ANNUAL REPORT & FINANCIAL STATEMENTS
For the year ended 29 February 2024
1
Vertu Motors plc (Company Number: 05984855)
Table of Contents
Page
Strategic Report
Performance Highlights
2
At a Glance
4
Group Stakeholders
5
Chairman’s Statement
9
Group Strategy
10
Key Performance Indicators
21
Financial Review
22
Environmental, Social and Governance
34
Health and Safety
40
Colleagues
41
Risk Management
46
Viability and Going Concern
51
Corporate Governance Report
Corporate Governance Report
53
Board Leadership
55
Division of Responsibilities
59
Nominations, Composition and Succession
61
Audit, Risk and Internal Control
62
Remuneration Committee Report
66
Directors’ Remuneration Report
73
Directors’ Report
78
Statement of Directors’ Responsibilities
81
Financial Statements
Independent Auditors’ Report
82
Consolidated Income Statement
90
Consolidated Statement of Comprehensive Income
91
Consolidated Balance Sheet
92
Consolidated Cash Flow Statement
93
Consolidated Statement of Changes in Equity
94
Notes to the Consolidated Financial Statements
96
Company Balance Sheet
141
Company Statement of Changes in Equity
142
Notes to the Company Financial Statements
144
Alternative Performance Measures
157
Company Information
160
Financial Diary
Annual General Meeting
25 June 2024
Interim Results 2024/25
October 2024
Final Results 2024/25
May 2025
Performance Highlights
2
Vertu Motors plc (Company Number: 05984855)
Operational Highlights
•
Profit before tax rose 6.5% to £34.6m from £32.5m.
•
Adjusted1 profit before tax of £37.8m (FY23: £39.3m), on record revenues of £4.7
billion. Profit in line with current market expectations.
•
Operating expenses as a percentage of revenues fell to 9.7% (FY23: 9.9%) reflecting
application of strong cost disciplines despite inflationary pressures.
•
Used car margins weakened in H2 due to price corrections in the market: values and
margins stabilised by the end of the Year.
•
Aftersales delivered a strong performance, with like-for-like revenue up 8.6% and
Core Group gross profit up £13.2m compared to FY23.
•
Free Cash Flow of £57.0m in the Year (FY23: £54.3m) reflecting excellent working
capital management and the underlying cash generative nature of the business.
•
Net debt2 of £54.0m as at 29 February 2024, lower than market expectations (FY23:
Net debt: £75.3m).
•
Final Dividend of 1.50p per share recommended, bringing full year dividend to 2.35p
per share (FY23: 2.15p), an increase of 9.3%.
•
Net tangible assets per share of 70.5p.
•
£7.5m returned to shareholders via repurchase of 11.3m shares during the Year.
Current Trading and Outlook Highlights
•
Strong trading performance delivered in key months of March and April gives
confidence for the new financial year.
•
Group gained market share in the critical March and April new retail market showing
like-for-like decline of 2.6% against market decline in SMMT registrations of 10.8%.
•
Fleet volumes and margins remain robust.
•
Used vehicle prices have been stable with volumes and margins robust in March and
April. Like-for-like used car volumes grew 5.8% year-on-year and gross profit
increased.
•
Aftersales revenues and profits remain highly resilient and saw growth aided by
retention products, such as service plans, and additional numbers of technicians
recruited.
•
Battery electric vehicle sales growth in the UK has stalled. Government mandated
targets increase over the coming years and there is a risk the industry falls short of
these targets. With the threat of significant fines on Manufacturers on missing targets,
the risk of potential market volatility later in the year and medium-term is elevated.
•
In FY25 cash proceeds from disposal of properties of £10.6m are anticipated,
approximately £2.6m in excess of book value.
•
Group well positioned with stable management and a very strong balance sheet.
•
A share buyback approval for the potential purchase of shares for up to £3m has
been put in place for the new financial year. Gearing limit of up to 1.5x net
debt/EBITDA reconfirmed.
1 Adjusted to remove non-underlying items
2 Excludes lease liabilities, includes used vehicle stocking loans
Performance Highlights (continued)
3
Vertu Motors plc (Company Number: 05984855)
Financial Summary
Years ended 29 February
2024
2023
2022
Revenue
£4,719.6m
£4,014.5m
£3,615.1m
Adjusted1 profit before tax
£37.8m
£39.3m
£80.7m
Profit before tax
£34.6m
£32.5m
£78.8m
Basic Adjusted1 EPS
8.37p
9.16p
17.92p
Dividends per share
2.35p
2.15p
1.70p
Free Cash Flow
£57.0m
£54.3m
£44.4m
Net (Debt)2/ Cash
(£54.0m)
(£75.3m)
£16.2m
1 Adjusted to remove non-underlying items
2 Excludes lease liabilities, includes used vehicle stocking loans
At a Glance
4
Vertu Motors plc (Company Number: 05984855)
188 sales outlets
32 car, bike and commercial franchise partners
143 locations across the UK
7,600 colleagues
218,350
vehicles sold
£4.7bn revenue
87.1% Used Car Customer Experience
(Net Promoter Score)
72.7% of Colleagues consider Group as a great
place to work
Car
Commercial
Bikes
Group Stakeholders
5
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.
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)
6
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. Webcasts
and events also take
place 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
FY24 and share buy-
back programme
continued in the
financial year
• Results webcast for
retail investors
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
• Delivery of the move
to an agency
distribution model in
certain franchises
• 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
Group Stakeholders (continued)
7
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
• Continued review of
retail finance
arrangements in
response to changes
in base rates
• Implementation of
Consumer Duty
• Assisting with finance
provider responses to
commission
disclosure FCA
investigation.
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)
8
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
• Response to FCA on
their sector review on
commission
disclosure.
• Implementation of
new FCA Consumer
Duty.
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 stakeholder
Chairman’s Statement
9
Vertu Motors plc (Company Number: 05984855)
The Group has again executed well, in what turned out to be a challenging Year, delivering an
Adjusted1 profit before tax of £37.8m, broadly in line with analysts’ expectations. There were
noteworthy highlights in the Year:
•
The successful integration of the significant Helston acquisition completed in
December 2022 and the bolt on acquisition of Rowes in October 2023, augmenting
the Group’s growing presence in the Southwest of England.
•
The delivery of operational excellence and digitalisation continued with the full roll-out
of the Group’s in-house analytics system ‘Vertu Insights’, a used vehicle stock
management tool. Use of this dynamic tool helped the Group to successfully
navigate the significant impact of movements in the wholesale used vehicle market in
the second half of the Year.
•
The roll out of the in-house developed ‘Pay Later’ product to all Group sites, allowing
customers to spread their vehicle repair payments interest free over 3-5 months. This
has aided conversion of the sale of repair work identified as part of the Group’s
vehicle health check process, and reduced costs compared to a third-party solution.
•
The successful reduction of vacancy levels, particularly in respect of service
technicians.
•
A 9.3% increase in the annual dividend per share reflects the Board’s confidence in
the Group’s future trading and continued strong free cash flow generation.
•
The return of £7.5m to shareholders through the purchase of 11,343,372 shares for
cancellation, representing 3.3% of opening total issued share capital.
The Board welcomed two new non-executive directors during the Year. John Mewett, the
Chief Executive Officer of Screwfix, part of the Kingfisher plc group, joined the Board in June
2023. John is responsible for the development of the Screwfix business across the UK,
Ireland and France and has over 25 years’ retail experience. David Gillard, a Non-Executive
Director and the Chair of Audit Committee at Bradford and Sons Limited, a builders’
merchant, joined the Board in January 2024. David was previously the Group Finance
Director and Deputy to the Managing Partner at DAC Beachcroft LLP, the international law
firm. David will replace Ken Lever as chair of the Audit Committee when Ken leaves the
Board at the forthcoming AGM after nine years’ service. I would like to take this opportunity
to thank Ken for his tremendous contribution to the strategy and success of the Group over
his nine-year tenure.
The Board is cognisant of possible challenges in the year ahead. These include the impacts
of a General Election, high interest rates and a cost-of-living squeeze on consumer
confidence. There is additionally, potential for disruption in new vehicle supply as the UK
Government seeks to transition to battery electric vehicles and Manufacturers attempt to
navigate new emission legislation and potential significant fines. These impacts have the
potential to effect revenues and profitability in the short-term. We remain, however, focused
on the delivery of the Group’s long-term strategic goals, appropriate capital allocation and free
cash flow generation.
The Group’s performance is, as always, the result of the commitment and hard work of all
colleagues. I would like to thank all the team for their continued effort and dedication.
Andy Goss, Chairman
1 Adjusted to remove non-underlying items
Group Strategy
10
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 – 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 and Customer focus
To develop and motivate the Group’s colleagues to ensure consistency of operational
excellence and delivery to customers across the business
Ancillary business
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)
11
Vertu Motors plc (Company Number: 05984855)
17 years of trading and 100 years of history
March 2024 marked a milestone 17 years of trading of the Group. This followed the £40m
purchase back in March 2007 of Bristol Street Group Limited, which operated 32 franchised
dealerships and three used vehicle supermarkets. Since this initial acquisition, the Group has
grown from 35 to 188 sales outlets and the number of colleagues employed by the Group has
risen from 1,700 to over 7,600. Over that same period, revenues have increased from the
£0.6 billion delivered by Bristol Street Group in 2006 to the £4.7 billion reported in these
results.
Whilst the Vertu Group is a relative youngster in the sector, another significant milestone was
reached in March 2024, the centenary of Bristol Street Motors. Officially incorporated on 18
March 1924, Bristol Street Motors operated a single Ford dealership in the heart of
Birmingham. Today, Bristol Street Motors Birmingham Ford still operates as part of the
Group from the same location as it did 100 years ago. Bristol Street Motors is the Group’s
largest brand; and is also the most well-known automotive brand in England. This strength
comes from 88 locations and substantial marketing activity including TV campaigns,
sponsorship of a British Touring Car Championship racing team and the EFL’s Bristol Street
Motors Trophy cup competition.
The Group has faced several considerable challenges over its short history. A global financial
crisis, Brexit, a global pandemic and its impact on supply chains, a shift in powertrains and
more normal economic fluctuations. The business has proven to be very resilient in the face
of these and indeed has developed significant advantages:
•
Dealer network
The Group operates franchised dealerships from a physical network of 143 locations,
from as far north as Paisley in Scotland, down to Orpington in the South East and
Truro in the South West of England. These locations are pivotal to the delivery of the
Group’s Mission ‘to deliver an outstanding customer motoring experience through
honesty and trust’ and to serve the requirements of our Manufacturer partners.
•
In-House systems
Over the years, the Group has developed in-house bespoke and proprietary systems,
including our showroom sales process system, fully integrated with the Group’s on-
line customer journey, excellent management information systems providing data in
real time and used vehicle inventory management systems. The Group currently has
56 in-house developers and robotics specialists.
•
Stable committed management team
The stable senior management team have a wealth of sector expertise and the Group
has a focus on growing its ‘Next Generation’ of senior leaders to assure the continued
and sustainable delivery of the Group’s strategic goals in the long-term.
•
Customer base
The Group’s 2 million strong customer base enables the Group to focus on retention
in sales and service and the further development of ancillary services such as retail
cosmetic repair operations.
•
Resilient aftersales operations
The Group has a well-established and growing aftersales business. Customer
retention initiatives such as over 163,000 live service plans together with focus on the
delivery of high levels of customer service aid the resilience of this business.
•
Brand strength
The longevity of the Bristol Street Motors brand along with the Group’s continued
investment in brand marketing and partnerships mean that Bristol Street Motors
remains the most recognised motor retail brands in England. Macklin Motors in
Scotland and Vertu also have growing brand awareness. Such awareness is vital in a
world of customers searching on the internet and undertaking omni-channel retailing.
Group Strategy (continued)
12
Vertu Motors plc (Company Number: 05984855)
17 years of trading and 100 years of history (continued)
•
Strong Manufacturer relationships
Operational delivery and strong mutual respect have generated good relationships
with the Group’s chosen Manufacturer partners. Such relationships are key to the
delivery of future scale and provide excellent support to the Group in periods of crisis,
such as the pandemic.
•
Balance sheet
Significant asset backing, low levels of net debt and strong cash generation enable
the Group to continue to deliver on its strategic goals.
•
Values based Group
Strong values-based culture and commitment to customer service with the Mission ‘to
deliver an outstanding customer motoring experience through honesty and trust’.
Strategy Summary
The Group’s key long-term strategic goal remains: To deliver growing, sustainable cashflows
from operational excellence in the automotive retail sector. The strategic objectives of the
Group, which were reviewed during the Year, remain consistent and 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, together with a focus on 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 and productivity.
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.
Group Strategy (continued)
13
Vertu Motors plc (Company Number: 05984855)
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. The following changes to the scale of the Group have been delivered
since 1 March 2023.
•
Acquisitions
The Group completed the acquisition of Rowes Garage Limited (‘Rowes’) in October 2023.
This added four sales outlets in South-West of England and further strengthened the Group’s
position in the region. These dealerships were rebranded to Bristol Street Motors or Vertu
Motors and were fully integrated onto Group systems and processes upon acquisition. The
outlets represent the Honda franchise in Plymouth and Truro and a used car sales outlet in
Plymouth. In February 2024, the Honda outlet acquired in Plymstock was closed with the
business being consolidated into the central Plymouth site. The now empty Plymstock
dealership will be refranchised to provide Plymouth with a Volvo outlet in the months ahead.
The Group already operates Volvo in the region such as in Truro, Exeter and Barnstaple. The
Plymouth used cars outlet will be franchised to represent Renault and Dacia which the Group
already represents in Exeter.
•
Multi-franchising and new outlets
On 24 April 2023, the Group agreed a sub-lease of a former Cazoo outlet in Tamworth,
Staffordshire. The outlet opened in July 2023 as a Bristol Street Motornation used car outlet
and has performed successfully since opening. The opening follows the strategy of the
Group to take opportunities as they arise in strong retail locations for the Group. In the past,
outlets which opened as Bristol Street Motornation have been transitioned to Franchise
dealerships over time. It is anticipated that Tamworth will be franchised within the next 12
months.
In July 2023, the Group agreed a sub-lease of a former Jaguar dealership in the west of
Newcastle upon Tyne. This excellently located dealership site was refurbished for the
relocation of the Group’s existing Vauxhall franchise from nearby Scotswood Road in the city.
Vauxhall opened in this new location in October 2023. Following the move, the substantial
freehold dealership vacated by Vauxhall was re-opened on 1 December 2023 as a Ford car
and commercial vehicle operation. This follows the award by Ford of Tyne and Wear as a
market area to the Group. This additional significant Ford operation augments the existing
representation of the brand by the Group in nearby Morpeth, Durham, and Hartlepool.
On 12 September 2023, the Group opened the MG franchise in Chesterfield, alongside the
Group’s existing Vauxhall dealership. This marks the fourth sales outlet for the MG brand
(owned by SAIC of China) operated by the Group, alongside the existing outlets in
Beaconsfield, Carlisle and Edinburgh. MG had a 4.3% market share of the UK car market in
calendar 2023 having seen significant growth.
On 28 November 2023, Bristol Street Motornation Stockton was re-franchised to Nissan,
providing a substantial dealership for this brand in Teesside and augmenting the existing
representation of the brand by the Group in nearby Darlington.
The Group has been in discussions with BYD, the world’s leading Manufacturer of new
energy vehicles, and the Board are delighted to announce that the Group will shortly
commence trading at Worcester and Gloucester with BYD.
•
Active Management
The Board continues to actively manage the Group’s portfolio of properties and businesses.
This includes assessing further growth opportunities as well as the future potential of existing
businesses, utilising strict investment return metrics to ensure discipline in capital allocation.
During the Year, the Group closed operations at its BMW/MINI outlet in Malton, Yorkshire and
secured an early exit from the associated leasehold premises. The Group also exited from a
Ford operation in Stroud, Gloucestershire, and closed its SEAT Cupra operation, exiting the
associated lease, in Birmingham in January 2024. Exiting these sub-scale dealerships has
reduced operating expenses, and the Group has retained many of the respective sales and
service customers in its nearby York BMW and MINI and Gloucester Ford dealerships, so
Group Strategy (continued)
14
Vertu Motors plc (Company Number: 05984855)
Execution of Group Strategy (continued)
Developing the Scale of the Group (continued)
augmenting revenues and profits at these outlets. Additionally, in existing multi-franchised
dealership locations, the Renault/Dacia franchises in Mansfield and the Hyundai Franchise in
Morpeth have been relinquished in consultation with the Manufacturers.
In the financial year, the Group continued to generate cash from surplus properties. A surplus
dealership in Taunton, acquired in the Helston acquisition, was sold for proceeds of £0.8m
and an accident repair centre business and property in Newcastle was disposed of for £1.4m
in the period. In addition, a surplus property in Hayle acquired with the Rowes acquisition
was sold for proceeds of £1.4m. These transactions collectively generated cash proceeds of
£3.6m and a profit on disposal of £0.5m.
Subsequent to the financial year end, planning was formally granted in respect of surplus land
adjacent to the Group’s Nissan dealership in central Glasgow. This 1.15-acre site had been
held by the Group since FY16. The sale has not completed as contractually anticipated, due
to the impact of recent legislative changes in Scotland imposing rent controls. The Group
continue to work with the developer concerned and the Board consider that a disposal is likely
to be completed in FY25.
A further surplus property, acquired with the Helston acquisition in FY23, has been sold
following the year end on 13 March 2024. This property in Taunton generated cash proceeds
of £0.8m, in line with the asset’s carrying value.
Additional surplus properties held by the Group are expected to be disposed of in the next 18
months. In total, in FY25, cash proceeds from disposal of properties of £10.6m are presently
anticipated, approximately £2.6m in excess of book value.
Digitalisation Developments
Omni-channel Retail Sales
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 prospective new
vehicle (’omni-channel retailing’).
In FY24, the Group focused on increasing the number of on-line vehicle sales reservations,
as such reservations convert to a sale at more than twice the rate of traditional vehicle sales
enquiries. The Group took over 22,000 on-line vehicle reservations in FY24, up 113% on the
previous year.
In terms of continued development of the customer journey, changes to the Group’s sales
experience/process software, built on the same platform that underpins our eCommerce
journeys, have been rolled out across the Group. These changes provide further efficiency
for the sales teams in the dealerships as well as improving the customer buying journey.
Data Model and Customer Data Platform
During FY24 the Group continued to scale its data capability. Further investment in the data
and business intelligence teams, which now number 14 colleagues, were made. This
enabled the launch of a comprehensive data warehouse in Q1 FY24. Utilising existing
infrastructure, this provides the bedrock of data for the Group and the opportunity to drive
further efficiencies across our finance and marketing functions as well as in dealership
operations.
This data platform drives the used vehicle pricing algorithm in use in the Group’s in-house
developed ‘Vertu Insights’ system. This was rolled out across the Group in FY24 and enables
real-time review and updates to used vehicle prices to reflect market conditions, and it also
forms the basis of our part exchange valuations to customers on-line. Since completing the
rollout of Vertu Insights, the number of used car price changes per day have increased by
150% as the technology, which uses a combination of proprietary and third party machine
learning, enables price changes across all vehicles at a location to be moved in line with
market supply and demand with a single click. Prices can go up as well as down to maximise
profitability. The system is also supported by our innovative QR Code based forecourt pricing
approach, where ‘windscreen’ pricing is updated in real-time, eliminating the need for
traditional price boards, which are time consuming to update.
Group Strategy (continued)
15
Vertu Motors plc (Company Number: 05984855)
Digitalisation Developments (continued)
Data Model and Customer Data Platform (continued)
FY24 also saw the introduction of the Group Internal Auction Platform, which allows
dealerships to sell part exchanges that do not meet their stock profile to other Group
dealerships, instead of them having traditionally been sold via an external remarketing
channel. Since launch, over 2,200 used vehicles have been retained in the business to retail,
helping with used vehicle inventory supply whilst reducing stock availability to competitors.
The business operates in an increasingly complex technological 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 increased customer uptake of the digital self-service check-in in the Group’s
service departments. 60% of customers now check in for their service from home with a third
of these going on to use the instore kiosks to safely deposit their vehicle keys. The Group has
also seen increased penetration of add-on sales in service from customers using this facility.
The functionality of the kiosks is being further enhanced to allow courtesy vehicle collection,
customer check out and payment as well as integration with the Group’s new Retail smart
repair offering, ‘Bristol Street Motors Repair Master’.
‘Pay Later’, an in-house developed deferred payment option for service customers, was fully
rolled out during the Year. This has substantially reduced the cost to the business of offering
this service, previously provided by a third party. Working capital increased by £1.3m to the
end of the financial year following the rollout and no material credit issues have been
experienced to date. The offering is an efficient use of capital and has a powerful impact on
converting work from Visual Health Check activity. It is driving higher average invoice values.
Digitalisation to improve efficiency and reduce cost
A new substantial project has commenced, investing significant development resource to
improve the productivity of the Group’s financial processing. The first project, to allow the
seamless transfer of vehicles between Group dealerships, including invoicing, transfer of
supporting records and payment is currently under development. This functionality will then
be utilised to allow similar ease of cross charging for Group parts supply and for services
such as cosmetic repairs. The successful implementation of this technology should
substantially improve the efficiency of the Group’s finance functions. Further opportunities to
increase finance efficiency, which should bring cost savings, have also been identified.
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. The Group has
been successful in reducing colleague turnover in recent years. Nevertheless, the Board
considers that turnover in the key roles of sales executives and service advisors remains at
too high a level. In order to increase colleague stability in all areas, the Group has
commenced substantial training and other initiatives to improve recruitment, induction and
appraisal processes. For example, every manager is currently undergoing training to improve
coaching skills. These initiatives should enhance colleague retention and therefore the
Group’s ability to deliver operational excellence.
Whilst the number of UK job vacancies has reduced slightly to 0.9 million in January 2024
from the more than 1.0 million seen, throughout much of 2023, (source: ONS: March 2024
labour market overview) workforce recruitment and retention remains a challenge for many
UK businesses. Resource constraints, coupled with cost-of-living pressures and the
significant increase in the national minimum wage have led to wage inflation, with average
weekly income growing in absolute and real terms in the UK. Following the recent increase in
the National Minimum Wage, 24.3% of the Group’s colleagues are paid at or within 5% of
Minimum Wage, up from 12.3%. Such colleagues are no longer able to participate in tax
efficient salary sacrifice schemes such as the holiday purchase scheme or making pension
Group Strategy (continued)
16
Vertu Motors plc (Company Number: 05984855)
Recruiting, Retaining and Developing Colleagues (continued)
contributions. The consequence of these Government actions appears to have led to
reduced level of satisfaction amongst these colleagues. A survey conducted in February
2024 saw 72.7% of colleagues ranking the Group as a great place to work (down from 85.9%
in the full annual survey). The greatest reductions in satisfaction scores were recorded in
roles paid at or just above minimum wage. In the face of such challenges, the Group
continues to strive to achieve a reasonable balance between managing the growth of
employment costs whilst ensuring that a stable, motivated workforce is in place.
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
’Evolution’ development programmes to facilitate progression to management roles in all
areas. These programmes are critical to delivering a business which is meritocratic and full of
opportunity for colleagues.
Ancillary Businesses
The Group’s ancillary business division has a dedicated divisional team to drive the success
of the businesses, which include Vansdirect, Aceparts and The Taxi Centre. The Group has
a strategy to develop such businesses to add revenue and returns that complement the core
dealership businesses.
The Taxi Centre, which has been in operation for over 20 years, delivered 1,066 taxis in the
Year (FY23: 854) and importantly generated profit before tax of £1.0m, a significant increase
on the £0.5m delivered in FY23. Improved supply of vehicles, and an expansion in the size of
the sales team, drove this strong performance.
Aceparts sells parts to customers via Marketplaces, with over 2.5 million listings on eBay, and
makes on average 2,000 despatches per day. The business has grown ‘direct to consumer’
sales from selected suppliers which has allowed sales growth whilst inventory levels have
been reduced. Wiperblades.com augments this business with a website sales platform.
Wiperblades distribution has been consolidated into the Group’s existing warehouse in
Sittingbourne in Kent. Aceparts is also a material supplier to our Dealerships for non-
manufacturer parts and consumables, facilitated from distribution centres in the Group’s
existing dealership premises.
Vansdirect had a good year, with a robust financial performance of £2.1m in profit before tax
(FY23: £2.8m). Supply dislocation in respect of a number of supplying Manufacturers held
back sales volumes in the Year and margins normalised.
Strategic Summary
The Group’s experienced management team, strong brands, digital prowess, and financial
strength ensure the Group is well positioned to take advantage of opportunities and react
quickly to challenges in the sector. 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)
Sector Trends
The franchised automotive retail sector continues to evolve with the following trends apparent.
1. Supply and outlet dynamics
The supply disruption in the post pandemic period eased as the Year progressed with
production flowing more freely once again. This resulted in a 17.9% increase in the
number of new vehicles registered in the UK in 2023 (Source: SMMT). Supply was such
that pre-registration activity reappeared, which had been largely absent in the last three
years. This indicates an excess of supply of inventory versus demand and a return to a
supply push environment. There is an expectation of increased competition from
Chinese manufacturers as they seek to expand vehicle sales into the relatively low tariff
environments in both Europe and the UK as growth in their domestic market has stalled.
Governments in the UK and EU are considering the competition aspects of this with the
potential for additional tariffs for Chinese producers.
Despite the addition of new entrants such as BYD and GWM ORA, the UK’s total number
of franchised sales outlets fell 3.2%2 (133 outlets), to a total of just over 4,200 outlets.
