Vertu Motors has set aside a £40m war chest to continue its accelerated growth in the UK car retailing market with further acquisitions.
In another stellar set of results the Gateshead-based group surpassed the £2bn revenue milestone for the first time in its eight-year history.
Pre-tax profits rose 32.9% to £21m during the year ended February 28, fuelled by acquisitive and organic growth.
The 116-showroom strong business, which is debt-free, continued its acquisitive strategy in the period. Fourteen new outlets were bought or opened in the UK since the beginning of March 2014.
Vertu’s aftersales functions reported higher customer retention rates with over 71,000 people signed up to Vertu service plans, up from 55,397 previously.
Chief executive Robert Forrester said growth in service had been fuelled by the Gateshead call centre operations and attractive pricing on aftersales packages, coupled with discounted service plans.
Service is a high margin area of the business which accounts for 8% of revenue but 39% of gross profit.
Mr Forrester said: “We believe that our number of customers on service plans is market leading.
“The service market is changing and it’s just no longer the case that non-dealership servicing is the cheapest option for the customer. We are clearly attracting people from the likes of Kwik-Fit and Halfords, or independents, because discount service plans are attractive, and actually make it more affordable for motorists.”
Earnings growth led the Vertu board to propose an increase in the final dividend to 0.7 pence per share, up from 0.5 pence in 2014. That will be paid on July 28 2015, and together with an interim dividend paid in January, the total dividend for the year will reach 1.05 pence per share, up from 0.8 pence.
Robert Forrester, chief executive of Vertu said: “The group is delivering a strong trading performance driven through its successful acquisition growth strategy and improvements in its underlying organic performance. Many businesses within the dealership portfolio in the group have the potential to achieve enhanced margins.
“We have substantial funds and financial capacity for further expansion and continue to see attractive acquisition opportunities.”
Mr Forrester also said sales of used cars had risen across the group, generating £728.9m of revenue. An influx of used cars to the market has driven down pricing, but canny stock control and volume had protected Vertu’s margins.
The firm’s balance sheet position strengthened during the year, underpinned by freehold and long leasehold property portfolio of £126.6m.
Trading outlook remained rosy as March represented the highest UK registrations month for new car this century.
In addition to its full year results Vertu also announced the appointment of ex-Arthur Andersen partner and prominent city executive director Ken Lever, who joins the firm as non executive director.
Mr Lever will replace David Forbes, a Vertu non executive director of six years, who is expected to resign in July.
Vertu chairman Peter Jones welcomed Mr Lever’s appointment and thanked Mr Forbes for his contribution during the early stages of the group.