 05984855)
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 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 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 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 Company will continue in business.
The Directors are responsible for safeguarding the assets of the Group and Company and
hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are also responsible for keeping adequate accounting records that are sufficient
to show and explain the Group’s and Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and 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 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
10 May 2023
Independent Auditors’ Report to the members of Vertu
Motors plc
76
Vertu Motors plc (Company Number: 05984855)
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 2023 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 as applied in accordance with the provisions of
the Companies Act 2006;
• the company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
including 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 and Financial
Statements (the “Annual Report”), which comprise: Vertu Motors plc as at 28 February 2023;
Consolidated income statement, Consolidated statement of comprehensive income,
Consolidated balance sheet, Consolidated cash flow statement and Consolidated Statement
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 other listed entities of public interest, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the
FRC’s Ethical Standard were not provided.
We have provided no non-audit services to the Company in the period under audit.
Our audit approach
Overview
Audit scope
• Three full scope audit components have been identified, alongside the company.
• This approach provides coverage of 71% of the Group's revenue.
Key audit matters
• Carrying value of intangible assets including goodwill (Group)
• Valuation of pension scheme liabilities (Group)
• Carrying value of investments in subsidiaries (Company)
• Completeness and valuation of assets and liabilities in the business combination (Group)
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
77
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Overview (continued)
Materiality
• Overall Group materiality: £3,600,000 (2022: £3,200,000) based on 0.09% of revenue.
• Overall Company materiality: £3,000,000 (2022: £2,750,000) based on 1% of total assets
(capped for Group materiality).
• Performance materiality: £2,700,000 (2022: £2,400,000) (Group) and £2,250,000 (2022:
£2,062,500) (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.
Completeness and valuation of assets and liabilities in the business combination is a new key
audit matter 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 this is the case and
a CGU has been subject to poor historical
performance,
there
is
a
risk
around
the
recoverability of goodwill and other intangible
assets. 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.
To address this risk, we have performed the
following: Assessed the Group’s budgeting
procedures as a basis for value in use
calculations;
Assessed the mathematical accuracy of the
model; 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;
Key inputs are assessed and challenged, for
example discount rates, inflation and forecast
revenues and costs; We engaged with PwC
Valuations experts to assess the discount rate;
We performed sensitivity analysis on the
forecasts, including downside scenarios to
assess headroom; and We reviewed the
disclosures included in the financial statements
for consistency.
We are satisfied with management’s conclusion
on the carrying value of goodwill and other
intangibles.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
78
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Key audit matter (continued)
How our audit addressed the key audit matter
(continued)
Valuation of pension scheme liabilities (Group)
There is inherent judgement in valuing the
Group’s post-retirement benefit liabilities within
the pension scheme. The nature of the calculation
means that small movements in key assumptions
could have a significant effect on the pension
obligations. In addition, factors impacting the
pension liability can be outside of management’s
control. Further details found in note 30.
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
(Company)
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. Further
details found in note 7 of the Company financial
statements.
To address this risk, we have performed 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
rates, inflation and forecast revenues and costs;
We engaged with PwC Valuations experts to
assess the discount rate;
We
performed
sensitivity
analysis
on
the
forecasts,
including
downside
scenarios
to
assess headroom; and We have assessed the
disclosures made by management.
We are satisfied with management’s conclusion
on the carrying value of investments.
Completeness and valuation of assets and
liabilities in the business combination (Group)
On 17 December 2022, the Group acquired the
entire share capital of Helston Garages Group
Limited ("Helston"), an automotive retail group
based in the South West of England, for
consideration of £181,914,000. This met the
definition of a business combination under IFRS 3
Business
combinations
which
required
management
to
undertake
an
acquisition
accounting
exercise.
Management
obtained
support from external experts in determining the
fair value of the tangible assets acquired.
Management
performed
a
calculation
to
determine the valuation of the intangible asset -
franchise
relationships,
recognised
at
£15,008,000. We identified this as a key audit
matter due to the risk that not all assets and
liabilities acquired are identified and due to the
judgement involved in determining fair values for
We addressed the risk that not all assets and
liabilities acquired had been identified through:
Considering what assets and liabilities were
identified
by
management
against
the
requirements of IFRS 3 Business combinations
and IAS 38 Intangible assets; and considering the
results of our audit work over the Helston
dealerships brought into the group to determine
whether or not any assets or liabilities existed
that had not been recognised by management as
part of the acquisition accounting exercise.
To address the risk that the fair values
determined for the intangible and tangible assets
were not reasonable we have:
Engaged our internal valuation experts to
challenge the methodology and assumptions
used by management in determining their fair
values;
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
79
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Key audit matter (continued)
How our audit addressed the key audit matter
(continued)
Completeness and valuation of assets and
liabilities in the business combination (Group)
(continued)
the intangible and tangible assets acquired.
Further details found in note 17.
Tested key inputs into the valuation models
including future cash flow forecasts that support
the franchise relationship intangible and the
existence of land, buildings and equipment
acquired; and
Reviewed the related disclosures to ensure these
are consistent with our audit work.
In performing these procedures, we did not
identify any issues.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to
give an opinion on the financial statements as a whole, taking into account the structure of the
group and the company, the accounting processes and controls, and the industry in which
they operate.
The Vertu Motors Group has grown organically and through acquisition, and as a result has a
number of subsidiary entities which contain geographically dispersed dealership locations.
Much of the day to day accounting function is performed at these individual dealerships, with
the support of a central Group accounting function. As a result of this structure there are three
components which required a full scope audit of their financial information, due to their size
and contribution to the financial results of the Group. These are Bristol Street First
Investments Limited, Bristol Street Fourth Investments Limited and 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 in scope components are carried out as part of our audit procedures, in
order to verify the existence of stock.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the
potential impact of climate risk on the Group’s and Company’s financial statements, and we
remained alert when performing our audit procedures for any indicators of the impact of
climate risk. Our procedures did not identify any material impact as a result of climate risk on
the Group’s and Company’s financial statements.
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:
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
80
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Materiality (continued)
Financial statements - Group
Financial statements - Company
Overall
materiality
£3,600,000 (2022: £3,200,000).
£3,000,000 (2022: £2,750,000).
How we
determined
it
0.09% of revenue
1% of total assets (capped for group
materiality)
Rationale
for
benchmark
applied
We applied our professional judgement to
determine an amount that was relevant to both
revenue and profit before tax, which are
measures used to assess the performance
and growth objectives of the Group, as well as
the scale of the Group’s operations.
We believe that total assets is the
primary
measure
used
by
the
shareholders
in
assessing
the
performance of the entity, and is a
generally
accepted
auditing
benchmark.
For each component in the scope of our Group audit, we allocated a materiality that is less
than our overall group materiality. The range of materiality allocated across components was
£3,100,000 and £2,900,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
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% (2022: 75%)
of overall materiality, amounting to £2,700,000 (2022: £2,400,000) for the Group financial
statements and £2,250,000 (2022: £2,062,500) 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 £180,000 (Group audit) (2022: £160,000) and £150,000
(Company audit) (2022: £137,000) 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:
• Performing a risk assessment to identify factors that could impact the going concern basis
of accounting;
• 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, as well as assessing the year to date performance against budget for the 2024
financial year;
• Obtaining and reviewing the Group's financing arrangements, including an audit of bank
covenant compliance and the classification of debt between current and non-current; and
• Reviewing and evaluating the adequacy of the disclosures made in the financial
statements in relation to going concern.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
81
Vertu Motors plc (Company Number: 05984855)
Conclusions relating to going concern (continued)
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, which includes reporting based on the Task Force on Climate-related
Financial Disclosures (TCFD) recommendations. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors Report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires
us also to report certain opinions and matters as described below.
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 2023 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.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
82
Vertu Motors plc (Company Number: 05984855)
Responsibilities for the financial statements and the audit (continued)
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 health and safety regulations, 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 AIM Rules, Companies Act 2006 and UK tax legislation. We
evaluated management’s incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to increase revenue, or
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); and
• 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.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
83
Vertu Motors plc (Company Number: 05984855)
Responsibilities for the financial statements and the audit (continued)
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for
our audit have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this responsibility.
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.
In our opinion, the part of the Directors' Remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Jonathan Greenaway (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
10 May 2023
Consolidated Income Statement
For the year ended 28 February 2023
84
Vertu Motors plc (Company Number: 05984855)
Underlying
items 2023
Non-
underlying
items 2023
(Note 8)
Total 2023
Underlying
items 2022
Non-
underlying
items 2022
(Note 8)
Total 2022
Note
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
5
4,014,544
-
4,014,544
3,615,052
-
3,615,052
Cost of sales
(3,566,134)
-
(3,566,134)
(3,179,632)
-
(3,179,632)
Gross profit
5
448,410
-
448,410
435,420
-
435,420
Operating expenses
6
(399,590)
(6,828)
(406,418)
(347,753)
(1,934)
(349,687)
Operating profit / (loss)
48,820
(6,828)
41,992
87,667
(1,934)
85,733
Finance income
11
1,300
-
1,300
163
-
163
Finance costs
11
(10,842)
-
(10,842)
(7,126)
-
(7,126)
Profit / (loss) before
tax
39,278
(6,828)
32,450
80,704
(1,934)
78,770
Taxation
12
(7,663)
746
(6,917)
(16,062)
(2,708)
(18,770)
Profit / (loss) for the
year attributable to
equity holders
31,615
(6,082)
25,533
64,642
(4,642)
60,000
Basic earnings per
share (p)
13
7.40
16.64
Diluted earnings per
share (p)
13
7.02
15.96
Consolidated Statement of Comprehensive Income
For the year ended 28 February 2023
85
Vertu Motors plc (Company Number: 05984855)
2023
2022
Note
£’000
£’000
Profit for the year
25,533
60,000
Other comprehensive (expenses) / income
Items that will not be reclassified to profit or loss:
Actuarial (losses) / gains on retirement benefit
obligations
30
(5,973)
2,801
Deferred tax relating to actuarial losses / (gains) on
retirement benefit obligations
30
1,493
(700)
Items that may be reclassified subsequently to profit or
loss:
Cash flow hedges
32
172
503
Deferred tax relating to cash flow hedges
32
(43)
(96)
Other comprehensive (expense) / income for the
year, net of tax
(4,351)
2,508
Total comprehensive income for the year
attributable to equity holders
21,182
62,508
Consolidated Balance Sheet
As at 28 February 2023
86
Vertu Motors plc (Company Number: 05984855)
2023
2022
Note
£’000
£’000
Non-current assets
Goodwill and other indefinite life assets
15
127,590
103,470
Other intangible assets
16
2,286
1,797
Retirement benefit asset
30
3,188
9,055
Property, plant and equipment
18
328,405
254,133
Right-of-use assets
19
73,078
78,278
Derivative financial instruments
27
507
-
Total non-current assets
535,054
446,733
Current assets
Inventories
21
674,380
475,027
Trade and other receivables
23
86,317
51,839
Current tax assets
1,654
-
Cash and cash equivalents
24
78,984
83,793
841,335
610,659
Property assets held for sale
22
6,077
-
Total current assets
847,412
610,659
Total assets
1,382,466
1,057,392
Current liabilities
Trade and other payables
25
(758,594)
(529,086)
Current tax liabilities
-
(3,734)
Derivative financial instruments
27
-
(13)
Contract liabilities
29
(13,477)
(11,752)
Borrowings
26
(29,821)
(12,283)
Lease liabilities
19
(14,498)
(14,132)
Total current liabilities
(816,390)
(571,000)
Non-current liabilities
Borrowings
26
(124,519)
(55,343)
Lease liabilities
19
(68,959)
(74,698)
Deferred income tax liabilities
28
(19,117)
(13,023)
Contract liabilities
29
(12,104)
(11,447)
Total non-current liabilities
(224,699)
(154,511)
Total liabilities
(1,041,089)
(725,511)
Net assets
341,377
331,881
Capital and reserves attributable to equity
holders of the Group
Ordinary share capital
31
34,894
35,942
Share premium
31
124,939
124,939
Other reserve
31
10,645
10,645
Hedging reserve
32
133
4
Treasury share reserve
31
(2,653)
(1,586)
Capital redemption reserve
31
4,833
3,785
Retained earnings
168,586
158,152
Total equity
341,377
331,881
These consolidated financial statements on pages 84 to 131 have been approved for issue by
the Board of Directors on 10 May 2023 and signed on its behalf by:
Robert Forrester
Karen Anderson
Chief Executive
Chief Financial Officer
Consolidated Cash Flow Statement
For the year ended 28 February 2023
87
Vertu Motors plc
2023
2022
Note
£’000
£’000
Cash flows from operating activities
Operating profit
41,992
85,733
Loss/(profit) on sale of property, plant and equipment
6
102
(9)
Profit on lease modification
19
(449)
(269)
Amortisation of other intangible assets
16
509
407
Depreciation of property, plant and equipment
18
14,510
14,365
Depreciation of right of use asset
19
16,225
16,658
Impairment charges
15
1,500
131
Movement in working capital
34
23,737
(27,973)
Share based payments charge
1,651
1,061
Cash inflow from operations
99,777
90,104
Tax received
100
135
Tax paid
(9,118)
(14,479)
Finance income received
1,053
39
Finance costs paid
(10,983)
(6,798)
Net cash inflow from operating activities
80,829
69,001
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and
borrowings acquired
17
(122,066)
(9,508)
Acquisition of freehold and long leasehold land and
buildings
(7,468)
-
Purchases of intangible assets
(186)
(44)
Purchases of other property, plant and equipment
(13,785)
(16,571)
Proceeds from disposal of property, plant and
equipment
179
1,605
Net cash outflow from investing activities
(143,326)
(24,518)
Cash flows from financing activities
Proceeds from borrowings
33
110,570
5,699
Repayment of borrowings
33
(23,358)
(10,638)
Principal elements of lease repayments
19
(16,187)
(15,786)
Purchase of treasury shares
(2,000)
-
Sale of treasury shares
744
951
Cash settled share options
(180)
(403)
Repurchase of own shares
(5,898)
(6,014)
Dividends paid to equity holders
(6,003)
(2,327)
Net cash inflow/(outflow) from financing activities
57,688
(28,518)
Net (decrease)/increase in cash and cash
equivalents
33
(4,809)
15,965
Cash and cash equivalents at beginning of year
83,793
67,828
Cash and cash equivalents at end of year
24
78,984
83,793
Consolidated Statement of Changes in Equity
For the year ended 28 February 2023
88
Vertu Motors plc
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 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, a further 3,960,331
shares were purchased for £2,000,000.