This decline in outlets continues the trend of the last few years and should mean
increased sales from those outlets which remain.
2 Source: Auto Retail Networks Report 2024
2. Electrification
The Group is supportive of the transition to electrified powertrains in the UK vehicle parc
as part of the move to a cleaner environment, particularly in respect of urban air
pollution. Investment in training, charging infrastructure, specialised tooling and
dedicated battery competence centres has been made to support this transition. The
Group has recently received recognition for the efforts made in embracing the transition
to ‘zero emissions’, winning the National Franchised Dealers Association (‘NFDA’) Green
Dealer Award in April 2024. The award was given for the Group’s commitment to the
Electric Vehicle Accreditation (‘EVA’) programme, demonstrating dedication to being at
the forefront of electric vehicle retailing.
In 2023, the UK Government rolled back the full ban on the sale of new petrol and diesel
cars in the UK from 2030 to 2035. Despite this policy announcement, the UK
Government have imposed the Vehicle Emission Trading Scheme (VETS) from January
2024. VETS was imposed instead of the much-discussed Zero Emissions Vehicle (ZEV)
mandate. VETS represents two schemes which run concurrently, namely the Non-Zero
Emission Car Registration Trading Scheme (CRTS) and Non-Zero Emission Car CO2
Trading Scheme (CCTS). This is the most aggressive Government imposed environment
policy in Europe, pushing BEV vehicle sales through fines rather than incentives.
CRTS requires Manufacturers to achieve specific zero emissions vehicle sales targets,
starting at 22% of total car sales and 10% of van sales in 2024. The target rises
incrementally each year to 80% for cars and 70% for vans in 2030, and 100% for both by
2035. Manufacturers can generate additional allowances through the purchase of credits
from other Manufacturers or through the CCTS scheme. The CCTS scheme looks at the
average CO2 of a Manufacturer’s registered vehicles in 2021, and if average CO2 is
reduced overall in future years, overachievement can be converted into CRTS credits.
For every vehicle that does not comply under CRTS the Manufacturer pays a fine of
£15,000. If a Manufacturer misses their CCTS target a fine of £86 is levied for every
gramme of CO2 over the base line.
The potential fines for Manufacturers from these two schemes are huge (particularly after
2024 as targets ramp up). Increased pressure for the sale of new electric vehicles is
evident in response to this complex legislation. Retail demand for electric vehicles
remains muted with no financial incentives from Government available, despite the
onerous targets and fine regime. Most demand is coming from the fleet and business
channels where Government tax incentives are in place. Manufacturers are seeking to
stimulate retail demand for these vehicles through the offer of discounted prices and
supported finance rates, yet these are clearly costly to their profitability.
Group Strategy (continued)
18
Vertu Motors plc (Company Number: 05984855)
Sector Trends (continued)
2. Electrification (continued)
Both CRTS and CCTS are only judged at the end of the calendar year and as such it is
highly likely that the pressure to generate BEV volumes will further increase as the year
progresses and in future years as targets tighten. One outcome may well be a reduction
in the supply of Internal Combustion Engine (ICE) vehicles in the second half of FY25 to
minimise exposure to regulatory fines. This could, in turn, impact on the size of the UK
vehicle market.
A further potential challenge to the transition to BEV discussed in previous reports arose
from tightening Rules of Origin requirements where BEVs sold between the EU and UK
face 10% tariffs, based on the origin of their components. The introduction of this tariff
has been delayed from 1 January 2024 to 2027 which is clearly a helpful development.
The Society of Motor Manufacturers and Traders (SMMT) registration statistics show UK
BEV registrations in the period January to April 2024 represented 15.7% of all sales,
below the mix achieved in 2023. Growth has been achieved in the fleet and Motability
sales channel, rather than retail.
3. Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is currently investigating Discretionary
Commission Arrangements (DCAs) within automotive finance. Preliminary findings from
the FCA review suggest that motor finance providers, and motor finance credit brokers
(including motor dealers) who have engaged in motor finance agreements involving
DCAs could be impacted. The Group ceased sales involving DCAs in January 2021.
The FCA have indicated that an update on this investigation will be given by September
2024. The Board does not currently consider that provisions are required to be made in
respect of any exposures in this area and will update shareholders as the position
becomes clearer.
In a separate development, in November 2023, the FCA highlighted concerns regarding
the proportion of premiums paid by customers being disbursed in claims in respect of
guaranteed asset protection (GAP) insurance. The Group ceased the sale of GAP
insurance to customers on 31 January 2024. No provisions have been made.
4. Agency Distribution
Under the agency distribution model, the Manufacturer transacts with the customer for
new vehicle sales while the retailer remains the physical touchpoint with the customer
and undertakes the sales process, customer contact and vehicle delivery as an agent.
The retailer-turned-agent receives a commission on each new vehicle sale. There are
varying versions of the agency model proposed and the picture is evolving in terms of
such factors as Manufacturers’ appetite to change, the legal structure of the model, and
the details of operational implementation.
The Group has long operated on an agency basis for a significant proportion of fleet and
parts sales. Mercedes-Benz passenger cars moved to a genuine agency model on 1
January 2023 and Volvo from July 2023 in respect of retail new car sales. The
Volkswagen Group brands have also implemented agency distribution for their BEV
ranges in the retail channel. Honda also moved to agency for the e:Ny1 product from the
end of April 2024. A number of others still plan to do so in time.
A number of Manufacturers previously announced they were considering implementing
the agency model in the UK, notably Ford and Land Rover. Both recently announced the
transition will not now take place.
Group Strategy (continued)
19
Vertu Motors plc (Company Number: 05984855)
Current trading and outlook
•
March and April 2024 Trading (the ‘Period’)
The Board is pleased with the Group’s strong trading performance in the critical first two
months of the new financial year. Overall the performance was slightly ahead of the Board’s
expectations and expectations for the full year are unchanged.
The UK new car market saw a growth in total registrations in March and April 2024 of 7.4%
compared to the prior year. This increase arose in the Fleet and Motability channels, whilst
registrations to private retail customers saw continued weakness and fell 10.8%.
The Group’s volumes of new retail vehicles sold fell only 2.6% in the Period, significantly
ahead of the 10.8% market decline, improving share to 4.9% (4.5% in the comparative
Period). The Group’s Motability sales grew 43.7% like-for-like compared to an increase of
48.5% in the UK Market. The growing mix of Motability sales, along with increased supply of
new vehicles generally, continues to weigh on margins. Gross profits per unit on the sale of
new retail and Motability vehicles in the Core Group were £2,101 in the Period, a decline of
£308 Period-on-period with gross margins normalising to 8.1%. Overall gross profits from the
sale of new vehicles were below prior year levels.
The Group’s Fleet and Commercial performance remained strong in the Period, generating
increased gross profit levels compared to the prior year Period. Group Fleet and Commercial
like-for-like volumes grew 6.7% in the Period. Gross profits per unit continued to exceed prior
year levels at over £1,300 per unit and consequently gross profits in this channel were above
prior year Period levels.
The UK used vehicle market saw relative stability in the post year end period, in respect of
both consumer demand and used vehicle prices. Like-for-like volumes of used cars sold by
the Group grew 5.8% in the Period year-on-year. Core Group Gross margins on the sale of
used cars were robust, growing 0.3% to 7.9%. This margin percentage increase was due to a
reduction in average selling prices of almost £2,000 per unit (9.0%) reflecting lower used
vehicle prices following the market correction in late 2023. Overall, gross profit from the sale
of used vehicles was slightly up on the prior year period.
Like-for-like the Group delivered improved gross profit from all aftersales channels in the
Period compared to last year. Service revenues in the Core Group grew by 9.5% with
margins stable.
As anticipated, the Core Group saw an increase in operating expenses. Salary costs rose
due to the impact of the National Minimum Wage and further success in filling vacancies.
Vehicle running costs increased year-on-year due to enhanced depreciation rates being
applied and the requirement by manufacturers for larger demonstrator ranges. Interest costs
also exceeded prior period levels because of the impact of increased interest rates.
•
Outlook
The Board is encouraged by the strong trading results in the first two months of FY25 and this
provides confidence for the remainder of the financial year.
The SMMT recently upgraded its outlook for 2024 to 1.984m registrations (previously 1.974m)
with BEV vehicles expected to represent a 19.8% share, (reduced on the previous 21.0%
share anticipated). For the four months to April 2024 BEV vehicles have taken a 15.7%
share. The softness of BEV retail demand represents a considerable challenge in achieving
the ZEV mandate targets for Manufacturers. If unamended this regime, together with the
absence of incentives for consumers in the retail market, may cause volatility and disruption
in the UK new vehicle market in the near and medium term.
The used vehicle market and pricing is likely to remain robust except potentially in BEV
residuals as consumer offers by Manufacturers increase to avoid fines and supply to the used
car market increases. A curtailment of supply of new ICE vehicles by Manufacturers to
improve the BEV mix in the light of potential fines, could underpin future used vehicle residual
values.
The Fleet and Motability markets are likely to remain strong powered by financial tax
incentives for BEV vehicles and the need to push BEV product in channels other than retail.
Group Strategy (continued)
20
Vertu Motors plc (Company Number: 05984855)
Current trading and outlook (continued)
•
Outlook (continued)
Aftersales demand looks to be well set in the months ahead as the Group benefits from its
customer retention strategies. Higher availability of technician resource is another favourable
tailwind.
Group Management remains focused on operational excellence around cost, conversion and
customer experience and the delivery of the Group’s strategic objectives.
Robert Forrester, CEO
Key Performance Indicators
21
Vertu Motors plc (Company Number: 05984855)
The Group has a number of Key Performance Indicators (“KPIs”) by which it monitors its
business. These include analysis of results by channel; as set out on page 22-33, 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)
FY24 – Underlying EPS of 8.37p
FY23 – Underlying EPS of 9.16p
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
Underlying
PBT
Profit before tax and non-underlying
items
FY24 – Underlying PBT £37.8m
FY23 – Underlying PBT £39.3m
❶❷❸❹❺
❻❼❽❾❿
⓫⓬⓭⓮
Gross
Margin by channel
Gross profit divided by revenue by
channel
See page 23
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
FY24 – decline of 2.0%
FY23 – decline of 10.1%
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
FY24 – decline of 0.9%
FY23 – decline of 3.6%
UK private registrations
FY24 – decline of 1.0%
FY23 – decline of 1.9%
❷❸❺❾⓬
⓮
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
FY24 – growth of 6.2%
FY23 – growth of 5.9%
❷❻❽❾
Online
Growth
Website visits to all Group trading
websites.
FY24 – unique users 10.42m
FY23 – unique users 8.11m
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
87.1% Net promoter score
(FY23 – 86.3%)
❹❼❽❾
Financial Review
22
Vertu Motors plc (Company Number: 05984855)
The Group’s income statement for the Year is summarised below:
FY24
FY23
Variance
£'m
£'m
%
Revenue
4,719.6
4,014.5
17.6
Gross profit
516.1
448.4
15.1
Operating expenses reported
(456.8)
(399.6)
(14.3)
Adjusted Operating profit
59.3
48.8
21.5
Net Finance Charges
(21.5)
(9.5)
126.3
Adjusted Profit Before Tax
37.8
39.3
(3.8)
Non-Underlying items3
(3.2)
(6.8)
52.9
Profit Before Tax
34.6
32.5
6.5
Taxation
(8.9)
(6.9)
(29.0)
Profit After Tax
25.7
25.6
0.4
3 Non-underlying items represent share-based payments charge, amortisation of intangible assets, impairment charges and other non-underlying
items.
The Group generated an adjusted profit before tax of £37.8m (FY23 £39.3m). Underlying
operating profitability declined due to the impact of declining used car vehicle values in the
final quarter of 2023 and the consequent impact on used car margins and gross profit
generation. Group profit before tax of £34.6m exceeded prior year levels by 6.5% due to
lower non-underlying costs incurred in the Year.
Revenue grew to £4.7 billion, a growth of £705.1m (17.6%) compared to the prior year.
Acquisitions completed after 1 March 2022 contributed additional revenues of £450.1m, whilst
dealerships disposed of or closed in the Year generated a £46.5m reduction in revenues.
Revenue in the Core Group increased by £301.5m (7.9%) driven by an increase in fleet and
Motability vehicle sales volumes, as new car supply increased.
Acquisition performance is dominated by the £115m Helston acquisition completed in
December 2022. This was the largest single acquisition undertaken by the Group and will
generate significant shareholder value. All of the acquired dealerships were fully integrated
onto Group systems and processes by the first quarter of the Year as anticipated. Synergies
have also been delivered as intended, yet despite this, the financial contribution in the Year
from this acquisition was below expectations due to the impact of the used car price
correction, concentrated in premium businesses in the second half of the Year. Financial
performance is now stronger in the ex-Helston dealership as used car prices have stabilised
and a robust contribution is anticipated in FY25.
Financial Review (continued)
23
Vertu Motors plc (Company Number: 05984855)
Revenue and Gross Profit by Department
An analysis of total revenue and gross profit by department is set out below:
FY24
FY23
Variance
£'m
£'m
£’m
Revenue
New
1,452.5
1,121.9
330.6
Fleet & Commercial
1,037.4
897.6
139.8
Used
1,816.2
1,658.2
158.0
Aftersales
413.5
336.8
76.7
Total Group Revenue
4,719.6
4,014.5
705.1
Gross Profit
New
119.6
98.4
21.2
Fleet & Commercial
55.6
42.3
13.3
Used
122.5
125.2
(2.7)
Aftersales
218.4
182.5
35.9
Total Gross Profit
516.1
448.4
67.7
Gross Margin
New
8.2%
8.8%
(0.6%)
Fleet & Commercial
5.4%
4.7%
0.7%
Used
6.7%
7.5%
(0.8%)
Aftersales4
43.5%
44.5%
(1.0%)
Total Gross Margin
10.9%
11.2%
(0.3%)
4 Aftersales margin expressed on internal and external revenues
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
%
FY24
FY23
Variance
FY24
FY23
Variance
Used retail vehicles
86,437
82,561
4.7
79,691
81,336
(2.0)
Direct new retail cars
35,228
33,727
4.5
31,607
33,167
(4.7)
Agency new retail cars
1,585
80
-
1,326
80
-
Total new retail cars
36,813
33,807
8.9
32,933
33,247
(0.9)
Motability cars
19,706
11,029
78.7
19,082
10,995
73.6
Direct fleet cars
19,474
18,259
6.7
18,388
17,813
3.2
Agency fleet cars
7,770
5,236
48.4
7,770
5,237
48.4
Total fleet cars
27,244
23,495
16.0
26,158
23,050
13.5
Commercial vehicles
17,569
17,710
(0.8)
17,276
17,636
(2.0)
Total New vehicles
101,332
86,041
17.8
95,449
84,928
12.4
Total vehicles
187,769
168,602
11.4
175,140
166,264
5.3
UK Market year-
on-year change6
Group year-on-
year change v
UK market5
New Retail Car
(1.0%)
0.1%
Motability Car
70.2%
3.4%
Fleet Car
26.5%
(13.0%)
Commercial
19.3%
(21.3%)
5 Represents the year-on-year variance of like-for-like Group volumes compared to the UK trends reported by SMMT
6 Source SMMT
Financial Review (continued)
24
Vertu Motors plc (Company Number: 05984855)
Used retail vehicles
The used vehicle market in the UK was best described as volatile in the Year, particularly in
the second half.
In terms of supply, low new vehicle registrations in the UK from 2020-2022 have meant that
generally the supply of older used vehicles into the market remains constrained. Improving
new vehicle supply as 2023 progressed allowed for the renewal of large corporate, Motability
and daily rental fleets particularly in September. This in turn generated an influx of supply into
the used wholesale markets, particularly of sub-3-year-old used petrol vehicles and BEVs.
Fleet companies typically held lower-than-market residual values on those vehicles being de-
fleeted, so wholesale sellers were willing to accept lower prices to liquidate inventory than
previously prevailing market prices, leading to price falls.
Whilst used vehicles have remained a necessity purchase for many consumers, factors like
cost-of-living pressures, high interest rates, high vehicle prices following considerable price
inflation in 2022 and the first half of 2023, and soaring insurance costs dampened consumer
demand. This was particularly pronounced in the more expensive premium segment.
These market dynamics had an impact on wholesale UK used vehicle prices over the Year.
Values saw relative stability in the months to August 2023, with prices remaining some 25-
30%7 above historic levels. Gentle monthly downward movements in prices were witnessed in
the first half of the financial year in all but BEVs. Used BEV supply had grown rapidly, albeit
from a very low base, and outstripped retail demand. Used BEV prices consequently fell
significantly, with a 44%8 correction being seen over the twelve months to August 2023. Later
in the financial year, the influx of de-fleet supply, described above, met with more muted
demand and so UK wholesale values across all powertrains experienced a significant price
correction. Wholesale values fell by 10.3% between October and December (Source:
CAPHPI). Premium vehicle values at the higher end of the market saw the greatest declines
within this, with CAP reporting drops of 7% - 11% in each month, October to December.
Used vehicle prices saw greater stability from January 2024 overall, however Premium
vehicles within this continued to show greater weakness than the market generally.
The Group continually monitors the used vehicle pricing, demand and supply environment.
Monitoring is significantly aided by the in-house developed ‘Vertu Insights’ system and
enhanced by the Group’s new data lake. This includes a pricing algorithm to ensure that, in
fast-moving market conditions, prices are adjusted to optimise stock turn, volume and margin
mix. Retail prices of Group inventory are now frequently changed on used cars both upwards
and downwards. The ability to respond quickly to market changes is enhanced by the
Group’s strong marketing and digital capability.
The Year started with low levels of used vehicle stock as the Group reduced inventory. Group
target inventory levels were increased in the first half of the Year reflecting good levels of
consumer demand and to take account of increased time needed to prepare vehicles for sale
due to the aging parc. Despite the ongoing supply constraints prevalent at the time, the Group
was successful in growing inventory levels to 31 August 2023 compared to the opening
position. As market conditions changed, and especially in response to the wholesale pricing
conditions evident from the end of September 2023, the Group sought to increase stock turn
and substantially reduce inventory levels. The Group was successful in driving increased
stock turn, delivering like-for-like volume growth of 2.0% in the second half of the financial
year. In the first half used volumes declined 5.7% like-for-like, mainly due to the absence of
0% finance used car events. Used vehicle inventory at 29 February 2024 totalled £163.0m, a
5.7% reduction on the opening position and substantial reduction of over £40.0m when
compared to half year-end inventory levels (31 August 2023: £205.9m). Approximately £11m
of the reduction was due to an 8% fall in the average price of inventory, aided by the market
price declines. The remaining £29m reduction was driven by a 16% reduction in the number
of used retail vehicles held in stock, a fall of over 1,500 units.
Core Group gross profit from the sale of used vehicles totalled £110.1m for the Year. This
represented a £9.7m decrease in Core Group gross profit year-on-year generated from used
vehicle sales. The following like-for-like variances compared to last year arose:
Financial Review (continued)
25
Vertu Motors plc (Company Number: 05984855)
Used retail vehicles (continued)
• 2.0% decrease in the number of used retail vehicles sold, with this all arising in the
first half of the Year. This decline was partly due to being unable to execute 0%
finance offer events due to increased interest rates.
• Gross profit per unit £1,447 (FY23: £1,533) reflective of declining used vehicle prices
and margins in the second half.
• Average selling price of £20,200, a 1.4% increase.
• Gross margin reduced to 7.2% (FY23: 7.7%) reflective of higher sales prices and
reduced gross profit per unit.
Outstanding customer experience on used cars remains vital to the Group’s ongoing success
in terms of profitability and future retention of customers. The Group assesses customer
experience through an extensive mystery shopping programme and in the majority of the
Group via the Judge Service third party platform. Net Promoter Scores recorded via Judge
Service throughout the Year have been very strong at c.85%, which the Board believe to be
sector leading amongst major market players.
7 Source: CAPHPI: October 2023 Car market overview
8 Source: CAPHPI: September 2023 Car market overview
New retail cars and Motability sales
UK retail car registrations declined 1.0% in the year to 29 February 2024. Retail demand has
become increasingly muted over the Year, and this is particularly the case for BEVs.
Increased supply of new BEV vehicles exceeded retail demand. Manufacturers are facing the
challenging combination of slow retail sales, complex new regulatory targets (with related
significant fines) related to the share of BEV, and increased competition from new entrants.
As a result, significant discounting and finance offers are increasingly apparent to stimulate
consumer demand for electric models.
The Group saw like-for-like new retail vehicle volumes decline by 0.9% when compared to the
prior year, in line with the market. Overall, the Group increased its UK retail market share to
4.6% (FY23: 4.1%) aided by new dealerships from acquisitions.
UK Motability registrations continued to benefit from pent up demand, as already extended
contracts came to an end and supply improved from Manufacturers, rising a significant
70.2%, compared to FY23. The Group’s Motability volumes outperformed the market,
growing 73.6% on a like-for-like basis and representing an increasing UK market share of
6.2% (FY23: 5.9%). The Group remains Motability’s largest partner in the UK with over
41,200 vehicles on the fleet. These vehicles require an annual service funded by Motability in
the Group’s service departments over the three-year lease period and therefore important to
aftersales revenues.
The Group is seeing a dampening effect on new vehicle gross profits as supply push
dynamics become more prevalent and impact margins and as the Motability channel
increases as a proportion of the new car market. BEV margins are coming under pressure as
the need to hit Government targets rises.
The following trends were apparent on a like-for-like basis for the New Retail and Motability
sales channel:
• A £7.0m increase in gross profit generated, driven by the substantial increase in
Motability volumes.
• Gross profit per unit of £1,970 (FY23: £2,155) representing the higher mix of lower
margin Motability volumes and increasing discounting to drive volumes.
• An average selling price of £24,637 per unit, a 2.9% increase. This is part driven by
increased BEV mix which has higher sales prices than internal combustion engine
product.
• Gross margin of 8.0% (FY23: 8.8%).
Financial Review (continued)
26
Vertu Motors plc (Company Number: 05984855)
New retail cars and Motability sales (continued)
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. This represents significant outperformance and reflects the
Group’s focus on executing its Mission Statement ‘’to deliver an outstanding customer
motoring experience through honesty and trust.’’
Fleet & Commercial vehicle sales
The UK car fleet market has driven the increase in new vehicle registrations in the UK over
the Year. Registration volumes in the UK car fleet market have grown 26.5% year-on-year
compared to FY23. This growth has been aided by robust demand for electric vehicles
through the fleet channel. Within the fleet market, daily rental registrations were up 139%9 in
the Year, as several manufacturers increased volumes in this area. These daily retail
volumes are still a long way short of pre-pandemic levels.
Like-for-like, the Group delivered over 26,000 fleet cars in the Year, representing an increase
of 13.5% compared to FY23. The Group’s performance was below the market trends as the
Group kept pricing disciplines to maintain margin and did not undertake significant volumes of
low margin daily rental sales. Overall, the Group has a 3.6% (FY23: 3.9%) share of the UK
fleet car market.
UK van registrations grew 19.3% in the year to 29 February 2024 as supply pressures eased
and demand stabilised. The market started to see increased pre-registration activity and a
large number of customers paying for vans, which while registered, were not delivered.
These trends therefore tended to flatter registration trends versus actual sales reported. The
Group’s like-for-like sales of new commercial vehicles fell 2.0% in the Year, largely due to
keeping strong pricing disciplines. The Group sold 5.1% of UK new light commercial vehicles
in the Year (FY23: 6.1%).
Importantly, the Group saw increased profit generation from its combined fleet and
commercial operations, growing Core Group gross profit by £10.0m compared to last year.
The following fleet and commercial trends were seen on a like-for-like basis:
• Like-for-like fleet and commercial volumes increased 6.8% and a total of 44,800
vehicles were sold by the Group in this channel.
• An average selling price of £27,382 (FY23: £24,634) reflecting increased BEV sales.
• Record gross profit per unit of £1,203, a rise of 18.2% from £1,018.
• Gross margin rising to a record 5.2% from 4.7%.
9 Source: SMMT
Financial Review (continued)
27
Vertu Motors plc (Company Number: 05984855)
Aftersales
The Group’s aftersales operations are a vital contributor to Group profitability, generating over
42% of total gross profit. The Group is delighted to report that it saw growth in gross profit
generation in all major 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
Revenue10
169.2
213.8
23.9
11.8
418.7
Revenue10 change
9.9
21.1
4.3
(2.1)
33.2
Revenue10 change (%)
6.2%
11.0%
21.8%
(15.1%)
8.6%
Gross profit
123.5
47.0
14.0
0.9
185.4
Gross profit change
5.8
3.8
3.6
-
13.2
Gross margin11 FY24 (%)
73.0%
22.0%
58.9%
7.8%
44.3%
Gross margin11 FY23 (%)
73.9%
22.4%
53.3%
6.4%
44.7%
Margin change (%)
(0.9%)
(0.4%)
5.6%
1.4%
(0.4%)
10 includes internal and external revenues
11 Aftersales margin expressed on internal and external revenues
•
Service
At the end of September 2023, there were 41.3 million12 licensed vehicles in the UK, including
commercial vehicles. In January 2024, the UK reached a milestone in that the millionth BEV
reached the road. Despite this milestone, BEV still represent a very small proportion of the
overall vehicle parc, less than 3%.
