Vertu Motors plc (VTU) Earnings Call Transcript

Good morning, and welcome to the Vertu Motors plc interim results for the 6 months ended August 2026. My name is Robert Forrester, Chief Executive, and I'm joined this morning by Karen Anderson, our long-standing CFO. If we move to the investment case, first of all, in terms of Vertu, I think our investment case is very clear. The results announced today demonstrate this. We are a scaled operation with 5% of the U.K. automotive market, one of the biggest brands in the U.K. and with significant capacity for future expansion to add value and future returns to shareholders. We have excellent scaled relationships with our growing number of vehicle manufacturers. We are having growth opportunities presented to us, which will allow future investment. Our management has capacity for growth, especially having appointed 2 managing directors at the start of the year. And our systems at technology is leading edge and scalable. The business is actually underpinned performance-wise by our aftersales business, which shows both resilience and growth. It's aided by nearly 200,000 customers, who are either on service plans or have motability service contracts. We have customer experience levels higher than the sector average, and that promotes retention. The last 2 years have seen a real focus on cost optimization. This included greater efficiency through technology gains, but also increasingly using data to make sure we've got optimization and marketing spend and then we made good decisions. The Board is focused on shareholder returns. Our portfolio is reviewed to deliver long-term returns, not short-term wins. We are here for the long term. We have a very disciplined capital allocation approach. We are pivoting towards Chinese brands, but with a very long-term strategy. That process will continue. Our buyback program has aided earnings per share and tangible net assets per share. And long term, we have purchased 22% of the company's equity back. So let's have a look at an overview of where we are. Today, we announced the third profit upgrade to this current year's profit numbers. The half year results represent 19% in adjusted profit before tax. We've also delivered a strong September when we get to the current trading and outlook section. Our cash generation has been very, very good, a 94% conversion, and that's helped to deliver a better-than-expected net debt number below GBP 55 million. Our net tangible assets per share of nearly 81p is a record and shows that our balance sheet strength. In terms of the wider sector, there is plenty to talk about this morning. The zero emission vehicle mandate has drained automotive profit pools, but is now undergoing consultation. Chinese brand market share has been spectacular in terms of growth. 25% of retail registrations in September were represented by Chinese brands, and our portfolio mix is clearly starting to reflect that. Scale is critical, and I think we have scale. Small dealerships and small regional groups are finding it far more difficult to get things working. We are in the super group bucket. I think $5 billion revenues and 5% market share, there is a path now to certain groups getting to 10 billion revenues, 10% market share. Technology and AI is certainly going to aid those scale economies. And manufacturers are now looking for efficiency in their retail partners to be super efficient and to deliver for them. And I think that stands us in good step. So let's turn to current trading and the important month of September. Why September important month? It's the second biggest profit month of the year and the biggest in H2. I'm delighted to report we had a strong September on the back of a very strong quarter in terms of new retail car sales. We hit the manufacturer targets at a high level, and that gave us the bonuses dropping in September. Now the new retail car market, the results have already been published by the [ SMMT], exhibited strong growth in registrations, and it's probably worth spending a moment as to why that is. The manufacturers who saw the fleet retail mix move last year to 65% fleet, have been working hard with better offers to stimulate the retail market, and that has paid off. Registrations have been bolstered by a high growth of Chinese brands but also by a substantial increase in preregistration activity where cars get registered by retailers and then sold as used cars. We now have nearly 20 Chinese outlets within the group and with plans for more, which I'll outline. We are still, as we've said for a number of periods, underweight relative to the market in general, that's not necessarily a bad thing. Motability, as predicted when we did our finals, has been very strong due to the timing of renewals, and we've performed well in that channel. And in all channels, we've had a real focus on pricing discipline to manage volume and margin to maximize profitability, and I think that is exhibited in these results. Indeed, if you ignore the JLR cyber attack effects last September, every channel has seen increase in gross profit in respect of that impact last year. profits have risen year-on-year. And this is the biggest month in our H2. So when we turn to look at the outlook, it clearly gives the Board some confidence. The Board now anticipates full year results to be ahead of expectations. And this is the third profit upgrade we've delivered this year. We are very focused on self-help initiatives to continue this delivery of results. The launch of Vertu cars by -- value cars by Vertu, where we look to progress market share in old used cars continues