During the year, 2,436,251 shares were transferred from the EBT on exercise of vested
CSOP, LTIP and PSO awards. 5,665,352 shares remain in the EBT at 28 February 2023.
Ordinary
share
capital
Share
premium
Other
reserve
Hedging
reserve
Treasury
share
reserve
Capital
redemption
reserve
Retained
earnings
Total
equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 March 2022
35,942
124,939
10,645
4
(1,586)
3,785
158,152
331,881
Profit for the year
-
-
-
-
-
-
25,533
25,533
Actuarial losses on
retirement benefit
obligations
-
-
-
-
-
-
(5,973)
(5,973)
Tax on items taken
directly to equity
-
-
-
(43)
-
-
1,493
1,450
Fair value gains
-
-
-
172
-
-
-
172
Total comprehensive
income for the year
-
-
-
129
-
-
21,053
21,182
Purchase of treasury
shares
-
-
-
-
(2,000)
-
-
(2,000)
Sale of treasury shares
-
-
-
-
933
-
(189)
744
Repurchase of own
shares
-
-
-
-
-
-
(5,898)
(5,898)
Cancellation of
repurchased shares
(1,048)
-
-
-
-
1,048
-
-
Dividends paid
-
-
-
-
-
-
(6,003)
(6,003)
Share based payments
charge
-
-
-
-
-
-
1,471
1,471
As at 28 February 2023
34,894
124,939
10,645
133
(2,653)
4,833
168,586
341,377
Consolidated Statement of Changes in Equity (continued)
For the year ended 28 February 2022
89
Vertu Motors plc
Ordinary
share
capital
Share
premium
Other
reserve
Hedging
reserve
Treasury
share
reserve
Capital
redemption
reserve
Retained
earnings
Total
Equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 March 2021
36,917
124,939
10,645
(403)
(2,791)
2,810
103,823
275,940
Profit for the year
-
-
-
-
-
-
60,000
60,000
Actuarial gains on
retirement benefit
obligations
-
-
-
-
-
-
2,801
2,801
Tax on items taken
directly to equity
-
-
-
(96)
-
-
(700)
(796)
Fair value gains
-
-
-
503
-
-
-
503
Total comprehensive
income for the year
-
-
-
407
-
-
62,101
62,508
Sale of treasury shares
-
-
-
-
1,025
-
(74)
951
Issuance of treasury
shares
-
-
-
-
180
-
(15)
165
Repurchase of own
shares
-
-
-
-
-
-
(6,014)
(6,014)
Cancellation of
repurchased shares
(975)
-
-
-
-
975
-
-
Dividends paid
-
-
-
-
-
-
(2,327)
(2,327)
Share based payments
charge
-
-
-
-
-
-
658
658
As at 28 February 2022
35,942
124,939
10,645
4
(1,586)
3,785
158,152
331,881
Notes to the Consolidated Financial Statements
90
Vertu Motors plc (Company Number: 05984855)
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 29 February 2024 as well as the known financial
performance of the Group in the period subsequent to 28 February 2023, 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 from consumers as well
as further cost increases. 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 140 to 142 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 2023 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 2023 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 2023 of the subsidiaries listed
below, further details of which are provided in note 36.
Notes to the Consolidated Financial Statements (continued)
91
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
Basis of preparation (continued)
The subsidiaries which have taken an exemption from an audit for the year ended 28
February 2023 by virtue of s479A Companies Act 2006 are:
Albert Farnell Limited
South Hereford Garages Trade Parts LLP
All Car Parts Limited
Tyne Tees Finance Limited
Bristol Street First Investments Limited
Vans Direct Limited
Bristol Street Fourth Investments Limited
Vertu Accident Repair Limited
Farmer & Carlisle Holdings Limited
Vertu Motors (Chingford) Limited
Farmer & Carlisle Limited
Vertu Motors (Continental) Limited
Farmer & Carlisle Leicester Limited
Vertu Motors (Property) Limited
F.C. Business Operations Limited
Vertu Motors (Property 2) Limited
Grantham Motor Company Limited
Vertu Motors (VMC) Limited
Group SMB Limited
Vertu Motors Third Limited
South Hereford Garages Limited
Westcountry Enterprises Limited
Jactamial Properties Limited
Wiper Blades Limited
Macklin Property Limited
The subsidiaries which have taken an exemption from the preparation of individual accounts
in respect of the year ended 28 February 2023 by virtue of s394A of Companies Act 2006 are:
Aceparts Limited
Motor Nation Cars Limited (formerly Vertu
Best4Vans Limited
Motors (Retail) Limited)
Blacks Autos Limited
National Allparts Limited
Blake Holdings Limited
Newbolds Garage (Mansfield) Limited
Boydslaw 103 Limited
Nottingham TPS LLP
Bristol Street (No.1) Limited
Peter Blake (Chatsworth) Limited
Bristol Street (No.2) Limited
Peter Blake Limited
Bristol Street Commercials (Italia) Limited
Power Bulbs Ltd
Bristol Street Fifth Investments Limited
Power Bulbs Online Limited
Bristol Street Fleet Services Limited
SHG Holdings Limited
Bristol Street Group Limited
Sigma Holdings Limited
Bristol Street Limited
The Taxi Centre Limited
Brookside (1998) Limited
Typocar Limited
BSH Pension Trustee Limited
VanMan Limited
Carsandvansdirect Limited
Vertu Fleet Limited
Dobies (Carlisle) Limited
Vertu Motors (AMC) Limited
Dunfermline Autocentre Limited
Vertu Motors Car Limited (formerly Motor
Easy Vehicle Finance Limited
Nation Car Hypermarkets Limited)
Gordon Lamb Group Limited
Vertu Motors (Durham) Limited
Gordon Lamb Limited
Vertu Motors (Finance) Limited
Gordon Lamb Holdings Limited
Vertu Motors (Knaresborough) Limited
Hillendale Group Limited
Vertu Motors (Pity Me) Limited
Hillendale LR Limited
Vertu Motors Property 2 Holdings Limited
Hughes Group Holdings Limited
Vertu Ventures Limited
Hughes of Beaconsfield Limited
Westcountry Ventures Limited
International Concessionaires Limited
Widnes Car Centre Limited
Merifield Properties 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.
Notes to the Consolidated Financial Statements (continued)
92
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
Basis of preparation (continued)
Standards and interpretations adopted by the Group in the year ended 28 February
2023
The Group has applied the following standards and amendments for the first time for their
annual reporting period commencing 1 March 2022:
•
Amendments to IFRS 3, ‘Business Combinations’
•
Amendments to IAS 16, ‘Property, Plant and Equipment’; and
•
Amendments to IAS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’.
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 2023 reporting periods and have not been early adopted by the
Group. These standards are not expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future transactions.
Leases
The Group 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.
Notes to the Consolidated Financial Statements (continued)
93
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
Leases (continued)
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.
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.
Notes to the Consolidated Financial Statements (continued)
94
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
Business combinations and goodwill
Business combinations are accounted for using the purchase method of accounting. This
involves recognising identifiable assets (including intangible assets not previously recognised
by the acquiree) and liabilities (including contingent liabilities) of acquired businesses at fair
value. Goodwill acquired in a business combination is initially measured at cost being the
excess of the cost of the consideration over the Group’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities. Where the net fair value of
the acquired identifiable assets, liabilities and contingent liabilities exceeds the consideration,
the excess or “negative goodwill” is recognised immediately in the Consolidated Income
Statement. Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of annual impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the Group’s cash
generating units.
Each cash generating unit (“CGU”) or group of cash generating units to which the goodwill is
allocated represents the lowest level within the Group at which the goodwill is monitored for
internal management purposes. Gains and losses on the disposal of a business component
are calculated on a basis which incorporates the carrying amount of goodwill relating to the
business sold. Acquisition related costs are expensed to the Consolidated Income Statement
as incurred.
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 where the asset arises 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. Freehold land is not depreciated.
Depreciation is provided at rates calculated to write off the cost of property, plant and
equipment less their estimated residual values, on a straight-line basis over their estimated
useful lives, as follows:
Freehold buildings
2%
Long leasehold buildings
Shorter of lease term and 50 years
Short leasehold buildings
Lease term (under 25 years)
Franchise standards property improvements
20%
Vehicles and machinery
10% - 20%
Furniture, fittings and equipment
20% - 50%
Notes to the Consolidated Financial Statements (continued)
95
Vertu Motors plc (Company Number: 05984855)
1. Accounting Policies (continued)
Property, plant and equipment (continued)
An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses
on disposals are determined by comparing the proceeds with the carrying amount and are
recognised within ‘operating expenses’ in the consolidated income statement, except where
amounts are material and are disclosed separately in ‘non-underlying items’.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost for parts is
determined using the first-in, first-out (FIFO) method. Costs incurred in bringing each product
to its present location and condition are included and cost is based on price including delivery
costs less specific trade discounts. Net realisable value is based on estimated selling price
less further costs to be incurred on disposal. Provision is made for obsolete, slow-moving or
defective items where appropriate.
The timing of recognition of new vehicle inventory as an asset of the Group is dependent on
the terms of the purchase which vary 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. ‘Invoiced’ arrangements
2. ‘Consignment’ arrangements
3. ‘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.
Notes to the Consolidated Financial Statements (continued)
96
Vertu Motors plc (Company Number: 05984855)
1. Accounting Policies (continued)
Inventories (continued)
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.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. A provision
for impairment of trade receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30
days overdue) are considered indicators that the trade receivable is impaired. The amount of
the provision is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate. The carrying
amount of the asset is reduced through the use of an allowance account, and the amount of
the loss is recognised in the Consolidated Income Statement within operating expenses.
When a trade receivable is uncollectible, it is written off against the allowance account for
trade receivables. Subsequent recoveries of amounts previously written off are credited
against operating expenses in the income statement.
Trade payables
Trade payables are recognised at fair value initially and subsequently measured at amortised
cost using the effective interest method.
Impairment of financial and non-financial assets
The Group assesses at each balance sheet date whether a financial asset or group of
financial assets are impaired.
If there is objective evidence that an impairment loss on loans and receivables at amortised
cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows discounted at
the financial asset’s original effective interest rates. The amount of the loss is recognised in
the Consolidated Income Statement.
At each reporting date, the Group assesses whether there is an indication that a non-financial
asset may be impaired. If any such indication exists, or when annual impairment testing for
an asset is required, the Group makes an estimate of the asset’s recoverable amount. An
asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its
value in use. Where fair value cannot be determined then the recoverable amount will be
determined by reference to value in use. Value in use is determined for an individual asset,
unless the asset does not generate cash flows that are largely independent of those from
other assets or groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows of separately identifiable CGUs are
discounted to their present value using a 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.
Notes to the Consolidated Financial Statements (continued)
97
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
Impairment of financial and non-financial assets (continued)
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.
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 instruments held by the Group throughout the year were cash
flow hedges swapping floating for fixed interest rates or capping a floating rate. 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:
Notes to the Consolidated Financial Statements (continued)
98
Vertu Motors plc (Company Number: 05984855)
1. Accounting Policies (continued)
Taxation (continued)
a.
where the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
b.
in respect of taxable temporary differences associated with investments in subsidiaries,
where the timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised except:
a.
where the deferred tax asset relating to the deductible temporary differences arises from
the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
b.
in respect of deductible temporary differences associated with investments 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.
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.
Notes to the Consolidated Financial Statements (continued)
99
Vertu Motors plc (Company Number: 05984855)
1. Accounting Policies (continued)
Revenue (continued)
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.
Disaggregation of revenue:
The table below shows revenue disaggregated by the Group’s main product/service lines:
2023
2022
£’000
£’000
Aftersales
336,886
288,819
Used cars
1,658,202
1,584,378
New car retail & Motability
1,121,896
969,846
New fleet & commercial
897,560
772,009
Total
4,014,544
3,615,052
Timing of revenue recognition:
Recognised at a point in time
4,001,280
3,607,039
Recognised over time
13,264
8,013
Total
4,014,544
3,615,052
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.
Notes to the Consolidated Financial Statements (continued)
100
Vertu Motors plc (Company Number: 05984855)
1. Accounting Policies (continued)
Pension costs (continued)
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.
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.
Notes to the Consolidated Financial Statements (continued)
101
Vertu Motors plc (Company Number: 05984855)
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.
Notes to the Consolidated Financial Statements (continued)
102
Vertu Motors plc (Company Number: 05984855)
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.
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. Total capital is calculated as total
shareholders’ equity.