Vehicle servicing and repair remains a vital and resilient revenue stream for the Group,
benefitting from robust demand aided by the Group’s excellent retention and conquest
strategies in this area. In the first half of the financial year, the Group faced challenges in
meeting demand due to constraints in technician resources, impacting both retail service work
and the preparation of used vehicles for sale. In the first half of the Year, the Group averaged
126 technician vacancies and, in response, the Group implemented additional pay measures
to enhance the recruitment and retention of technicians. Each technician contributes an
average of £115,000 in service and parts gross profit for the Group, underscoring the
significance of reducing technician vacancies to capitalise on revenue opportunities. The
Group was successful in reducing vacancy levels and bolstering its technician workforce, with
a 9.8% increase in like-for-like technician numbers, totalling 914 technicians by the end of the
Year (compared to 832 in those same dealerships in February 2023).
The Group has embraced the use of technology to improve productivity in aftersales. Over
60% of eligible customers now check-in for their service or repair on-line in advance of
attending the dealership. A third of those customers now also go on to use the check-in
kiosks in dealerships. This increases colleague productivity and enhances the customer
experience.
The added efficiency and improvement in technician resource has helped the Group achieve
greater consistency of execution in its vehicle health check process. This process checks
every vehicle in the workshop to identify safety related issues requiring immediate attention
and any items which may warrant the customers attention within the next few months. The
customer is sent a video from the vehicle technician, highlighting any such items found and
then a colleague will contact the customer to ascertain whether they would like the work to be
carried out whilst the vehicle is with the dealership. On average, each customer was sold an
additional approximately £95 per visit because of this process, aiding average invoice values
to reach record levels of over £330 during the Year. The ability to sell identified work to
customers was augmented during the Year by the launch of ‘Pay Later’, which allows
customer to spread the cost of their repair, interest free, over 3 to 5 equal instalments. In
addition, the Group is now piloting a new technology solution whereby work identified is
communicated digitally to the customer who can click to approve the work to be undertaken
and can also pay for such work online.
Financial Review (continued)
28
Vertu Motors plc (Company Number: 05984855)
Aftersales (continued)
•
Service (continued)
Service performance and delivery of outstanding customer experiences was, negatively
impacted in the Year by dislocation in parts supply in respect of certain of the Group’s
Manufacturer partners and technician shortages. This led to significantly longer repair lead
times for some customers and also reduced the efficiency of a number of the Group’s service
operations. The Group’s service departments delivered above average customer experiences
as measured by the Manufacturers.
The Group remains committed to excellence of customer service and uses several customer
retention strategies to ensure that vehicle sales customers return to the Group for their
service. 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 163,000 live service
plans, including manufacturer service plans, which creates significant resilience to future
revenue streams.
Reflecting the trends set out above, like-for-like service revenue growth of £9.9m (6.2%) was
delivered in the Year. Gross margin percentages on vehicle servicing were 73.0% (FY23:
73.9%) in the Core Group reflecting increased remuneration to address technician resource
constraints and hence gross profit generation rose on a like-for-like basis by £5.8m in service.
12 source www.gov.uk
•
Parts
The Group’s substantial parts operations include traditional wholesale operations, agency
distribution centres, on-line parts retailing and accessory sales to dealership customers.
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 indeed across the world via the
Groups online parts operations. The Group successfully grew like-for-like revenue by £21.1m
(11%) from the sale of parts in the Year compared to FY23. Along with price rises, two
operational enhancements have helped overall performance. First, improvements in the
Group’s vehicle health check process as outlined above drove an increase in parts revenues
per labour hour sold through the Group’s workshops. Secondly, all the Group’s dealerships
are now serviced by a new Gateshead based central parts sales hub where 21 colleagues
handle inbound parts sales calls in respect of retail parts sales. This increased conversions
and sales.
Gross profits generated from the sale of parts increased by £3.8m over the Year. Parts
margins reduced slightly to 22.0% in the Year reflecting higher selling prices and reduced
bonuses from Manufacturers.
•
Accident and Smart Repair
The Group’s accident repair centres are managed separately from the dealership businesses
in a standalone division, concentrating solely on the management of accident repair
operations. The Group now operates 13 accident repair centres, from Sunderland in the
North East to Truro in the South West of England. The successful accident repair business in
Yeovil, acquired with the Helston acquisition, was relocated to standalone leasehold premises
in October 2023 with an investment of £0.5m. In addition, an accident repair operation in
Truro was acquired with the Rowes Garages acquisition on 31 October 2023 and immediately
integrated into the Division and Group systems. The introduction of uniform operating
systems, specific key performance indicators and focus on higher margin work providers,
have all driven performance improvements over the Year.
The Group’s Smart Repair operations have two fixed operations in addition to 100 vans,
mainly servicing the Group’s dealerships’ demand for internal repairs to used cars. A new
retail focused smart repair operation (‘Bristol Street Motors Repair Master’) has been created
as a new business unit to serve the Group’s two million customers. Four vans are currently
operational, servicing corporate clients. Services to retail customers have commenced in
early April 2024 with a pilot in the Group’s Sunderland BMW outlet. The pilot uses the service
check-in kiosks in dealerships to determine whether customers require a quote for work. The
Group has the aspiration to significantly increase the capacity of this new business offering
substantially over the next 18 months.
Financial Review (continued)
29
Vertu Motors plc (Company Number: 05984855)
Aftersales (continued)
•
Accident and Smart Repair (continued)
The Group has delivered a 21.8% increase in revenues generated from the Group’s accident
and smart repair Core operations and a £3.6m increase in related gross profit.
•
Fuel Forecourt
In the Core Group, one fuel forecourt is operated by the Group in Widnes. As a result of the
tempering of fuel prices from the peaks in FY23, this forecourt saw slightly reduced revenues
but a return to more normal gross margins of 7.8% in the Year. Active pricing strategies
ensured that the forecourt has maintained market share and delivered increased gross profit.
Operating Expenses
A summary of Group operating expenses is set out below:
FY24
FY23
FY24 variance to FY23
£'m
£'m
£’m
%
Salary costs
220.0
214.2
5.8
2.7%
Vehicle and valeting costs
45.6
38.0
7.6
20.0%
Marketing costs
35.3
36.5
(1.2)
(3.3%)
Property costs and depreciation
48.1
45.4
2.7
5.9%
Energy costs
8.6
7.9
0.7
8.9%
Other
33.0
33.8
(0.8)
(2.4%)
Core Group operating expenses
390.6
375.8
14.8
3.9%
Acquisitions
62.5
14.9
47.6
Disposals
3.7
8.9
(5.2)
Group Net Underlying Operating
Expenses
456.8
399.6
57.2
Operating expenses as a % of
Revenue
9.7%
9.9%
(0.2%)
Reported underlying operating expenses of £456.8m, increased by £57.2m compared to the
year ended 28 February 2023. Dealerships acquired or sold in the period since 1 March 2022
generated a net £42.4m of this increase. Underlying Core Group operating expenses
therefore grew, by 3.9%, (£14.8m) compared to last year. Vitally, operating expenses as a
percentage of revenue fell to 9.7% (FY23: 9.9%) despite obvious inflationary pressures.
The largest operating cost of the Group is salary costs, which have increased by £5.8m
(2.7%) in the Core Group, compared to last year. Salary costs shown in operating expenses
exclude the productive cost of the Group’s aftersales technicians, which are included in cost
of sales. Much of increase in salary costs is the result of the Group’s success in reducing
outstanding vacancy levels in the Year and the impact of the investment in the Group’s
Accident and Smart repair business. Salary changes, such as the impact of the minimum
wage were broadly offset by reduced commissions and bonus payments because of reduced
retail volumes delivered in the Year and by lower profitability reducing management bonuses.
The cost of the Core Group’s demonstrator and courtesy vehicle fleet, included within vehicle
and valet costs, increased by £6.7m in the Year. The improving supply position and
expanding product ranges meant a return to increased demonstrator requirements mandated
by Manufacturers. The Group also applied in the Year increased vehicle depreciation rates,
reflecting the price correction in the wholesale vehicle market in the Year, to ensure that
vehicle carrying values on de-fleet are appropriate. BEV and Premium vehicles, in particular,
required higher write-down rates.
The Group reduced its core marketing costs principally as a result of fewer used vehicle
events undertaken in the Year. These savings were delivered whilst 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 conquest activity.
Financial Review (continued)
30
Vertu Motors plc (Company Number: 05984855)
Operating Expenses (continued)
As anticipated, energy was a significant cost headwind for the Group in the first half of the
financial year. Successful execution of the Group’s energy purchasing strategy, efforts to
reduce usage along with the softening in the market price of electricity meant that Core Group
energy costs grew just £0.7m over the Year. The Group reduced gas and electricity
consumption by 2.0% on a total basis compared to FY23. The Group completed its
investment in LED Lighting and solar panel installation totalling £2.8m in FY24. A total of 41
of the Group’s dealership now have roof solar installations. 5.9% of the Group’s total
electricity requirements were self-generated in FY24 by this onsite clean solar energy, with
this figure expected to exceed 10% in FY25 as the full year benefit of the installations comes
through.
Other costs were tightly controlled delivering a £0.8m saving in the Core Group compared to
prior year.
Non-underlying operating expenses
FY24
FY23
FY24 Var
to FY23
£'m
£'m
£’m
Redundancy costs
0.9
-
0.9
Lease surrender premium
(0.8)
-
(0.8)
Impairment charges
0.1
1.5
(1.4)
Share based payments charge
2.5
2.1
0.4
Amortisation
0.5
0.5
-
Acquisition fees
-
2.7
(2.7)
3.2
6.8
(3.6)
The Group undertook a strategic review of aftersales collection and delivery services at the
start of the Year. Customer charges for this service were introduced or increased, to match
the cost of provision more closely. The number of employed drivers was also significantly
reduced in order to match reduced demand levels. This led to a one-off redundancy cost in
the Year of £0.9m.
The Group purchased the freehold interest in its Derby multi-site operation in FY23. A
premium was received in the Year in respect of the remaining lease obligation from the
intermediate landlord. The premium received has been included in non-underlying items due
to its one-off nature and size.
Net Finance Charges
Net finance charges are analysed below:
FY24
FY23
FY24 Var
to FY23
£’m
£’m
£’m
New vehicle Manufacturer stocking interest
8.2
3.4
4.8
Mortgage Interest
6.2
1.4
4.8
Interest on bank borrowings
3.8
1.7
2.1
Used vehicle stock funding interest
1.1
0.8
0.3
Interest on lease liabilities
3.5
3.5
-
Interest income
(1.3)
(1.3)
-
Net Finance Charges
21.5
9.5
12.0
The Group saw a significant 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, increased average prices of new vehicles in the
pipeline and an easing of supply of new vehicles in some franchises so extending the pipeline
consigned. The trend was exacerbated in some franchises by reduced interest free stocking
periods offered by Manufacturers which resulted in a cost transfer to retailers. Total Group
new vehicle stock as at 29 February 2024 was £516m (2023: £427m), up 21%.
Financial Review (continued)
31
Vertu Motors plc (Company Number: 05984855)
Net Finance Charges (continued)
Interest on bank borrowings and mortgages increased due to the additional facilities drawn for
the acquisition of Helston Garages in December 2022 as well as the impact of increased base
rate applicable to the borrowing. 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 (excluding the applicable margin) 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.
Pension Costs
The Group has a closed defined benefit scheme. The last actuarial valuation of the scheme
was performed as at 5 April 2021. This valuation showed the scheme had a funding surplus,
with no contributions required from the Company to meet the cost of accrued benefits.
Expenses are also met by the scheme. No contribution payments are therefore expected for
the accounting period beginning 1 March 2024.
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. A reduction in the surplus arose
over the Year relating to movements in the applicable inflation assumptions. Overall, a net
actuarial loss of £0.7m was recognised in the Statement of Comprehensive Income for the
Year. The accounting surplus on the scheme decreased to £2.5m as at 29 February 2024
(2023: £3.2m).
Tax Payments
The Group’s underlying effective rate of tax for the Year was 25.0% (FY23: 19.5%). The
overall effective tax rate, increased to 25.6% (FY23: 21.3%) as a result of the increase in the
corporation tax rate applied in the Year. The total tax charge for the Year increased to £8.9m
from £6.9m. The Group continues to be classified as ‘low risk’ in a recent review 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 £57.0m (FY23: £54.3m) was generated in the Year:
FY24
FY23
FY24 Var
to FY23
£'m
£'m
£’m
Operating profit
56.0
42.0
14.0
Depreciation, amortisation, share based
payments & other
37.5
34.1
3.4
Movement in working capital
16.7
23.7
(7.0)
Interest and tax payments
(26.2)
(19.0)
(7.2)
Net Cash Inflow from operating activities
84.0
80.8
3.2
Sustaining capital expenditure
(12.4)
(10.3)
(2.1)
Proceeds from sale of property, plant and
equipment
3.6
-
3.6
Lease principal repayments
(18.2)
(16.2)
(2.0)
Free Cash Flow
57.0
54.3
2.7
Net cash inflow from operating activities benefited from a cash inflow of £16.7m from a
reduction in working capital (FY23: £23.7m). The movements in working capital which
resulted in this cash inflow were: A reduction in the Group’s used vehicle inventory which
generated a £12.6m inflow. An £11.6m inflow arose from an increase in creditors, this
represented increased activity in the Group’s businesses, including ancillary businesses such
as Aceparts, Vansdirect and in the Group’s used vehicle procurement business together with
an increase in VAT recoverable on certain new vehicle inventory. These two inflows were
partially offset by a £7.5m outflow in respect of an increase in trade receivables, arising from
increased Fleet and Commercial vehicle sales in the Year.
Financial Review (continued)
32
Vertu Motors plc (Company Number: 05984855)
Cash Flows (continued)
In addition to the above movements in working capital, the Year saw a significant increase in
new vehicle inventory, matched by an equivalent increase in Manufacturer funding shown
within creditors, thus having no impact on cash flow overall. This £94.0m movement
comprised an increase of new vehicle inventory in the pipeline of approximately £53.0m, a
£33m increase in tactical registrations of vehicles purchased to supply the Group’s fleet and
commercial vehicle operations and an £8m increase in demonstrator vehicles.
Financing and Capital Structure
The Group has a balance sheet with shareholders’ funds of £353.4m (2023: £341.4m)
underpinned by a freehold and long leasehold portfolio of £311.8m (2023: £306.6m) and net
debt (excluding lease liabilities) of £54.0m as at 29 February 2024. The Group’s conservative
financing and capital structure resulted in a strong tangible net assets position of £235.0m as
at 29 February 2024, representing 70.5p per share.
The Group has a committed acquisition debt facility of £93m taken out in December 2022 for
three years with the option to extend for a further two years. During the Year, this facility was
extended for the first of the two additional years out to December 2026. £44m of this
committed facility was drawn as at 29 February 2024 with £49m therefore available undrawn.
The Group operated comfortably within all covenants during the Year.
The Group also has long term debt funding in the form of 20-year mortgages totalling £81.5m
provided by BMW Financial Services (‘BMW FS’). The mortgages are amortising facilities
with annual repayments of capital of £4.3m.
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. While, during the Year, there
was some utilisation of the facility, as at 29 February 2024, no amounts were drawn in this
facility. The Group has a £50.0m facility under these arrangements and held £163.0m of
unencumbered used vehicle inventory at 29 February 2024.
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 £6.0m on acquisitions during the Year, invested £9.2m in multi-franchising
or the expansion of capacity at existing dealerships and made a one off investment in solar
panels of £2.4m, collectively ‘expansion capex’. These cash outflows are excluded from
sustaining capital expenditure utilised in the calculation of Free Cash Flow.
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 0.85p per share was paid in January 2024. The
Board recommends a final dividend in respect of the year ended 29 February 2024 of 1.50p
per share to be approved at the Annual General Meeting on 25 June 2024. This dividend will
be paid, subject to shareholder approval, on 26 July 2024. The ex-dividend date will be 27
June 2024 and the associated record date 28 June 2024. This final dividend brings the total
dividend in respect of FY24 to 2.35p per share (FY23: 2.15p), an increase of 9.3%. Against
adjusted, fully diluted EPS of 7.83p this dividend is covered 3.3 times in line with the Group’s
stated policy of 3-4 times.
During the Year, the Group purchased 11,343,372 shares for cancellation, representing 3.3%
of opening total issued share capital, for £7.5m. 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. £7.8m was spent on dividends paid,
representing the final dividend in respect of the year ended 28 February 2023 and interim
dividend in respect of the Year.
Financial Review (continued)
33
Vertu Motors plc (Company Number: 05984855)
Capital Allocation (continued)
The Group also deploys capital on its extensive franchised dealership network, expending
£24.0m on asset additions in FY24. This included £11.6m of non-sustaining ‘expansion
capital expenditure’ increasing Group capacity to generate revenues. The balance of £12.4m
is considered sustaining capital expenditure. For FY25, sustaining capital expenditure is
anticipated to be approximately £18.0m, which includes some redevelopment projects to meet
revised Manufacturer standards which do not necessarily increase Group capacity. A further
£13.8m of expenditure is anticipated in respect of expansion capital expenditure. This high
level of activity includes the cost of land purchases to provide additional vehicle compounding
for certain of the Group’s dealerships. The category also includes the build costs of the Ayr
Toyota dealership and the expansion of the Group’s Toyota dealership in Chesterfield. The
Group has surplus property assets with disposals in FY25 expected to generate cash
proceeds of c.£10m, £0.8m of which has already been received after 29 February 2024.
Karen Anderson, CFO
Environmental, Social and Governance
34
Vertu Motors plc (Company Number: 05984855)
The Group recognises the reporting recommendations across the four core elements of the
Task Force on Climate-Related Financial Disclosures (‘’TCFD’’) in relation to governance,
strategy, risk management, and metrics and targets.
Governance
Governance around the Group’s response to climate change, providing oversight on climate-
related risks and opportunities and the assessment of progress on actions required in
response is embedded within the Group’s risk management processes set out on page 46.
The Board is responsible for the identification of risks and setting the strategic objectives of
the Group. The CEO, Robert Forrester, oversees sustainability and communicates with our
stakeholders, the Board and management about the Group’s action plan and progress. The
COO, and head of the Group’s Compliance Committee, David Crane, oversees supplier
matters and communicates to the Board on regulatory changes in response to climate change
and their potential impact on the Group. The CFO, Karen Anderson, provides reporting on
progress towards the Group’s sustainability goals and oversees the assessment and
monitoring of climate-related risks.
The Audit Committee’s key responsibilities include monitoring the Group’s risk management
process and systems of internal controls. The Compliance Committee is responsible for
Compliance and Whistleblowing. An internal Efficiency Committee, comprising the Executive
Directors and senior management of the Group focuses on the delivery of cost saving
initiatives, such as energy reduction, reduction in resources used by the Group and
sustainability. Regular colleague forums also take place throughout the Group’s network and
feedback is requested on climate related issues.
Strategy
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.
Risk Management
The Group’s risks associated with climate change have been identified and are set out on
page 50.
Metrics and targets
Key metrics in respect of the Group’s sustainability programme are set out on pages 35 and
36.
Environmental, Social and Governance (continued)
35
Vertu Motors plc (Company Number: 05984855)
Sustainability initiatives
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
Environmental, Social and Governance (continued)
36
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 1.0% in FY24. BEV and hybrid vehicle sales represented
27.1% of the Group’s total new retail vehicle sales in FY24 compared to
27.7% in FY23.
The Group continues to operate the largest Motability fleet in the UK.
Reduce the environmental footprint of our business
The Group has maintained a strong focus on the reduction of energy used in
its operations in FY24.
The Group advanced its ‘War on Waste’ programme during the financial year.
This programme highlights the importance of reducing energy wastage and
helped the Group to deliver a like-for-like decrease in electricity usage across
the business despite an increase in both the size and use of BEV charging
Infrastructure. In FY24 the Group invested £2.4m in solar panel installations
across 41 Group locations, these will provide 10% of the Group’s electricity
requirements in the first full year post installation. Energy usage data is
shared across the Group and energy management reviews, and audits
provide support to those sites where the potential for reduction in energy use
has been identified.
The Group has a commitment to renewable energy procurement and ended
the year with 100% of energy purchased directly from the grid procured from
Certified Renewable Green certified clean means of generation (i.e. wind,
solar or hydro plants).
Emissions associated with transportation have increased, with an increased
volume of fuel consumed over the financial year, this is due to increased
operational and business travel as the business continues to return to pre-
covid operational levels.
The carbon intensity of the Group’s operations has seen an overall 9.09%
decrease year-on-year.
In FY24 smart water meters were fitted to those dealerships consuming the
most water. This allows the monitoring of water consumption half hourly, so
potential water leaks, both internally and externally, can be detected quickly
and resolved.
The Group recycled 61% of its dry waste on site in FY24.
Care for our colleagues and support our communities
In a recent pulse survey of all Group colleagues, 72.7% of respondents
agreed that the Group is a great place to work. The Group’s colleague
engagement strategy continues to provide opportunities for improvement in
this score.
The Group centrally supported communities by over £300,000 in FY24 with
some of those benefitting from this support highlighted in the following
‘community’ section.
Responsible Sourcing
All of the Group’s business locations are situated within the UK and operate in strict
compliance with all applicable labour relations laws. We have no presence, either directly or
via sub-contractors, in any areas which present a material risk of the exploitation of men,
women or children in the workplace. We work with vehicle manufacturers and other suppliers
who manage their supply chains in a responsible way. The Group’s modern slavery
statement is published on the Group’s website, at https://investors.vertumotors.com/.
Environmental, Social and Governance (continued)
37
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 water
usage reduction activities. Energy audits have been carried out in a sample of the Group’s
dealerships identifying potential savings. The Group targets 70% of dry waste to be recycled
at source and has also set a 15% reduction in paper usage and printing target to be delivered
in FY25.
Energy and Emissions Reporting
This table below summarises the Group’s energy usage, associated emissions, energy
efficiency actions and energy performance under the government policy Streamlined Energy
& Carbon Reporting (SECR). This is implemented by the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
Government Emissions Factor Database 2023 version 1.1 has been used, utilising the
published kWh gross calorific value (CV) and kgCO2e emissions factors relevant for the
reporting period, being the year ended 29 February 2024.
Estimations to cover missing billing periods for properties were calculated on a kWh/day pro-
rata basis at the meter level. These full-year estimations were applied to five electricity
supplies and six gas supplies. All estimations equated to 4.00% of reported consumption.
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.
Natural Gas &
Other Fuels
Electricity
Transport
Total
2024 Carbon and Energy Consumption
kWh
26,993,845
27,009,947
47,201,064
101,204,856
tCO2e
4,967
5,593
10,738
21,298
2023 Carbon and Energy Consumption
kWh
28,954,281
29,028,884
38,232,241
96,215,406
tCO2e
5,303
5,614
8,897
19,814
Y0Y Percentage
Change (tCO2e)
(6.34%)
(0.37%)
20.69%
7.49%
Carbon Intensity Metric (tCO2e/Revenue)
2024
1.05
1.18
2.27
4.50
2023
1.33
1.40
2.22
4.95
YoY Percentage
Change
(21.05%)
(15.71%)
2.25%
(9.09%)
Total emissions for the Group have increased, because of the growth in the Group through
acquisitions completed in FY23 and FY24. Despite this growth in the number of Group
locations, a decrease in location-based emissions associated with electricity, natural gas, and
other fuel consumption was delivered compared to FY23.
Environmental, Social and Governance (continued)
38
Vertu Motors plc (Company Number: 05984855)
Community
As the Group has continued to expand, so has the scope of its involvement in the community
as part of our wider corporate and social responsibility strategy and Group sustainability
goals.
The projects the Group’s chosen to support reflect the diversity and depth within the business,
and also the desire our colleagues have to be an active part of the communities served by
their dealership. During the year to 29 February 2024, the Group’s community activities have
included:
Great Christmas Raffle:
The Group supported the Great Christmas Raffle again by donating a 23-Reg Toyota Aygo X.
Over the last four years, the raffle has raised more than £200,000 for over 100 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 combatting inflation and the
rising cost of living.
St. Oswald’s Hospice:
Another charity that the Group has continued to support 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 23-Reg Hyundai i10 helped to raise
over £40,000. St Oswald's Hospice has now raised a remarkable total of £1.45 million over
the years in running its Big Car Raffle, making a huge difference to their operation.
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.
Wolverhampton Project:
The Group has long been a supporter of Wolverhampton’s Churches 4 Positive Change
charity, previously aiding the launch of the Back To Eden Project, which included 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 since
supported a year of events and conferences designed to promote community cohesion,
including a summer BBQ & family sports day, which was attended by more than 3,000 local
people, in addition to the charity’s Civic Engagement Youth Conference, which aims to offer
young people civil opportunities and organically develop a new generation of local leaders.
Yorkshire Cricket Foundation:
The Group has supported the Yorkshire Cricket Foundation, which delivers a number of
community projects across the County, with both monetary support and provision of a 17-
seater minibus. The Group’s support this year also assisted with 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.
Burnley FC in the Community:
The Group supports Whitehough Outdoor Centre, which is operated by the Burnley FC in the
Community charity. The Centre offers outdoor education opportunities for both young people
from local disadvantaged communities and those with special educational needs, as well as
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.
Environmental, Social and Governance (continued)
39
Vertu Motors plc (Company Number: 05984855)
Community (continued)
Sunderland AFC Mental Health Hub:
Vertu Motors continues to support 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.
Dunston Silver Band:
The Group continues to back Dunston Silver Band and Dunston Silver Youth Band, as they
build back following the pandemic and rising cost of living. Our support facilitates the bands’
operations, including covering rent expenses for the Dunston Community Centre and
professional conductor's fees. The partnership aims to promote the enduring power of music
within the local community; the bands have been a source of joy, entertainment, and cultural
enrichment since 1908.
