Vertu embarks on £3m share buyback after £10m profit upgrade

Vertu Motors has embarked on a £3 million share buyback programme and is set to resume dividend payments after upgrading its 2021 profit before tax expectations to £50m to £55m.

The upgrade represents a £10m increase on a trading update issued by the AM100 car retail PLC less than a month ago and is its third upgrade in just three months.

Vertu’s buyback scheme has been prompted by its board’s opinion that “the share price of the company for some time has traded at a discount to the tangible net asset value” and “below the intrinsic value of the business”, a trading update issued this morning (August 20) revealed.

Shares will be bought at a price of 10p between now and February 28.

Vertu also intends to resume the payment of dividends – an announcement is expected upon publication of its interim results to August 31 – after it rode the tailwind of appreciating used car values to realise strong margins in H1 2021.

The group now expects to deliver an adjusted profit before tax of no less than £50m in the six months to August 31.

Despite the buoyant trading experienced in recent months, Vertu’s trading update warned of market uncertainty in what remains of the year.

It said: “The group's like-for-like new vehicle order take for the key month of September is currently running in excess of prior year levels, however, there is a risk that well documented new vehicle supply shortages will result in vehicle deliveries being delayed into future periods.  

“As a consequence of reduced new vehicle supply, used vehicle supply may also be restricted in the coming months.

“Uncertainty also remains around the possible impact of COVID-19 from potential future restrictions and colleague absence. 

“The current UK wide labour shortages, high vacancy levels and upward pressure on employment costs remain a risk for the business.”

Vertu’s board said that it remains very confident in the group’s prospects, adding that it was “strategically well placed to capitalise on the changes and opportunities in the UK motor retail sector”.

Market analysts at Zeus Capital said: “The shares look too cheap to us even on 2023/24 EPS backed with a current forecast yield of 3.6% and trading below net tangible assets per share of 50.2p.

“We believe this update should be taken well with Vertu very well positioned to capitalise on the inevitable changes in the industry with a well-executed capital allocation strategy to boot.”

At the start of 2021, Vertu set out to harness a "big brand" marketing push to boost the profile of its Bristol Street Motors, Vertu Motors and Macklin Motors divisions.

It has completed high-proflle sponsoship eals, along with that of Channel 4's Formula One coverage, and last week chief executive Robert Forrester took centre stage in ITV's Undercover Big Boss TV series.

He told AM: “It has been extremely positive. Being on Undercover Big Boss hasn’t done me or the business any harm at all.”