The Group had net debt of £158,813,000 (including £83,457,000 lease liabilities) at 28
February 2023 as disclosed in note 33 to the consolidated financial statements (2022: net
debt of £72,663,000 including £88,830,000 lease liabilities).
Less than
one year
Between one
and two years
Between two
and five years
Between five
and ten years
Over ten
years
Total
£’000
£’000
£’000
£’000
£’000
£’000
Bank borrowings
2,566
48,486
-
-
-
51,052
Mortgage
9,612
9,325
26,973
39,480
54,731
140,121
Other borrowings
25,460
-
-
-
-
25,460
Lease liabilities
19,420
16,827
33,524
24,066
8,485
102,322
Contract liabilities
13,477
8,169
3,912
23
-
25,581
Trade and other payables
(excluding social security
and other taxes)
744,945
-
-
-
-
744,945
At 28 February 2023
815,480
82,807
64,409
63,569
63,216
1,089,481
Less than
one year
Between one
and two years
Between two
and five years
Between five
and ten years
Over ten
years
Total
£’000
£’000
£’000
£’000
£’000
£’000
Bank borrowings
904
45,007
-
-
-
45,911
Mortgage
978
960
2,751
4,190
6,329
15,208
Other borrowings
11,647
-
-
-
-
11,647
Lease liabilities
18,046
15,795
35,531
27,783
10,384
107,539
Contract liabilities
11,752
7,220
4,201
26
-
23,199
Trade and other payables
(excluding social security
and other taxes)
511,422
-
-
-
-
511,422
At 28 February 2022
554,749
68,982
42,483
31,999
16,713
714,926
Notes to the Consolidated Financial Statements (continued)
103
Vertu Motors plc (Company Number: 05984855)
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 2023, 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 and
amortisation rates applied are set out in Note 1.
Pension benefits
During the year ended 28 February 2023, 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
2023 are provided in note 30.
Notes to the Consolidated Financial Statements (continued)
104
Vertu Motors plc (Company Number: 05984855)
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 2023. 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 2023
Revenue
Revenue
Mix
Gross
Profit
Gross
Profit
Mix
Gross
Margin1
£’m
%
£’m
%
%
Aftersales
336.8
8.4
182.5
40.7
44.5
Used cars
1,658.2
41.3
125.2
27.9
7.5
New car retail and Motability
1,121.9
27.9
98.4
22.0
8.8
New fleet and commercial
897.6
22.4
42.3
9.4
4.7
4,014.5
100.0
448.4
100.0
11.2
Year ended 28 February 2022
Revenue
Revenue
Mix
Gross
Profit
Gross
Profit
Mix
Gross
Margin1
£’m
%
£’m
%
%
Aftersales
288.8
8.0
164.9
37.9
47.1
Used cars
1,584.4
43.8
154.4
35.5
9.7
New car retail and Motability
969.9
26.8
80.6
18.5
8.3
New fleet and commercial
772.0
21.4
35.5
8.1
4.6
3,615.1
100.0
435.4
100.0
12.0
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
Notes to the Consolidated Financial Statements (continued)
105
Vertu Motors plc (Company Number: 05984855)
6.
Operating expenses
2023
2022
£’000
£’000
Wages and salaries excluding share based payments
charge (note 9)
226,441
199,855
Depreciation on property, plant and equipment (note 18)
14,510
14,365
Depreciation on right-of-use assets (note 19)
16,225
16,658
Loss/(profit) on disposal of property, plant and
equipment
102
(9)
Profit on lease modification (note 19)
(449)
(269)
Auditors’ remuneration (note 7)
375
263
Rental income
(686)
(291)
Share based payments charge (note 31)
2,066
1,396
Amortisation (note 16)
509
407
Impairment charges (note 15)
1,500
131
Non-underlying acquisition costs (note 8)
2,753
-
Other expenses
143,072
117,181
406,418
349,687
7.
Auditors’ remuneration
2023
2022
£’000
£’000
Fees payable to the Company’s auditors for the
audit of the parent company and consolidated
financial statements
375
258
Fees payable to the Company’s auditors and its
associates for other services:
- audit of Group’s subsidiaries
-
5
375
263
8.
Non-underlying items
2023
2022
£’000
£’000
Acquisition costs
(2,753)
-
Share based payments charge (note 31)
(2,066)
(1,396)
Amortisation (note 16)
(509)
(407)
Impairment charges (notes 15)
(1,500)
(131)
Non-underlying loss before tax
(6,828)
(1,934)
Acquisition costs relating to the acquisition of Helston Garages Group Limited (note 17 (c)) have
been included in non-underlying items in the year ended 28 February 2023 due to the one-off
nature and material value of the individual acquisition.
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
2023
2022
£’000
£’000
Wages and salaries
234,182
205,774
Social security costs
25,752
22,362
Pension costs – defined contribution plans
6,489
5,682
266,423
233,818
Share based payments charge (note 31)
2,066
1,396
268,489
235,214
Notes to the Consolidated Financial Statements (continued)
106
Vertu Motors plc (Company Number: 05984855)
9. Employee benefit expense (continued)
Employee benefit expense included in:
2023
2022
£’000
£’000
Operating expenses
226,441
199,855
Cost of sales
39,982
33,963
Share based payments charge (note 31)
2,066
1,396
268,489
235,214
Details of the remuneration of the Directors who served during the year from 1 March 2022 to 28
February 2023 and the year from 1 March 2021 to 28 February 2022 are given in the Directors’
Remuneration Report on pages 66 to 71.
10. Average monthly number of people employed (including Directors)
2023
2022
Number
Number
Sales and distribution
2,195
1,979
Service, parts and accident repair centres
3,083
2,718
Administration
1,441
1,173
6,719
5,870
To demonstrate the impact of acquisitions on the above figures, the actual year-end number of
people employed was as follows:
2023
2022
Number
Number
Sales and distribution
2,355
2,071
Service, parts and accident repair centres
3,423
2,836
Administration
1,545
1,280
7,323
6,187
11. Finance income and costs
2023
2022
£’000
£’000
Interest on short-term bank deposits
1,053
39
Net finance income relating to defined benefit
pension scheme (note 30)
247
124
Finance income
1,300
163
Bank loans and overdrafts
(3,112)
(1,701)
Vehicle stocking interest
(4,242)
(1,844)
Lease liability interest (note 19)
(3,488)
(3,581)
Finance costs
(10,842)
(7,126)
12. Taxation
2023
2022
£’000
£’000
Current tax
Current tax charge
6,444
16,350
Adjustment in respect of prior years
(1,836)
14
Total current tax
4,608
16,364
Deferred tax
Origination and reversal of temporary differences
409
(245)
Adjustment in respect of prior years
1,684
(147)
Rate differences
216
2,798
Total deferred tax (note 28)
2,309
2,406
Income tax expense
6,917
18,770
Notes to the Consolidated Financial Statements (continued)
107
Vertu Motors plc (Company Number: 05984855)
12. Taxation (continued)
2023
2022
£’000
£’000
Profit before taxation
32,450
78,770
Profit before taxation multiplied by the rate of
corporation tax in the UK of 19% (2022: 19%)
6,166
14,966
Non-qualifying depreciation
658
638
Non-deductible expenses
658
432
Effect on deferred tax balances due to rate change
216
2,798
IFRS 16
(65)
77
Property adjustment
10
41
Permanent benefits
(574)
(49)
Adjustments in respect of prior years
(152)
(133)
Total tax expense included in the income statement
6,917
18,770
A summary of the Group’s tax expense in respect of underlying and non-underlying items is as
follows:
Underlying
items 2023
Non-
underlying
items 2023
Total
2023
Underlying
items 2022
Non-
underlying
items 2022
Total
2022
£’000
£’000
£’000
£’000
£’000
£’000
Profit / (loss) before tax
39,278
(6,828)
32,450
80,704
(1,934)
78,770
Taxation
(7,663)
746
(6,917)
(16,062)
(2,708)
(18,770)
Profit / (loss) after tax
31,615
(6,082)
25,533
64,642
(4,642)
60,000
Effective tax rate
19.51%
21.32%
19.90%
23.83%
The Group’s underlying effective rate of tax is 19.51% (2022: 19.90%) 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 2023.
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. As a result the Group’s deferred tax obligations at 28 February
2023 and 28 February 2022 have been measured at 25%.
The overall effective tax rate of 21.32% includes tax on non-underlying items (2022: 23.83%).
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 73.
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.
Notes to the Consolidated Financial Statements (continued)
108
Vertu Motors plc (Company Number: 05984855)
13. Earnings per share (continued)
2023
2022
£’000
£’000
Profit attributable to equity shareholders
25,533
60,000
Non-underlying loss after tax (note 12)
6,082
4,642
Underlying earnings attributable to equity
shareholders
31,615
64,642
Weighted average number of shares in issue (‘000s)
345,239
360,651
Potentially dilutive shares (‘000s)
18,703
15,222
Diluted weighted average number of shares in
issue (‘000s)
363,942
375,873
Basic earnings per share
7.40p
16.64p
Diluted earnings per share
7.02p
15.96p
Basic underlying earnings per share
9.16p
17.92p
Diluted underlying earnings per share
8.69p
17.20p
14. Dividends per share
Dividends of £6,003,000 were paid in the year ended 28 February 2023 (2022: £2,327,000),
1.75p per share (2022: 0.65p).
A final dividend of 1.45p per share is to be proposed at the Annual General Meeting on 28
June 2023. The ex-dividend date will be 29 June 2023 and the associated record date 30
June 2023. The dividend will be paid, subject to shareholder approval, on 28 July 2023 and
these financial statements do not reflect this final dividend payable.
15. Goodwill and other indefinite life assets
2023
Goodwill
Franchise
relationships
Total
£’000
£’000
£’000
Cost
At 1 March 2022
91,026
28,895
119,921
Acquisitions (note 17)
10,612
15,008
25,620
At 28 February 2023
101,638
43,903
145,541
Accumulated impairment charges
At 1 March 2022
16,451
-
16,451
Impairment charges
1,500
-
1,500
At 28 February 2023
17,951
-
17,951
Net Book Value
At 28 February 2023
83,687
43,903
127,590
At 28 February 2022
74,575
28,895
103,470
Impairment charges in the year ended 28 February 2023 relates to two of the Group’s
previously acquired Jaguar sales outlets for which goodwill arose on acquisition. The
franchise will cease at these locations on 30 October 2024.
Notes to the Consolidated Financial Statements (continued)
109
Vertu Motors plc (Company Number: 05984855)
15. Goodwill and other indefinite life assets (continued)
2022
Goodwill
Franchise
relationships
Total
£’000
£’000
£’000
Cost
At 1 March 2021
87,930
27,582
115,512
Acquisitions
3,096
1,313
4,409
At 28 February 2022
91,026
28,895
119,921
Accumulated impairment charges
At 1 March 2021
16,320
-
16,320
Impairment charge
131
-
131
At 28 February 2022
16,451
-
16,451
Net Book Value
At 28 February 2022
74,575
28,895
103,470
At 28 February 2021
71,610
27,582
99,192
Impairment
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 2023 and 28 February 2022, the acquired goodwill and other
indefinite life assets were tested for impairment.
For the purposes of impairment testing of goodwill and other indefinite life assets, the
Directors recognise the Group’s Cash Generating Units (“CGU”s) to be connected groupings
of dealerships acquired together.
A summary of the goodwill purchased is presented below:
2023
2022
£’000
£’000
Bristol Street Group Limited
13,860
13,860
Albert Farnell Limited
12,529
13,279
Helston Garages Group Limited
8,422
-
SHG Holdings Limited
7,842
7,842
Hillendale Group Limited
4,409
5,159
Sigma Holdings Limited and Hughes Group Holdings Limited
5,874
5,874
Gordon Lamb Group Limited
5,754
5,754
Vans Direct Limited
4,475
4,475
Bolton Land Rover
4,415
4,415
Farmer & Carlisle Holdings Limited
2,769
2,769
Wiper Blades Limited
1,607
-
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
1,114
1,114
Other acquisitions
10,617
10,034
83,687
74,575
A summary of franchise relationships acquired is presented below:
2023
2022
£’000
£’000
Helston Garages Group Limited
15,008
-
Sigma Holdings Limited and Hughes Group Holdings Limited
9,989
9,989
Albert Farnell Limited
7,373
7,373
Gordon Lamb Group Limited
3,207
3,207
Bolton Land Rover
2,595
2,595
Hillendale Group Limited
1,749
1,749
SHG Holdings Limited
1,497
1,497
Farmer & Carlisle Holdings Limited
1,313
1,313
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
677
677
Sunderland, Durham, Teesside, Malton and York BMW MINI
495
495
43,903
28,895
Notes to the Consolidated Financial Statements (continued)
110
Vertu Motors plc (Company Number: 05984855)
15. Goodwill and other indefinite life assets (continued)
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 9% (2022: 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 vehicle sales or reduced demand for service work as a consequence of a
reduced vehicle parc significantly reduces the Group’s earnings in the year ending
29 February 2024, with a return to normalised trading in the year ending 28 February
2025, it is not expected to create an additional impairment charge.
•
If the growth rate in years three to five is reduced to -5%, an additional impairment
charge in respect of goodwill and other indefinite life assets of £4.3m 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 £8.4m would arise.