English Football League (EFL) Community Outreach:
The Group’s new partnership with the EFL has provided the opportunity to support a huge
and diverse range of community initiatives across England and Wales, through their
relationships with their local football clubs. For each round of fixtures in the Bristol Street
Motors Trophy, we have provided the home team with complimentary tickets to be gifted to a
programme of their choosing, enabling people from a wide cross-section of the community to
attend fixtures.
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.
Some examples include Bristol Street Motors Bolton Ford’s Green Christmas Appeal, an
initiative set up by the dealership to promote sustainability along with raising vital funds for
their local community. Derby Renault Dacia ran a shoebox appeal, with all donations going to
children in Ukraine, Moldova, Georgia, Bosnia, and Romania. Sunderland Vauxhall supported
two young local gymnasts with a donation towards their competition costs, which culminated
with them becoming European Champions.
Vertu Volvo Taunton further supported Somerset Cricket’s Museum to help with their website
development, whilst Vertu Sunderland MINI raised over £1,300 for Children’s Cancer North
through their MINI Big Love Campaign. Vertu Bolton Jaguar Land Rover is a patron of Bolton
Lads and Girls Club, which offers sports, arts, mentoring and community outreach to around
3,500 young people in Bolton, and took them on a thrilling Land Rover Experience Day.
Macklin Motors Toyota Glasgow supported Darnley School’s 6-week employability
programme, designed to ignite the creative and entrepreneurial spirits of local nine-year-old
pupils.
The above are just a few examples of dealership community support throughout the Group,
whilst colleagues in head office at Vertu House have also been involved in charitable
initiatives, most notably with a football match that saw Vertu and Rotterdam House go up
against Digital House to raise funds for automotive industry charity BEN as well as Mind.
Health and Safety
40
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. This year we have raised the
pass mark on this audit from 80% to 85%. The results of these audits continue to be
encouraging with most Dealerships scoring very highly, and only a small number of failed
audits which result in a follow-up audit with the pass mark raised again to 90%.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
41
Vertu Motors plc (Company Number: 05984855)
Engaging our Colleagues
The engagement and development 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. Colleague based metrics
measuring our success in these areas feature consistently in our annual Vision and in both
operational and PLC Board meetings.
The Group seeks to create a welcoming culture and an inclusive environment within which
colleagues feel valued and can fulfil their individual potential. The Group provides several
structured development pathways at all levels for those who wish to develop their career.
Recruitment activity is designed to attract talent from a wide range of backgrounds and our
internal talent development programmes are structured to open up opportunity to ensure that
all colleagues have equal prospects to progress within the Group, irrespective of background.
This approach maximises our ability to attract a diverse range of talent and to develop
sufficient colleagues to support the Group’s growth strategy. Structured and regularly
deployed Colleague engagement and feedback programmes are in-place and are working
well, ensuring that colleagues have a voice and this it is represented at a senior level.
The Board seeks to create an environment within 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.
Colleague Communication
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 every
month. Each General Manager is responsible for delivering these monthly Team Briefs,
updating colleagues on relevant issues impacting the Group, their franchised operating
division and the dealership. These meetings seek to reinforce the Group’s values and
contribute to the creation of a Group culture. Colleague recognition and the benefits and
support services available to them feature in these briefings. These are supported by regular
video updates on key colleague and franchise related matters by members of the operational
board.
Colleague Satisfaction Surveys
A key strand of our workforce engagement strategy is the delivery of an annual
comprehensive Colleague Satisfaction Survey which takes place in October each year. This
provides colleagues with the ability to provide feedback on a wide range of subjects. The
annual survey is followed-up with two shorter pulse surveys which take place in February and
June each year.
In October 2023, 72.6% of colleagues participated in the annual survey maintaining the
participation rate achieved in 2022. 85.9% of colleagues confirmed that they would
recommend the Group as a great place to work (2022: 86.2%). In the annual survey,
Colleagues have the opportunity to 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, how they feel about their pay
and reward level to how well we train and develop and whether or not management live the
Group Values. Colleagues can also provide free text feedback which is exceptionally valuable
in helping us improve their experience. All feedback is gathered anonymously and trust in the
survey is high.
The results of every survey are reviewed at PLC and operational board level, dealership level
managers receive the results relevant to their businesses. Areas of opportunity for
improvement are identified and where relevant, action plans and management focus is
specifically targeted to deliver on these plans.
Colleagues (continued)
42
Vertu Motors plc (Company Number: 05984855)
Engaging our Colleagues (continued)
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. Suitable and effective feedback is provided to the workforce on what steps have
been taken to implement their ideas or 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. These meetings follow a
standard format and are delivered by the General Manager (with the support of the HR
department where required). These meetings are attended by elected colleague
representatives and focus on how the Group can deliver a great place to work for colleagues
and the Groups sustainability initiatives.
The Workforce Engagement Director and Group HR Director also hold multiple colleague
feedback sessions around the Group. These include elected colleague engagement
representatives to give their feedback on the Group Colleague Satisfaction Survey results and
any other issues that are concerning colleagues.
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, including discussions around the Group’s ‘War on Waste’
programme.
Colleague feedback is collected, considered and progressed to the operational board and
Board where specific time is allocated to consider it.
Colleague Recognition Programmes
The Group operates several different formalised colleague recognition programmes. These
are intended to recognise and reward talented and committed individuals at all levels who
deliver results and support the Values and culture of the business.
One of the cornerstones of this strategy is The Masters Awards. This non-management
recognition programme is specifically designed to identify and recognise colleagues for their
exceptional personal performance or contribution. There are several different types of award
category, ranging from individual performance-based awards, designed to identify high
performers in specific fields, quality based awards, where achievement of high standards (i.e.
generating positive customer outcomes) is recognised, and all-round behaviour and
contribution awards. This approach facilitates engagement through competition as well as
identifying those making valuable contributions to the culture and performance of the Group in
other ways. Our Divisional Colleague of the Year category identifies one winning colleague
from each of our operating divisions based on nominations from colleagues. 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. This
approach generates a dealership colleague of the year winner and one of these colleagues
wins the divisional award. All non-management colleagues have the ability to win one of these
awards. 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 CEO Management Awards, announced each December recognise high performing
managers for their outstanding leadership performance. These awards are linked directly to
excellence in managers delivery against the Group’s annual Vison.
Within our dealerships and in our support centres in Gateshead, a Colleague of the Month
Award is delivered each month as part of the Team Brief.
Colleagues (continued)
43
Vertu Motors plc (Company Number: 05984855)
Engaging our Colleagues (continued)
Colleague Recognition Programmes (continued)
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.
• 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.
Diversity and Inclusion
The Group is focused on the attraction, recruitment and development of colleagues who
embody what we call the five unteachable attributes, namely, Character, Attitude, Energy,
Drive and Talent, irrespective of background. Our recruitment processes are structured to
attract applicants from a wide range of backgrounds to maximise the opportunity for talented
individuals to apply to work for the Group. The Group believes that appointments into all roles
or into internal talent programmes should be based on the individual’s suitability for a
particular post or potential to develop and without reference to demographics factors or
personal characteristics. The principle of equality of opportunity for all colleagues is woven
into our development and recognition programmes.
The motor retail sector within which the Group operates has traditionally attracted higher
proportions of male applicants into entry level roles, specifically Sales Executive and
Technician roles and this remains the case today. The Group has taken specific steps,
including implementing a Sales Advisor role, and introducing a Customer Service
Apprenticeship scheme to attract more female and out of sector applicants to help address
this imbalance. 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 current gender split is 25% female and 75% male,
consistent with the wider motor-retail sector.
Colleagues (continued)
44
Vertu Motors plc (Company Number: 05984855)
Diversity and Inclusion (continued)
The Group's aim is to attract and retain the best people from within and beyond the
automotive retail sector whilst 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.
Group Colleagues Gender Split:
At 29 February 2024
At 28 February 2023
Female
Male
Total
Female
Male
Total
Directors
2
6
8
2
4
6
Group Senior Managers
8
56
64
8
65
73
All Colleagues
1,891
5,719
7,610
1,813
5,510
7,323
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 colleagues,
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. The Group is in the process of rolling out comprehensive coaching
training for all line managers to further support the development of colleagues and ensure that
managers are equipped to nurture and develop talented colleagues.
A significant number of leadership development programmes are operated by the Group
including many in partnership with Dale Carnegie training. Over 10% of the Group’s
management will progress through these programmes during FY25. 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 individual behaviour to
identify potential.
The Group also operates a substantial apprenticeship programme in partnership with the
Group’s Manufacturer partners, with over 450 apprentices currently engaged in training.
The Group also offers access to an ‘Evolution’ programme which provides a development
path for promising non-management colleagues in the areas of sales, aftersales and finance
to line management roles. This programme has been operating for over 7-years and has
developed a pedigree of delivering management level appointees to support the Group’s
growth strategy. The programme has supported the development of a disproportionate
number of female colleagues into management roles over recent years, helping to improve
gender balance in management positions.
Colleagues (continued)
45
Vertu Motors plc (Company Number: 05984855)
Learning and Development (continued)
Our Next Generation Senior Development Programme launched in FY24 continues to operate
with the aim of developing senior managers into director level positions. The most recent
appointment to the Operational Board came through this route.
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 report.
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
46
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 81. The statement
by the auditors about their reporting responsibilities is given on pages 88 and 89.
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)
47
Vertu Motors plc (Company Number: 05984855)
Risk Management and Internal Controls (continued)
The Board's approach involves identification of material risks including climate related 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
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
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
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
•
Build on the Group’s established on-line sales
capability
BRAND PARTNERS AND REPUTATION
Description of risk
Impact
Mitigation
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)
48
Vertu Motors plc (Company Number: 05984855)
Principal Risks and Uncertainties (continued)
ECONOMIC, POLITICAL AND ENVIRONMENTAL
Description of risk
Impact
Mitigation
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
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 and react to changes.
•
Real time inventory management and control to enable
the Group to react quickly to pricing changes
LEGAL AND REGULATORY
Description of risk
Impact
Mitigation
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
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
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)
49
Vertu Motors plc (Company Number: 05984855)
Principal Risks and Uncertainties (continued)
SYSTEMS AND TECHNOLOGY
Description of risk
Impact
Mitigation
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
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
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
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
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
Risk Management (continued)
50
Vertu Motors plc (Company Number: 05984855)
Principal Risks and Uncertainties (continued)
Climate Related
Description of risk
Impact
Mitigation
Impact of the transition
to lower emissions
alternatives and
Battery Electric
vehicles (BEV)
Vehicle Emission
Trading Scheme (VETS)
compliance.
Retail demand for BEV
may not match required
VETS sales targets.
BEV vehicles changing
aftersales work.
•
Focus on the delivery of excellent customer
experiences to ensure retention.
•
Ensure the Group has the right technology and training
in latest vehicle models.
•
Maintain close relations with Manufacturer partners.
•
Introduction of retail Smart Repair.
Potential for changes in
cost base driven by
climate goals
BEV currently more
expensive than ICE
vehicles.
Cost of missing VETS
targets for
Manufacturers
Increasing cost of
compliance with
changing legislation.
Investment in BEV tools
and charging
infrastructure.
•
Maintain close relationships with Manufacturer
partners.
•
Monitor regulatory changes.
•
Focus on sustainability goals.
•
Ensure appropriate capital allocation.
Physical risks
Climate change may
result in extreme heat
or increased risk of
flooding.
Possibility of business
interruption within the
Group’s extensive
network of dealerships.
•
Business continually planning for location identified as
at greater risk of flooding.
•
Maintain heating and ventilation systems and
drainage.
•
Maintain adequate insurance cover.
•
Ensure appropriate capital allocation.
Viability and Going Concern
51
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, environmental 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 2024 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 2027.
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 2027, 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 47 of the Strategic
Report.
•
Prudent growth assumptions in both volume and margin, reflecting the risks set out
on pages 47 to 50 of the Strategic Report.
The Group’s banking facilities were renewed in FY23, and now expire in December 2026, with
an option to extend out to December 2027. The Group is also funded by a 20 year mortgage
facility expiring in 2043.
The Board carried out a robust assessment of the principal risks facing the Group and the
purpose of the principal risks on pages 47 to 50 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 47 to 50 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)
52
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 2027.
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
15 May 2024
15 May 2024
Corporate Governance Report
53
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. The QCA Code was updated in 2023 and the Board have reviewed the updated Code
to consider any necessary changes or improvements that will need to be made in FY25. The
Board has adopted the 2023 Code for FY25 with reporting based on the 2023 Code to be
reflected in full in the Corporate Governance Report for that year. The Board has shown the
2023 Code Principles below but does not yet fully comply with the 2023 Code requirements.
As previously stated, the Group continued to deliver on its strategy. The Board continues to
work and interact well together through both its regular formal meetings and other ad-hoc
contacts and the two new directors (referred to previously and below have integrated well).
The Group’s sustainability 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. 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
Two new Non-executive Directors joined the Board during the year, John Mewett and David
Gillard. David will replace Ken as Chair of the Audit Committee following the AGM in June.
Pauline will replace Ken as the Senior Independent Director at the same time.
The Board undertook an annual board evaluation in February 2024 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. The Board are also reviewing alternative
methods of evaluation for the future. 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 25 June 2024.
Andrew Goss
Non-executive Chairman
15 May 2024
Corporate Governance Report (continued)
54
Vertu Motors plc (Company Number: 05984855)
QCA Code Principle 2023
Where to find out more (page)
1. Establish a purpose, strategy and business model which promote
long-term value for shareholders.
Group Strategy - pages 10-20
2. Promote a corporate culture that is based on ethical values and
behaviours.
Roles and Responsibilities – page 60
Division of Responsibilities – page 59
investors.vertumotors.com
3. Seek to understand and meet shareholder needs and
expectations.
investors.vertumotors.com
4. Take into account wider stakeholder interests, including social
and environmental responsibilities and their implications for long-
term success.
s172 statement - pages 5-8
5. Embed effective risk management, internal controls and
assurance activities, considering both opportunities and threats,
throughout the organisation.
Risk Management - pages 46-50
6. Establish and maintain the Board as a well-functioning balanced
team led by the Chair.
Board Leadership - pages 55-58
7. Maintain appropriate governance structures and ensure that
individually and collectively the directors have the necessary up-
to-date experience, skills and capabilities.
Division of Responsibilities – page 59
Audit Report - pages 82-89
Board Leadership - pages 55-58
8. Evaluate Board performance based on clear and relevant
objectives, seeking continuous improvement.
Chairman’s Corporate Governance Statement
page 53
9. Establish a remuneration structure which is supportive of long-
term value creation and the company’s purpose, strategy and
culture.
Remuneration Committee Report - pages 66-72
10. Communicate how the Company is governed and is performing by
maintaining a dialogue with shareholders and other key
stakeholders.
Remuneration Committee Report - pages 66-72
investors.vertumotors.com
Board Leadership
55
Vertu Motors plc (Company Number: 05984855)
Board of Directors
The Board has five 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 (66) 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 (70) is a former partner of Arthur Andersen and has held senior executive director roles
in many listed companies including Alfred McAlpine plc, Albright & Wilson plc and Tomkins
plc. Ken was CFO of Numonyx in Switzerland from April 2008 to September 2010 and was
CEO of Xchanging plc from June 2011 until December 2015. From 2007 to 2013, Ken was a
Member of the Accounting Committee 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 in his role as Chair of the Audit
Committee. Ken will step down at the AGM in June.
External Appointments
Ken is Non-executive Chairman of Cirata plc, a Non-executive Director of Rockwood
Strategic Plc and Deputy Chairman of Rainier Developments Ltd. Ken also Chairs the
Advisory Board of the Alliance Manchester Business School.
Pauline Best
Non-Executive Director
Appointed
31 May 2016
Committee Membership
Audit Committee, Nominations Committee and
Chair of the Remuneration Committee
Relevant Experience
Pauline (60) 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 and will replace Ken as the
Senior Independent Director after the AGM in June.
Board Leadership (continued)
56
Vertu Motors plc (Company Number: 05984855)
Board of Directors (continued)
John Mewett
Non-Executive Director
Appointed
6 June 2023
Committee Membership
Relevant Experience
John (56) has over 25 years of retail experience having held roles such as Marketing Director
and Digital Director and is currently Chief Executive Officer of Screwfix, part of the Kingfisher
plc Group.
David Gillard
Non-Executive Director
Appointed
2 January 2024
Committee Membership
Audit Committee, Nominations Committee and
Remuneration Committee
Relevant Experience
David (61) is an experienced financial professional having held several senior finance
positions in the UK and overseas including Group Finance Director and Deputy to the
Managing Partner of DAC Beachcroft LLP, the international law firm. David is also a Non-
Executive Director and chair of the Audit Committee at Bradford and Sons Limited, a builder’s
merchant. He will replace Ken Lever as Chair of the Audit Committee and Chair of BSH
Pension Trustee Limited following the AGM in June.
Robert Forrester
Chief Executive Officer
Appointed
6 November 2006
Relevant Experience
Robert (54) 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 (56) 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 (52) 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.
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 Leadership (continued)
57
Vertu Motors plc (Company Number: 05984855)
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 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
• Compliance – Update from the Chair of the Compliance Committee on current issues
and regulatory changes
During the financial year the Board has met formally 8 times in person and 6 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
14
14
3
3
3
3
5
5
R T Forrester
14
14
-
-
-
-
-
-
D P Crane
14
14
-
-
-
-
-
-
K Anderson
14
14
-
-
-
-
-
-
K Lever
14
14
3
3
3
3
5
5
P Best
14
11
3
3
3
3
5
4
J Mewett
10
10
-
-
-
-
-
-
D Gillard
2
2
-
-
-
-
2
2
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)
58
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
FY2024 full year
results and FY2024
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
implementation of the
consumer duty by the
FCA regulated
entities in the Group
Monitoring the
culture and Values
including colleague
survey feedback
Monitoring the FCA
investigation into
commission
structures and
disclosure and the
actions and
responses taken by
the Group.
Developing the
Group’s
consideration, and
reporting, relating to
TCFD.
Annual General
Meeting
Meetings with key
shareholders on
results roadshows
Annual review of key
Group risks and
mitigating controls,
including TCFD
elements.
Approval of the
Group’s hedging
strategy
Division of Responsibilities
59
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
• 13 Senior
Managers
• D P Crane (Chair)
• K Anderson
• N Loose
• 6 Senior Managers
• Regular attendance
by Audit Chair
• 9 Senior
Managers
• H & S Manager
• K Lever (Chair)
• A P Goss
• P Best
• D Gillard
• P Best (Chair)
• K Lever
• A P Goss
• D Gillard
• A P Goss (Chair)
• K Lever
• P Best
• D Gillard
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)
60
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.
As Non-Executive Director, Ken is also 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 his broad range of
experience and expertise, particularly in relation to finance and
listed company issues.
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.
Non-executive Director –
John Mewett
As Non-Executive Director, John 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 his experience and
expertise, particularly relating to multi-site retail, marketing and
digital retailing.
Non-executive Director –
David Gillard
As Non-Executive Director, David 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 his experience and
expertise, particularly relating to finance.
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. He also oversees sustainability and
communicates with our stakeholders, the Board and management
about the Group’s action plan and progress.
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. He also oversees supplier matters and
communicates to the Board on compliance and regulatory changes,
including in response to climate change, and their potential impact
on 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. She also provides reporting on progress towards the Group’s
sustainability goals and oversees the assessment and monitoring of
climate-related risks.
Nominations, Composition and Succession
61
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 2023 Annual General Meeting will expire on the date of the 2024
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
15 May 2024
Audit, Risk and Internal Control
62
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 57.
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 59.
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 Rowes Garage Limited on 31 October 2023.
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 2024 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 29 February
2024 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 29
February 2024 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 29 February 2024 as shown in note 21 and concluded that
these were appropriate.
Audit, Risk and Internal Control (continued)
63
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 51 and 52.
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 29 February 2024 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.
Complexity of distribution arrangements also give rise to potential judgement as to
whether the Group is acting as principal or agent in respect of sales transactions.
The committee reviewed the assumptions set out in the revenue recognition policy and
confirmed that the assumptions applied and categorisation of sales as principal or agent
were appropriate.
Audit, Risk and Internal Control (continued)
64
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 82 to 89.
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 29 February 2024, 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 16 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 consequently a new
audit partner, Nicholas Cook has taken responsibility for the FY24 audit from Jonathan
Greenaway who had served since February 2019. 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 29 February 2024.
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)
65
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. PricewaterhouseCoopers LLP did not provide any non-audit
services to the Group during the year ended 29 February 2024.
K Lever
Chairman of Audit Committee
15 May 2024
Remuneration Committee Report
66
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 29 February 2024. 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 2024 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 29 February 2024 and is subject to an advisory shareholder vote at this
year’s AGM.
Key remuneration decisions for the year to 29 February 2024
On 1 March 2023, the Group awarded a £1,000 pay rise to all colleagues earning under
£30,000. During FY24 the Group reviewed key skilled roles and undertook a benchmarking
exercise. As a result, changes were implemented to remuneration packages for key roles. In
late 2023 into early 2024, the Group undertook a comprehensive review of its remuneration
strategy. This included reviewing the impact of the significant investments made in this area
over the last two financial years, the general economic backdrop, the recent performance of
the Motor Retail sector and the employment cost headwinds facing UK employers. This
review also included consideration of the impact of the 2024 National Minimum Wage rates
on the Group's cost base. It concluded that applying a general pay award to colleagues on 1
March 2024 was not appropriate but that role specific adjustments would be reviewed (and
where appropriate enacted) throughout FY25 as required to ensure that the Group is able to
continue to attract and retain talent.
This review also incorporated the external benchmarking of the remuneration packages of the
Executive Directors. This benchmarking exercise included a range of relevant comparator
companies from both within and beyond the Motor Retail sector. It concluded that the
Executive Directors’ remuneration packages remained below those in comparator companies.
Accordingly, the Remuneration Committee recommended a 5% pay rise be applied. This
recommendation was rejected by all three Executive Directors given the performance of the
Group in FY24 and in light of the approach taken to the wider Group remuneration strategy
outlined above.
The Executive Director annual bonus structure remains unchanged from the scheme
operated in the last three financial years. It continues to include measures on financial
performance (Group profit), 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 not receive the Group profit element bonus for the year
commencing 1 March 2023 (FY24) as the threshold of 85% of the target was not reached in
the financial year. They will receive the elements related to customer satisfaction and
colleague satisfaction.
The Partnership Share Scheme continued to operate in the year ended 29 February 2024
(FY24) for senior management of the Group, and will also apply in the year commencing 1
March 2024 (FY25) with 232 members participating. 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
number 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
Remuneration Committee Report (continued)
67
Vertu Motors plc (Company Number: 05984855)
Annual Statement from the Chair of the Remuneration Committee (continued)
Key remuneration decisions for the year to 29 February 2024 (continued)
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 and this year was the first year in which beneficiaries received shares under the
scheme (following the conclusion of the three-year holding period for shares issued in FY21).
The Executive Directors were not issued Partnership Share Scheme options in FY21 and are
therefore not included in the population of colleagues whose shares vested. The Executive
Directors’ participation started in FY22.
The Partnership Share award made in the year ended 29 February 2024 (FY24) will vest in
part for the majority of beneficiaries, but, due to the lack of Group profit bonus payable to the
Executive Directors, only 23% of their Partnership Share options for the year ended 29
February 2024 have vested.
A Partnership Share Scheme annual award to the Executive Directors has again been made
for the year commencing 1 March 2024 at 40% of on-target earnings (consistent with the level
made in the previous year).
The Remuneration Committee considered the compound impact of the lack of profit bonus on
the Partnership Share Scheme award and agreed to make a necessary adjustment to the
remuneration policy for FY24 onwards to provide it with flexibility in relation to the setting of
the minimum threshold for the payment of Group profit bonus in special circumstances. As a
result, the Remuneration Committee will in future reserve the right to use its discretion to
review the 85% annual profit bonus threshold and adjust it downwards (to a minimum of 75%)
and to pay a proportion of the annual profit bonus for performance between the adjusted
threshold and the original 85% target. This discretion would be used only where appropriate
to reflect special circumstances and where performance by the Executive justifies it.
Partnership share options would then vest at the rate of bonus actually paid. The
Remuneration Committee believe that this flexibility is required to ensure that the Executive
Directors’ remuneration remains competitive and to retain a motivated, stable and
experienced Executive Director team.
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 29 February 2024. The Committee
continues to be mindful of shareholder views and interests, and the importance of retaining
the stable, experienced management team. We believe that our Directors’ remuneration
policy continues to be prudent and 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
15 May 2024
Remuneration Committee Report (continued)
68
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)
69
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 profit performance bonus is
payable where performance is below the
threshold of 85% (unless the Committee
exercises its discretion in special
circumstances, in which case it may be
reduced downwards, and a proportion of
the original bonus paid).
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)
70
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)
71
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)
72
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 may 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
73
Vertu Motors plc (Company Number: 05984855)
Total 2024/25 Remuneration Opportunity
The chart below illustrates the remuneration that would be paid to each of the Executive
Directors in the 2024/25 financial year under three different performance scenarios: (i)
Minimum; (ii) On-target; and (iii) Maximum.
The elements of remuneration have been categorised into three components: (i) Fixed; (ii)
Annual variable (annual bonus awards); and (iii) Multiple year (LTIP awards) which are set out
in the future policy table above. The element included for multiple year (LTIP Awards) relates
to Partnership Share Scheme options which are capable of vesting in the financial year to 28
February 2025 and is based on the closing share price on 1 March 2024.