and is doing well. We are now launching a new initiative of Sharia Law-compliant used car finance to grow our market share in some of our core territories with strong muzzling populations. Our new sales executive packages have driven performance and we're now going to extend those into the premium side, that's giving us greater retention of sales teams. We're also looking to enhance our technician packages in the next month to gain more resource, to drive our aftersales profit and to give us higher efficiency. In essence, the business is in good shape, as can be seen by the fact that last week, we won 2 National Autotrade awards, including Retailer of the Year for the second year in a row. I will talk more about the [ ZF ] mandate shortly, but I think it will be wise to factor in much relief from the consultation in the next few years. I think we'll see some short-term relief, but the targets for 2030 will still be very high. We are seeing, given the pressure on cost and [ as et ] mandate, more growth opportunities being presented to us each week, smaller businesses are tending to struggle. And pricing, we feel is moving in our direction. So we will assess these opportunities against our investment hurdle [ rates ]. We turn to strategy. The group strategy, which is outlined here, has been presented before and remains very consistent. The sector is moving fast, and our strategy is [ flexible ] enough to allow us to respond. We certainly have the desire and the capacity to grow in terms of outlet numbers of franchise dealerships, but also in related ancillary businesses, which bring the wider group synergies. So you will see growth. We are implementing technology consistently to reduce cost to be quicker at making the business more efficient and make better decisions. These initiatives are much better for customers. We are enhancing our customer speed of response, but also quality of response. It's also fair to say that the advent in the last 9 months of AI coding is a game changer for our development team. However, we're still a people business. People buy of people, and I'm pleased to report we've got a strategy that gives us highly trained colleagues were motivated and at high levels of satisfaction. That, in turn, drives [ both ] sector levels of customer experience. It won't be a surprise when I discussed the evolving competitive landscape in new vehicles, that there are two somewhat linked themes. One is the electrification of new vehicle sales and the other is the growth of Chinese new entrants. So let's turn to electrification, first, which is really around the government zero-emission vehicle mandate regulations mandating sales of battery electric vehicles. This is a well-known subject. Clearly, we've covered it before. Let's just reiterate this year's targets are 33% for cars have to be [ batched ] electric vehicles and new car market, 24% for vans. This is then backed up by fines on the manufacturers for being above target of GBP 12,000 per car and GBP 15,000 per [ ounce ]. This is powerful stuff. Now the sector will not hit the battery electric vehicle mix on cars this year. I think we'll be around 25%, 26% target 33%. In fact, the industry will not hit last year's target this year. The target in 2030 is currently at 80%. This is putting massive pressure on manufacturers and on retailers and everybody within the automotive world because it clearly offsets supply and demand and leads to massive discounting to try and stimulate battery electric vehicle sales. Now the government is currently consulting on these targets, which sounds in itself great, and there's something to be welcomed. The lowest 2030 targets in the consultation are 50% in 2030 for cars and 40% for bonds. They are still very stretching. So I think we can see continued pressure on the sector if these targets are -- land, and they might not land. The actual targets coming up, the consultation may be higher. I suspect 2027, we'll see some short-term relief from where we might have been, but I think this is not a [ penalty ] of this consultation. Now in terms of the Chinese, and you can't pick up a newspaper any day of the week and not see an article on the growth of Chinese brands and discussions about tariffs, et cetera; they did hit 25% of the market in September. That excludes Volvo, which is owned by Geely, but we don't class as Chinese. Why are we seeing this rise in Chinese brands? Well, the Chinese car market is depressed, and there's currently around 20 million surplus cars produced every year in China. That's the root cause. The U.K. has the lowest tariffs in the Western world with regard to Chinese battery electric vehicles. But also the Chinese are very adept at making excellent plug-in hybrids, never mind battery electric vehicles. So any tariffs the U.K. government imposes may slow down the Chinese onslaught. However, they have a major cost advantage, some with their technology advantage, so it's unlikely to stop them in their tracks. The U.K. government is currently under pressure to put in place battery electric vehicle tariffs, and that may allow the European Union to let U.K. car production into the made in EU protection measures that have been put in place, that is not for certain. So tariffs would change the playing field with regards to the incumbent manufacturers and the Chinese. As an aside, the Chinese government has also announced in the last couple of days that from April 2027, their export VAT rebates will be reduced from 13% to 9%. And that, again, lower support levels for Chinese manufacturers exporting. And therefore, we could see increase in