16. Other intangible assets
2023
Software
costs
Brand
Customer
relationships
Total
£’000
£’000
£’000
£’000
Cost
At 1 March 2022
2,631
795
1,985
5,411
Acquisitions (note 17)
-
812
-
812
Additions
186
-
-
186
Disposals
(1,616)
-
-
(1,616)
At 28 February 2023
1,201
1,607
1,985
4,793
Accumulated amortisation
At 1 March 2022
2,351
200
1,063
3,614
Charge for the year
156
213
140
509
Disposals
(1,616)
-
-
(1,616)
At 28 February 2023
891
413
1,203
2,507
Net book value at 28 February 2023
310
1,194
782
2,286
Net book value at 28 February 2022
280
595
922
1,797
Notes to the Consolidated Financial Statements (continued)
111
Vertu Motors plc (Company Number: 05984855)
16. Other intangible assets (continued)
2022
Software
costs
Brand
Customer
relationships
Total
£’000
£’000
£’000
£’000
Cost
At 1 March 2021
2,648
541
1,985
5,174
Additions
45
254
-
299
Disposals
(62)
-
-
(62)
At 28 February 2022
2,631
795
1,985
5,411
Accumulated amortisation
At 1 March 2021
2,195
108
923
3,226
Charge for the year
175
92
140
407
Disposals
(19)
-
-
(19)
At 28 February 2022
2,351
200
1,063
3,614
Net book value at 28 February 2022
280
595
922
1,797
Net book value at 29 February 2021
453
433
1,062
1,948
17. Business combinations
a) Acquisition of Wiper Blades Limited
On 1 July 2022, the Group acquired the entire issued share capital of Wiper Blades Limited
which operates as an e-commerce specialist. Total consideration of £3,513,000 was settled
from the Group’s existing cash resources.
Detail of the fair value of the net assets acquired and goodwill arising are as follows:
Fair
Value
£’000
Intangible assets
812
Property, plant and equipment
4
Right of use assets
31
Inventories
123
Trade and other receivables
20
Cash and cash equivalents
1,137
Trade and other payables
(121)
Lease liabilities
(31)
Corporation tax
(69)
Net assets acquired
1,906
Goodwill
1,607
Consideration
3,513
Acquisition related costs (included in underlying operating expenses in the consolidated
income statement for the year ended 28 February 2023) totalled £67,000 in respect of this
acquisition.
The goodwill arising on acquisition is attributable to the anticipated profitability of the
distribution of parts through the acquired business.
If the acquisition of Wiper Blades Limited had occurred on 1 March 2022, Group revenues
would have been £696,000 higher and Group profit before tax would have been £72,000
higher.
Notes to the Consolidated Financial Statements (continued)
112
Vertu Motors plc (Company Number: 05984855)
17. Business combinations (continued)
b) Shipley and Rotherham Motorrad
On 31 October 2022, the Group acquired the business and assets of two BMW Motorrad
outlets in Shipley and Rotherham, Yorkshire. Total consideration of £4,150,000 was settled
from the Group’s existing cash resources.
Fair
Value
£’000
Property, plant and equipment
1,963
Inventories
2,867
Trade and other receivables
7
Trade and other payables
(1,187)
Deferred tax
(83)
Net assets acquired
3,567
Goodwill
583
Consideration
4,150
Acquisition related costs (included in underlying operating expenses in the consolidated
income statement for the year ended 28 February 2023) totalled £103,000 in respect of this
acquisition.
The goodwill arising on acquisition is attributable to the anticipated profitability of the
distribution of vehicles and parts through the acquired dealerships.
c) Helston Garages Group Limited
On 17 December 2022, the Group acquired the entire issued share capital of Helston
Garages Group Limited (“Helston”). Helston is a predominantly premium manufacturer
automotive retail group in the South West of England representing 28 franchised outlets.
Total consideration of £181,914,000 was met from a combination of a new £74,757,000
mortgage facility secured against a portfolio of 22 freehold and long leasehold properties
including a combination of acquired properties and existing Group properties, renegotiated
banking facilities and existing cash resources. £22,000,000 of the renegotiated banking
facility was drawn down for the initial acquisition payment, however, was subsequently
repaid in February 2023.
Details of the estimated fair value of net assets acquired and goodwill arising are as follows:
Fair
Value
£’000
Other indefinite life assets
15,008
Property, plant and equipment
69,414
Right of use assets
962
Inventories
59,740
Trade and other receivables
19,518
Corporation tax receivable
1,062
Cash and cash equivalents
66,692
Trade and other payables
(52,790)
Lease liabilities
(962)
Deferred tax
(5,152)
173,492
Goodwill
8,422
181,914
Notes to the Consolidated Financial Statements (continued)
113
Vertu Motors plc (Company Number: 05984855)
17. Business combinations (continued)
Acquisition related costs (included in non-underlying operating expenses in the consolidated
income statement for the year ended 28 February 2023) in respect of this acquisition totalled
£2,753,000.
The goodwill arising on acquisition is attributable to the anticipated profitability of the
distribution of vehicles and parts through the acquired business.
If the acquisition of Helston Garages Group Limited had occurred on 1 March 2022, Group
revenues would have been £387,343,000 higher and Group profit before tax would have been
£18,568,000 higher.
d) Summary of acquisitions’ cash consideration
Cash
consideration
(Cash)/
Borrowings
acquired
Total
£’000
£’000
£’000
Wiper Blades Limited
3,513
(1,137)
2,376
Shipley & Rotherham Motorrad
4,150
-
4,150
Helston Garages Group Limited
181,914
(66,692)
115,222
189,577
(67,829)
121,748
Previous year acquisitions
318
-
318
Cash consideration for acquisitions
189,895
(67,829)
122,066
e) Summary of the fair value of net assets acquired
Wiper
Blades
Limited
Shipley &
Rotherham
Motorrad
Helston
Garages
Group Limited
Total
£’000
£’000
£’000
£’000
Other indefinite life assets
-
-
15,008
15,008
Intangible assets
812
-
-
812
Property, plant and equipment
4
1,963
69,414
71,381
Right-of-use asset
31
-
962
993
Inventories
123
2,867
59,740
62,730
Trade and other receivables
20
7
19,518
19,545
Cash and cash equivalents
1,137
-
66,692
67,829
Trade and other payables
(121)
(1,187)
(52,790)
(54,098)
Lease liabilities
(31)
-
(962)
(993)
Corporation tax
(69)
-
1,062
993
Deferred tax
-
(83)
(5,152)
(5,235)
Net assets acquired
1,906
3,567
173,492
178,965
Notes to the Consolidated Financial Statements (continued)
114
Vertu Motors plc (Company Number: 05984855)
18. Property, plant and equipment
2023
Freehold
and long
leasehold
land and
buildings1
Short
leasehold
land and
buildings1
Vehicles
and
machinery
Furniture,
fittings
and
equipment
Total
£’000
£’000
£’000
£’000
£’000
Cost
At 1 March 2022
277,754
5,937
15,569
24,530
323,790
Acquisitions (note 17)
68,230
43
2,004
1,104
71,381
Transfer to assets held for resale (note 22)
(6,421)
-
-
-
(6,421)
Additions
14,659
591
3,826
4,683
23,759
Reclassifications
(3)
3
(9)
9
-
Disposals
(3,917)
(1,505)
(1,043)
(6,071)
(12,536)
At 28 February 2023
350,302
5,069
20,347
24,255
399,973
Accumulated depreciation and impairment
At 1 March 2022
41,352
3,317
9,027
15,961
69,657
Depreciation charge
6,519
775
2,998
4,218
14,510
Transfer to assets held for resale (note 22)
(344)
-
-
-
(344)
Reclassifications
-
-
4
(4)
-
Disposals
(3,831)
(1,505)
(943)
(5,976)
(12,255)
At 28 February 2023
43,696
2,587
11,086
14,199
71,568
Net Book Value
At 28 February 2023
306,606
2,482
9,261
10,056
328,405
At 28 February 2022
236,402
2,620
6,542
8,569
254,133
1 Includes leasehold improvements and franchise standards property improvements.
Depreciation expense of £14,510,000 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 (2022: £10,900,000) have
been granted to manufacturer partners as security against consignment stocking lines. A further
specific fixed charge is held over certain freehold and long leasehold properties in respect of
mortgage funding of £85,515,000 (2022: £15,950,000).
2022
Freehold
and long
leasehold
land and
buildings1
Short
leasehold
land and
buildings1
Vehicles
and
machinery
Furniture,
fittings
and
equipment
Total
£’000
£’000
£’000
£’000
£’000
Cost
At 1 March 2021
264,751
5,954
13,756
22,163
306,624
Acquisitions
5,005
-
24
134
5,163
Additions
8,699
373
3,112
4,666
16,850
Reclassifications
338
(307)
185
(216)
-
Disposals
(1,039)
(83)
(1,508)
(2,217)
(4,847)
At 28 February 2022
277,754
5,937
15,569
24,530
323,790
Accumulated depreciation and impairment
At 1 March 2021
35,583
2,889
7,887
13,601
59,960
Depreciation charge
6,592
726
2,466
4,581
14,365
Reclassifications
215
(215)
74
(74)
-
Disposals
(1,038)
(83)
(1,400)
(2,147)
(4,668)
At 28 February 2022
41,352
3,317
9,027
15,961
69,657
Net Book Value
At 28 February 2022
236,402
2,620
6,542
8,569
254,133
At 28 February 2021
229,168
3,065
5,869
8,562
246,664
1 Includes leasehold improvements and franchise standards property improvements.
Notes to the Consolidated Financial Statements (continued)
115
Vertu Motors plc (Company Number: 05984855)
19. Leases
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
2023
2022
Right-of-use assets
£’000
£’000
Property
66,767
73,019
Vehicles
6,311
5,259
73,078
78,278
Lease liabilities
Current
(14,498)
(14,132)
Non-current
(68,959)
(74,698)
(83,457)
(88,830)
Additions to the right-of-use assets and lease liabilities during the year ended 28 February
2023 were £13,307,000 (2022: £14,132,000).
During the year ended 28 February 2023, right-of-use assets with a net book value of
£2,044,000 (2022: £348,000) were disposed of as a result of assignment, settlement or
modification of various leases. The corresponding lease liability disposed of was £2,493,000
(2022: £617,000) generating a £449,000 profit recognised in the Consolidated Income
Statement (2022: £269,000).
Amounts recognised in the Income Statement
The Income Statement shows the following amounts relating to leases:
2023
2022
£’000
£’000
Included in operating expenses
Depreciation charge in respect of right-of-use assets:
Property
10,970
10,984
Vehicles
5,255
5,674
16,225
16,658
Profit on lease modification
(449)
(269)
Included in finance costs
Interest expense
3,488
3,581
The total cash outflow in respect of lease payments in the year ended 28 February 2023 was
£19,675,000, of which £3,488,000 related to interest on lease liabilities (2022: £19,367,000
including £3,581,000 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 2023 and 28 February 2022 is given in note 7 of the
Vertu Motors plc company only financial statements (pages 140 to 142).
Notes to the Consolidated Financial Statements (continued)
116
Vertu Motors plc (Company Number: 05984855)
21. Inventories
2023
2022
£’000
£’000
New vehicle stock
427,126
274,873
Used vehicle stock
172,920
155,000
Demonstrator and courtesy vehicles
52,286
30,938
Parts and sundry stocks
22,048
14,216
674,380
475,027
The total value of new vehicle stock is comprised of the following:
2023
2022
£’000
£’000
Interest bearing consignment stock
30,778
23,387
Stock invoiced not yet paid held by Manufacturers to the
order of the Group
322,559
217,617
Other new vehicle stock
73,789
33,869
427,126
274,873
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
£3,651,240,000 (2022: £3,273,963,000).
22. Property assets held for resale
2023
2022
£’000
£’000
At beginning of year
-
1,369
Transfers in from freehold property
6,077
-
Property sold during the year
-
(1,369)
At end of year
6,077
-
During the year ended 28 February 2023, the Group transferred the following properties from
tangible fixed assets to property assets held for resale:
Freehold land in Glasgow adjacent to one of the Group’s Nissan dealerships in Glasgow.
Long-leasehold property in Newburn, Newcastle upon Tyne from which the Group operated
an accident repair operation until the trade and assets of this business were sold on 30 April
2023 (note 39).
Two empty properties in Taunton acquired with the acquisition of Helston Garages Group
Limited.
All properties are expected to be disposed of in the next 12 months recovering cash proceeds
in excess of their book value.
23. Trade and other receivables
2023
2022
£’000
£’000
Trade receivables
70,785
42,262
Less provision for impairment of trade receivables
(3,680)
(2,062)
Trade receivables (net)
67,105
40,200
Other receivables
941
428
Prepayments and accrued income
18,271
11,211
86,317
51,839
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.
Notes to the Consolidated Financial Statements (continued)
117
Vertu Motors plc (Company Number: 05984855)
23. Trade and other receivables (continued)
The following table shows the profile of the Group’s trade receivables.
As at 28 February 2023, trade receivables of £3,134,000 (2022: £886,000) 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:
2023
2022
£’000
£’000
At beginning of year
2,062
1,967
Net remeasurement of loss allowance
3,073
980
Receivables written off during the year as uncollectible
(1,455)
(885)
At end of year
3,680
2,062
The net remeasurement of the loss allowance has been included in ‘other expenses’ within
‘operating expenses’ in the income statement (note 6). Amounts charged to the loss
allowance account are generally written off when there is no expectation of recovering
additional cash.
The Group considers there to be no material difference between the fair value of trade and
other receivables and their carrying amount in the balance sheet.
The other asset classes within trade and other receivables do not contain impaired assets.
Credit Risk Management
It is the Group’s policy to invest cash and assets safely and profitably. 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.
