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Vertu Motors expands in vans with £7.5mln acquisition of South Wales-based online retailer Vans Direct

The automotive retailer said it expects the deal to be immediately earnings enhancing and it sees synergy opportunities with its existing light commercial vehicle businesses
Van
For the year ended 31 October 2017, Vans Direct reported revenues of £34.6mln, a gross margin of 11.7% and underlying earnings (EBITDA) of £1.2mln

Vertu Motors PLC (LON:VTU) is paying £7.5mln to acquire Vans Direct Ltd, a well-established online retailer of new vans based in Newport, South Wales.

The automotive retailer, which has a network of 125 outlets across the UK, said it expects the deal to be immediately earnings enhancing and it sees synergy opportunities with its existing light commercial vehicle businesses.

READ: Vertu Motors slides as profits dip amid pressure from weak pound and emissions regulations

The group said the Vans Direct business, founded in 1999, has built a successful online, van retailing business, which has flourished following the appointments of Jane Pocock as managing director and Richard Simmonds, as operations director, in 2009. It added that Simmonds will be joining the group and Pocock will remain a non-executive director of Vans Direct following the acquisition.

For the year ended 31 October 2017, Vans Direct reported revenues of £34.6mln, a gross margin of 11.7% and underlying earnings (EBITDA) of £1.2mln.

The company said the initial consideration of £7mln being paid for the business includes goodwill payment of £6mln, together with estimated net assets of £1m - including cash of £0.6mln – and has been settled in cash from the group's existing resources.

It added that the total consideration, estimated at £7.5mln, includes an amount in respect of an earn-out arrangement rewarding an on-target performance over a two-year period.

Robert Forrester, Vertu Motors’ CEO commented: "This is an exciting development in a growing space, which is synergistic and parallel to our core motor retail business and which strengthens our multi-channel offering.”

He added: “We expect Vans Direct to generate an earnings stream with higher gross and net margins than those typically earned by the Group, and we believe that the future growth prospects for this new business are significant.”

Shares rally; Liberum repeats 'buy'

In afternoon trading, Vertu Motors’ shares had recovered from earlier falls to gain 2.2% at 36.90p.

In a note to clients, analysts at Liberum Capital reiterated a ‘buy’ rating and 56p price target on Vertu Motor shares and said: “We maintain our view that Vertu is well positioned to consolidate the market, with a strong track record of acquisition integration as well as plenty of balance sheet firepower.  

They added: "Any turmoil in the market should provide opportunity for the strongest. The timing of this acquisition from what is typically a cautious management team, points to confidence in the strategy and the resilience of the model.”

 -- Updates share price, adds analyst comment -- 



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