Car dealer Vertu Motors (VTU:AIM) is in demand today, accelerating 2.6% higher to 59p on record finals and a confident outlook. Better-than-expected profits drive further upgrades, while a 30% plus dividend hike sends confident signals indeed.

Annual results to end-February from the UK's sixth biggest automotive retailer reveal adjusted profit before tax motoring 26% higher to £22 million. Revenue is up 23% to more than £2 billion, a new milestone for Gateshead-headquartered Vertu.

Stellar numbers reflect continued growth across the piece, with like-for-like sales ahead in both new and used cars. Vertu's profitable growth reflects the success of its acquisition and turnaround strategy, with improving recently-acquired dealerships chipping in and management flagging further margin improvement potential from many businesses within the dealership portfolio.

Web news - VTU - May 15

Significantly, Vertu also reports a fifth successive year of growth in higher margin service revenues. Earnings visibility is improving with over 71,000 customers on service plans, up from 55,397 year-on-year. This is important as customer retention is a key area of focus for CEO Robert Forrester (pictured below) – read our recent Griller interview with the boss here for a more in-depth look at Vertu's strategy.

CEO Robert Forrester 1

Yet another highlight is a significant and surprisingly high 31.3% dividend hike to 1.05p, a step-change in the shareholder reward demonstrating Forrester's confidence in the sustainability of Vertu's profit growth and cash generation.

Investors are also encouraged by the outlook statement, with Vertu trading ahead of budget and 'significantly ahead' of last year during March and April. In fact, March 2015 saw the highest UK new car market registrations of any month this century, while April registrations were the strongest for a decade. Vertu is outperforming and gaining share in this still-buoyant UK new car market, supported by improving consumer confidence and a consistent flow of excellent new cars and attractive finance offers from manufacturers.

Issue Date: 13 May 2015