Directors’ Remuneration Report (continued)
74
Vertu Motors plc (Company Number: 05984855)
Total 2024/25 Remuneration Opportunity (continued)
Each element of remuneration is defined in the table below:
Element
Description
Fixed
Base salary for the 2024/2025 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 (FY24
Partnership Share Award)
Value of Partnership Share Scheme Awards which vest in the year ended
28 February 2025 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 2024.
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 28 February
2025 are set out in the table below, together with any increase expressed as a percentage.
28-Feb
29-Feb
2025
2024
Underlying Increase
(Excluding Committee
Appointments)
£’000
£’000
%
R T Forrester
415
415
-
K Anderson
263
263
-
D P Crane
263
263
-
K Lever
20**
62
-
P Best
59***
52
-
A P Goss
130
130
-
J Mewett
45
34*
-
D Gillard
50****
8*
-
*Reflects a part year figure for appointment during the year ended 29 February 2024.
**Reflects a part year figure for resignation at the AGM.
***The figures for P Best include an increase from the date she takes over the Senior Independent Director role.
****The figures for D Gillard include an increase from the date he takes over the Audit Committee Chair role.
Directors’ Remuneration Report (continued)
75
Vertu Motors plc (Company Number: 05984855)
Single Total Figure of Remuneration
The remuneration of the Directors who served during the period from 1 March 2023 to 29
February 2024 is as follows:
Salary or
fees
Taxable
Benefits1
Pension
Bonus
Long Term
Incentive
Plan
Single total
figure
£’000
£’000
£’000
£’000
£’000
£’000
2024
2023
2024
2023
2024
2023
2024
2023
20243
20232
2024
2023
Executive Directors
R T Forrester
415
415
4
3
68
68
76
355
317
247
880
1,088
K Anderson
263
263
3
3
43
43
36
174
178
139
523
622
D P Crane
263
263
4
3
43
43
36
174
178
139
524
622
Non-Executive Directors
0
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
J Mewett
34
-
-
-
-
-
-
-
-
-
34
-
D Gillard
8
-
-
-
-
-
-
-
-
-
8
-
1 Taxable benefits include vehicle insurance, together with medical and life assurance premiums.
2 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.
3 Represents PSO nil cost awards granted in March 2022 which vested in March 2023. The value has been calculated by reference
to the closing share price of the Company on 1 March 2023. These vested awards are subject to a 3 year holding period.
Annual Bonuses
The Executive Directors were awarded no Company profit performance bonus for the Year as
the minimum target was not achieved. Customer outcome bonus was awarded at the level of
52% and colleague satisfaction bonus at the level of 100% - having achieved a colleague
great place to work result in the full annual survey above 85%. These bonuses are to be paid
in May 2024.
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 29 February 2024
is as follows:
Number at 1
March 2023
Exercised in
Year
Lapsed in
Year
Granted in
Year1
Number at 29
February 2024
R T Forrester
961,889
-
-
484,772
1,446,661
K Anderson
1,041,147
-
-
272,727
1,313,874
D P Crane
1,041,147
-
-
272,727
1,313,874
1 These Partnership Share Scheme awards vested in March 2024 at a rate of 22.8% 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)
76
Vertu Motors plc (Company Number: 05984855)
Statement of Directors’ Shareholding
The Directors who held office on 29 February 2024 and their connected persons had interests
in the issued share capital of the Company as at 29 February 2024 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
29 February
28 February
29 February
28 February 29 February
28 February
29 February
28 February
2024
2023
2024
2023
2024
2023
2024 1
2023
R T Forrester
7,489,518
7,486,575
-
-
961,889
443,451
484,772
518,438
K Anderson
1,166,637
1,163,694
500,000
500,000
541,147
249,480
272,727
291,667
D P Crane
481,462
465,479
500,000
500,000
541,147
249,480
272,727
291,667
K Lever
100,800
100,800
-
-
-
-
-
-
P Best
-
-
-
-
-
-
-
-
A P Goss
62,083
62,083
-
-
-
-
-
-
J Mewett
-
n/a
-
n/a
-
n/a
-
n/a
D Gillard
-
n/a
-
n/a
-
n/a
-
n/a
1 These options vested at a rate of 22.8% post year end and are now subject to a 3 year holding period.
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 2023 and 29 February 2024 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
0.0%
0%
(78.7%)
Employees
8.3%
0%
(6.4%)
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
J Mewett
2 June 2023
D Gillard
29 December 2023
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 2023 and 29 February 2024 compared with other disbursements from profit (i.e. the
distributions to shareholders).
Spend in the
year ended 29
February 2024
£’000
Spend in the
year ended 28
February 2023
£’000
% change
Spend on remuneration (including Directors)
302,831
266,423
13.7%
Profit distributed by way of dividend
7,759
6,003
29.3%
Directors’ Remuneration Report (continued)
77
Vertu Motors plc (Company Number: 05984855)
Shareholders’ Vote on Remuneration at the 2023 AGM
2023 Directors’ Remuneration Report
Number
Proportion of
votes cast (%)
Votes cast in favour
124,643,705
98.74
Votes cast against
1,587,022
1.26
Total votes cast in favour or against
126,230,727
100.00
Votes withheld
28,833
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, D Gillard (joined in the year) and A P Goss and details of meetings
held are shown on page 57.
Directors’ Report
78
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 2-52) 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
2-52
Business model
Strategic Report
2-52
Corporate Governance Framework
Corporate Governance Report
53-81
Community and charitable giving
Strategic Report
2-52
Details of Directors
Corporate Governance Report
53-81
Directors’ share interests and remuneration
Directors Remuneration Report
73-77
Diversity, equality and inclusion
Strategic Report
2-52
Employee engagement
Strategic Report
2-52
Financial Instruments
Financial Statements (Note 27)
Future developments and strategic priorities
Strategic Report
2-52
Going concern statement
Strategic Report
2-52
Principal risks and risk management
Strategic Report
2-52
Modern Slavery Statement
Strategic Report
2-52
Results
Consolidated Income Statement
90
Section 172 Statement
Strategic Report
2-52
Stakeholder engagement
Strategic Report
2-52
Statement of Directors Responsibilities
Corporate Governance Report
53-81
Viability Statement
Strategic Report
2-52
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 £311,000 were made by the Group during the year ended 29
February 2024 (2023: £318,000).
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 29 February 2024.
Directors’ Report (continued)
79
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 29 February 2024 was £7,759,000 (2.30p per share) (2023:
£6,003,000 (1.75p per share)). A final dividend in respect of the year ended 29 February
2024 of 1.5p per share, is to be proposed at the annual general meeting on 25 June 2024.
The ex dividend date will be 27 June 2024 and the associated record date 28 June 2024.
The dividend will be paid on 26 July 2024, 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
(2023: Nil).
Post Balance Sheet Events
Details of events after 29 February 2024 are disclosed in note 39 of the Financial Statements.
Powers for the issuance or repurchase of Shares
At 1 March 2023, 5,665,352 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 29 February 2024, 1,273,903 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. 4,391,449
ordinary shares in the Company were held by the Trustee at 29 February 2024.
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 2023 AGM.
Directors’ Report (continued)
80
Vertu Motors plc (Company Number: 05984855)
Share Capital
As at 29 February 2024, the Company’s issued share capital comprised a single class:
ordinary shares of 10 pence each of which 337,602,150 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
15 May 2024
Statement of Directors’ Responsibilities
81
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
15 May 2024
Independent Auditors’ Report to the members of Vertu
Motors plc
82
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 29 February 2024 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 & Financial
Statements (the “Annual Report”), which comprise: the Consolidated Balance Sheet and
Company Balance Sheet as at 29 February 2024; the Consolidated Income Statement,
Consolidated Statement of Comprehensive Income, Consolidated Cash Flow Statement,
Consolidated Statement of Changes in Equity and Company Statement of Changes in Equity
for the year then ended; and the notes to the financial statements, comprising material
accounting policy information and other explanatory information.
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 or its controlled undertakings in the
period under audit.
Our audit approach
Overview
Audit scope
• 24 full scope audit components were identified, including the Company. For additional
coverage, audit procedures were performed over certain financial statement line items
across a further 19 components.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
83
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Overview (continued)
Audit scope (continued)
• This approach provides coverage of 87% of the group's profit before tax through the audit
of full scope components.
Key audit matters
• Carrying value of goodwill and other indefinite life assets (group)
• Carrying value of investments in subsidiaries (parent)
Materiality
• Overall group materiality: £23,600,000 based on 0.5% of revenue.
• Overall company materiality: £4,400,000 based on 1% of total assets.
• Performance materiality: £17,700,000 (group) and £3,300,000 (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.
Valuation of pension scheme liabilities and Completeness and valuation of assets and
liabilities in the business combination, which were key audit matters last year, are no longer
included because of our revised risk assessment and materiality in respect of pension
scheme liabilities and the business combination only being applicable in the prior year.
Otherwise, the key audit matters below are consistent with last year.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
84
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and other indefinite
life assets (group)
The Group has significant goodwill and other
indefinite life assets in respect of acquisitions
made across various CGUs of £129,092,000
(2023: £128,080,000). The recoverable amount of
the CGUs 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 lower than
expected performance, there is a risk around the
recoverability of goodwill and other indefinite life
assets. An impairment assessment is required to
be prepared annually by accounting standards for
goodwill and intangible assets that are not
amortised. Management have prepared a value in
use assessment including sensitivities 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.
Refer to the accounting policies section within the
consolidated financial statements for disclosures
of the related accounting policies, judgements
and estimates and note 15 in the consolidated
financial statements for detailed disclosures in
respect of goodwill and other indefinite life assets.
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 indefinite life assets;
•
Key inputs are assessed and challenged, for
example discount rates, inflation and forecast
revenues and costs;
•
We discussed with PwC Valuations experts
to assess the discount rate;
We considered the appropriateness of using
a nil growth rate into perpetuity;
•
We benchmarked growth in years 2-5 against
independent industry reports and forecasts;
•
We performed sensitivity analysis on the
forecasts, including downside scenarios to
assess the level of headroom; and,
•
We reviewed the disclosures included in the
financial statements and compared to the
requirements of IAS36.
We are satisfied with management’s conclusion
on the carrying value of goodwill and other
indefinite life assets.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
85
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
Key audit matter (continued)
How our audit addressed the key audit matter
(continued)
Carrying value of investments in subsidiaries
(parent)
The Company has significant investments in
respect of acquisitions made across various
subsidiaries of £348,574,000 (2023:
£348,636,000). The recoverable amount of the
investments in subsidiaries 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 impairment indicators are identified, there
is a risk around the recoverability of each
investment. Management have prepared an
assessment of impairment indicators and where
an impairment indicator has been identified, a
detailed impairment assessment including
sensitivities has been performed to consider the
carrying value of the subsidiaries. There is
inherent uncertainty and judgement in forecasting
future cash flows, and therefore this is a
judgmental area of the audit.
Refer to the accounting policies section within the
Company financial statements for disclosures of
the related accounting policies, judgements and
estimates and note 7 in the Company financial
statements for detailed disclosures in respect of
investments.
To address this risk, we have performed the
following:
•
Considered the assessment of impairment
indicators prepared by management and
compared to our own conclusions;
•
Assessed the underlying net assets for each
subsidiary and compared to the carrying
value of each investment;
•
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 discussed with PwC Valuations experts
to assess the discount rate;
•
We performed sensitivity analysis on the
forecasts, including downside scenarios to
assess the level of headroom; and
•
We have assessed the disclosures made by
management.
We are satisfied with management’s conclusion
on the carrying value of investments.
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.
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. We scoped the audit based on dealerships which is in line with how
management monitor the business. This resulted in 23 dealerships and the Company being
identified as full scope audit components, and a further 19 dealerships where audit
procedures were performed over certain financial statement line items. We, as the group
engagement team, audited all in scope components which are all based in the UK.
This approach provided coverage of 87% of the group's profit before tax through the audit of
full scope components.
The Company is subject to a full scope audit of its financial information due to the separate
presentation of the Company financial statements. The Company audit was also performed
by the Group audit team. The Company is principally a holding company and there are no
branches outside the UK. The Company is audited on a stand-alone basis, and hence, testing
has been performed on all material financial statement line items.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
86
Vertu Motors plc (Company Number: 05984855)
Our audit approach (continued)
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:
Financial statements - Group
Financial statements - Company
Overall
materiality
£23,600,000
£4,400,000
How we
determined
it
0.5% of revenue
1% of total assets
Rationale
for
benchmark
applied
We applied our professional judgement
to
determine
that
revenue
is
an
appropriate measure 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
between £3,000,000 and £18,000,000.
We use performance materiality to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance materiality was 75% of overall
materiality, amounting to £17,700,000 for the group financial statements and £3,300,000 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 in the middle 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 £1,180,000 (group audit) and £220,000 (company audit) as
well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
87
Vertu Motors plc (Company Number: 05984855)
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 severe but plausible scenarios modelled by management;
• Reviewing the sensitivities performed by management and understood the impact this has
on the level of headroom on banking 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 2025
financial year;
• Obtaining and reviewing the Group's financing arrangements, including assessing the
compliance with banking covenants 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.
Based on the work we have performed, we have not identified any material uncertainties
relating to events or conditions that, individually or collectively, may cast significant doubt on
the group's and the company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a
guarantee as to the group's and the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are
described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the
financial statements and our auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material
misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors' Report, we also considered whether the
disclosures required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires
us also to report certain opinions and matters as described below.
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
88
Vertu Motors plc (Company Number: 05984855)
Reporting on other information (continued)
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given
in the Strategic report and Directors' Report for the year ended 29 February 2024 is
consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the group and company and their environment
obtained in the course of the audit, we did not identify any material misstatements in the
Strategic report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors' Responsibilities, the directors are
responsible for the preparation of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s
and the company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We
design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of
non-compliance with laws and regulations related to non-compliance with FCA requirements,
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 corporate 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 profit, 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 regulations and fraud;
• Reviewing Board minutes;
• Reviewing legal expenditure in the year to identify potential non-compliance with laws and
regulations;
Independent Auditors’ Report to the members of Vertu
Motors plc (continued)
89
Vertu Motors plc (Company Number: 05984855)
Responsibilities for the financial statements and the audit (continued)
Auditors’ responsibilities for the audit of the financial statements (continued)
• Challenging assumptions and judgements made by management in their significant
accounting estimates, in particular in relation to the assessment of carrying value of
goodwill and other indefinite life assets and the assessment of carrying value of
investments in the company (see key audit matters above);
• Reviewing monthly margin in each in scope dealership to identify significant outliers;
• Identifying and testing journal entries, in particular any journal entries posted with unusual
account combinations; and
• Reviewing financial statements disclosures and testing to supporting documentation to
assess compliance with applicable laws and regulations.
There are inherent limitations in the audit procedures described above. We are less likely to
become aware of instances of non-compliance with laws and regulations that are not closely
related to events and transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and
balances, possibly using data auditing techniques. However, it typically involves selecting a
limited number of items for testing, rather than testing complete populations. We will often
seek to target particular items for testing based on their size or risk characteristics. In other
cases, we will use audit sampling to enable us to draw a conclusion about the population from
which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s
members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these opinions, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for
our audit have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this responsibility.
Nicholas Cook (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
15 May 2024
Consolidated Income Statement
For the year ended 29 February 2024
90
Vertu Motors plc (Company Number: 05984855)
Underlying
items 2024
Non-
underlying
items 2024
(Note 8)
Total 2024
Underlying
items 2023
Non-
underlying
items 2023
(Note 8)
Total 2023
Note
£’000
£’000
£’000
£’000
£’000
£’000
Revenue
5
4,719,587
-
4,719,587
4,014,544
-
4,014,544
Cost of sales
(4,203,507)
-
(4,203,507)
(3,566,134)
-
(3,566,134)
Gross profit
5
516,080
-
516,080
448,410
-
448,410
Operating expenses
6
(456,845)
(3,194)
(460,039)
(399,590)
(6,828)
(406,418)
Operating profit / (loss)
59,235
(3,194)
56,041
48,820
(6,828)
41,992
Finance income
11
1,254
-
1,254
1,300
-
1,300
Finance costs
11
(22,728)
-
(22,728)
(10,842)
-
(10,842)
Profit / (loss) before
tax
37,761
(3,194)
34,567
39,278
(6,828)
32,450
Taxation
12
(9,430)
576
(8,854)
(7,663)
746
(6,917)
Profit / (loss) for the
year attributable to
equity holders
28,331
(2,618)
25,713
31,615
(6,082)
25,533
Basic earnings per
share (p)
13
7.60
7.40
Diluted earnings per
share (p)
13
7.11
7.02
Consolidated Statement of Comprehensive Income
For the year ended 29 February 2024
91
Vertu Motors plc (Company Number: 05984855)
2024
2023
Note
£’000
£’000
Profit for the year
25,713
25,533
Other comprehensive expenses
Items that will not be reclassified to profit or loss:
Actuarial losses on retirement benefit obligations
30
(737)
(5,973)
Deferred tax relating to actuarial losses on retirement
benefit obligations
30
184
1,493
Items that may be reclassified subsequently to profit or
loss:
Cash flow hedges
32
116
172
Deferred tax relating to cash flow hedges
32
(29)
(43)
Other comprehensive expense for the year, net of
tax
(466)
(4,351)
Total comprehensive income for the year
attributable to equity holders
25,247
21,182
Consolidated Balance Sheet
As at 29 February 2024
92
Vertu Motors plc (Company Number: 05984855)
2024
2023
Note
£’000
£’000
Non-current assets
Goodwill and other indefinite life assets
15
129,092
128,080
Other intangible assets
16
1,971
2,286
Retirement benefit asset
30
2,477
3,188
Property, plant and equipment
18
335,295
328,405
Right-of-use assets
19
72,886
73,078
Derivative financial instruments
27
203
507
Total non-current assets
541,924
535,544
Current assets
Inventories
21
761,996
674,380
Trade and other receivables
23
93,702
85,827
Current tax assets
203
1,654
Cash and cash equivalents
24
70,599
78,984
926,500
840,845
Property assets held for sale
22
7,881
6,077
Total current assets
934,381
846,922
Total assets
1,476,305
1,382,466
Current liabilities
Trade and other payables
25
(869,931)
(758,594)
Contract liabilities
29
(13,400)
(13,477)
Borrowings
26
(4,395)
(29,821)
Lease liabilities
19
(17,710)
(14,498)
Total current liabilities
(905,436)
(816,390)
Non-current liabilities
Borrowings
26
(120,183)
(124,519)
Lease liabilities
19
(65,214)
(68,959)
Deferred income tax liabilities
28
(22,024)
(19,117)
Contract liabilities
29
(10,075)
(12,104)
Total non-current liabilities
(217,496)
(224,699)
Total liabilities
(1,122,932)
(1,041,089)
Net assets
353,373
341,377
Capital and reserves attributable to equity
holders of the Group
Ordinary share capital
31
33,760
34,894
Share premium
31
124,939
124,939
Other reserve
31
10,645
10,645
Hedging reserve
32
220
133
Treasury share reserve
31
(2,056)
(2,653)
Capital redemption reserve
31
5,967
4,833
Retained earnings
179,898
168,586
Total equity
353,373
341,377
These consolidated financial statements on pages 90 to 140 have been approved for issue by
the Board of Directors on 15 May 2024 and signed on its behalf by:
Robert Forrester
Karen Anderson
Chief Executive
Chief Financial Officer
Consolidated Cash Flow Statement
For the year ended 29 February 2024
93
Vertu Motors plc
2024
2023
Note
£’000
£’000
Cash flows from operating activities
Operating profit
56,041
41,992
(Profit)/loss on sale of property, plant and equipment
6
(516)
102
Profit on lease modification
19
(411)
(449)
Amortisation of other intangible assets
16
568
509
Depreciation of property, plant and equipment
18
17,449
14,510
Depreciation of right-of-use asset
19
18,254
16,225
Impairment charges
15
128
1,500
Movement in working capital
34
16,708
23,737
Share based payments charge
1,965
1,651
Cash inflow from operations
110,186
99,777
Tax received
552
100
Tax paid
(5,296)
(9,118)
Finance income received
1,099
1,053
Finance costs paid
(22,576)
(10,983)
Net cash inflow from operating activities
83,965
80,829
Cash flows from investing activities
Acquisition of businesses, net of cash, overdrafts and
borrowings acquired
17
(5,966)
(122,066)
Acquisition of freehold and long leasehold land and
buildings
(3,003)
(7,468)
Purchases of intangible assets
(253)
(186)
Purchases of other property, plant and equipment
(23,686)
(13,785)
Proceeds from disposal of businesses
204
-
Proceeds from disposal of property, plant and
equipment
3,589
179
Net cash outflow from investing activities
(29,115)
(143,326)
Cash flows from financing activities
Proceeds from borrowings
33
-
110,570
Repayment of borrowings
33
(29,836)
(23,358)
Principal elements of lease repayments
19
(18,183)
(16,187)
Purchase of treasury shares
-
(2,000)
Sale of treasury shares
115
744
Cash settled share options
(109)
(180)
Repurchase of own shares
(7,463)
(5,898)
Dividends paid to equity holders
(7,759)
(6,003)
Net cash (outflow)/inflow from financing activities
(63,235)
57,688
Net decrease in cash and cash equivalents
33
(8,385)
(4,809)
Cash and cash equivalents at beginning of year
78,984
83,793
Cash and cash equivalents at end of year
24
70,599
78,984
Consolidated Statement of Changes in Equity
For the year ended 29 February 2024
94
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, 1,273,903 shares were transferred from the EBT on exercise of vested
CSOP and PSO awards. 4,391,449 shares remain in the EBT at 29 February 2024.
All issued shares are fully paid
.
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 2023
34,894
124,939
10,645
133
(2,653)
4,833
168,586
341,377
Profit for the year
-
-
-
-
-
-
25,713
25,713
Actuarial losses on
retirement benefit
obligations
-
-
-
-
-
-
(737)
(737)
Tax on items taken
directly to equity
-
-
-
(29)
-
-
184
155
Fair value gains
-
-
-
116
-
-
-
116
Total comprehensive
income for the year
-
-
-
87
-
-
25,160
25,247
Sale of treasury shares
-
-
-
-
597
-
(482)
115
Repurchase of own
shares
-
-
-
-
-
-
(7,463)
(7,463)
Cancellation of
repurchased shares
(1,134)
-
-
-
-
1,134
-
-
Dividends paid
-
-
-
-
-
-
(7,759)
(7,759)
Share based payments
charge
-
-
-
-
-
-
1,856
1,856
As at 29 February 2024
33,760
124,939
10,645
220
(2,056)
5,967
179,898
353,373
Consolidated Statement of Changes in Equity (continued)
For the year ended 28 February 2023
95
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 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
Notes to the Consolidated Financial Statements
96
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 (“UK IFRS”) and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those standards.
The consolidated financial statements have been prepared on the going concern basis under
the historical cost convention, as modified by the revaluation of financial assets and liabilities
(including derivative financial instruments) at fair value.
In order to prepare the financial statements on the going concern basis, the Directors have
considered detailed financial projections for a period of 12 months from the date of signing the
financial statements (‘Review Period’). These projections are based on the Group’s detailed
annual business plan for the year ending 28 February 2025 as well as the known financial
performance of the Group in the period subsequent to 29 February 2024, 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
reduced volume of new and used car sales, reduced demand from aftersales customers,
further increases in the Group’s operating cost base and application of an arbitrary amount in
respect of potential liabilities arising as a result of ongoing investigations into Discretionary
Commission Arrangements by the Financial Conduct Authority (note 36). 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 149 to 151 of the annual report. Certain of these subsidiaries,
which are listed below, have taken the exemption from an audit for the year ended 29
February 2024 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 29 February 2024 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 29 February 2024 of the subsidiaries listed
below, further details of which are provided in note 36.
Notes to the Consolidated Financial Statements (continued)
97
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 29
February 2024 by virtue of s479A Companies Act 2006 are:
Albert Farnell Limited
Tyne Tees Finance Limited
All Car Parts Limited
Vans Direct Limited
Bristol Street First Investments Limited
Vertu Accident Repair Limited
Bristol Street Fourth Investments Limited
Vertu Motors (Chingford) Limited
Grantham Motor Company Limited
Vertu Motors (Continental) Limited
Helston Garages Limited
Vertu Motors (Property) Limited
Helston Garages Group (Management) Limited
Vertu Motors (Property 2) Limited
Macklin Property Limited
Vertu Motors (VMC) Limited
Rowes Garage Limited
Vertu Motors Third Limited
South Hereford Garages Trade Parts LLP
Wiper Blades Limited
The subsidiaries which have taken an exemption from the preparation of individual accounts
in respect of the year ended 29 February 2024 by virtue of s394A of Companies Act 2006 are:
Aceparts Limited
Hughes of Beaconsfield Limited
Best4Vans Limited
International Concessionaires Limited
Blacks Autos Limited
Jactamial Properties Limited
Blake Holdings Limited
Merifield Properties Limited
Boydslaw 103 Limited
Motor Nation Cars Limited
Bristol Street (No.1) Limited
National Allparts Limited
Bristol Street (No.2) Limited
Newbolds Garage (Mansfield) Limited
Bristol Street Commercials (Italia) Limited
Nottingham TPS LLP
Bristol Street Fifth Investments Limited
Peter Blake (Chatsworth) Limited
Bristol Street Fleet Services Limited
Peter Blake Limited
Bristol Street Group Limited
Power Bulbs Ltd
Bristol Street Limited
Power Bulbs Online Limited
Brookside (1998) Limited
SHG Holdings Limited
BSH Pension Trustee Limited
Sigma Holdings Limited
Carsandvansdirect Limited
South Hereford Garages Limited
Dobies (Carlisle) Limited
The Taxi Centre Limited
Dunfermline Autocentre Limited
Typocar Limited
Easy Vehicle Finance Limited
VanMan Limited
Farmer & Carlisle Holdings Limited
Vertu Fleet Limited
Farmer & Carlisle Leicester Limited
Vertu Motors (AMC) Limited
Farmer & Carlisle Limited
Vertu Motors (Durham) Limited
F.C. Business Operations Limited
Vertu Motors (Finance) Limited
Gordon Lamb Group Limited
Vertu Motors (Knaresborough) Limited
Gordon Lamb Limited
Vertu Motors (Pity Me) Limited
Gordon Lamb Holdings Limited
Vertu Motors Property 2 Holdings Limited
Group SMB Limited
Vertu Ventures Limited
Helston Garages Group Limited
Westcountry Enterprises Limited
Hillendale Group Limited
Westcountry Ventures Limited
Hillendale LR Limited
Widnes Car Centre Limited
Hughes Group Holdings 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 or presentation of items of profit or loss 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)
98
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 29 February
2024
The Group has applied the following standards and amendments for the first time for
their annual reporting period commending 1 March 2023:
•
Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2
•
Definition of Accounting Estimates – Amendments to IAS 8
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction –
Amendments to IAS 12
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 29 February 2024 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.
