Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Vertu Motors – there is life in motor retail

Shares in AIM quoted Vertu Motors have staged somewhat of a recovery over the last weeks rising over 200% off their lows of 10p. Although this is nowhere near the meteoric rise in share price experienced by the likes of larger peers Pendragon and Inchcape it’s nonetheless encouraging given all the misery surrounding motor retail.

Vertu hasn’t really done much wrong since arriving on the market at the end of 2006 other than choosing a poor time to grow a motor retail group from scratch. However, at least financial markets were accommodating at the time enabling them to raise well in excess of the required funds; it’s just a pity they didn’t hold back a bit longer before going on the acquisition spree!
The group’s trading update on 5th March was actually quite promising, relatively that is! Same-store used car sales rose 12% on the year between September 2008 and January 2009 and the company announced that they would meet market expectations of pre-tax profit c£3m.

Unlike their larger heavily indebted peers Vertu has a relatively modest debt burden which should have fallen further over the second half of their financial year. At the interim stage net assets were £59m or around 64 pence per share. Admittedly this includes a good dollop of Goodwill of £18.6m, however, even after stripping out the Goodwill and taking a hatchet to the property and inventory values you are left with a group seemingly trading at a discount to written down tangible net asset value.

As the shares have tumbled over the last few months the Chief Exec has also been happy to add to his holding most recently acquiring a further 94,000 at 10.5p in December 2008 - he’s done well with that trade at least!


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