prices of Chinese cars coming into the U.K. Our view overall is that this could slow down the Chinese, but is unlikely to halt the growth of different Chinese brands taking market share. Of course, it's also true to say that if the U.K. ends up with tariffs on battery electric vehicles, that will make money for -- the overall industry hitting the government's mandate targets even harder. I should point out when we talk about battery electric vehicles, we are not negative on battery electric vehicles. In fact, Vertu has outperformed on the sale of battery electric vehicles for the past 3 years. And in this period, our battery electric vehicle retail sales grew 126%. So given that sort of backdrop, what are we doing about Chinese brands? And the answer is we are actively engaging with Chinese brands. In fact, it's been one of our core occupations for the past 12 months. I actually believe the Chinese brands [ Vertu ] is a must-have partner in the U.K. because of our scale and our ability to deliver volume, property and indeed, customer experiences. As this table shows, we've made good progress in terms of introducing new brands and introducing an increasing number of Chinese outlets. By mid-2027, we will have at least 15% of our outlets being Chinese. Again, that excludes Volvo, where we are also strong. That number may indeed be higher. What we're actually seeing is Wave 1 partners of the Chinese who came in 2 or 3 years ago, actually, in some cases, being replaced, some cases, by [ yours ], where they fail to deliver on property investment, operational excellence or indeed a solid relationship, and we stand to benefit as the shakeout comes in the first wave of partners into second wave. So the Chinese brand strategy is clearly a key part of what we've been doing strategically over the past 6 months. However, there are other strategic actions that we've undertook, which largely fall under the controlling the controllables banner. I've mentioned technology quite a lot already, but I think it's worth just focusing in a bit more detail. Digitalization, including AI adoption, is critical if the business is to be efficient and to deliver scale economies. Smaller players cannot adopt this strategy. I'd just like to go through 3 successful examples of where we've been implementing technology in the past 6 months. Opportune has been developed with our telephony partner to provide a sales customer experience and that is much better and to enhance sales conversion. By using large language models of 40,000 inbound phone calls linked to sales data and linked to our training material, we can now predict after a phone call has been received in the sales contact center, the predictability of making a sale. And the salespeople in the dealership get, "these are the three things you need to talk about. I wouldn't mention this very often. This needs to be in the video." That is moving our sales conversion up. And we've been piloting in a number of dealerships, as you can see here, and it's so far, given a 12.7% increase in conversion. This is not a small thing. So we are now clearly rolling it. [ VMAX ] a personalized dashboard where each salesperson can see their earnings real time, how much they've earned months to date, where they've earned it, where they've missed out what the next transaction is worth. And it uses gamification around successful KPIs to stimulate the outcomes we would like by effectively having a dashboard, which is in place in our volume dealerships, and it's had good effect. We're now going to launch it with new sales packages into our premium dealership. The final, third area is an area of the business we don't often talk about, which is our past departments. So we've used a dashboard again for each parts department with lead tables and gamification. So for each KPI, you can earn points, which then puts you into a league table. And that has led in the last 3 months since you've implemented it into a significant improvement in controls and efficiency on the nuts and bolts literally of running a part department. I also highlighted a few low-level frauds and some poor practice and it's certainly doing its job. This is good use of technology to make our business better. When we spoke at the finals a few -- 6 months ago. We discussed the launch of value cards by Vertu. This was an initiative to grow our market share in the car age of 7-year old cars to 14-year cars, not something that we'd put much attention to previously, but is a growth area. And with the cost-of-living crisis, it's clearly in a sweet spot. Now we have implemented this on the first of April, and it's been a big success. We actually changed a lot of things, how we prepare the cars whether the cars can be moved across the group, our finance products, our warranty products to make it easier to sell these cars, but also to make them more profitable. And we're delighted with the progress. 