Vertu Motors buys Newport-based Vans Direct for £7.5m

Automotive retailer Vertu Motors has bought Newport-based online van retailer Vans Direct for £7.5m in a deal that will be immediately earnings-enhancing.

The total consideration includes an estimated amount in respect of an earn-out arrangement rewarding an on-target performance over a two-year period. The terms of the earn-out may result in an additional payment of up to £2m in the event that future targets are exceeded.

Founded in 1999, Vans Direct reported revenue of £34.6m for the year to the end of October 2017, a gross margin of 11.7% and earnings before interest, tax, depreciation and amortisation of £1.2m.

Vertu said on Monday that the business brings "significant" know-how and accelerates the group's presence in multi-channel retailing through its high-ranking website domain. It also highlighted synergy opportunities with existing Vertu light commercial vehicle businesses.

Vertu's chief executive, Robert Forrester, said: "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. 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.

"By working with the complementary skills of the Vans Direct team and the group's existing operations, we believe that we can build a significant business which will meet the needs of a wider range of customers."

Liberum said the attraction for Vertu is the brand recognition and reputation that comes with Vans Direct, as well as the traffic that comes with the website.

"Vertu already has a very small version of the business, but has not put any significant marketing behind it. The acquisition will therefore provide a significant step forward in terms of Vertu's multi-channel presence in the vans market.

"Unlike the new car market, the vans market has been robust, supported by the growth in online delivery networks as well as a solid SME market."

Liberum reckoned that around £1.7m EBITDA is achievable on a two to three year view, given expected synergies, implying an acquisition multiple of 4x .

"We expect no impact in FY19E and circa 3% EPS enhancement in FY20E, but make no change to EPS ahead of the pre close update," it said.

At 0802 GMT, Vertu shares were down 4.5% to 34.50p.