Measurement period adjustment
The Group assesses the fair value of assets acquired and finalises purchase price allocation
within the measurement period following acquisition and in accordance with IFRS 3.
The finalisation of the purchase price allocation may result in a change in the fair value of
assets acquired.
Within the measurement period of the acquisition of Helston Garages Group Limited acquired
in the year ended 28 February 2023, the purchase price allocation was finalised which
resulted in a £490,000 reduction in the fair value of trade and other receivables acquired.
There was a corresponding increase of £490,000 in the fair value of goodwill arising on this
acquisition.
In accordance with IFRS 3, measurement period adjustments are reflected in the financial
statements as if the final purchase price allocation had been completed at the acquisition
date. Consequently, the balance sheet for the year ended 28 February 2023 has been
amended in these financial statements from that previously reported, to reflect this
adjustment.
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.
Notes to the Consolidated Financial Statements (continued)
99
Vertu Motors plc (Company Number: 05984855)
1.
Accounting policies (continued)
Leases (continued)
Assets and liabilities arising from a lease are initially measured on a present value basis.
Lease liabilities include the net present value of the following lease payments:
-
Fixed payments, less any incentives receivable,
-
Variable lease payments that are based on an index or a rate,
-
Amounts expected to be payable by the lessee under residual value guarantees,
-
The exercise price of a purchase option if the lessee is reasonably certain to exercise
that option; and
-
Payment of penalties for terminating the lease, if the lease term reflects the lessee
exercising that option.
Lease payments to be made under reasonably certain extension options are also included in
the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate
cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the
lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in
a similar economic environment with similar terms and conditions.
To determine the incremental borrowing rate, the Group:
•
where possible, uses recent third-party financing received by the individual lessee as
a starting point, adjusted to reflect changes in financing conditions since third party
financing was received, or
•
uses a build-up approach that starts with a risk-free interest rate adjusted for credit
risk for leases held by Vertu Motors plc, which does not have recent third party
financing, and
•
makes adjustments specific to the lease, e.g., term, country, currency and security.
The Group is exposed to potential future increases in variable lease payments based on an
index or rate, which are not included in the lease liability until they take effect. When
adjustments to lease payments based on an index or rate take effect, the lease liability is
reassessed and adjusted against the right-of-use asset.
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.
Notes to the Consolidated Financial Statements (continued)
100
Vertu Motors plc (Company Number: 05984855)
1.
Accounting policies (continued)
Basis of consolidation
The consolidated financial statements comprise the financial statements of Vertu Motors plc
and its subsidiary undertakings. Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are
consolidated from the date at which control is transferred to the Group and they are excluded
from the consolidated financial statements from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the accounting
policies adopted by the Group.
Business combinations and goodwill
Business combinations are accounted for using the purchase method of accounting. This
involves recognising identifiable assets (including intangible assets not previously recognised
by the acquiree) and liabilities (including contingent liabilities) of acquired businesses at fair
value. Goodwill acquired in a business combination is initially measured at cost being the
excess of the cost of the consideration over the Group’s interest in the net fair value of the
acquiree’s identifiable assets, liabilities and contingent liabilities. Where the net fair value of
the acquired identifiable assets, liabilities and contingent liabilities exceeds the consideration,
the excess or “negative goodwill” is recognised immediately in the Consolidated Income
Statement. Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of annual impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the Group’s cash
generating units.
Each cash generating unit (“CGU”) or group of cash generating units to which the goodwill is
allocated represents the lowest level within the Group at which the goodwill is monitored for
internal management purposes. Gains and losses on the disposal of a business component
are calculated on a basis which incorporates the carrying amount of goodwill relating to the
business sold. Acquisition related costs are expensed to the Consolidated Income Statement
as incurred.
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.
Notes to the Consolidated Financial Statements (continued)
101
Vertu Motors plc (Company Number: 05984855)
1. Accounting policies (continued)
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%
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.
Notes to the Consolidated Financial Statements (continued)
102
Vertu Motors plc (Company Number: 05984855)
1. Accounting policies (continued)
Inventories (continued)
‘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 and a corresponding liability recognised in
trade payables at the consigned price. This is because the Group has significant risks and
rewards of ownership at the point interest starts to accrue as a result of not having sold the
vehicle, and therefore control is deemed to have passed.
Other vehicle inventory is recognised upon title passing to the Group, typically on physical
receipt.
As part of its normal trading activities the Group has contracted to repurchase, at
predetermined values and dates, certain vehicles it has previously supplied. The Group
recognises its residual interest in these vehicles through the inclusion of such vehicles within
inventory, at the lower of the repurchase price or estimated recoverable value, with a liability
equal to the repurchase price within trade payables.
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.
Notes to the Consolidated Financial Statements (continued)
103
Vertu Motors plc (Company Number: 05984855)
1.
Accounting policies (continued)
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 Cash
Generating Units (“CGU”s) are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to
the CGU. In determining fair value less costs to sell, an appropriate valuation model is used.
Impairment losses are recognised in the Consolidated Income Statement in the expense
category consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date as to whether
there is any indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the Group makes an estimate of any amount
recoverable. A previously recognised impairment loss is only reversed if there has been a
change in the estimates used to determine the asset’s recoverable amount since the
impairment loss was recognised.
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.
Notes to the Consolidated Financial Statements (continued)
104
Vertu Motors plc (Company Number: 05984855)
1. Accounting policies (continued)
Derivative financial instruments (continued)
Amounts accumulated in equity are recycled in the Consolidated Income Statement in the
years when the hedged item affects profit and loss. The gain or loss relating to the effective
portion of interest rate swaps hedging variable rate borrowings is recognised in the
Consolidated Income Statement within ‘finance costs’. The fair values of derivative financial
instruments used for hedging purposes are disclosed in note 27.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria
for hedge accounting, any cumulative gain or loss existing in equity at that time remains in
equity and is recognised when the forecast transaction is ultimately recognised in the
Consolidated Income Statement. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported within equity is immediately transferred to the
Consolidated Income Statement within finance income or costs.
Taxation
Current tax
Current income tax assets and liabilities are measured at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively enacted at
the balance sheet date.
Deferred tax
Deferred tax is provided using the liability method on temporary differences at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts at the
balance sheet date for financial reporting purposes. Deferred tax liabilities are recognised for
all temporary differences, except:
a.
where the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
b.
in respect of taxable temporary differences associated with investments in subsidiaries,
where the timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for all temporary differences, carry forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised except:
a.
where the deferred tax asset relating to the deductible temporary differences arises from
the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
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.
Notes to the Consolidated Financial Statements (continued)
105
Vertu Motors plc (Company Number: 05984855)
1. Accounting policies (continued)
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.
Principal vs Agent sales
Judgement is applied to all sales arrangements with the Group’s Manufacturer partners to
determine whether the Group is acting as Agent on behalf of the Manufacturer, or Principal.
Judgement is required in applying consideration of who has responsibility for fulfilling the
promise of the sale, who holds the associated inventory risk and who has price discretion
over the product.
Where the Group determines that it is acting as the Principal in a sales arrangement, the
sales value is recognised within revenue and the cost recognised within cost of sales in the
period in which the vehicle or part is delivered.
Where the Group determines that it is acting as an Agent on behalf of the Manufacturer, the
Group recognises the associated handling fee income within revenue in the period in which
the vehicle or part is delivered.
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. Commissions are based on agreed rates and income is recognised when
the finance and/or insurance package that the customer has entered into commences.
Typically, this is on delivery of the vehicle. Where the commission received relates to a
specific vehicle sale, it is recognised within revenue. Where the commission received relates
to a central rebate, it is recognised within cost of sales.
Manufacturer rebates
Vehicle specific rebates from Manufacturers are recognised when it is probable that the
economic benefit will flow to the Group and the value can be reliably measured. In practice,
this means that vehicle specific Manufacturer rebates are recognised when the vehicle to
which the rebate relates, has been invoiced and physically despatched. In the case of non-
vehicle specific related rebates from suppliers, these are recognised in the Consolidated
Income Statement upon achievement of the specific agreed supplier criteria. Manufacturer
rebates are recognised within cost of sales.
Notes to the Consolidated Financial Statements (continued)
106
Vertu Motors plc (Company Number: 05984855)
1. Accounting policies (continued)
Revenue (continued)
Disaggregation of revenue:
The table below shows revenue disaggregated by the Group’s main product/service lines:
2024
2023
£’000
£’000
Aftersales
413,487
336,886
Used cars
1,816,230
1,658,202
New car retail & Motability
1,452,508
1,121,896
New fleet & commercial
1,037,362
897,560
Total
4,719,587
4,014,544
Timing of revenue recognition:
Recognised at a point in time
4,704,744
4,001,280
Recognised over time
14,843
13,264
Total
4,719,587
4,014,544
All of the Group’s revenue was generated in the United Kingdom.
Contract liabilities
Where the Group receives consideration for a sale in advance of the performance obligation
being satisfied, the amount received is held on the balance sheet within contract liabilities and
released to the income statement in line with the relevant revenue recognition policy.
Pension costs
The Group operates a trust based defined benefit pension scheme, “Bristol Street Pension
Scheme”, which has three defined benefit sections which were closed to new entrants and
future accrual on 31 May 2003, with another section closed to new entrants in July 2003 and
future accrual in October 2013.
Typically, defined benefit schemes define an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age, years of
service and compensation.
The assets of the defined benefit scheme are held separately from the assets of the Group.
The asset or liability recognised in the balance sheet in respect of the defined benefit pension
scheme is the fair value of plan assets less the present value of the defined benefit
obligations at the balance sheet date. Defined benefit obligations are calculated annually by
independent actuaries using the projected unit credit method. The present value of defined
benefit obligations is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which
the benefits will be paid, and that have terms to maturity approximating to the terms of the
related pension liability.
Differences between the actual and expected return on assets, changes in retirement benefit
obligations due to experience and changes in actuarial assumptions are included in the
Statement of Comprehensive Income in full for the year in which they arise.
A Group personal pension arrangement under which the Group pays fixed contributions into
an individual’s funds, is also in place. The Group has no legal or constructive obligations to
pay further contributions if the fund does not hold sufficient assets to pay employees the
benefits relating to employee service in the current and prior years. Contributions into this
scheme are charged to the Consolidated Income Statement in the year in which they are
payable.
Notes to the Consolidated Financial Statements (continued)
107
Vertu Motors plc (Company Number: 05984855)
1. Accounting policies (continued)
Share based payments
The Group allows employees to acquire shares of the Company through share option
schemes. The fair value of share options granted is recognised as an employee expense
with a corresponding increase in equity. The Group operates a number of equity-settled,
share-based compensation plans. The total amount to be expensed over the vesting period
is determined by reference to the fair value of the options granted, excluding the impact of
any non-market vesting conditions (for example, profitability and sales growth targets). Non-
market vesting conditions are included in assumptions about the number of options that are
expected to vest. At each balance sheet date, the entity revises its estimates of the number
of options that are expected to vest. It recognises the impact of the revision to original
estimates, if any, in the Consolidated Income Statement, with a corresponding adjustment to
equity.
The proceeds received net of any directly attributable transaction costs are credited to share
capital (nominal value) and share premium when the options are exercised.
Where an exercise is settled by an issue of shares from the Group’s Employee Benefit Trust,
this is credited to the treasury share reserve.
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)
108
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,
including the potential impact of plausible downside scenarios and contingent liabilities that
may fall due should they materialise, 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)
109
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, principal and interest payment obligations payable under the Group’s borrowing
facilities and leases and for meeting any contingent liabilities that may fall due should they
materialise.
Consistent with others in this industry, the Group monitors capital on the basis of the gearing
ratio, which is calculated as net debt (excluding lease liabilities) 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 equity as shown on the consolidated balance sheet.
The Group had net debt of £136,903,000 (including £82,924,000 lease liabilities) at 29
February 2024 as disclosed in note 33 to the consolidated financial statements (2023: net
debt of £158,813,000 including £83,457,000 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
2,662
2,662
46,006
-
-
51,330
Mortgage
9,522
9,338
27,103
38,990
48,834
133,787
Lease liabilities
21,313
16,433
29,949
20,441
7,995
96,131
Contract liabilities
13,400
6,565
3,494
16
-
23,475
Trade and other
payables (excluding
social security and
other taxes)
858,695
-
-
-
-
858,695
At 29 February 2024
905,592
34,998
106,552
59,447
56,829
1,163,418
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
2,559
45,927
-
-
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
36,880
110,336
63,569
63,216
1,089,481
Notes to the Consolidated Financial Statements (continued)
110
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 29 February 2024, 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 29 February 2024, 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 29 February
2024 are provided in note 30.
Notes to the Consolidated Financial Statements (continued)
111
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.
Principal vs Agent sales
Judgement is applied to all sales arrangements with the Group’s Manufacturer partners to
determine whether the Group is acting as Agent on behalf of the Manufacturer, or Principal.
Judgement is required in applying consideration of who has responsibility for fulfilling the
promise of the sale, who holds the associated inventory risk and who has price discretion
over the product.
Valuation of inventory
Judgement is applied in the assessment of used vehicle inventory carrying values at 29
February 2024. 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.
Notes to the Consolidated Financial Statements (continued)
112
Vertu Motors plc (Company Number: 05984855)
5.
Segmental information (continued)
Year ended 29 February 2024
Revenue
Revenue
Mix
Gross
Profit
Gross
Profit
Mix
Gross
Margin1
£’m
%
£’m
%
%
Aftersales
413.5
8.7
218.4
42.3
43.5
Used cars
1,816.2
38.5
122.5
23.7
6.7
New car retail and Motability
1,452.5
30.8
119.6
23.2
8.2
New fleet and commercial
1,037.4
22.0
55.6
10.8
5.4
4,719.6
100.0
516.1
100.0
10.9
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
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 internal revenue is considered to be an important element of margin for the purpose of
monitoring departmental performance
6.
Operating expenses
2024
2023
£’000
£’000
Wages and salaries excluding share based payments
charge (note 9)
253,864
226,441
Depreciation on property, plant and equipment (note 18)
17,449
14,510
Depreciation on right-of-use assets (note 19)
18,254
16,225
(Profit)/loss on disposal of property, plant and
equipment
(516)
102
Profit on lease modification (note 19)
(411)
(449)
Auditors’ remuneration (note 7)
385
375
Rental income
(565)
(686)
Share based payments charge (note 31)
2,466
2,066
Amortisation (note 16)
568
509
Impairment charges (note 15)
128
1,500
Non-underlying redundancy costs (note 8)
872
-
Lease surrender premium (note 8)
(840)
-
Non-underlying acquisition costs (note 8)
-
2,753
Other expenses
168,385
143,072
460,039
406,418
7.
Auditors’ remuneration
2024
2023
£’000
£’000
Fees payable to the Company’s auditors for the
audit of the parent company and consolidated
financial statements
385
375
385
375
Notes to the Consolidated Financial Statements (continued)
113
Vertu Motors plc (Company Number: 05984855)
8.
Non-underlying items
2024
2023
£’000
£’000
Redundancy costs
(872)
-
Lease surrender premium
840
-
Share based payments charge (note 31)
(2,466)
(2,066)
Amortisation (note 16)
(568)
(509)
Impairment charges (note 15)
(128)
(1,500)
Acquisition costs
-
(2,753)
Non-underlying loss before tax
(3,194)
(6,828)
Redundancy costs included in non-underlying items relate to a reduction in the number of
employed drivers following a strategic review of aftersales collection and delivery service during the
year.
The lease surrender premium included in non-underlying items relates to a premium received
following the purchase of the Group’s freehold interest in its Derby multi-site operation, in respect
of the remaining lease obligation from the intermediate landlord.
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
2024
2023
£’000
£’000
Wages and salaries
267,746
234,182
Social security costs
27,711
25,752
Pension costs – defined contribution plans
7,374
6,489
302,831
266,423
Share based payments charge (note 31)
2,466
2,066
305,297
268,489
Employee benefit expense included in:
2024
2023
£’000
£’000
Operating expenses
253,864
226,441
Cost of sales
48,967
39,982
Share based payments charge (note 31)
2,466
2,066
305,297
268,489
Notes to the Consolidated Financial Statements (continued)
114
Vertu Motors plc (Company Number: 05984855)
9.
Employee benefit expense (continued)
Directors’ remuneration
The remuneration of the Directors who served during the period from 1 March 2023 to 29
February 2024 is as follows:
Salary or
fees
Taxable
Benefits1
Pension
Bonus
Long Term
Incentive
Plan
Single total
figure
£’000
£’000
£’000
£’000
£’000
£’000
2024
2023
2024
2023
2024
2023
2024
2023
20243
20232
2024
2023
Executive Directors
R T Forrester
415
415
4
3
68
68
76
355
317
247
880
1,088
K Anderson
263
263
3
3
43
43
36
174
178
139
523
622
D P Crane
263
263
4
3
43
43
36
174
178
139
524
622
Non-Executive Directors
0
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
J Mewett
34
-
-
-
-
-
-
-
-
-
34
-
D Gillard
8
-
-
-
-
-
-
-
-
-
8
-
1 Taxable benefits include vehicle insurance, together with medical and life assurance premiums.
2 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.
3 Represents PSO nil cost awards granted in March 2022 which vested in March 2023. The value has been calculated by reference
to the closing share price of the Company on 1 March 2023. These vested awards are subject to a 3 year holding period.
10. Average monthly number of people employed (including Directors)
2024
2023
Number
Number
Sales and distribution
2,302
2,195
Service, parts and accident repair centres
3,577
3,083
Administration
1,562
1,441
7,441
6,719
To demonstrate the impact of acquisitions on the above figures, the actual year-end number of
people employed was as follows:
2024
2023
Number
Number
Sales and distribution
2,359
2,355
Service, parts and accident repair centres
3,692
3,423
Administration
1,559
1,545
7,610
7,323
11. Finance income and costs
2024
2023
£’000
£’000
Interest on short-term bank deposits
1,099
1,053
Net finance income relating to defined benefit
pension scheme (note 30)
155
247
Finance income
1,254
1,300
Bank loans and overdrafts
(9,924)
(3,112)
Vehicle stocking interest
(9,347)
(4,242)
Lease liability interest (note 19)
(3,457)
(3,488)
Finance costs
(22,728)
(10,842)
Notes to the Consolidated Financial Statements (continued)
115
Vertu Motors plc (Company Number: 05984855)
12. Taxation
2024
2023
£’000
£’000
Current tax
Current tax charge
6,437
6,444
Adjustment in respect of prior years
(440)
(1,836)
Total current tax
5,997
4,608
Deferred tax
Origination and reversal of temporary differences
2,393
409
Adjustment in respect of prior years
411
1,684
Rate differences
53
216
Total deferred tax (note 28)
2,857
2,309
Income tax expense
8,854
6,917
2024
2023
£’000
£’000
Profit before taxation
34,567
32,450
Profit before taxation multiplied by the rate of
corporation tax in the UK of 24.5% (2023: 19%)
8,469
6,166
Non-qualifying depreciation
768
658
Non-deductible expenses
471
658
Effect on deferred tax balances due to rate change
53
216
IFRS 16
(88)
(65)
Property adjustment
(201)
10
Permanent benefits
(589)
(574)
Adjustments in respect of prior years
(29)
(152)
Total tax expense included in the income statement
8,854
6,917
A summary of the Group’s tax expense in respect of underlying and non-underlying items is as
follows:
Underlying
items 2024
Non-
underlying
items 2024
Total
2024
Underlying
items 2023
Non-
underlying
items 2023
Total
2023
£’000
£’000
£’000
£’000
£’000
£’000
Profit/(loss) before tax
37,761
(3,194)
34,567
39,278
(6,828)
32,450
Taxation
(9,430)
576
(8,854)
(7,663)
746
(6,917)
Profit/(loss) after tax
28,331
(2,618)
25,713
31,615
(6,082)
25,533
Effective tax rate
24.97%
25.61%
19.51%
21.32%
The Group’s underlying effective rate of tax is 24.97% (2023: 19.51%) which is in line with the
standard rate of corporation tax in the UK.
The rate of corporation tax in the UK rose from 19% to 25% on 1 April 2023.
The overall effective tax rate of 25.61% includes tax on non-underlying items (2023: 21.32%).
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 in issue during the year or the
diluted weighted average number of ordinary shares in issue during 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 79.
Notes to the Consolidated Financial Statements (continued)
116
Vertu Motors plc (Company Number: 05984855)
13. Earnings per share (continued)
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.
2024
2023
£’000
£’000
Profit attributable to equity shareholders
25,713
25,533
Non-underlying loss after tax (note 12)
2,618
6,082
Underlying earnings attributable to equity
shareholders
28,331
31,615
Weighted average number of shares in issue (‘000s)
338,355
345,239
Potentially dilutive shares (‘000s)
23,376
18,703
Diluted weighted average number of shares in
issue (‘000s)
361,731
363,942
Basic earnings per share
7.60p
7.40p
Diluted earnings per share
7.11p
7.02p
Basic underlying earnings per share
8.37p
9.16p
Diluted underlying earnings per share
7.83p
8.69p
14. Dividends per share
Dividends of £7,759,000 were paid in the year ended 29 February 2024 (2023: £6,003,000),
2.30p per share (2023: 1.75p).
A final dividend of 1.50p per share is to be proposed at the Annual General Meeting on 25
June 2024. The ex-dividend date will be 27 June 2024 and the associated record date 28
June 2024. The dividend will be paid, subject to shareholder approval, on 26 July 2024 and
these financial statements do not reflect this final dividend payable.
15. Goodwill and other indefinite life assets
2024
Goodwill
Franchise
relationships
Total
£’000
£’000
£’000
Cost
At 1 March 2023
102,128
43,903
146,031
Acquisitions (note 17)
1,140
-
1,140
At 29 February 2024
103,268
43,903
147,171
Accumulated impairment charges
At 1 March 2023
17,951
-
17,951
Impairment charges
128
-
128
At 29 February 2024
18,079
-
18,079
Net Book Value
At 29 February 2024
85,189
43,903
129,092
At 28 February 2023
84,177
43,903
128,080
Notes to the Consolidated Financial Statements (continued)
117
Vertu Motors plc (Company Number: 05984855)
15. Goodwill and other indefinite life assets (continued)
2023
Goodwill
Franchise
relationships
Total
£’000
£’000
£’000
Cost
At 1 March 2022
91,026
28,895
119,921
Acquisitions 1
11,102
15,008
26,110
At 28 February 2023
102,128
43,903
146,031
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
84,177
43,903
128,080
At 28 February 2022
74,575
28,895
103,470
1 Includes £490,000 measurement period adjustment described in note 1.
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 29 February 2024 and 28 February 2023, 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 net book value of goodwill purchased is presented below:
2024
2023
£’000
£’000
Bristol Street Group Limited
13,860
13,860
Albert Farnell Limited
12,529
12,529
Helston Garages Group Limited 1
8,912
8,912
SHG Holdings Limited
7,842
7,842
Hillendale Group Limited
4,409
4,409
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
1,607
Leeds, Huddersfield, Harrogate and Skipton Volkswagen
1,114
1,114
Rowes Garage Limited
1,140
-
Other acquisitions
10,489
10,617
85,189
84,177
1 Includes £490,000 measurement period adjustment described in note 1.
There are a number of business acquisitions from previous financial years included within the
"other acquisitions" total shown above. The value of goodwill on such acquisitions were
individually immaterial and in aggregate are not significant relative to the total value of
goodwill in the Group.
Notes to the Consolidated Financial Statements (continued)
118
Vertu Motors plc (Company Number: 05984855)
15. Goodwill and other indefinite life assets (continued)
A summary of franchise relationships acquired is presented below:
2024
2023
£’000
£’000
Helston Garages Group Limited
15,008
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
43,903
The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use pre-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 pre-tax rates that reflect current market
assessments and the time value of money and the risks specific to the CGUs.
• Growth rates are based upon industry forecasts and the past performance of the CGU.
• Changes in gross profits and direct costs are based on past practices and expectations of
future changes in the market.