1,400-plus more cars sold, stronger margins in this stage cover than we previously had. And when you look at the margins, our normal younger used cars have a 6.9% gross margin. These cars had a 13.5% gross margin. So it does augment the margin as we expected. They also sell quicker. Now there is more to come as we focus on this and as people get used to it. The next initiative is to launch Sharia-compliant used car finance, where we can effectively sell cars with a counterparty on finance, fully compliant with U.K. and Sharia law, no interest on the loan. So this will enable us to take customers from that growing minority and to deliver a main dealer experience, which we think we can take market share. For all the talk of technology, the world is still populated by people who buy off people. And I'm delighted to say that we've made good progress again in this area, and we've got good plans to make more. There is definitely a benefit in a stable sales team. The graph on the left-hand side shows that this industry has a high level of sales executive turnover always have, particularly in new starters within the first 6 months. but we've seen a step-change in our sales team stability, with turnover declining from 53% to 39% in the last 18 months, which is a major change. Why? Well, we've adopted new sales executive packages. We've been very good at selling cars, which are always good if you're a sales executive. I think we've tightened up on recruitment. So I think there's a number of reasons. But this could have quite a material impact going forward in terms of customer experience, sales retention, our overall effectiveness. Turning to technicians, this is clearly going to be -- it's come in and out in terms of being an issue, but there is a long-term issue around retirement of technicians versus a number of prices coming through in the industry as a whole. We're putting a lot of apprentices into the business. But we want to get on the front foot and make sure we've got the right level of resource to go after sales business. So in November, we are going to launch revised packages, particularly around new bonuses to drive efficiency. We expect a benefit from that and to enable us to recruit more people and retain more people to grow after sales. Overall, I believe we've got a committed team of colleagues. We drive and really look at colleague satisfaction in a lot of detail. We have very high levels of colleague satisfaction and then that translates into customer satisfaction. And this is critical not only to drive retention of customers, they don't come back and [ eat ] product experience. And you can see in sales, compared to the manufacturer franchises with 38% of that of the national average. In service, we're 6% higher natural average, and our used car Net Promote Score is absolutely excellent. This clearly helps us win awards like the Autotrader Rewards, but customer satisfaction scores are also vital in terms of making sure we deliver for manufacturers and able to buy new dealerships, but also to drive search engine optimization and AI search, and we have got excellent Google and Trustpilot scores, which help us drive that web engagement. So I'm now going to pass to Karen, who's going to look at cost reduction and control.

Thank you, Robert. The group came into the financial year, having completed the second consecutive year of targeted cost reduction programs. These programs, which included some dealership closures have kept cost growth in the total group to 2.1% in the period and have driven a reduction in operating expense as a percentage of revenues. Salary costs, as Robert said, this is a people business, so it's no surprise really that salary costs remain the largest single cost of the group. And these costs rose by 3.9% or GBP 5.4 million, with this explained by higher sales commissions and performance-related bonuses to colleagues based on the improved financial and sales performance we have delivered. The headcount savings delivered as part of the cost reduction programs offset the increased costs of company National Insurance and of national minimum wage as we expected they would. The improvement in sales performance also impacted on marketing costs, which include fleet introductory commissions. The increase in fleet sales volumes increased costs in this area. In addition, the group also delivered 2 new group-wide new vehicle sales events in the period with such events not occurring in the prior year. Cost control clearly remains a priority for the group, and we are taking further proactive action actions, sorry, to mitigate cost headwinds. For example, the deployment of technology to increase efficiency installation of building management systems to reduce energy costs and increasing the use of data and sales attribution to improve marketing cost return on investment. If we turn next to another key element of our strategy, which is returns to shareholders, the group continues to seek a balance between investment and growth targeting returns in excess of weighted average cost of capital to deliver on the group's strategic objectives and shareholder returns. And we have a pipeline of potential acquisitions currently under consideration. A key element of the group's approach to capital allocation remains pruning. You've seen the impact of this actually already on the cost side. and the group maintained its discipline in reviewing dealership operations regularly to ensure each generates an adequate return on investment and the contribution to group profitability. In terms of investment in organic growth, the group anticipates net capital expenditure of GBP 21.6 million in FY '27 full year, with this spend, including the investment in additional Chinese manufacturer outlooks that Robert has outlined. The group has had a program of share buybacks in place since FY '18. The group spent GBP 1.8 million in the period on share buybacks and since the start of these programs, has bought back almost 22% of our issued share capital. We announced a further GBP 12 million share buyback program back in March for the FY '27 financial year, and we have GBP 10.2 million left to deploy under this program. The Board are committed to continue share buybacks at prices up to 105% of tangible net assets per share, around 85p a share. Finally, we proposed an 