24. Cash and cash equivalents
2023
2022
£’000
£’000
Cash in bank and in hand
78,984
83,793
25. Trade and other payables
2023
2022
£’000
£’000
Current
Trade payables
630,451
415,011
Social security and other taxes
13,649
17,664
Accruals
88,494
70,411
Other payables
26,000
26,000
758,594
529,086
Current
31-60
days
61-90
days
>90
days
Trade
Receivables
Loss
Allowance
Trade
Receivables
(net)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
2023
60,045
7,811
953
1,976
70,785
(3,680)
67,105
2022
37,240
3,454
531
1,037
42,262
(2,062)
40,200
Notes to the Consolidated Financial Statements (continued)
118
Vertu Motors plc (Company Number: 05984855)
25. Trade and other payables (continued)
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 £13,150,000 (2022: £11,894,000) in respect of outstanding service plans.
26. Borrowings
2023
2022
£’000
£’000
Current
Other borrowings
25,460
11,647
Mortgage
4,361
636
29,821
12,283
Non-current
Mortgage
81,153
11,337
Bank borrowings
43,366
44,006
124,519
55,343
154,340
67,626
Borrowings are repayable as follows:
2023
2022
£’000
£’000
6 months or less
27,602
11,962
6-12 months
2,219
321
1-5 years
57,213
46,549
Over 5 years
67,306
8,794
154,340
67,626
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
At 1 March 2022 the Group had a committed Revolving Credit Facility (‘’RCF’’) available of
£62,000,000. Interest was charged on this facility at a 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. £44,100,000 of the RCF was drawn at 1 March 2022.
On 7 December 2022, the Group completed the refinancing of its long-term bank facilities. As
a result of this, a new three year facility was entered into with a limit of £93,000,000, replacing
the Group’s previous RCF, which was due to expire in February 2024. A third lending bank
joined the Group’s existing lenders in the new facility which is in place until November 2025
with an option to further extend to 2027. This facility bears an interest rate of between 1.8%
and 2.6% above SONIA depending on the value of the Group’s net debit to EBITDA rate.
£22,000,000 of this facility was drawn down in respect of the Helston Garages Group limited
acquisition in December 2022, however, was subsequently repaid in February 2023.
£44,000,000 of the facility remained drawn at 28 February 2023.
During the year ended 28 February 2023, the Group had two interest rate swaps in place in
respect of funds drawn on the RCF facility. One covered £15,000,000 swapping the SONIA
variable element of the interest charge for a fixed rate of 1.214% and a further £7,000,000 of
the drawn balance was covered by a swap replacing the variable rate for a fixed rate of
1.424%. Both swaps expired on 27 February 2023. The Group entered into a new interest
rate swap arrangement, effective from 8 March 2023, covering £30,000,000 of the drawn
balance swapping the variable element of the interest charge for a fixed rate of 4.42%.
Notes to the Consolidated Financial Statements (continued)
119
Vertu Motors plc (Company Number: 05984855)
26. Borrowings (continued)
a)
Bank borrowings (continued)
A rate of 1.45% above base rate has been applied in relation to overdrafts during the year
ended 28 February 2023. 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 17 April 2023 until 31 May 2024 with the
same limits as were in place at 28 February 2023.
The Group had the following undrawn borrowing and overdraft facilities at 28 February:
2023
2022
£’000
£’000
Floating rate
- Overdraft (uncommitted) expiring in one year
5,000
5,000
- CMML (committed) facility expiring in one year
48,000
48,000
- RCF facility expiring in greater than one year 1
49,000
17,900
- Other borrowings
44,540
23,353
146,540
94,253
1Excludes the uncommitted “accordion” facility referred to above.
b)
Mortgage funding
The Group had two mortgage facilities in place at 28 February 2023. The first drawn down in
December 2020 was the Group’s existing 20 year mortgage drawn down in a previous
financial year to partially fund the BMW MINI acquisition in the North East and Yorkshire.
This mortgage is secured against the freehold and long leasehold properties in Sunderland,
Durham and Teesside which were acquired as part of the acquisition. This mortgage is
repayable in equal monthly instalments over the 20 year term and interest is charged on this
facility at a fixed rate of 2.9% per annum for the first 5 years.
During the year ended 28 February 2023 the Group entered into a new 20 year mortgage
facility for £74,757,000 to partially fund the acquisition of Helston Garages Group limited.
This mortgage is secured against a portfolio of 22 freehold and long leasehold properties
including a combination of properties acquired with the acquisition as well as existing
properties owned by the Group. This mortgage is repayable in equal instalments over the 20
year term and interest is charged on this facility rate of 2.8% above BMW Base Rate. During
the year ended 28 February 2023, the Group also entered into interest rate cap arrangements
in respect of £50,000,000 of this facility to limit the variable element of the applicable interest
rate to a maximum of 4.5%.
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. As a result of the acquisition of Helston Garages Group Limited during this year
ended 28 February 2023, the limit on this facility was increased to £70,000,000.
At 28 February 2023 the total used vehicle stocking facility available to the Group was
£70,000,000 (2022: £35,000,000).
d)
Financial assets
The Group’s financial assets on which floating interest is receivable comprise cash deposits
and cash in hand of £78,984,000 (2022: £83,793,000). 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.
Notes to the Consolidated Financial Statements (continued)
120
Vertu Motors plc (Company Number: 05984855)
27. Derivative financial instruments
Interest rate swap and cap contracts
The fair values of derivative financial instruments used for hedging purposes are disclosed
below:
2023
2022
£’000
£’000
£50m Interest rate cap – cash flow hedges
507
-
£7m Interest rate swap – cash flow hedges
-
(13)
£15m Interest rate swap – cash flow hedges
-
18
Total derivates designated as hedging instruments
507
5
2023
2022
£’000
£’000
Non-current borrowings subject to hedging instruments
50,000
22,000
Total derivative financial liabilities
50,000
22,000
The Group manages its cash-flow interest rate risk by using a combination of interest rate
swap and cap contracts. Normally the Group raises long-term borrowings at floating rates and
manages the exposure to interest rate variability by swapping floating rates for fixed rates or
capping floating rates at a fixed amount.
At 28 February 2022, the Group had two interest rates swaps in place in respect of
£22,000,000 of the Group’s bank borrowings. Both of these swaps expired on 27 February
2023.
During the year ended 28 February 2023, the Group entered into interest rate cap contracts in
respect of £50,000,000 of the Group’s outstanding mortgage funding which was drawn in
respect of the acquisition of Helston Garages Group Limited, capping the applicable
underlying floating rate at 4.5%. The floating rate in respect of this borrowing is BMW Base
Rate.
The notional principal amounts of outstanding floating to fixed interest rate swap and interest
rate cap contracts designated as hedging instruments in cash flow interest rate hedges of
variable rate debt at 28 February 2023 totalled £50,000,000 (2022: £22,000,000). The fair
value of these instruments at 28 February 2023 was an asset of £507,000 (2022: £5,000). At
28 February 2022 the £18,000 asset in respect of the £15m interest rate swap was included
within prepayments in note 23.
An interest rate swap has been entered into in respect of £30,000,000 of borrowing under the
RCF. This swap fixes the underlying rate at 4.42% per annum. The swap is effective from 8
March 2023 to 8 March 2025.
Gains and losses recognised in the cash flow hedging reserve in equity on interest rate swap
contracts as at 28 February 2023 will be released to the consolidated statement of
comprehensive income as the related interest expense is recognised.
Notes to the Consolidated Financial Statements (continued)
121
Vertu Motors plc (Company Number: 05984855)
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:
2023
2022
£’000
£’000
Deferred tax asset to be recovered after more than 12 months
(4,090)
(4,825)
Deferred tax liabilities to be recovered after more than 12 months
23,207
17,848
Deferred tax liabilities (net)
19,117
13,023
The gross movement on the Group’s deferred income tax account is as follows:
2023
Deferred tax
liabilities
Deferred tax
assets
Net
£’000
£’000
£’000
At 1 March 2022
17,848
(4,825)
13,023
Charged / (credited) to income statement
(note 12)
1,617
692
2,309
(Credited) / charged directly to equity
(1,493)
43
(1,450)
Acquisitions (note 17)
5,235
-
5,235
At 28 February 2023
23,207
(4,090)
19,117
2022
Deferred tax
liabilities
Deferred tax
assets
Net
£’000
£’000
£’000
At 1 March 2021
12,245
(3,065)
9,180
Charged / (credited) to income statement
4,262
(1,856)
2,406
Charged directly to equity
700
96
796
Acquisitions
641
-
641
At 28 February 2022
17,848
(4,825)
13,023
Deferred tax balances as at 28 February 2023 have been measured at a rate of 25%.
2023
Accelerated
tax
depreciation
Share
based
payments
Pensions
Other timing
differences
Total
£’000
£’000
£’000
£’000
£’000
At 1 March 2022
4,462
(1,379)
2,264
7,676
13,023
Charged / (credited) to
income statement (note 12)
3,633
(273)
26
(1,077)
2,309
Acquisitions (note 17)
3,534
-
-
1,701
5,235
Charged directly to equity
-
-
(1,493)
43
(1,450)
At 28 February 2023
11,629
(1,652)
797
8,343
19,117
2022
Accelerated
tax
depreciation
Share
based
payments
Pensions
Other timing
differences
Total
£’000
£’000
£’000
£’000
£’000
At 1 March 2021
3,341
(978)
1,186
5,631
9,180
Charged / (credited) to
income statement
808
(401)
378
1,621
2,406
Acquisitions
313
-
-
328
641
Charged directly to equity
-
-
700
96
796
At 28 February 2022
4,462
(1,379)
2,264
7,676
13,023
Notes to the Consolidated Financial Statements (continued)
122
Vertu Motors plc (Company Number: 05984855)
29. Contract liabilities
Warranty
policies
Free
servicing
Total
£’000
£’000
£’000
At 1 March 2022
21,286
1,913
23,199
Created in the year
14,344
2,052
16,396
Recognised as income during the year
(13,264)
(750)
(14,014)
At 28 February 2023
22,366
3,215
25,581
Current
11,157
2,320
13,477
Non-current
11,209
895
12,104
22,366
3,215
25,581
Warranty policies
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. The Group recognises any actuarial gains and losses in each year in the
Statement of Comprehensive Income.
Regular employer contributions to the scheme (including contributions paid in respect of
scheme expenses) for the year commencing 1 March 2023 are estimated to be £Nil.
The IAS 19 (Revised) figures and disclosures have been based on the 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.
Notes to the Consolidated Financial Statements (continued)
123
Vertu Motors plc (Company Number: 05984855)
30. Retirement benefit asset (continued)
The fair value of the assets of the scheme are:
Market Value
Market Value
28 February
28 February
2023
2022
£’000
£’000
Liability driven Investment Funds
26,137
38,782
Diversified growth funds
3,964
10,091
Secured finance
5,464
5,453
Other
390
1,131
35,955
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 28 February 2022 was 2.75%. This is equal to the
discount rate used in the calculation of the net interest income for the year ended 28 February
2023.
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:
2023
2022
£’000
£’000
Fair value of scheme assets
35,955
55,457
Present value of funded obligations
(32,767)
(46,402)
Asset on the balance sheet
3,188
9,055
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:
2023
2022
£’000
£’000
Opening fair value of scheme assets
55,457
56,171
Interest income
1,497
1,100
Actuarial (losses) / gains
(18,952)
541
Benefits paid
(1,906)
(2,239)
Expenses recognised in the income statement
(141)
(116)
Closing fair value of scheme assets
35,955
55,457
Notes to the Consolidated Financial Statements (continued)
124
Vertu Motors plc (Company Number: 05984855)
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:
2023
2022
£’000
£’000
Opening fair value of scheme liabilities
46,402
49,925
Interest cost
1,250
976
Actuarial gains
(12,979)
(2,260)
Benefits paid
(1,906)
(2,239)
Closing fair value of scheme liabilities
32,767
46,402
The amounts recognised in the income statement in the year are as follows:
2023
2022
£’000
£’000
Expenses
141
116
Net interest income (note 11)
(247)
(124)
Total income included in income statement
(106)
(8)
The actual returns on Scheme assets in the year are as follows:
2023
2022
£’000
£’000
Expected return on scheme assets
1,497
1,100
Actuarial (losses) / gains
(18,952)
541
(17,455)
1,641
The principal assumptions used by the independent qualified actuaries to calculate the
liabilities under IAS 19 are set out below:
2023
2022
Discount rate
4.95%
2.75%
Limited Price Indexation (“LPI”) pension increases
3.00%
3.60%
Inflation rate
2.45%
3.10%
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:
2023
2022
Male
22
22
Female
24
24
The average life expectancy in years of a pensioner retiring at age 65, 20 years after the
balance sheet date is as follows:
2023
2022
Male
23
23
Female
26
26
Amounts recognised in the Consolidated Statement of Comprehensive Income in the year are
as follows:
2023
2022
£’000
£’000
Actuarial (losses) / gains
(5,973)
2,801
Related deferred tax credit / (charge) (note 28)
1,493
(700)
Total, included within retained earnings
(4,480)
2,101
Cumulative actuarial (losses)/gains
(3,960)
520
Notes to the Consolidated Financial Statements (continued)
125
Vertu Motors plc (Company Number: 05984855)
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:
Approximate impact on
current surplus:
£’000
0.25% increase in discount rate
925
0.25% decrease in discount rate
(970)
0.25% increase in price inflation (and associated assumptions)
(737)
0.25% decrease in price inflation (and associated assumptions)
621
1 year increase in life expectancy at age 65
(1,003)
1 year decrease in life expectancy at age 65
1,002
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve
2023
Ordinary
shares of
10p each
Ordinary
Treasury
Capital
Number of
shares
share
capital
Share
premium
Other
reserve
share
reserve
redemption
reserve
Total
(‘000)
£’000
£’000
£’000
£’000
£’000
£’000
At 1 March 2022
355,281
35,942
124,939
10,645
(1,586)
3,785
173,725
Purchase of treasury shares
(3,960)
-
-
-
(2,000)
-
(2,000)
Issuance and sale of
treasury shares
2,436
-
-
-
933
-
933
Repurchase of own shares
(10,477)
-
-
-
-
-
-
Cancellation of repurchased
shares
-
(1,048)
-
-
-
1,048
-
At 28 February 2023
343,280
34,894
124,939
10,645
(2,653)
4,833
172,658
The other reserve is a merger reserve, arising from shares issued for shares, as
consideration to the former shareholders of acquired businesses.