Annual growth rates typically between 0% and 7% are assumed for years three to five
depending on the CGU, after which a growth rate of 0% is assumed to perpetuity. Cash flows
into perpetuity have been used to reflect the long-term and open-ended nature of the Group’s
business model. A risk adjusted pre-tax discount rate reflecting the Group’s Weighted
Average Cost of Capital (“WACC”) of 9% (2023: 9%) 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 28
February 2025, with a return to normalised trading in the year ending 28 February 2026, 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 £2.5m would arise.
• If the pre-tax WACC was increased to 12%, an additional impairment charge in respect of
goodwill and other indefinite life assets of £3.1m would arise.
Notes to the Consolidated Financial Statements (continued)
119
Vertu Motors plc (Company Number: 05984855)
16. Other intangible assets
2024
Software
costs
Brand
Customer
relationships
Total
£’000
£’000
£’000
£’000
Cost
At 1 March 2023
1,201
1,607
1,985
4,793
Additions
253
-
-
253
At 29 February 2024
1,454
1,607
1,985
5,046
Accumulated amortisation
At 1 March 2023
891
413
1,203
2,507
Charge for the year
161
267
140
568
At 29 February 2024
1,052
680
1,343
3,075
Net book value at 29 February 2024
402
927
642
1,971
Net book value at 28 February 2023
310
1,194
782
2,286
2023
Software
costs
Brand
Customer
relationships
Total
£’000
£’000
£’000
£’000
Cost
At 1 March 2022
2,631
795
1,985
5,411
Acquisitions
-
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)
120
Vertu Motors plc (Company Number: 05984855)
17. Business combinations
a) Acquisition of Rowes Garage Limited
On 31 October 2023, the Group acquired the entire issued share capital of Rowes Garage
Limited which operates three Honda outlets in Plymouth, Plymstock and Truro as well as a
used car outlet in Plymouth. Total consideration of £10,385,000 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
Property, plant and equipment (note 18)
3,658
Right of use assets
917
Inventories
4,199
Trade and other receivables
281
Cash and cash equivalents
4,419
Trade and other payables
(2,661)
Lease liabilities
(917)
Corporation tax
(196)
Deferred tax (note 28)
(205)
Net assets acquired
9,495
Goodwill (note 15)
1,140
Total consideration
10,635
Deferred consideration
(250)
Cash consideration
10,385
Acquisition related costs (included in underlying operating expenses in the consolidated
income statement for the year ended 29 February 2024) totalled £197,000 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 Rowes Garage Limited had occurred on 1 March 2023, Group revenues
would have been £19,496,000 higher and Group profit before tax would have been £681,000
higher.
b) Summary of acquisitions’ cash consideration
Cash
consideration
Cash acquired
Total
£’000
£’000
£’000
Rowes Garage Limited
10,385
(4,419)
5,966
Cash consideration for acquisitions
10,385
(4,419)
5,966
Notes to the Consolidated Financial Statements (continued)
121
Vertu Motors plc (Company Number: 05984855)
18. Property, plant and equipment
2024
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 2023
350,302
5,069
20,347
24,255
399,973
Acquisitions (note 17)
3,600
-
57
1
3,658
Transfer to assets held for
resale (note 22)
(3,929)
-
-
-
(3,929)
Additions
14,311
645
5,024
5,818
25,798
Reclassifications
58
-
(149)
91
-
Disposals
(4,544)
(34)
(637)
(3,140)
(8,355)
At 29 February 2024
359,798
5,680
24,642
27,025
417,145
Accumulated depreciation
and impairment
At 1 March 2023
43,696
2,587
11,086
14,199
71,568
Depreciation charge
7,969
690
3,820
4,970
17,449
Transfer to assets held for
resale (note 22)
(335)
-
-
-
(335)
Reclassifications
(10)
-
40
(30)
-
Disposals
(3,285)
(33)
(471)
(3,043)
(6,832)
At 29 February 2024
48,035
3,244
14,475
16,096
81,850
Net Book Value
At 29 February 2024
311,763
2,436
10,167
10,929
335,295
At 28 February 2023
306,606
2,482
9,261
10,056
328,405
1 Includes leasehold improvements and franchise standards property improvements.
Depreciation expense of £17,449,000 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 (2023: £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
outstanding mortgage funding of £81,236,000 (2023: £85,514,000).
Notes to the Consolidated Financial Statements (continued)
122
Vertu Motors plc (Company Number: 05984855)
18. Property, plant and equipment (continued)
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
68,230
43
2,004
1,104
71,381
Transfer to assets held for
resale
(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
(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.
Notes to the Consolidated Financial Statements (continued)
123
Vertu Motors plc (Company Number: 05984855)
19. Leases
Amounts recognised in the Balance Sheet
The balance sheet shows the following amounts relating to leases:
2024
2023
Right-of-use assets
£’000
£’000
Property
62,757
66,767
Vehicles
10,129
6,311
72,886
73,078
Lease liabilities
Current
(17,710)
(14,498)
Non-current
(65,214)
(68,959)
(82,924)
(83,457)
Additions to the right-of-use assets and lease liabilities during the year ended 29 February
2024 were £20,586,000 (2023: £13,307,000).
During the year ended 29 February 2024, right-of-use assets with a net book value of
£2,525,000 (2023: £2,044,000) were disposed of as a result of assignment, settlement or
modification of various leases. The corresponding lease liability disposed of was £2,936,000
(2023: £2,493,000) generating a £411,000 profit recognised in the Consolidated Income
Statement (2023: £449,000).
Amounts recognised in the Income Statement
The Income Statement shows the following amounts relating to leases:
2024
2023
£’000
£’000
Included in operating expenses
Depreciation charge in respect of right-of-use assets:
Property
11,371
10,970
Vehicles
6,883
5,255
18,254
16,225
Profit on lease modification
(411)
(449)
Included in finance costs
Interest expense
3,457
3,488
The total cash outflow in respect of lease payments in the year ended 29 February 2024 was
£21,640,000, of which £3,457,000 related to interest on lease liabilities (2023: £19,675,000
including £3,488,000 interest on lease liabilities).
20. Subsidiary undertakings
A list of subsidiary undertakings (ordinary shares 100% owned and incorporated within the
United Kingdom), as at 29 February 2024 and 28 February 2023 is given in note 7 of the
Vertu Motors plc company only financial statements (pages 149 to 151).
Notes to the Consolidated Financial Statements (continued)
124
Vertu Motors plc (Company Number: 05984855)
21. Inventories
2024
2023
£’000
£’000
New vehicle stock
515,794
427,126
Used vehicle stock
162,958
172,920
Demonstrator and courtesy vehicles
60,611
52,286
Parts and sundry stocks
22,633
22,048
761,996
674,380
The total value of new vehicle stock is comprised of the following:
2024
2023
£’000
£’000
Interest bearing consignment stock
51,165
30,778
Stock invoiced not yet paid held by Manufacturers to the
order of the Group
361,444
322,559
Other new vehicle stock
103,185
73,789
515,794
427,126
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
£4,299,740,000 (2023: £3,651,240,000).
22. Property assets held for resale
2024
2023
£’000
£’000
At beginning of year
6,077
-
Transfers in from freehold property
3,594
6,077
Property sold during the year
(1,790)
-
At end of year
7,881
6,077
During the year ended 29 February 2024, the Group sold the following properties which were
held for resale at 28 February 2023:
•
A Long-leasehold property in Newburn, Newcastle upon Tyne which the Group
previously operated as an accident repair operation until the trade and assets of the
business were sold during the year.
•
An empty property in Taunton acquired with the acquisition of Helston Garages
Group Limited.
All properties recovered their carrying value on disposal.
During the year ended 29 February 2024, the Group transferred the following properties from
tangible fixed assets to property assets held for resale:
•
An empty property in Stroud which was previously a used vehicle and Ford
authorised repairer operation which closed during the year.
•
A former PDI centre in Wendover which closed during the year.
•
A former Volvo dealership and petrol filling station in Yeovil following the relocation of
the business to a new facility.
All properties remaining in assets held for resale at 29 February 2024 are currently expected
to be disposed of in the next 12 months recovering cash proceeds in excess of their book
value.
Notes to the Consolidated Financial Statements (continued)
125
Vertu Motors plc (Company Number: 05984855)
23. Trade and other receivables
2024
2023 1
£’000
£’000
Trade receivables
78,102
70,785
Less provision for impairment of trade receivables
(2,171)
(3,680)
Trade receivables (net)
75,931
67,105
Other receivables
2,663
941
Prepayments and accrued income
15,108
17,781
93,702
85,827
1 Includes £490,000 measurement period adjustment described in note 1.
The Group measures the loss allowance for trade receivables at an amount equal to the
lifetime expected credit losses (“ECL”). The ECL on trade receivables are measured using a
provision matrix by reference to past default experience, current financial position of the
debtors and any known specific factors.
There has been no change in significant assumptions or the method of estimation of ECL
during the current financial year.
The following table shows the profile of the Group’s trade receivables.
As at 29 February 2024, trade receivables of £3,915,000 (2023: £3,134,000) 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:
2024
2023
£’000
£’000
At beginning of year
3,680
2,062
Net remeasurement of loss allowance
(874)
3,073
Receivables written off during the year as uncollectible
(635)
(1,455)
At end of year
2,171
3,680
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.
Current
31-60
days
61-90
days
>90
days
Trade
Receivables
Loss
Allowance
Trade
Receivables
(net)
£’000
£’000
£’000
£’000
£’000
£’000
£’000
2024
73,535
3,532
459
576
78,102
(2,171)
75,931
2023
60,045
7,811
953
1,976
70,785
(3,680)
67,105
Notes to the Consolidated Financial Statements (continued)
126
Vertu Motors plc (Company Number: 05984855)
24. Cash and cash equivalents
2024
2023
£’000
£’000
Cash in bank and in hand
70,599
78,984
25. Trade and other payables
2024
2023
£’000
£’000
Current
Trade payables
743,748
630,451
Social security and other taxes
11,236
13,649
Accruals
88,947
88,494
Other payables
26,000
26,000
869,931
758,594
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 £14,076,000 (2023: £13,150,000) in respect of outstanding service plans.
26. Borrowings
2024
2023
£’000
£’000
Current
Other borrowings
-
25,460
Mortgage
4,395
4,361
4,395
29,821
Non-current
Mortgage
76,841
81,153
Bank borrowings
43,342
43,366
120,183
124,519
124,578
154,340
Borrowings are repayable as follows:
2024
2023
£’000
£’000
6 months or less
2,154
27,602
6-12 months
2,241
2,219
1-5 years
57,189
57,213
Over 5 years
62,994
67,306
124,578
154,340
The fair value of borrowings equals their carrying amount, as the impact of discounting is not
significant. Borrowings are designated as financial liabilities carried at amortised cost.
a)
Bank borrowings
The Group has a committed Revolving Credit Facility (‘’RCF’’) available of £93,000,000.
Interest is charged on this facility at a rate of between 1.8% and 2.6% above the Sterling
Overnight Index Average (“SONIA”) depending on the value of the Group’s net debt to
EBITDA ratio. £44,000,000 of the RCF was drawn at 1 March 2023 and remained drawn at
29 February 2024.
The facility was entered into in December 2022 for an initial three year period with an option
to extend to December 2026, and a further option to extend to December 2027. The first of
these extensions was completed during the year ended 29 February 2024 such that the
facility is currently in place until December 2026.
Notes to the Consolidated Financial Statements (continued)
127
Vertu Motors plc (Company Number: 05984855)
26. Borrowings (continued)
a)
Bank borrowings (continued)
During the year ended 29 February 2024, the Group had an interest rate swap arrangement
in place, 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%.
A rate of 1.45% above base rate has been applied in relation to overdrafts during the year
ended 29 February 2024. 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 2 April 2024 until 31 May 2025 with the
same limits as were in place at 29 February 2024.
The Group had the following undrawn borrowing and overdraft facilities at 29 February:
2024
2023
£’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
49,000
- Other borrowings
50,000
44,540
152,000
146,540
b)
Mortgage funding
The Group had two mortgage facilities in place at 29 February 2024, both provided by BMW
Financial Services. The first drawn down in December 2020 is secured against the freehold
and long leasehold properties in Sunderland, Durham and Teesside operating the BMW and
MINI franchises. 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 until December
2025.
A second mortgage was drawn in December 2022 when 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 owned by the Group. This mortgage is repayable in equal instalments
over the 20 year term and interest is charged on this facility at a rate of 2.8% above BMW
Base Rate. The Group also has an interest rate cap arrangement 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%
until 28 February 2025.
c)
Other borrowings
Other borrowings represent amounts repayable under used vehicle stocking facilities. These
loans are subject to interest at 1.5% above base rate and are secured against the related
vehicles. At 1 March 2023 the limit on this facility was £70,000,000. During the year ended 29
February 2024, as a result of the level of usage of the facility during the period, the limit was
reduced to £50,000,000. Drawings on this facility at 29 February 2024 were £Nil (2023:
£25,460,000).
d)
Financial assets
The Group’s financial assets on which floating interest is receivable comprise cash deposits
and cash in hand of £70,599,000 (2023: £78,984,000). 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)
128
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:
2024
2023
£’000
£’000
£50m Interest rate cap – cash flow hedges
282
507
£30m Interest rate swap – cash flow hedges
203
-
Total derivates designated as hedging instruments
485
507
Non-current derivative financial instruments
203
507
Current derivative financial instruments
282
-
485
507
Current derivative financial instruments were included within other receivables (note 23) at 29
February 2024 to reflect the interest rate caps expiration date of 28 February 2025.
2024
2023
£’000
£’000
Borrowings subject to hedging instruments:
Mortgage
50,000
50,000
Bank borrowings
30,000
-
Total derivative financial liabilities
80,000
50,000
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 rate.
During the year ended 29 February 2024, the Group had an interest rate cap contract in
respect of £50,000,000 of the Group’s outstanding mortgage funding, capping the applicable
underlying floating rate at 4.5% until 28 February 2025. The floating rate in respect of this
borrowing is BMW Base Rate.
In addition, the Group had an interest rate swap 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.
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 29 February 2024 totalled £80,000,000 (2023: £50,000,000). The fair
value of these instruments at 29 February 2024 was an asset of £485,000 (2023: £507,000).
Gains and losses recognised in the cash flow hedging reserve in equity on interest rate swap
contracts as at 29 February 2024 will be released to the consolidated statement of
comprehensive income as the related interest expense is recognised.
The movement on the hedging reserve within shareholders’ equity is shown within note 32.
In accordance with IFRS 13 “Financial Instruments: Disclosure”, fair values are defined as
follows:
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
•
Level 2: inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
•
Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
The fair values of the interest rate swaps have been determined using a level 3 valuation
technique with non-observable inputs obtained from the counterparty (2023: level 3).
Notes to the Consolidated Financial Statements (continued)
129
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:
2024
2023
£’000
£’000
Deferred tax asset to be recovered after more than 12 months
(3,048)
(4,090)
Deferred tax liabilities to be recovered after more than 12 months
25,072
23,207
Deferred tax liabilities (net)
22,024
19,117
The gross movement on the Group’s deferred income tax account is as follows:
2024
Deferred tax
liabilities
Deferred tax
assets
Net
£’000
£’000
£’000
At 1 March 2023
23,207
(4,090)
19,117
Charged to income statement (note 12)
1,844
1,013
2,857
(Charged)/credited directly to equity
(184)
29
(155)
Acquisitions (note 17)
205
-
205
At 29 February 2024
25,072
(3,048)
22,024
2023
Deferred tax
liabilities
Deferred tax
assets
Net
£’000
£’000
£’000
At 1 March 2022
17,848
(4,825)
13,023
Charged to income statement
1,617
692
2,309
(Credited) / charged directly to equity
(1,493)
43
(1,450)
Acquisitions
5,235
-
5,235
At 28 February 2023
23,207
(4,090)
19,117
Deferred tax balances as at 29 February 2024 have been measured at a rate of 25%.
2024
Accelerated
tax
depreciation
Share
based
payments
Pensions
Other timing
differences
Total
£’000
£’000
£’000
£’000
£’000
At 1 March 2023
11,629
(1,652)
797
8,343
19,117
Charged / (credited) to
income statement (note 12)
1,826
(327)
6
1,352
2,857
Acquisitions (note 17)
205
-
-
-
205
(Charged)/credited directly
to equity
-
-
(184)
29
(155)
At 29 February 2024
13,660
(1,979)
619
9,724
22,024
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
3,633
(273)
26
(1,077)
2,309
Acquisitions
3,534
-
-
1,701
5,235
(Credited) / charged
directly to equity
-
-
(1,493)
43
(1,450)
At 28 February 2023
11,629
(1,652)
797
8,343
19,117
Notes to the Consolidated Financial Statements (continued)
130
Vertu Motors plc (Company Number: 05984855)
29. Contract liabilities
Warranty
policies
Free
servicing
Total
£’000
£’000
£’000
At 1 March 2023
22,366
3,215
25,581
Created in the year
12,812
834
13,646
Recognised as income during the year
(14,843)
(909)
(15,752)
At 29 February 2024
20,335
3,140
23,475
Current
10,535
2,865
13,400
Non-current
9,800
275
10,075
20,335
3,140
23,475
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 2024 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)
131
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
29 February
28 February
2024
2023
£’000
£’000
Liability Driven Investment Funds
25,589
26,137
Diversified Growth Gunds
3,202
3,964
Secured Finance
5,887
5,464
Other
342
390
35,020
35,955
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 are 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 scheme 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 2023 was 4.95%. This is equal to the
discount rate used in the calculation of the net interest income for the year ended 29 February
2024.
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:
2024
2023
£’000
£’000
Fair value of scheme assets
35,020
35,955
Present value of funded obligations
(32,543)
(32,767)
Asset on the balance sheet
2,477
3,188
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:
2024
2023
£’000
£’000
Opening fair value of scheme assets
35,955
55,457
Interest income
1,734
1,497
Actuarial losses
(781)
(18,952)
Benefits paid
(1,759)
(1,906)
Expenses recognised in the income statement
(129)
(141)
Closing fair value of scheme assets
35,020
35,955
Notes to the Consolidated Financial Statements (continued)
132
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:
2024
2023
£’000
£’000
Opening fair value of scheme liabilities
32,767
46,402
Interest cost
1,579
1,250
Actuarial gains
(44)
(12,979)
Benefits paid
(1,759)
(1,906)
Closing fair value of scheme liabilities
32,543
32,767
The amounts recognised in the income statement in the year are as follows:
2024
2023
£’000
£’000
Expenses
129
141
Net interest income (note 11)
(155)
(247)
Total income included in income statement
(26)
(106)
The actual returns on Scheme assets in the year are as follows:
2024
2023
£’000
£’000
Expected return on scheme assets
1,734
1,497
Actuarial losses
(781)
(18,952)
953
(17,455)
The principal assumptions used by the independent qualified actuaries to calculate the
liabilities under IAS 19 are set out below:
2024
2023
Discount rate
5.00%
4.95%
Limited Price Indexation (“LPI”) pension increases
3.10%
3.00%
Inflation rate
2.55%
2.45%
Assumptions regarding future mortality experience are set based on mortality tables which
allow for future mortality changes.
The average life expectancy in years of a pensioner retiring at age 65 at the balance sheet
date is as follows:
2024
2023
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:
2024
2023
Male
23
23
Female
25
26
Amounts recognised in the Consolidated Statement of Comprehensive Income in the year are
as follows:
2024
2023
£’000
£’000
Actuarial losses
(737)
(5,973)
Related deferred tax credit (note 28)
184
1,493
Total, included within retained earnings
(553)
(4,480)
Cumulative actuarial losses
(4,513)
(3,960)
Notes to the Consolidated Financial Statements (continued)
133
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
870
0.25% decrease in discount rate
(910)
0.25% increase in price inflation (and associated assumptions)
(578)
0.25% decrease in price inflation (and associated assumptions)
595
1 year increase in life expectancy at age 65
(1,031)
1 year decrease in life expectancy at age 65
1,024
31. Ordinary share capital, share premium, other reserves, treasury share reserve and
capital redemption reserve
2024
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 2023
343,280
34,894
124,939
10,645
(2,653)
4,833
172,658
Issuance and sale of
treasury shares
1,274
-
-
-
597
-
597
Repurchase of own shares
(11,343)
-
-
-
-
-
-
Cancellation of repurchased
shares
-
(1,134)
-
-
-
1,134
-
At 29 February 2024
333,211
33,760
124,939
10,645
(2,056)
5,967
173,255
The other reserve is a merger reserve, arising from shares issued for shares, as
consideration to the former shareholders of acquired businesses.
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
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 options
under the Company Share Option Plan (“CSOP”) scheme 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”) and Partnership Share Option (“PSO”) schemes. The options are
exercisable from the end of the vesting period and any holding period which is set out in the
scheme. Options are subject to performance criteria and are conditional on the employee
completing a fixed period of service (vesting period and any holding period).
Notes to the Consolidated Financial Statements (continued)
134
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)
Details of the performance criteria, vesting periods and holding periods for options yet to vest
are set out below. The Group has no legal or constructive obligation to repurchase or settle
the options in cash.
As disclosed in note 8, a share based payments charge of £2,466,000 (2023: £2,066,000)
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 29
February 2024
No of shares
Granted /
Outstanding at 28
February 2023
No of shares
Exercise
price
Date from
which
exercisable
Expiry date
5 Sep 2016 1
LTIP
40,337
40,337
0.00p
5 Sep 2019
5 Sep 2026
2 Jul 2018 1
CSOP
2,400,000
2,400,000
49.60p
2 Jul 2021
2 Jul 2028
8 Nov 2018 1
CSOP
2,745,033
3,062,533
38.25p
8 Nov 2021
8 Nov 2028
1 Mar 2020 1
PSO
3,781,336
4,454,437
0.00p
1 Mar 2024
1 Mar 2030
1 Mar 2021 1
PSO
5,343,896
6,250,352
0.00p
1 Mar 2025
1 Mar 2031
24 Jun 2021 1
PSO
942,411
942,411
0.00p
1 Mar 2025
1 Mar 2031
1 Mar 2022 1
PSO
5,216,144
6,015,573
0.00p
1 Mar 2026
1 Mar 2032
1 Mar 2023 2
PSO
6,218,095
-
0.00p
1 Mar 2027
1 Mar 2033
26,687,252
23,165,643
1 Vested.
2 Partially vested subsequent to 29 February 2024.
Movements in the number of share options outstanding are as follows:
2024
2023
No of share
options
No of share
options
At beginning of year
23,165,643
22,012,247
Granted
7,145,996
6,453,290
Forfeited
(1,942,234)
(1,709,436)
Exercised
(1,441,787)
(3,138,287)
Lapsed
(240,366)
(452,171)
At end of year
26,687,252
23,165,643
The weighted average share price during the year was 67.4p (2023: 52.8p). The weighted
average fair value of PSO options granted during the year, determined using the Black-
Scholes model was 58.5p per option.
Movements in the number of share options outstanding and their related exercise prices are
as follows:
CSOP
LTIP 3
PSO 3
Total
No of
share
options
Weighted
average
exercise price
No of
share
options
No of
share
options
No of
share
options
At 1 March 2022
8,677,500
41.31p
93,920
13,240,827
22,012,247
Granted
-
-
-
6,453,290
6,453,290
Forfeited
(554,966)
45.44p
-
(1,154,470)
(1,709,436)
Exercised
(2,650,001)
36.71p
(53,583)
(434,703)
(3,138,287)
Lapsed
(10,000)
39.25p
-
(442,171)
(452,171)
At 28 February 2023
5,462,533
43.24p
40,337
17,662,773
23,165,643
Granted
-
-
-
7,145,996
7,145,996
Forfeited
(17,500)
38.25p
-
(1,924,734)
(1,942,234)
Exercised
(300,000)
38.25p
-
(1,141,787)
(1,441,787)
Lapsed
-
-
-
(240,366)
(240,366)
At 29 February 2024
5,145,033
43.54p
40,337
21,501,882
26,687,252
3 The weighted average exercise price of LTIP and PSO nil cost awards is 0.00p.
Notes to the Consolidated Financial Statements (continued)
135
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
6%
Option life
10 years
Expected life
7 years
Annual risk-free interest rate
3.7%
Dividend yield
3.5%
Expected volatility is based on statistical analysis of daily share prices since the admission of
Vertu Motors plc to AiM. This is then adjusted for events not considered to be reflective of the
volatility of the share price going forward.
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
Outstanding CSOP awards relate to remaining awards which vested in previous financial
years and are within their exercisable period. No CSOP awards were issued during the year.
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)
136
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 2023, 7,025,400 PSO awards were made to the Executive Directors and certain
senior managers. 807,305 of these awards were forfeited as a result of leavers during the
year, the remaining awards will vest in proportion to achievement of on-target bonus earnings
by the relevant colleagues in the year ended 28 February 2024, determined after the balance
sheet date.
The number of vested PSO awards which remained outstanding at 29 February 2024 are
shown in the table on page 134.