11% increase in the FY '27 interim dividend to 1p per share, and this will be paid in January. Turning now to the financial performance in the period. Slide 17 highlights some financial highlights for the year. Strong organic growth drove revenues to a new record. And like-for-like growth in gross profit was delivered in all channels. as well as strong cost control meeting exhibitors. Adjusted profit before tax, therefore, increased 19% to GBP 23.8 million with a nonunderlying profit on sale of surplus property, driving PBT to GBP 24.2 million. That's a 24% increase. I was delighted with the strong conversion of operating profit to cash driving the low level of net debt at the end of August, which frankly exceeded my expectations. And this was thanks to better-than-anticipated fleet sales cash flows around the [ per ] event. If I turn over now to Slide 18 is a summary of our group income statement for the period. Group revenues grew by GBP 86.5 million, with actually a growth of GBP 106 million delivered from the group's core dealerships. New and acquired businesses added GBP 29.5 million of revenues, while site closures reduced revenues by GBP 49 million over the period. Gross margin was stable at 11.2%, and costs as a percentage of revenue declined to 9.9%, increasing together operating margins to 1.3%. And the group's interest costs reduced by GBP 800,000 compared to last year, and this was driven by reduced charges on manufactured new vehicle funding, and this was due to a reduction in the level of funded inventory held by the group. Adjusted profit before tax, therefore, rose by 19% to GBP 24.2 million. Nonunderlying income actually represents a profit on the sale of surplus property, partially offset a little by some site closure costs. If I turn over again now to Slide 19, we're presenting our bridge of the group's adjusted profit before tax compared to last year, the last prior-year period. Core group gross profit increased by GBP 10.9 million over the prior period, with increases in all 4 segments of new, fleet, used and aftersales. The group's resilient and high-margin aftersales operations generated an additional GBP 3.9 million of gross profit in the period. New vehicle sales generated an additional GBP 3.4 million of gross profit, which has been very welcome following 2 years of decline in profits in this channel. Used gross profit generation in the core group also rose, again, aided by the success of the value cars initiative. As anticipated, core group operating expenses grew year-on-year, with much of this increase driven by the improvements in financial performance, which have driven increased sales commission and performance-related bonus earnings for colleagues, as I've just outlined. Turning then to Slide 20, the group's balance sheet is very stable and strong, underpinned by a freehold and long leasehold property portfolio of GBP 327 million, prudently carried at a historic depreciated cost. A recent desktop valuation by [ Knight Frank ] indicates support of property values at current net book value with just over half of the group's property portfolio unencumbered by mortgages. Vehicle inventory reduced, with this reduction arising in new vehicles. These are largely funded by manufacturer facilities. And therefore, the reduction had little cash impact. but did obviously result in reduced stocking interest costs being paid. Tangible net assets per share increased again to 80.8p, and this is a new record for the group. Slide 21 summarizes the group's debt facilities and net debt at the 31st of August. This week, the group has agreed the renewal of its bank facilities, a new facility comprising a GBP 70 million revolving credit facility for general commercial purposes, together with a GBP 50 million accordion has been put in place. These new facilities replaced the old GBP 93 million acquisition facility. The same counterparty banks, namely Barclays, Lloyds and [ NatWest]; have remained in place. And the facilities are for an initial term of 3 years, with the option for the group to extend for a further 2 years. The new facility reduces the margin payable by 0.25% and increases flexibility, allowing the group to repay and draw funds as cash and working capital fluctuations allow. We anticipate the annualized finance cost savings of up to GBP 0.5 million are anticipated as a result of this new facility in terms of the reduction in margin, reduction in limit and our ability to flexibly pay back. It's worth remembering, though, that approximately 60% of the group's net debt remains long-term property back to mortgages with no covenants. Slide 22 highlights the group's cash flows. The group generated a free cash inflow of GBP 17.5 million in the period, with an excellent 94% conversion of operating profit to cash flow from operating activities. The working capital movement represented an GBP 11 million outflow in the period, driven by lower vehicle deposit levels and an increase in trade receivables driven by the growth in fleet sales in the period. Sustaining capital expenditure of GBP 5.7 million was spent in the period, with this partially offset by proceeds on sale of surplus properties and other assets of GBP 1.6 million. A further GBP 1.2 million has been spent in the period on capital projects, which enhanced the operating capacity of the group and freehold and business acquisitions. Net debt at the end of the period was GBP 54.2 million excluding lease liabilities, representing a GBP 7.1 million increase -- decrease on FY '26. I I'll now turn back to Robert to cover some of the trading and operational elements of the period.