2022
Ordinary
shares of
10p each
Ordinary
Treasury
Capital
Number of
shares
share
capital
Share
premium
Other
reserve
share
reserve
redemption
reserve
Total
(‘000)
£’000
£’000
£’000
£’000
£’000
£’000
At 1 March 2021
361,886
36,917
124,939
10,645
(2,791)
2,810
172,520
Issuance and sale of
treasury shares
3,146
-
-
-
1,205
-
1,205
Repurchase of own shares
(9,751)
-
-
-
-
-
-
Cancellation of repurchased
shares
-
(975)
-
-
-
975
-
At 28 February 2022
355,281
35,942
124,939
10,645
(1,586)
3,785
173,725
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.
Notes to the Consolidated Financial Statements (continued)
126
Vertu Motors plc (Company Number: 05984855)
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 £2,066,000 (2022: £1,396,000)
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
Type
Granted /
Outstanding at 28
February 2023
No of shares
Granted /
Outstanding at 28
February 2022
No of shares
Exercise
price
Date from
which
exercisable
Expiry date
12 Jun 20121
CSOP
-
800,000
27.50p
30 Aug 2015
12 Jun 2022
24 Oct 20121
20 Aug 20131
CSOP
LTIP
-
-
1,130,000
53,583
39.25p
0.00p
30 Aug 2015
20 Aug 2016
24 Oct 2022
20 Aug 2023
5 Sep 20161
LTIP
40,337
40,337
0.00p
5 Sep 2019
5 Sep 2026
2 Jul 20181
CSOP
2,400,000
3,000,000
49.60p
2 Jul 2021
2 Jul 2028
8 Nov 20181
CSOP
3,062,533
3,747,500
38.25p
8 Nov 2021
8 Nov 2028
1 Mar 20201
PSO
4,454,437
5,074,569
0.00p
1 Mar 2024
1 Mar 2030
1 Mar 20211
PSO
6,250,352
7,223,847
0.00p
1 Mar 2025
1 Mar 2031
24 Jun 2021
PSO
942,411
942,411
0.00p
1 Mar 2025
1 Mar 2031
1 Mar 2022
PSO
6,015,573
-
0.00p
1 Mar 2026
1 Mar 2032
23,165,643
22,012,247
1 Vested.
Movements in the number of share options outstanding are as follows:
2023
2022
No of share
options
No of share
options
At beginning of year
22,012,247
21,762,732
Granted
6,453,290
8,500,899
Forfeited
(1,709,436)
(716,024)
Exercised
(3,138,287)
(4,511,242)
Lapsed
(452,171)
(3,024,118)
At end of year
23,165,643
22,012,247
The weighted average share price during the year was 52.8p (2022: 52.3p). The weighted
average fair value of PSO options granted during the year, determined using the Black-
Scholes model was 56.3p per option.
Movements in the number of share options outstanding and their related exercise prices are
as follows:
CSOP
LTIP
PSO
Total
Options
No of
shares
Weighted
average
exercise
price
Options
No of
shares
Weighted
average
exercise
price
Options
No of
shares
Weighted
average
exercise
price
Options
No of
shares
At 1 March 2021
15,779,229
40.16p
593,123
0.00p
5,390,380
0.00p
21,762,732
Granted
-
-
-
-
8,500,899
0.00p
8,500,899
Forfeited
(199,998)
40.68p
-
-
(516,026)
0.00p
(716,024)
Exercised
(4,436,731)
35.55p
(40,337)
0.00p
(34,174)
0.00p
(4,511,242)
Lapsed
(2,465,000)
45.00p
(458,866)
0.00p
(100,252)
0.00p
(3,024,118)
At 28 February 2022
8,677,500
41.31p
93,920
0.00p
13,240,827
0.00p
22,012,247
Granted
-
-
-
-
6,453,290
0.00p
6,453,290
Forfeited
(554,966)
45.44p
-
-
(1,154,470)
0.00p
(1,709,436)
Exercised
(2,650,001)
36.71p
(53,583)
0.00p
(434,703)
0.00p
(3,138,287)
Lapsed
(10,000)
39.25p
-
-
(442,171)
0.00p
(452,171)
At 28 February 2023
5,462,533
43.24p
40,337
0.00p
17,662,773
0.00p
23,165,643
Notes to the Consolidated Financial Statements (continued)
127
Vertu Motors plc (Company Number: 05984855)
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
4 years
Expected volatility
37%
Option life
10 years
Expected life
7 years
Annual risk-free interest rate
0.9%
Dividend yield
3%
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
CSOP options issued on 2 July 2018 and 8 November 2018 vested in full in the year ended
28 February 2022.
The number of vested CSOP options which remained outstanding at 28 February 2023 are
shown in the table on page 126.
There were no CSOP share options issued during the financial year to 28 February 2023.
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.
Notes to the Consolidated Financial Statements (continued)
128
Vertu Motors plc (Company Number: 05984855)
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve (continued)
Share Option Schemes (continued)
d)
Partnership Share Options (“PSO”)
A 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 2022, 6,453,290 PSO awards were made to the Executive Directors and certain
senior managers. 412,932 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 2023.
The number of vested PSO awards which remained outstanding at 28 February 2023 are
shown in the table on page 126.
On 1 March 2023, 7,025,400 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:
2023
2022
£’000
£’000
At beginning of year
4
(403)
Fair value gains on derivative financial instruments
during the year
172
503
Deferred taxation on fair value gains during year (note 28)
(43)
(96)
At end of year
133
4
Notes to the Consolidated Financial Statements (continued)
129
Vertu Motors plc (Company Number: 05984855)
33. Reconciliation of net cash flow to movement in net debt
2023
2022
£’000
£’000
Net (decrease)/increase in cash and cash equivalents
(4,809)
15,965
Cash inflow from proceeds of borrowings
(110,570)
(5,699)
Cash outflow from repayment of borrowings
23,358
10,638
Cash movement in net debt
(92,021)
20,904
Capitalisation of loan arrangement fees
1,037
-
Amortisation of loan arrangement fees
(131)
(206)
Increase in accrued loan interest
(408)
-
Non-cash movement in net debt
498
(206)
Movement in net debt (excluding lease liabilities)
(91,523)
20,698
Opening net cash / (debt) (excluding lease liabilities)
16,167
(4,531)
Closing net (debt) / cash (excluding lease liabilities)
(75,356)
16,167
Lease liabilities at 1 March
(88,830)
(91,101)
Capitalisation of new leases (Note 19)
(13,307)
(14,132)
Disposal of lease liabilities (Note 19)
2,493
617
Interest element of lease repayments (Note 11)
(3,488)
(3,581)
Cash outflow from lease repayments (Note 19)
19,675
19,367
Lease liabilities at 28 February (Note 19)
(83,457)
(88,830)
Closing net debt (including lease liabilities)
(158,813)
(72,663)
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.
2023
Inventories
(Note 21)
£’000
Current trade
and other
receivables
(Note 23)
£’000
Trade and
other
payables
£’000
Total working
capital
movement
£’000
Trade and other payables (Note 25)
(758,594)
Contract liabilities (Note 29)
(25,581)
At 28 February 2023
674,380
86,317
(784,175)
At 28 February 2022
475,027
51,839
(552,285)
Balance sheet movement
(199,353)
(34,478)
231,890
Acquisitions (Note 17)
62,730
19,545
(54,098)
Previous year acquisitions
-
-
333
Movement excluding business
combinations
(136,623)
(14,933)
178,125
26,569
Pension related balances
141
Increase in capital creditor
(2,268)
Increase in interest accrual
(705)
Movement as shown in Consolidated Cash Flow Statement
23,737
Notes to the Consolidated Financial Statements (continued)
130
Vertu Motors plc (Company Number: 05984855)
34. Cash flow from movement in working capital (continued)
2022
Inventories
£’000
Current trade
and other
receivables
£’000
Trade and
other
payables
£’000
Total working
capital
movement
£’000
Trade and other payables
(529,086)
Contract liabilities
(23,199)
At 28 February 2022
475,027
51,839
(552,285)
At 28 February 2021
597,391
59,375
(710,515)
Balance sheet movement
122,364
7,536
(158,230)
Acquisitions
5,175
1,469
(6,181)
Movement excluding business
combinations
127,539
9,005
(164,411)
(27,867)
Pension related balances
116
Increase in capital creditor
(286)
Increase in interest accrual
(100)
Bonus accrual settled in shares
164
Movement as shown in Consolidated Cash Flow Statement
(27,973)
35. Reconciliation of movement in liabilities to cash arising from financing activities
Borrowings
Lease
liabilities
Treasury
share
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
As at 1 March 2022
67,626
88,830
(1,586)
158,152
313,022
Cash flows from financing activities:
Purchase of treasury shares
-
-
(2,000)
-
(2,000)
Issue of treasury shares
-
-
933
(189)
744
Repurchase of own shares
-
-
-
(5,898)
(5,898)
Proceeds from borrowings
110,570
-
-
-
110,570
Repayment of borrowings
(23,358)
-
-
-
(23,358)
Lease repayments
-
(16,187)
-
-
(16,187)
Dividends paid
-
-
-
(6,003)
(6,003)
Cash settled share options
-
-
-
(180)
(180)
Net cash outflow from financing activities
87,212
(16,187)
(1,067)
(12,270)
57,688
Other changes:
Liability related: capitalisation and amortisation
of loan fees and expenses
(906)
-
-
-
(906)
Liability related: capitalisation of lease liabilities
-
13,307
-
-
13,307
Liability related: disposal of lease liabilities
-
(2,493)
-
-
(2,493)
Liability related: increase in accrued loan
interest
408
-
-
-
408
Equity related: other movements
-
-
-
22,704
22,704
As at 28 February 2023
154,340
83,457
(2,653)
168,586
403,730
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 page
91 were subject to at the end of 28 February 2023 until they are satisfied in full. These
liabilities total £1,146,788,000 (2022: £823,915,000), including intercompany loans of
£349,460,000 (2022: £329,074,000). Such guarantees are enforceable against Vertu Motors
plc by any person to whom any such liability is due.
Notes to the Consolidated Financial Statements (continued)
131
Vertu Motors plc (Company Number: 05984855)
37. Capital commitments
Capital commitments in respect of property, plant and equipment amounting to £1,712,000
were outstanding as at 28 February 2023 (2022: £415,000).
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 2023 is set out in the
Directors’ Remuneration Report on pages 66 to 71.
Ken Lever, a Director of the Company, sat on the board of Biffa Limited prior to his
resignation from the board of Biffa Limited in January 2023. A subsidiary company of Biffa plc
provides waste disposal services to the Group on normal commercial terms. In the year
ended 28 February 2023, the value of such services provided was £592,913 (2022:
£584,757). £120,865 was unpaid at 28 February 2023 in respect of these services (2022:
£62,379). In the year ended 28 February 2023, sales of £13,647 (2022: £14,071) were made
to Biffa plc, of which £3,267 was outstanding at the year end (2022: £Nil).
During the year to 28 February 2023, 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 2023 and the year ended 28
February 2022 is presented below. No profit or loss was made in respect of these
transactions in the year ended 28 February 2023 or the year ended 28 February 2022. 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 2023 (2022: £Nil).
2023
Bought from the Group
Sold to the Group
Number of
vehicles
Purchase
price
Number of
vehicles
Sale price
£’000
£’000
Robert Forrester
3
285
3
299
David Crane
3
297
3
274
Karen Anderson
4
357
4
318
Andrew Goss
2
115
2
114
Pauline Best
2
126
2
123
Ken Lever
2
133
2
125
2022
Bought from the Group
Sold to the Group
Number of
vehicles
Purchase
price
Number of
vehicles
Sale price
£’000
£’000
Robert Forrester
4
367
4
350
David Crane
4
234
5
281
Karen Anderson
4
262
4
247
Andrew Goss
2
121
2
119
Pauline Best
2
124
2
118
Ken Lever
2
122
1
58
39. Post balance sheet events
On 30 April 2023, the Group sold the trade and assets of its standalone accident repair
operation in Newburn, Newcastle upon Tyne at above net book value. The sale included the
leasing of the long-leasehold property to the buyer.