On 1 March 2024, 6,248,220 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:
2024
2023
£’000
£’000
At beginning of year
133
4
Fair value gains on derivative financial instruments
during the year
116
172
Deferred taxation on fair value gains during year (note 28)
(29)
(43)
At end of year
220
133
Notes to the Consolidated Financial Statements (continued)
137
Vertu Motors plc (Company Number: 05984855)
33. Reconciliation of net cash flow to movement in net debt
2024
2023
£’000
£’000
Net decrease in cash and cash equivalents
(8,385)
(4,809)
Cash inflow from proceeds of borrowings
-
(110,570)
Cash outflow from repayment of borrowings
29,836
23,358
Cash movement in net debt
21,451
(92,021)
Capitalisation of loan arrangement fees
186
1,037
Amortisation of loan arrangement fees
(184)
(131)
Increase in accrued loan interest
(76)
(408)
Non-cash movement in net debt
(74)
498
Movement in net debt (excluding lease liabilities)
21,377
(91,523)
Opening net (debt)/cash (excluding lease liabilities)
(75,356)
16,167
Closing net debt (excluding lease liabilities)
(53,979)
(75,356)
Lease liabilities at 1 March
(83,457)
(88,830)
Capitalisation of new leases (Note 19)
(20,586)
(13,307)
Disposal of lease liabilities (Note 19)
2,936
2,493
Interest element of lease repayments (Note 11)
(3,457)
(3,488)
Cash outflow from lease repayments (Note 19)
21,640
19,675
Lease liabilities at 29 February (Note 19)
(82,924)
(83,457)
Closing net debt (including lease liabilities)
(136,903)
(158,813)
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.
2024
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)
(869,931)
Contract liabilities (Note 29)
(23,475)
At 29 February 2024
761,996
93,702
(893,406)
At 28 February 2023
674,380
85,827
(784,175)
Balance sheet movement
(87,616)
(7,875)
109,231
Acquisitions (Note 17)
4,199
281
(2,661)
Deferred consideration (Note 17)
-
-
(250)
Disposals
(104)
(27)
9
Movement excluding business
combinations
(83,521)
(7,621)
106,329
15,187
Pension related balances
129
Increase in capital creditor
1,049
Increase in interest accrual
61
Derivative financial instruments (Note 27)
282
Movement as shown in Consolidated Cash Flow Statement
16,708
Notes to the Consolidated Financial Statements (continued)
138
Vertu Motors plc (Company Number: 05984855)
34. Cash flow from movement in working capital (continued)
2023
Inventories
£’000
Current trade
and other
receivables 1
£’000
Trade and
other
payables
£’000
Total working
capital
movement
£’000
Trade and other payables
(758,594)
Contract liabilities
(25,581)
At 28 February 2023
674,380
85,827
(784,175)
At 28 February 2022
475,027
51,839
(552,285)
Balance sheet movement
(199,353)
(33,988)
231,890
Acquisitions 1
62,730
19,055
(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
1 Includes £490,000 measurement period adjustment described in note 1.
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 2023
154,340
83,457
(2,653)
168,586
403,730
Cash flows from financing activities:
Issue of treasury shares
-
-
597
(482)
115
Repurchase of own shares
-
-
-
(7,463)
(7,463)
Repayment of borrowings
(29,836)
-
-
-
(29,836)
Lease repayments
-
(18,183)
-
-
(18,183)
Dividends paid
-
-
-
(7,759)
(7,759)
Cash settled share options
-
-
-
(109)
(109)
Net cash outflow from financing activities
(29,836)
(18,183)
597
(15,813)
(63,235)
Other changes:
Liability related: capitalisation and
amortisation of loan fees and expenses
(2)
-
-
-
(2)
Liability related: capitalisation of
lease liabilities
-
20,586
-
-
20,586
Liability related: disposal of lease liabilities
-
(2,936)
-
-
(2,936)
Liability related: increase in accrued loan
interest
76
-
-
-
76
Equity related: other movements
-
-
-
27,125
27,125
As at 29 February 2024
124,578
82,924
(2,056)
179,898
385,344
36. Contingencies
Contingent liabilities
The Financial Conduct Authority (FCA) is currently investigating Discretionary Commission
Arrangements (“DCAs”) within automotive finance. Under such arrangements, automotive
dealers received variable commissions from lenders in respect of brokering finance for
customers. The Group received such commission from lenders until January 2021 when the
Group ceased sales involving DCA. Preliminary findings from the FCA review suggest that
motor finance providers, and motor finance credit brokers (including motor dealers), who have
engaged in motor finance agreements involving DCAs could be impacted and an update on
this investigation is expected to be made by September 2024.
Notes to the Consolidated Financial Statements (continued)
139
Vertu Motors plc (Company Number: 05984855)
36. Contingencies (continued)
Contingent liabilities (continued)
As this investigation is still ongoing, the Group does not have sufficient certainty over the
nature, timing or value of any potential financial impact to be able to estimate the liability, if
any, that may arise for the Group. As a result, no liability has been recognised at 29 February
2024 in respect of this investigation.
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
97 were subject to at 29 February 2024 until they are satisfied in full. These liabilities total
£1,252,872,000 (2023: £1,146,788,000), including intercompany loans of £359,432,000
(2023: £349,460,000). Such guarantees are enforceable against Vertu Motors plc by any
person to whom any such liability is due.
37. Capital commitments
Capital commitments in respect of property, plant and equipment amounting to £5,244,000
were outstanding as at 29 February 2024 (2023: £1,712,000).
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 29 February 2024 is set out in note 9.
During the year to 29 February 2024, 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 29 February 2024 and the year ended 28
February 2023 is presented below. No profit or loss was made in respect of these
transactions in the year ended 29 February 2024 or the year ended 28 February 2023. 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 29 February 2024 (2023: £Nil).
2024
Bought from the Group
Sold to the Group
Number of
vehicles
Purchase
price
Number of
vehicles
Sale price
£’000
£’000
Robert Forrester
3
309
5
471
David Crane
4
265
4
326
Karen Anderson
3
232
3
251
Andrew Goss
1
60
1
64
Pauline Best
1
69
1
67
Ken Lever
1
74
1
72
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
Notes to the Consolidated Financial Statements (continued)
140
Vertu Motors plc (Company Number: 05984855)
39. Post balance sheet events
On 13 March 2024, the Group disposed of a surplus property in Taunton. The disposal
generated cash proceeds of £800,000, in line with the asset’s carrying value.
Company Balance Sheet
As at 29 February 2024
141
Vertu Motors plc (Company Number: 05984855)
2024
2023
Note
£’000
£’000
Fixed assets
Intangible assets
5
395
302
Tangible assets
6
3,423
3,151
Investments
7
348,574
348,636
352,392
352,089
Current assets
Debtors
8
96,867
119,402
Total current assets
96,867
119,402
Creditors: amounts falling due within
one year
10
(112,420)
(120,437)
Net current liabilities
(15,553)
(1,035)
Total assets less current liabilities
336,839
351,054
Creditors: amounts falling due after
more than one year
11
(53,417)
(55,470)
Net assets
283,422
295,584
Capital and reserves
Called up share capital
13
33,760
34,894
Share premium account
13
124,939
124,939
Other reserve
13
10,645
10,645
Hedging reserve
14
220
133
Treasury share reserve
13
(2,056)
(2,653)
Capital redemption reserve
13
5,967
4,833
Profit and loss account:
At start of year
122,793
114,603
Profit for the year
1,003
18,809
Other changes in retained earnings
(13,849)
(10,619)
15
109,947
122,793
Total shareholders’ funds
283,422
295,584
These financial statements, on pages 141 to 156, have been approved for issue by the Board
of Directors on 15 May 2024 and signed by:
Robert Forrester
Karen Anderson
Chief Executive
Chief Financial Officer
Company Statement of Changes in Equity
For the year ended 29 February 2024
142
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 2023
34,894
124,939
10,645
133
(2,653)
4,833
122,793
295,584
Profit for the year
-
-
-
-
-
-
1,003
1,003
Tax on items taken
directly to equity
-
-
-
(29)
-
-
-
(29)
Fair value gains
-
-
-
116
-
-
-
116
Total comprehensive
income for the year
-
-
-
87
-
-
1,003
1,090
Sale of treasury shares
-
-
-
-
597
-
(482)
115
Repurchase of own
shares
-
-
-
-
-
-
(7,464)
(7,464)
Cancellation of
repurchased shares
(1,134)
-
-
-
-
1,134
-
-
Dividends paid
-
-
-
-
-
-
(7,759)
(7,759)
Share based payments
charge
-
-
-
-
-
-
1,856
1,856
As at 29 February 2024
33,760
124,939
10,645
220
(2,056)
5,967
109,947
283,422
Company Statement of Changes in Equity (continued)
143
Vertu Motors plc (Company Number: 05984855)
For the year ended 28 February 2023
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
Notes to the Company Financial Statements
144
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 29 February 2024 was
£1,003,000 (2023: £18,809,000).
The consolidated financial statements include the results of all subsidiaries owned by Vertu
Motors plc listed on pages 149 to 151 of these financial statements. Certain of these
subsidiaries, which are listed below, have taken the exemption from an audit for the year
ended 29 February 2024 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 29 February 2024 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 29 February 2024 of the subsidiaries listed below, further detail of
which is provided in note 36 to the consolidated financial statements on page 139.
Notes to the Company Financial Statements (continued)
145
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 29 February
2024 by virtue of s479A Companies Act 2006 are:
Albert Farnell Limited
Tyne Tees Finance Limited
All Car Parts Limited
Vans Direct Limited
Bristol Street First Investments Limited
Vertu Accident Repair Limited
Bristol Street Fourth Investments Limited
Vertu Motors (Chingford) Limited
Grantham Motor Company Limited
Vertu Motors (Continental) Limited
Helston Garages Limited
Vertu Motors (Property) Limited
Helston Garages Group (Management) Limited
Vertu Motors (Property 2) Limited
Macklin Property Limited
Vertu Motors (VMC) Limited
Rowes Garage Limited
Vertu Motors Third Limited
South Hereford Garages Trade Parts LLP
Wiper Blades Limited
The subsidiaries which have taken an exemption from the preparation of individual accounts in
respect of the year ended 29 February 2024 by virtue of s394A of Companies Act 2006 are:
Aceparts Limited
Hughes of Beaconsfield Limited
Best4Vans Limited
International Concessionaires Limited
Blacks Autos Limited
Jactamial Properties Limited
Blake Holdings Limited
Merifield Properties Limited
Boydslaw 103 Limited
Motor Nation Cars Limited
Bristol Street (No.1) Limited
National Allparts Limited
Bristol Street (No.2) Limited
Newbolds Garage (Mansfield) Limited
Bristol Street Commercials (Italia) Limited
Nottingham TPS LLP
Bristol Street Fifth Investments Limited
Peter Blake (Chatsworth) Limited
Bristol Street Fleet Services Limited
Peter Blake Limited
Bristol Street Group Limited
Power Bulbs Ltd
Bristol Street Limited
Power Bulbs Online Limited
Brookside (1998) Limited
SHG Holdings Limited
BSH Pension Trustee Limited
Sigma Holdings Limited
Carsandvansdirect Limited
South Hereford Garages Limited
Dobies (Carlisle) Limited
The Taxi Centre Limited
Dunfermline Autocentre Limited
Typocar Limited
Easy Vehicle Finance Limited
VanMan Limited
Farmer & Carlisle Holdings Limited
Vertu Fleet Limited
Farmer & Carlisle Leicester Limited
Vertu Motors (AMC) Limited
Farmer & Carlisle Limited
Vertu Motors (Durham) Limited
F.C. Business Operations Limited
Vertu Motors (Finance) Limited
Gordon Lamb Group Limited
Vertu Motors (Knaresborough) Limited
Gordon Lamb Limited
Vertu Motors (Pity Me) Limited
Gordon Lamb Holdings Limited
Vertu Motors Property 2 Holdings Limited
Group SMB Limited
Vertu Ventures Limited
Helston Garages Group Limited
Westcountry Enterprises Limited
Hillendale Group Limited
Westcountry Ventures Limited
Hillendale LR Limited
Widnes Car Centre Limited
Hughes Group Holdings Limited
Widnes Car Centre (1994) Limited
The auditors’ remuneration for audit and other services was £25,000 (2023: £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)
146
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 of the relevant subsidiary company 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)
147
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 29 February 2024, 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
2024
2023
£’000
£’000
Wages and salaries
19,317
19,250
Social security costs
6,780
6,719
Pension costs – defined contribution plans
2,959
2,639
29,056
28,608
Share based payments charge (note 17)
2,466
2,066
31,522
30,674
Details of the emoluments of the Directors who served during the years ended 29 February
2024 and 28 February 2023, which are included in the table above, are provided in note 9 of
the Vertu Motors plc consolidated financial statements.
Notes to the Company Financial Statements (continued)
148
Vertu Motors plc (Company Number: 05984855)
4.
Average monthly number of people employed (including Directors)
2024
2023
Number
Number
Sales
148
149
Service
28
24
Administration
649
581
825
754
5.
Intangible assets
Computer
Software
Cost
£’000
At 1 March 2023
1,362
Additions
254
At 29 February 2024
1,616
Accumulated Amortisation
At 1 March 2023
1,060
Amortisation charge
161
At 29 February 2024
1,221
Net Book Value
At 29 February 2024
395
At 28 February 2023
302
6.
Tangible assets
Computer
equipment
Office
equipment
Total
£’000
£’000
£’000
Cost
At 1 March 2023
8,141
287
8,428
Additions
2,590
85
2,675
Disposals
(129)
(5)
(134)
At 29 February 2024
10,602
367
10,969
Accumulated Depreciation
At 1 March 2023
5,174
103
5,277
Depreciation charge
2,296
67
2,363
Disposals
(91)
(3)
(94)
At 29 February 2024
7,379
167
7,546
Net Book Value
At 29 February 2024
3,223
200
3,423
At 28 February 2023
2,967
184
3,151
Notes to the Company Financial Statements (continued)
149
Vertu Motors plc (Company Number: 05984855)
7. Investments
£’000
Cost
At 1 March 2023
361,907
Additions
22
At 29 February 2024
361,929
Accumulated impairment charges
At 1 March 2023
13,271
Impairment Charge
84
At 29 February 2024
13,355
Net Book Value
At 29 February 2024
348,574
At 28 February 2023
348,636
Vertu Motors plc, the Company, as at 29 February 2024 and 28 February 2023, 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
Helston Garages 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
Helston Garages Group (Management) Limited 1
Payroll administration company
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
Helston Garages Group 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
Notes to the Company Financial Statements (continued)
150
Vertu Motors plc (Company Number: 05984855)
7.
Investments (continued)
Company
Principal activity
Bristol Street Limited 1
Dormant company
Bristol Street (No. 1) Limited 1
Dormant company
Bristol Street (No. 2) Limited 1
Dormant company
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
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
Jactamial Properties Limited 1
Dormant company
Westcountry Ventures Limited 1
Dormant company
Group SMB Limited 1
Dormant company
Westcountry Enterprises Limited 1
Dormant company
Wiper Blades 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.
Notes to the Company Financial Statements (continued)
151
Vertu Motors plc (Company Number: 05984855)
7.
Investments (continued)
The following subsidiary which the Company was invested in as at 28 February 2023 was
dissolved during the year ended 29 February 2024, with no impact on the carrying value of the
Company’s investments:
Company
Principal activity
Vertu Motors Car Limited
Dormant subsidiary
The following subsidiary undertaking (ordinary shares 100% owned and incorporated within the
United Kingdom) was acquired by a subsidiary of the Company, and is therefore held indirectly
by the Company, during the year ended 29 February 2024:
Company
Principal activity
Rowes Garage Limited 2, 3
Motor retailer
2 Held indirectly by the Company
3 On 31 October 2023, this company was acquired by Grantham Motor Company Limited, a subsidiary of the Group.
On the same date, the trade and assets of this company were transferred to other subsidiary undertakings of the
Company.
The registered address of the above subsidiary companies is Vertu House, Fifth Avenue
Business Park, Team Valley, Gateshead, Tyne & Wear, NE11 0XA.
The Directors believe that the carrying value of the investments is supported by their
underlying net assets, or their value in use based on discounted future cash flows.
The Company tests annually, or whenever events or changes in circumstances occur, to
determine whether the fixed asset investments held have suffered any impairment. The
recoverable amounts of cash-generating units (“CGUs”) have been determined based on
value-in-use calculations.
The key assumptions for the value in use calculations are those regarding the discount rates,
growth rates and expected changes to gross profits and direct costs during the year in respect
of the Company’s trading subsidiaries:
• Management estimates discount rates using pre-tax rates that reflect current market
assessments and the time value of money and the risks specific to the CGUs.
• Growth rates are based upon industry forecasts and the past performance of the CGU.
• Changes in gross profits and direct costs are based on past practices and expectations of
future changes in the market.
Annual growth rates typically between 0% and 7% are assumed for years three to five
depending on the CGU, after which a growth rate of 0% is assumed to perpetuity. Cash flows
into perpetuity have been used to reflect the long-term and open-ended nature of the Group’s
business model. A risk adjusted pre-tax discount rate reflecting the Group’s Weighted Average
Cost of Capital (“WACC”) of 9% (2023: 9%) 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, an additional
impairment charge of £6.5m would arise in respect of the Company’s investments.
If the growth rate in years three to five is reduced to -5%, an additional impairment charge of
£40.5m would arise in respect of the Company’s investments.
If the pre-tax WACC was increased to 12%, an additional impairment charge of £38.8m would
arise in respect of the Company’s investments.
Notes to the Company Financial Statements (continued)
152
Vertu Motors plc (Company Number: 05984855)
8.
Debtors
2024
2023
£’000
£’000
Trade debtors
1,421
2,165
Amounts owed by Group undertakings
68,720
87,717
Deferred tax asset (note 9)
2,681
3,780
Corporation tax
405
1,937
Value Added Tax
11,639
14,296
Prepayments and accrued income
12,001
9,507
96,867
119,402
Amounts owed by Group undertakings are unsecured, bear no interest and have no fixed
repayment date.
9.
Deferred tax asset
2024
2023
£’000
£’000
At beginning of year
3,780
3,535
(Charged)/credited to the profit and loss account
(1,070)
288
Charged directly to equity
(29)
(43)
At end of year
2,681
3,780
The amounts recognised for deferred tax assets, calculated under the liability method at 25%
(2023: 25%) are set out below:
2024
2023
£’000
£’000
Depreciation in excess of capital allowances
(204)
248
Other short-term timing differences
2,885
3,532
Total
2,681
3,780
During the year ending 28 February 2025, the reversal of deferred tax assets is expected to
decrease the corporation tax charge for the year by £518,000. This is primarily due to timing
differences in relation to depreciation in excess of capital allowances.
10. Creditors: amounts falling due within one year
2024
2023
£’000
£’000
Bank overdraft
12,861
19,193
Trade creditors
10,422
9,529
Other creditors
26,000
26,000
Other taxation and social security
8,813
7,807
Accruals
40,924
44,431
Deferred income
13,400
13,477
112,420
120,437
Other creditors comprise non-interest bearing advance payments from the Group’s finance
company partners.
Accruals includes £14,076,000 (2023: £13,150,000) in respect of outstanding service plans.
Notes to the Company Financial Statements (continued)
153
Vertu Motors plc (Company Number: 05984855)
11. Creditors: amounts falling due after more than one year
2024
2023
£’000
£’000
Bank borrowings
43,342
43,366
Deferred income (note 12)
10,075
12,104
53,417
55,470
2024
2023
Borrowings are repayable as follows:
£’000
£’000
1-2 years
-
-
2-5 years
43,342
43,366
43,342
43,366
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
-
43,342
43,342
Trade and other creditors
112,420
10,075
122,495
At 29 February 2024
112,420
53,417
165,837
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
12. Deferred income
Deferred income due in greater than one year comprises:
2024
2023
£’000
£’000
Warranty policies
9,800
11,209
Free servicing
275
895
10,075
12,104
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 in the relevant subsidiary company over the life of the policies. There is an
additional £10,535,000 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 (2023: £11,157,000).
Notes to the Company Financial Statements (continued)
154
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 of the relevant subsidiary company when the service has been
undertaken. There is an additional £2,865,000 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 (2023: £2,320,000).
13. Called up share capital, share premium, other reserve, treasury share reserve and
capital redemption reserve
2024
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 2023
343,280
34,894
124,939
10,645
(2,653)
4,833
172,658
Sale of treasury
shares
1,274
-
-
-
597
-
597
Repurchase of own
shares
(11,343)
-
-
-
-
-
-
Cancellation of
repurchased shares
-
(1,134)
-
-
-
1,134
-
At 29 February 2024
333,211
33,760
124,939
10,645
(2,056)
5,967
173,255
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.
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
Notes to the Company Financial Statements (continued)
155
Vertu Motors plc (Company Number: 05984855)
14. Hedging reserve
2024
2023
£’000
£’000
Cash flow hedges:
At beginning of year
133
4
Fair value gains on derivative financial instruments
during the year
116
172
Deferred taxation on fair value gains during year
(29)
(43)
At end of year
220
133
15. Profit and loss account
2024
2023
£’000
£’000
As at beginning of year
122,793
114,603
Profit for the financial year
1,003
18,809
Dividend paid
(7,759)
(6,003)
Share based payments charge
1,856
1,471
Repurchase of own shares
(7,464)
(5,898)
Treasury shares issued
(482)
(189)
As at end of year
109,947
122,793
16. Dividends per share
Dividends of £7,759,000 were paid in the year ended 29 February 2024 (2023: £6,003,000),
2.30p per share (2023: 1.75p).
A final dividend of 1.50p per share is to be proposed at the Annual General Meeting on 25
June 2024. The ex-dividend date will be 27 June 2024 and the associated record date 28 June
2024. The dividend will be paid, subject to shareholder approval, on 26 July 2024 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 £2,466,000 (2023: £2,066,000).
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 2023 to 29
February 2024 is set out in note 9 of the consolidated financial statements on page 114.
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:
2024
£’000
2023
£’000
No later than 1 year
668
614
Later than 1 year and no later than 5 years
482
523
Later than 5 years
-
-
1,150
1,137
Notes to the Company Financial Statements (continued)
156
Vertu Motors plc (Company Number: 05984855)
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
157
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.
FY24
The twelve month period ended 29 February 2024.
FY23
The twelve month period ended 28 February 2023.
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
2024
2023
£’000
£’000
Operating profit
56,041
41,992
Non-underlying items (note 8):
Redundancy costs
872
-
Lease surrender premium
(840)
-
Share based payment charge (note 31)
2,466
2,066
Amortisation (note 16)
568
509
Impairment charges (note 15)
128
1,500
Acquisition costs
-
2,753
Adjusted operating profit
59,235
48,820
Free cash flow
2024
2023
£’000
£’000
Net cash inflow from operating activities
83,965
80,829
Purchase of other property, plant and equipment
(23,686)
(13,785)
Enhancement capital expenditure included in above
11,610
3,459
Purchase of intangible assets
(253)
(185)
Proceeds from disposal of property, plant and equipment
3,589
179
Principal elements of lease repayments (note 19)
(18,183)
(16,187)
Free cash flow
57,042
54,310
Alternative Performance Measures (continued)
158
Vertu Motors plc (Company Number: 05984855)
Adjusted profit before tax (PBT)
2024
2023
£’000
£’000
Profit before tax
34,567
32,450
Non-underlying items (note 8):
Redundancy costs
872
-
Lease surrender premium
(840)
-
Share based payment charge (note 31)
2,466
2,066
Amortisation (note 16)
568
509
Impairment charges (note 15)
128
1,500
Acquisition costs
-
2,753
Adjusted PBT
37,761
39,278
Tangible net assets per share
2024
2023
£’000
£’000
Net assets
353,373
341,377
Less:
Goodwill and other indefinite life assets (note 15)
(129,092)
(127,590)
Other intangible assets (note 16)
(1,971)
(2,286)
Add:
Deferred tax on above adjustments
12,668
12,621
Tangible net assets
234,978
224,122
Tangible net assets per share
70.5p
65.3p
At 29 February 2024, there were 337,602,150 shares in issue (2023: 348,945,522) of which,
4,391,449 were held by the Group’s employee benefit trust (2023: 5,665,352). 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
2024
FY24
Group
revenue
FY24
Acquisition
revenue
FY24
Disposals
revenue
FY24
Like-for-like
revenue
£’m
£’m
£’m
£’m
New car retail and Motability
1,452.5
(183.1)
(11.7)
1,257.7
New fleet and commercial
1,037.4
(53.4)
(4.4)
979.6
Used cars
1,816.2
(264.8)
(13.6)
1,537.8
Aftersales
413.5
(70.2)
(2.5)
340.8
Total revenue
4,719.6
(571.5)
(32.2)
4,115.9
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
(32.3)
(18.0)
1,071.6
New fleet and commercial
897.6
(10.7)
(17.6)
869.3
Used cars
1,658.2
(63.1)
(36.5)
1,558.6
Aftersales
336.8
(15.3)
(6.6)
314.9
Total revenue
4,014.5
(121.4)
(78.7)
3,814.4
Alternative Performance Measures (continued)
159
Vertu Motors plc (Company Number: 05984855)
Like-for-like reconciliations (continued):
Gross profit (“GP”) by department
2024
FY24
Group
GP
FY24
Acquisition
GP
FY24
Disposals
GP
FY24
Like-for-like
GP
£’m
£’m
£’m
£’m
New car retail and Motability
119.6
(17.5)
(1.0)
101.1
New fleet and commercial
55.6
(4.2)
(0.6)
50.8
Used cars
122.5
(11.9)
(0.5)
110.1
Aftersales
218.4
(31.6)
(1.3)
185.5
Total GP
516.1
(65.2)
(3.4)
447.5
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
(2.6)
(1.7)
94.1
New fleet and commercial
42.3
(0.7)
(0.8)
40.8
Used cars
125.2
(3.5)
(1.9)
119.8
Aftersales
182.5
(6.5)
(3.7)
172.3
Total GP
448.4
(13.3)
(8.1)
427.0
Company Information
160
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