Okay. So both of each of the key segments in a little bit more detail. If we turn to new vehicle sales performance, and that includes vans and fleet; the market overall for new vehicles, but particularly actually in the retail market has been surprisingly strong in the past 10 months really. And we've seen a rise in retail registrations versus fleet after fleet got to 65% of the market, a real high watermark historically 6 months ago. Historically, the market between retail and fleet has been about 50-50. So why is the retail market being so strong? And I think there are a number of answers there. If you go 10 years ago, the average age of a car in the U.K. was 7 years. It's now risen to 9 years, 10 months, big increase. So you could argue there's a lot of people who are looking to replace their cars if an offer is affordable. The manufacturers have been making new car offers far more affordable than in the past 2 or 3 years. And in addition, the Chinese manufacturers have come in with very competitive monthly payments and have probably taken some used car customers out to the market and put them into the new retail market. On top of this, we've seen a far more normalized market in terms of levels of preregistration. Preregistration is where a retailer buys a car from the manufacturer in new car and then sells a delivery mileage as a used car. So it bolsters registrations, you don't see the same in new retail sales. So I think that's why the market is up. We've actually underperformed notionally against the market data. But of course, we don't have preventation registrations in our sales data, and we've hit manufacturer targets at a high level. So albeit on a headline basis, we've lost share, we're actually quite comfortable. So we've got a rising market. Motability was particularly strong and is actually accelerating as those contracts come through. If you actually look at sales prices of vehicles, and we've got new retail motability and then we've got fleet and fans here. You can see sales price is actually coming down for a variety of reasons. Car sales prices have come down because we've got now cheaper battery electric vehicles, both in terms of smaller vehicles and the discounted vehicles to hit the Monday. That's clearly having an effect. In the van market, we've seen a shift to smaller bands away from larger vans for sure. And we've seen more car fleet as opposed to Van fleet. Vans are clearly more expensive than cars. So therefore, the actual average sales price has come down by over GBP 2,000. The key thing for us is clearly a combination of volume and margin, and I'm pleased to say that our margin percentages in car retail has gone up. That's pricing discipline. We are very aware that we need to generate profitability and balance volume and margin. We don't want too much volume with no margin clearly or the other way around. So we've been very clinical actually in trying to balance that. And we've also been helped by agency where Honda and Mini went into the agency model where we don't have revenue, actually, we just got a handling fee. So that has augmented our gross margin percentages. In terms of fleet and commercial vehicle margins, actually, they reduced, but that is entirely due to the fact we've done a lot more fleet car. We've taken a lot of market share in fleet car as opposed to Vans. And I think overall, a margin of GBP 984 gross profit per unit is actually very respectable. So reason we complicate your picture, we have generated more gross profit. We turn to used vehicle sales, much bigger market than the new vehicle market quite clearly. We've now had 2 periods of like-for-like growth in our used vehicle volume. That's despite this thought that Chinese manufacturers on new cars have taken some used car business and put it into new cars. And I think why have we managed to grow like-for-likes in that environment, the value car initiative has clearly given us access to a new market, and we've done well with that extra 1,400 cars actually in growing volumes, it's also enhanced margins, as you saw. Now the margin expansion I was actually envisaging will be greater. I would expect to see greater margins in used cars as a result of value. And that's because that effect has been offset by weakness in values of large premium. And I think that's for two reasons. One, the escalation in fuel prices always seems to knock large petrol diesel SUVs, they tend to go down in value in that period. And the manufacturers have been really adopting an aggressive stance on new vehicles which has an effect on residuals. So I think I was expecting slightly more in used car margin than we actually delivered for good reasons. If we turn to aftersales, this is clearly a major high-margin and growing profit generator for the group and has been for many years. gross profit overall was up GBP 3.9 million across the channels in the 6 months that we're very pleased with that. Service represented the biggest increase, even though I think we were a bit resource constrained on technicians, which were about to fix. The vehicle health at process, the Vertu Paylater process has added real value to our service