Company Balance Sheet
As at 28 February 2023
132
Vertu Motors plc (Company Number: 05984855)
2023
2022
Note
£’000
£’000
Fixed assets
Intangible assets
5
302
274
Tangible assets
6
3,151
2,953
Investments
7
348,636
166,722
352,089
169,949
Current assets
Debtors
8
119,402
185,504
Cash at bank and in hand
-
83,633
Total current assets
119,402
269,137
Creditors: amounts falling due within
one year
10
(120,437)
(95,301)
Net current (liabilities)/assets
(1,035)
173,836
Total assets less current liabilities
351,054
343,785
Creditors: amounts falling due after
more than one year
11
(55,470)
(55,453)
Net assets
295,584
288,332
Capital and reserves
Called up share capital
13
34,894
35,942
Share premium account
13
124,939
124,939
Other reserve
13
10,645
10,645
Hedging reserve
14
133
4
Treasury share reserve
13
(2,653)
(1,586)
Capital redemption reserve
13
4,833
3,785
Profit and loss account:
At start of year
114,603
75,388
Profit for the year
18,809
46,987
Other changes in retained earnings
(10,619)
(7,772)
15
122,793
114,603
Total shareholders’ funds
295,584
288,332
These financial statements, on pages 132 to 146, have been approved for issue by the Board
of Directors on 10 May 2023 and signed by:
Robert Forrester
Karen Anderson
Chief Executive
Chief Financial Officer
Company Statement of Changes in Equity
For the year ended 28 February 2023
133
Vertu Motors plc (Company Number: 05984855)
The other reserve is a merger reserve, arising from shares issued for shares as consideration,
to the former shareholders of acquired companies.
Ordinary
share
capital
Share
premium
Other
reserve
Hedging
reserve
Treasury
share
reserve
Capital
redemption
reserve
Profit and
loss account
Total
Equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 March 2022
35,942
124,939
10,645
4
(1,586)
3,785
114,603
288,332
Profit for the year
-
-
-
-
-
-
18,809
18,809
Tax on items taken
directly to equity
-
-
-
(43)
-
-
-
(43)
Fair value gains
-
-
-
172
-
-
-
172
Total comprehensive
income for the year
-
-
-
129
-
-
18,809
18,938
Purchase of treasury
shares
-
-
-
-
(2,000)
-
-
(2,000)
Sale of treasury shares
-
-
-
-
933
-
(189)
744
Repurchase of own
shares
-
-
-
-
-
-
(5,898)
(5,898)
Cancellation of
repurchased shares
(1,048)
-
-
-
-
1,048
-
-
Dividends paid
-
-
-
-
-
-
(6,003)
(6,003)
Share based payments
charge
-
-
-
-
-
-
1,471
1,471
As at 28 February 2023
34,894
124,939
10,645
133
(2,653)
4,833
122,793
295,584
Company Statement of Changes in Equity (continued)
134
Vertu Motors plc (Company Number: 05984855)
For the year ended 28 February 2022
Ordinary
share
capital
Share
premium
Other
reserve
Hedging
reserve
Treasury
share
reserve
Capital
redemption
reserve
Profit and
loss account
Total
Equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 March 2021
36,917
124,939
10,645
(403)
(2,791)
2,810
75,388
247,505
Profit for the year
-
-
-
-
-
-
46,987
46,987
Tax on items taken
directly to equity
-
-
-
(96)
-
-
-
(96)
Fair value gains
-
-
-
503
-
-
-
503
Total comprehensive
income for the year
-
-
-
407
-
-
46,987
47,394
Sale of treasury shares
-
-
-
-
1,025
-
(74)
951
Issuance of treasury
shares
180
(15)
165
Repurchase of own
shares
-
-
-
-
-
-
(6,014)
(6,014)
Cancellation of
repurchased shares
(975)
-
-
-
-
975
-
-
Dividends paid
-
-
-
-
-
-
(2,327)
(2,327)
Share based payments
charge
-
-
-
-
-
-
658
658
As at 28 February 2022
35,942
124,939
10,645
4
(1,586)
3,785
114,603
288,332
Notes to the Company Financial Statements
135
Vertu Motors plc (Company Number: 05984855)
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 2023 was
£18,809,000 (2022: £46,987,000).
The consolidated financial statements include the results of all subsidiaries owned by Vertu
Motors plc listed on pages 140 to 142 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 2023 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 2023 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 2023 of the subsidiaries listed below, further detail of
which is provided in note 36 to the consolidated financial statements on page 130.
Notes to the Company Financial Statements (continued)
136
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
Basis of preparation (continued)
The subsidiaries which have taken an exemption from an audit for the year ended 28 February
2023 by virtue of s479A Companies Act 2006 are:
Albert Farnell Limited
South Hereford Garages Trade Parts LLP
All Car Parts Limited
Tyne Tees Finance Limited
Bristol Street First Investments Limited
Vans Direct Limited
Bristol Street Fourth Investments Limited
Vertu Accident Repair Limited
Farmer & Carlisle Holdings Limited
Vertu Motors (Chingford) Limited
Farmer & Carlisle Limited
Vertu Motors (Continental) Limited
Farmer & Carlisle Leicester Limited
Vertu Motors (Property) Limited
F.C. Business Operations Limited
Vertu Motors (Property 2) Limited
Grantham Motor Company Limited
Vertu Motors (VMC) Limited
Group SMB Limited
Vertu Motors Third Limited
Jactamial Properties Limited
Westcountry Enterprises Limited
Macklin Property Limited
Wiper Blades Limited
South Hereford Garages Limited
The subsidiaries which have taken an exemption from the preparation of individual accounts in
respect of the year ended 28 February 2023 by virtue of s394A of Companies Act 2006 are:
Aceparts Limited
Motor Nation Cars Limited (formerly Vertu
Best4Vans Limited
Motors (Retail) Limited)
Blacks Autos Limited
National Allparts Limited
Blake Holdings Limited
Newbolds Garage (Mansfield) Limited
Boydslaw 103 Limited
Nottingham TPS LLP
Bristol Street (No.1) Limited
Peter Blake (Chatsworth) Limited
Bristol Street (No.2) Limited
Peter Blake Limited
Bristol Street Commercials (Italia) Limited
Power Bulbs Ltd
Bristol Street Fifth Investments Limited
Power Bulbs Online Limited
Bristol Street Fleet Services Limited
SHG Holdings Limited
Bristol Street Group Limited
Sigma Holdings Limited
Bristol Street Limited
The Taxi Centre Limited
Brookside (1998) Limited
Typocar Limited
BSH Pension Trustee Limited
VanMan Limited
Carsandvansdirect Limited
Vertu Fleet Limited
Dobies (Carlisle) Limited
Vertu Motors (AMC) Limited
Dunfermline Autocentre Limited
Vertu Motors Car Limited (formerly Motor
Easy Vehicle Finance Limited
Nation Car Hypermarkets Limited)
Gordon Lamb Group Limited
Vertu Motors (Durham) Limited
Gordon Lamb Limited
Vertu Motors (Finance) Limited
Gordon Lamb Holdings Limited
Vertu Motors (Knaresborough) Limited
Hillendale Group Limited
Vertu Motors (Pity Me) Limited
Hillendale LR Limited
Vertu Motors Property 2 Holdings Limited
Hughes Group Holdings Limited
Vertu Ventures Limited
Hughes of Beaconsfield Limited
Westcountry Ventures Limited
International Concessionaires Limited
Widnes Car Centre Limited
Merifield Properties Limited
Widnes Car Centre (1994) Limited
The auditors’ remuneration for audit and other services was £25,000 (2022: £25,000).
Intangible assets
Intangible assets comprise computer software and are carried at cost less accumulated
amortisation and any impairment losses. Amortisation is provided on a straight-line basis to
allocate the cost of the asset over its estimated useful life, which in the case of computer
software is between four and six years.
Notes to the Company Financial Statements (continued)
137
Vertu Motors plc (Company Number: 05984855)
1.
Accounting Policies (continued)
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
16.6% - 50%
Office equipment
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.
Notes to the Company Financial Statements (continued)
138
Vertu Motors plc (Company Number: 05984855)
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 2023, 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
2023
2022
£’000
£’000
Wages and salaries
19,250
18,005
Social security costs
6,719
6,061
Pension costs – defined contribution plans
2,639
2,360
28,608
26,426
Share based payments charge (note 17)
2,066
1,396
30,674
27,822
Details of the emoluments of the Directors who served during the years ended 28 February
2023 and 28 February 2022, which are included in the table above, are provided in the
Directors’ Remuneration Report on page 66 to 71 of the consolidated financial statements.
Notes to the Company Financial Statements (continued)
139
Vertu Motors plc (Company Number: 05984855)
4.
Average monthly number of people employed (including Directors)
2023
2022
Number
Number
Sales
149
144
Service
24
22
Administration
581
485
754
651
5.
Intangible assets
Computer
Software
Cost
£’000
At 1 March 2022
2,629
Additions
186
Disposals
(1,453)
At 28 February 2023
1,362
Accumulated Amortisation
At 1 March 2022
2,355
Amortisation charge
156
Disposals
(1,451)
At 28 February 2023
1,060
Net Book Value
At 28 February 2023
302
At 28 February 2022
274
6.
Tangible assets
Computer
equipment
Office
equipment
Total
£’000
£’000
£’000
Cost
At 1 March 2022
11,135
742
11,877
Additions
1,989
83
2,072
Disposals
(4,983)
(538)
(5,521)
At 28 February 2023
8,141
287
8,428
Accumulated Depreciation
At 1 March 2022
8,344
580
8,924
Depreciation charge
1,794
61
1,855
Disposals
(4,964)
(538)
(5,502)
At 28 February 2023
5,174
103
5,277
Net Book Value
At 28 February 2023
2,967
184
3,151
At 28 February 2022
2,791
162
2,953
Notes to the Company Financial Statements (continued)
140
Vertu Motors plc (Company Number: 05984855)
7. Investments
£’000
Cost
At 1 March 2022
179,993
Additions
181,914
At 28 February 2023
361,907
Accumulated impairment charges
At 1 March 2022 and 28 February 2023
13,271
Net Book Value
At 28 February 2023
348,636
At 28 February 2022
166,722
Vertu Motors plc, the Company, as at 28 February 2023 and 28 February 2022, invested in
100% of the ordinary share capital of the following subsidiary undertakings, incorporated in the
United Kingdom:
Company
Principal activity
The registered office address of the following companies is Vertu House, Fifth Avenue
Business Park, Team Valley, Gateshead, Tyne & Wear, NE11 0XA:
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
Tyne Tees Finance Limited 1
Motor retailer
Vertu Motors (Continental) Limited 1
Motor retailer
Vertu Accident Repair Limited
Maintenance and repair of motor vehicles
South Hereford Garages Trade Parts LLP 1
Parts retailer
Vans Direct Limited 1
Online van retailer
Vertu Motors Third Limited
Online advertising
All Car Parts Limited 1
Online parts retailer
Macklin Property Limited
Property company
Vertu Motors (Property) Limited
Property company
Vertu Motors (Property 2) Limited 1
Property company
BSH Pension Trustee Limited 1
Pension scheme trustee
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 (dormant subsidiaries)
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
Holding company
South Hereford Garages Limited 1
Dormant company
Hughes of Beaconsfield Limited 1
Dormant company
Vertu Motors (Knaresborough) Limited
Dormant company
International Concessionaires Limited 1
Dormant company
Vertu Motors (AMC) Limited
Dormant company
Vertu Motors Car Limited (formerly Motor Nation
Car Hypermarkets Limited)
Dormant company
Bristol Street Limited 1
Dormant company
Bristol Street (No. 1) Limited 1
Dormant company
Bristol Street (No. 2) Limited 1
Dormant company
Notes to the Company Financial Statements (continued)
141
Vertu Motors plc (Company Number: 05984855)
7.
Investments (continued)
Company
Principal activity
National Allparts Limited 1
Dormant company
Merifield Properties Limited 1
Dormant company
Peter Blake Limited 1
Dormant company
Peter Blake (Chatsworth) Limited 1
Dormant company
Typocar Limited
Dormant company
Widnes Car Centre Limited 1
Dormant company
Dobies (Carlisle) Limited 1
Dormant company
Newbolds Garages (Mansfield) Limited 1
Dormant company
Hillendale LR Limited 1
Dormant company
Blacks Autos Limited 1
Dormant company
Gordon Lamb Limited 1
Dormant company
Vertu Motors (Finance) Limited
Dormant company
Vertu Motors (Pity Me) Limited 1
Dormant company
Bristol Street Commercials (Italia) Limited
Dormant company
Vertu Fleet Limited
Dormant company
Motor Nation Cars Limited (formerly Vertu Motors
(Retail) Limited)
Dormant company
Bristol Street Fleet Services Limited 1
Dormant company
VanMan Limited 1
Dormant company
Best4Vans Limited 1
Dormant company
Carsandvansdirect Limited 1
Dormant company
Power Bulbs Online Limited 1
Dormant company
Power Bulbs Ltd 1
Dormant company
Farmer & Carlisle Holdings Limited 1
Dormant company
Farmer & Carlisle Limited 1
Dormant company
Farmer & Carlisle Leicester Limited 1
Dormant company
F.C. Business Operations Limited 1
Dormant company
Nottingham TPS LLP 1
Dormant LLP
The registered address of the following companies is Dunfermline Autocentre, Halbeath Road,
Dunfermline, Fife, KY12 7RD
Boydslaw 103 Limited 1
Holding company (dormant subsidiaries)
Dunfermline Autocentre Limited 1
Dormant company
The registered address of the following company is Peugeot Paisley, Saturn Avenue, Phoenix
Retail Park, Paisley, PA1 2BH
Easy Vehicle Finance Limited
Dormant company
The registered address of the following company is 900 Kennishead Road, Darnley, Glasgow,
G53 7RA
The Taxi Centre Limited
Dormant company
1 Held indirectly by the Company.
The following subsidiaries which the Company was invested in as at 28 February 2022 were
dissolved during the year ended 28 February 2023, with no impact on the carrying value of the
Company’s investments:
Company
Principal activity
Why Pay More For Cars Limited
Dormant company
Peter Blake (Clumber) Limited
Dormant company
KC Mobility Solutions Limited
Dormant company
Compare Click Call Limited
Dormant company
Horseshoe Vehicle Contracts Limited
Dormant company
The registered address of the above subsidiary companies was Vertu House, Fifth Avenue
Business Park, Team Valley, Gateshead, Tyne & Wear, NE11 0XA.
