Vertu goes full speed ahead on expansion

The motor company founded by former Reg Vardy executives has spent £4.9m on its second acquisition in three months.

The motor company founded by former Reg Vardy executives has spent £4.9m on its second acquisition in three months. Newcastle-based Vertu Motors has bought three dealerships and a vehicle service centre in Derbyshire and Nottinghamshire after acquiring all of the shares in Blake Holdings, which employs 200 staff.

Vertu, which raised £25m through a flotation on the Alternative Investment Market last November, funded the deal from existing resources, debt and the issue of £250,000-worth of new shares. The new shares were issued at 85.5p.

Vertu chief executive Robert Forrester said a "six figure" investment was needed to increase the profitability of family-owned Blake, which last year generated pre-tax profits of just £40,000 on reported turnover of more than £59m.

He said: "In terms of what a dealership should be doing [pre-tax profits] it is 1.5% of turnover.

"Taking it from a family-owned company to a plc, we can benefit from purchasing on a larger scale and we hope also to increase the number of cars that we sell."

The audited net assets of Blakes on December 31 was £2.3m, although this rose to £4.4m following a revaluation by Vertu of the company's three freehold properties.

The share issue was "dependent on the finalisation of the level of the net assets at completion", although Mr Forrester said yesterday he did not expect any variation to be material.

Mr Forrester, a former Vardy managing director, who formed Vertu with former non-executive director Bill Teasdale before the sale of the Sunderland company to Pendragon plc last year, said the acquisition fitted the company's strategy stated at the time of the float.

He said: "We said we wanted to buy volume dealerships, ideally with freehold property attached to them, where we could use the brand name to create a significant motor retail group, and get benefits in terms of purchasing, and this falls very much within that."

Mr Forrester said Vertu would increase the ratio of used cars Blake sells relative to new car sales to guard against any slippage in new car sales brought on by a further hike in interest rates expected as early as today [Thursday].

He said: "Both [used and new car sales] are buoyant at the moment. The March market was up, and probably surprised most commentators how strong it was.

"There is a definitive relationship between interest rates and new car sales, so we will just have to wait and see, but we will probably see some softening."

Mr Forrester said the company was scouting for more dealerships and hoped to secure at least one more deal before the end of 2007.

He said: "We are evaluating opportunities all the time. The strategy as a group is to acquire further businesses."

Vertu's share price fell 3p, or 3.6%, by yesterday's close to 80.50p.

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