operations, growing revenues and margin. Interestingly, since we started Vertu Paylater, which I think is 2 years ago, We've actually lent out GBP 60 million on the pay later product on a 3- to 5-month basis, but we are running with excellent recovery profiles, and it's really helping boost profitability. Our parts businesses saw strong revenue growth, actually mainly in the trade wholesale share where we have a real expertise and resource in trade parts and those businesses did really well. In accident and smart repair, fairly complicated here, actually, accident repair saw a reduction number of accidents as technology continues to reduce major accidents. But we saw a nice increase in our smart repair business of actually repairing alloy wheels where we -- in our sales department, sold a [ Tindel ], repair insurance policy, and that's reasonably good margin. So you can see the margin enhancement in accident smart repair 1.4% of. We don't often talk about petrol forecourts. We have 1 petrol for call, an excellent [ Petrofin witness ], if you're ever passing. And interestingly there, you can see a 33% increase in revenue. That is clearly higher fuel prices coming through. You can see it in our numbers. So final slide for me. I think the group is very well positioned. I think we've got real scale, and that gives our group a competitive advantage over much of the sector. We are in top 4. Many outside of the top 4 are struggling. We have a balance sheet with management and technology and strong manufacturer relationships to grow and grow with significant additional shareholder value going forward. We are in a great position. We have a winning team, and I think today's results are witness to that. Thank you.

[Operator Instructions] Our first question is how profitable are Chinese brands compared to the established franchises? Are they the biggest opportunity you've had in years? Or are there a risk?

It's a good interesting question. Thank you for the question. It's a relatively complex answer because actually, if you look at how a dealership operates, it operates with new cars, fleet, used cars and aftersales. And clearly, if you have a new start-up Chinese brand, it has no aftersales at all. And for the group, 9% of our revenues are aftersales with 44% of our gross profit. So one answer is if you just bought a building, put a Chinese brand in it, you would absolutely blow your brains in, to be honest. However, our strategy has been to seek to put Chinese brands either multi franchise alongside a traditional brand, but always seeking to keep an authorized repair a contract for an aftersales traditional brand in the back end to give us tough sales contribution. If you [ own ] the question down to what are margins like on new retail vehicles, Chinese brands profitability is very similar on average to a normal franchise, a traditional franchise. So I think long term, profitability will, from one of these businesses would be very much akin to a traditional historic franchises. In relation to whether it's a massive opportunity or a massive risk, as we move things in life, it represents an opportunity under risk. We've got to decide which brands we invest in. Some of those may work out, some of them -- those may not. And every time a Chinese operator takes a percentage of market share in the U.K. clearly, the remaining portfolio, which is the vast majority at the moment, potentially suffers. And I think the strategy we've got of multi-franchising of continuing the traditional manufacturers aftersales in the same building is a pretty good hedge. And actually, we see the good long-term returns coming out of Chinese franchises once they actually did up after sales. So I hope that sort of answers the question.

Thank you, Robert. Next, we have how are you turning EV growth into better profits?

I don't see why a change in powertrain of electric vehicles would yield higher profits. I think the profitability on the sales side of an at vehicle or a plug-in hybrid or a petrol or diesel, I don't sense any great difference there. I think in aftersales, that's actually quite nuanced. I think there is good evidence that a simpler electric-only model probably means there's less parts to go wrong, less wear and tear on parts, et cetera. So you could see aftersales revenue decline. However, and said that, we'd be fairly optimistic in an electric vehicle environment, especially with the complex technology in modern cars, that we'd see retention actually going up. So, so far, so good. And let's be honest, electric vehicle adoption and impact on the vehicle park is going to be very, very slow, nowhere near what the government thinks it is. The 42 million vehicles in the park. I think it's a long time before we see our last diesel or petrol car coming through the workshop. And we should also remember that a plug-in hybrid actually has 2 power range going on. So lots of things can go wrong and lots of things have wear and tear on. So I don't think the premise of the question is actually correct. The EV represents this massive opportunity. I don't actually see that. But neither do I see it necessarily as a massive threat.

