Hungry Vertu hits the road for more deals

The company snapped up the Yorkshire-based Farnell partnership, a long-established Land Rover dealership in Leeds, Bradford and Guiseley, for £31m and at the same time announced a £50m fully underwritten share placing that releases around £40m of equity for future deals.

Vertu’s chief executive, Robert Forrester, said they expect to make further acquisitions as a result of the deal.

The Newcastle-based car dealership group, which established in 2006 with the ambition of consolidating the fragmented automotive retail sector, agreed to pay Co-operative Group Motors £31m for Albert Farnell Ltd, a Yorkshire based company that largely consists of three Land Rover outlets. The company was the first Land Rover dealer in the UK, Mr Forrester said.

The Leeds dealership won the best Land Rover dealership in 2012 and in 2011, the accolade went to Farnell’s Bradford dealership.

Mr Forrester, who is the former finance director and managing director of Reg Vardy, described the deal as the most significant moment in the company’s history after its acquisition of Bristol Street Motors led to the growth. He said they are now entering premium space as Land Rover is such a fabulous British premium marque.

He said Britain is not in recession technically and nowhere on earth is the car trade in recession as sales are up globally with Land Rover up by 36 per cent. He said: “It’s not just the Evoque, it’s also the new Range Rover launched in January which has been a great success. Farnells is such a strong proposition because it offers a great product and values customer service.”

Old stereotypes depicted by Swiss Tony from TV’s Fast Show have long gone and he said the industry cannot afford to ignore women. “They are a strong influence on 81 per cent of car purchases,” he said. “As are children.”

The company has 70 mystery shoppers with hidden video cameras who regularly go into sales offices to test out customer service.

They also employ women in the sales team as they have empathetic skills that may otherwise be lacking. He said he has a letter from a woman in Worcester who had a bad car accident and went to one of his dealerships and had a great experience.

The purchase means Vertu is now a major player in terms of turnover and the company is aiming to expand further in both premium and volume markets through further deals. Mr Forrester said there are significant opportunities in the marketplace. Having the money means they can go straight to completion.

Several new institutional investors have been attracted as a result of the placing. It will also help fund the purchase of Farnell, which Vertu said would be earnings enhanced in the first full year of ownership.

The deal had been planned and was not a distress sale triggered by pressures on the Co-operative Group. After completing the Farnell purchase, the remaining cash from the placing and existing debt give Vertu around £40m to draw on.

Farnell has a consistent record of profitability and cash generation. During the financial year ending December 31, 2012 it achieved unaudited reserves of approximately £113m and unaudited operating profit of around £3.9m.

The current operations manager at Farnell, Jatinder Aujla, will head up a new division within Vertu.

Dealership management is a crucial factor in the company’s success along with recruitment, development and retention of high performing professionals.

The directors continue to believe there are opportunities for further growth, both in terms of geography and in expansion of the range of franchises the group represents.

Making waves in motor industry

THE Vertu group has pursued a strategy to grow a scaled, asset backed automotive retail business through acquisition and consolidation of UK motor retail businesses with the potential for performance improvement.

It is now the UK’s seventh largest motor retailer by revenue.

In the year to February 28, Vertu said total revenue increased by 15.7 per cent year-on-year, to £1,259m, with like-for-like revenue up 6 per cent. During this period it sold around 95,000 new and used vehicles, opened 20 new outlets and closed 12, giving it a total of 96.

It is also closing three Iveco outlets as it exits the truck business. In March, it opened its first Volvo franchise in the East Midlands.