Notes to the Company Financial Statements (continued)
142
Vertu Motors plc (Company Number: 05984855)
7.
Investments (continued)
The following subsidiary undertaking (ordinary shares 100% owned and incorporated within the
United Kingdom) were acquired by the Company during the year ended 28 February 2023:
Company
Principal activity
Helston Garages Group Limited
Holding company
Helston Garages Group (Management)
Limited 2
Payroll administration company
Helston Garages Limited 2
Motor retailer
Westcountry Enterprises Limited 2
Property company
Jactamial Properties Limited 2
Dormant company
Westcountry Ventures Limited 2
Dormant company
Group SMB Limited 2
Dormant company
2 Held indirectly by the Company
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 2023:
Company
Principal activity
Wiper Blades Limited 3, 4
Online retailer
3 Held indirectly by the Company
4 On 1 July 2022, this company was acquired by All Car Parts Limited, a subsidiary of the Group.
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 9% (2022: 8%) is applied.
Sensitivity analysis has been performed on the impairment test based on three potential
scenarios with the following results:
If restricted vehicle sales or reduced demand for service work as a consequence of a reduced
vehicle parc significantly reduces the Group’s earnings in the year ending 29 February 2024,
with a return to normalised trading in the year ending 28 February 2025, it is not expected to
create an additional impairment charge.
If the growth rate in years three to five is reduced to -5%, an additional impairment charge of
£28.6m would arise in respect of the Company’s investments.
If the post-tax WACC was increased to 12%, an additional impairment charge of £33.5m would
arise in respect of the Company’s investments.
Notes to the Company Financial Statements (continued)
143
Vertu Motors plc (Company Number: 05984855)
8.
Debtors
2023
2022
£’000
£’000
Trade debtors
2,165
2,189
Amounts owed by Group undertakings
87,717
163,006
Deferred tax asset (note 9)
3,780
3,535
Corporation tax
1,937
-
Value Added Tax
14,296
8,693
Prepayments and accrued income
9,507
8,081
119,402
185,504
Amounts owed by Group undertakings are unsecured, bear no interest and have no fixed
repayment date.
9.
Deferred tax asset
2023
2022
£’000
£’000
At beginning of year
3,535
2,416
Credited to the profit and loss account
288
1,215
Charged directly to equity
(43)
(96)
At end of year
3,780
3,535
The amounts recognised for deferred tax assets, calculated under the liability method at 25%
(2022: 25%) are set out below:
2023
2022
£’000
£’000
Depreciation in excess of capital allowances
248
1,116
Other short-term timing differences
3,532
2,419
Total
3,780
3,535
During the year ending 29 February 2024, the reversal of deferred tax assets is expected to
decrease the corporation tax charge for the year by £478,000. This is primarily due to timing
differences in relation to depreciation in excess of capital allowances.
10. Creditors: amounts falling due within one year
2023
2022
£’000
£’000
Bank overdraft
19,193
-
Trade creditors
9,529
10,633
Other creditors
26,000
26,000
Corporation tax
-
2,589
Other taxation and social security
7,807
6,180
Accruals
44,431
38,147
Deferred income
13,477
11,752
120,437
95,301
Other creditors comprise non-interest bearing advance payments from the Group’s finance
company partners.
Accruals includes £13,150,000 (2022: £11,894,000) in respect of outstanding service plans.
Notes to the Company Financial Statements (continued)
144
Vertu Motors plc (Company Number: 05984855)
11. Creditors: amounts falling due after more than one year
2023
2022
£’000
£’000
Bank borrowings
43,366
44,006
Deferred income (note 12)
12,104
11,447
55,470
55,453
2023
2022
Borrowings are repayable as follows:
£’000
£’000
1-2 years
-
44,006
2-5 years
43,366
-
43,366
44,006
The bank borrowings are secured on the assets of the Company and the subsidiaries. The
table below analyses the Company’s financial liabilities into relevant maturity groupings based
on the remaining period at the balance sheet date to contractual maturity date. The amounts
disclosed in the table are the contractual undiscounted cash flows. Balances due within 12
months equal their carrying amounts as the impact of discounting is not significant.
Within one
year
Within two
to five years
Total
£’000
£’000
£’000
Bank borrowings
-
43,366
43,366
Trade and other creditors
120,437
12,104
132,541
At 28 February 2023
120,437
55,470
175,907
Within one
year
Within two
to five years
Total
£’000
£’000
£’000
Bank borrowings
-
44,006
44,006
Trade and other creditors
95,301
11,447
106,748
At 28 February 2022
95,301
55,453
150,754
12. Deferred income
Deferred income due in greater than one year comprises:
2023
2022
£’000
£’000
Warranty policies
11,209
10,987
Free servicing
895
460
12,104
11,447
Warranty policies
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 £11,157,000 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 (2022:
£10,299,000).
Notes to the Company Financial Statements (continued)
145
Vertu Motors plc (Company Number: 05984855)
12. Deferred income (continued)
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
£2,320,000 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 (2022: £1,453,000).
13. Called up share capital, share premium, other reserve, treasury share reserve and
capital redemption reserve
2023
Ordinary
shares of
10p each
Called up
Share
Treasury
Capital
Number of
Share
premium
Other
share
redemption
shares
(‘000)
capital
£’000
account
£’000
reserve
£’000
reserve
£’000
reserve
£’000
Total
£’000
At 1 March 2022
355,281
35,942
124,939
10,645
(1,586)
3,785
173,725
Purchase of treasury
shares
(3,960)
-
-
-
(2,000)
-
(2,000)
Sale of treasury
shares
2,436
-
-
-
933
-
933
Repurchase of own
shares
(10,477)
-
-
-
-
-
Cancellation of
repurchased shares
-
(1,048)
-
-
1,048
-
At 28 February 2023
343,280
34,894
124,939
10,645
(2,653)
4,833
172,658
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.
2022
Ordinary
shares of
10p each
Called up
Share
Treasury
Capital
Number of
Share
premium
Other
share
redemption
shares
(‘000)
capital
£’000
account
£’000
reserve
£’000
reserve
£’000
reserve
£’000
Total
£’000
At 1 March 2021
361,886
36,917
124,939
10,645
(2,791)
2,810
172,520
Issuance and sale of
treasury shares
3,146
-
-
-
1,205
-
1,205
Repurchase of own
shares
(9,751)
-
-
-
-
-
-
Cancellation of
repurchased shares
-
(975)
-
-
-
975
-
At 28 February 2022
355,281
35,942
124,939
10,645
(1,586)
3,785
173,725
14. Hedging reserve
2023
2022
£’000
£’000
Cash flow hedges:
At beginning of year
4
(403)
Fair value gains on derivative financial instruments
during the year
172
503
Deferred taxation on fair value gains during year
(43)
(96)
At end of year
133
4
Notes to the Company Financial Statements (continued)
146
Vertu Motors plc (Company Number: 05984855)
15. Profit and loss account
2023
2022
£’000
£’000
As at beginning of year
114,603
75,388
Profit for the financial year
18,809
46,987
Dividend paid
(6,003)
(2,327)
Share based payments charge
1,471
658
Repurchase of own shares
(5,898)
(6,014)
Treasury shares issued
(189)
(89)
As at end of year
122,793
114,603
16. Dividends per share
Dividends of £6,003,000 were paid in the year ended 28 February 2023 (2022: £2,327,000),
1.75p per share (2022: 0.65p).
A final dividend of 1.45p per share is to be proposed at the Annual General Meeting on 28
June 2023. The ex-dividend date will be 29 June 2023 and the associated record date 30 June
2023. The dividend will be paid, subject to shareholder approval, on 28 July 2023 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 £2,066,000 (2022: £1,396,000).
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 2022 to 28
February 2023 is set out within the Directors’ Remuneration Report on pages 66 to 71.
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:
2023
£’000
2022
£’000
No later than 1 year
614
557
Later than 1 year and no later than 5 years
523
283
Later than 5 years
-
-
1,137
840
21. Related party transactions
The Company has related party relationships with its subsidiaries and with key management
personnel.
Transactions with the Directors of the Company are disclosed in note 38 of the consolidated
financial statements.
Alternative Performance Measures
147
Vertu Motors plc (Company Number: 05984855)
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
Dealerships that have comparable trading periods in two
consecutive financial years.
FY23
The twelve month period ended 28 February 2023.
FY22
The twelve month period ended 28 February 2022.
Adjusted
Adjusted for share based payments charge, amortisation of
intangible assets, impairment charges and exceptional acquisition
costs, 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
2023
2022
£’000
£’000
Operating profit
41,992
85,733
Non-underlying items (note 8):
Acquisition costs
2,753
-
Share based payment charge (note 31)
2,066
1,396
Amortisation (note 16)
509
407
Impairment charges (note 15)
1,500
131
Adjusted operating profit
48,820
87,667
Free Cash Flow
2023
2022
£’000
£’000
Net cash inflow from operating activities
80,829
69,001
Purchase of other property, plant and equipment
(13,785)
(16,571)
Enhancement capital expenditure included in above
3,459
6,180
Purchase of intangible assets
(185)
(44)
Proceeds from disposal of property, plant and equipment
179
1,605
Principal elements of lease repayments
(16,187)
(15,786)
Free cash flow
54,310
44,385
Alternative Performance Measures (continued)
148
Vertu Motors plc (Company Number: 05984855)
Adjusted Profit Before Tax (PBT)
2023
2022
£’000
£’000
Profit before tax
32,450
78,770
Non-underlying items (note 8):
Acquisition costs
2,753
Share based payment charge (note 31)
2,066
1,396
Amortisation (note 16)
509
407
Impairment charges (note 15)
1,500
131
Adjusted PBT
39,278
80,704
Tangible net assets per share
2023
2022
£’000
£’000
Net assets
341,377
331,881
Less:
Goodwill and other indefinite life assets
(127,590)
(103,470)
Other intangible assets
(2,286)
(1,797)
Add:
Deferred tax on above adjustments
12,621
10,856
Tangible net assets
224,122
237,470
Tangible net assets per share
65.3p
66.8p
At 28 February 2022, there were 348,945,522 shares in issue (2022: 359,422,972) of which,
5,665,352 were held by the Group’s employee benefit trust (2022: 4,141,272). 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
2023
FY23
Group
revenue
FY23
Acquisition
revenue
FY23
Disposals
revenue
FY23
Like-for-like
revenue
£’m
£’m
£’m
£’m
New car retail and Motability
1,121.9
(54.0)
-
1,067.9
New fleet and commercial
897.6
(31.1)
-
866.5
Used cars
1,658.2
(89.0)
-
1,569.2
Aftersales
336.8
(24.7)
-
312.1
Total revenue
4,014.5
(198.8)
-
3,815.7
2022
FY22
Group
revenue
FY22
Acquisition
revenue
FY22
Disposals
revenue
FY22
Like-for-like
revenue
£’m
£’m
£’m
£’m
New car retail and Motability
969.9
(3.8)
(2.5)
963.6
New fleet and commercial
772.0
(2.6)
-
769.4
Used cars
1,584.4
(6.9)
(13.6)
1,563.9
Aftersales
288.8
(2.3)
(1.5)
285.0
Total revenue
3,615.1
(15.6)
(17.6)
3,581.9
Alternative Performance Measures (continued)
149
Vertu Motors plc (Company Number: 05984855)
Like-for-like reconciliations (continued):
Gross profit (“GP”) by department
2023
FY23
Group
GP
FY23
Acquisition
GP
FY23
Disposals
GP
FY23
Like-for-like
GP
£’m
£’m
£’m
£’m
New car retail and Motability
98.4
(4.5)
-
93.9
New fleet and commercial
42.3
(2.0)
-
40.3
Used cars
125.2
(5.0)
-
120.2
Aftersales
182.5
(10.8)
-
171.7
Total GP
448.4
(22.3)
-
426.1
2022
FY22
Group
GP
FY22
Acquisition
GP
FY22
Disposals
GP
FY22
Like-for-like
GP
£’m
£’m
£’m
£’m
New car retail and Motability
80.7
(0.3)
(0.2)
80.2
New fleet and commercial
35.5
(0.1)
-
35.4
Used cars
154.4
(0.6)
(0.7)
153.1
Aftersales
164.6
(1.0)
(0.9)
162.7
Total GP
435.2
(2.0)
(1.8)
431.4
Company Information
150
Vertu Motors plc (Company Number: 05984855)
Nominated Advisor and Broker
Zeus Capital Limited
82 King Street
Manchester
M2 4WQ
Solicitors
Muckle LLP
Ashurst LLP
32 Gallowgate
London Fruit & Wool Exchange
Newcastle upon Tyne
1 Duval Square
NE1 4BF
London E1 6PW
Independent Auditors
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
Registered Office:
Vertu House,
Fifth Avenue Business Park,
Team Valley, Gateshead,
Tyne and Wear, NE11 0XA
Company Number: 05984855
www.vertumotors.com