Thank you. And on that topic, are more customers choosing EVs because they genuinely want them or because of manufacturer discounts?

Another good question. And again, the world is complicated. A slight variation on the question would be, is higher diesel and petrol prices leading to an increase in battery electric vehicle and plug-in hybrid sales? I think logic would say yes, it is true. But it very much actually the fastest growth growing powertrain is actually plugging in hybrid not [ baseliner ] vehicles. So it's not just all about [ batch ] electric vehicles. What I think the question might be getting effectively is the government's policy of the Zero Emission Vehicle [ Monday ], which sets unrealistic targets in terms of mix of battery electric vehicle sales as a percentage of new car or a new van market is leading to seismic manufacturer discounts to avoid fines. So for example, this year, the industry is on around 25%, 26% [ by ] electric vehicle mix. The target for this year is 33%. Bear in mind the target for 2030 is 80%. And the manufacturers, by their own organizations calculations, are discounting about GBP 5 million a year to stimulate [ Bachelet ] vehicle demand. So whereas there is certainly a group like electric vehicles, there are others who are being stimulated into buying a battery vehicle because the manufacturers are deeper discounting. So there is definitely some truth in that. And clearly, you could have a long debate with yourself around what's the impact if the U.K. imposes tariffs on Chinese battery electric vehicles, for example and how does that affect the uptake of bus-related vehicles and indeed adherence to the zero emission vehicle Monday.

Thank you, Robert. Our next question is, could you please comment on new car warranty revenue? Is this significant? And for that, how do new brands compare with established brands? .

Okay. I'll try and understand what the question is. The question is how much [ money ] due from new vehicle warranty. Well, we don't sell new vehicle warranties. The car comes with a new vehicle warranty as opposed to in used cars, where we've actually made money selling warrants, the revenue stream comes actually in the aftersales business where the car goes wrong within 3 or indeed some warrant is now 8 years. And then that work comes into our workshop, we undertake the work on health of the manufacturer under the warranty and then the customer goes home happy having not paid anything. And that has always been a material part of aftersales. That is one of the benefits of being franchise retailers as we get that warranty work and that is continuing and that will continue. In terms of electric vehicles, they come with warranty on the batteries, can be 8 years, probably 8 years in most cases, actually Chinese manufacturers have warranties, so nothing really changes on that. The only thing I would say is that it can be quite lumpy. You can get period to the manufacturer where you get big amount of recalls, then it dissipates, you can get significant warranty issues on particular endogens, and then it [ data ]. And I don't think any manufacturer was immune from those periodic increases in warranty, but warranty is important as a revenue stream and it's a high-margin revenue stream.

Thank you. Our next question is you've bought back over 20% of the company's shares since 2018. Has that made much of a difference to shareholder value as you'd hoped? .

I think it has, yes, we like to strike a balance in terms of capital allocation between our objectives to grow and our strategy to grow and returns to shareholders. And I think it's an important element of return to shareholders, along with dividends. It helped enhance earnings per share because the number of shares that we're actually dividing your earnings has decreased. It's helped tangible net assets per share. We've bought them back at an average of 56p actually, which is well below tangible net assets per share. And the main thing there is, obviously, we couldn't buy additional assets at so much discount to tangible netr assets per share. And at times where price aspirations in the market for people selling dealerships have been very high. It's been a good way to deploy capital. And we've done it whilst maintaining low gearing. So we haven't taken risks with the balance sheet to do it. So no, I'm quite happy with the buyback program. But it isn't a massive racy offer to buy lots of shares. It would just keep ticking away in the background, and I think does add value.

Thank you, Karen. Our next question is, what would an acquisition need to offer for you to pursue in today's market?