7 minute read
Interview: Robert Forrester
Vertu Motors CEO Robert Forrester wasn’t exactly backward in coming forward during an in-depth chat with James Batchelor.
It goes without saying that to be the chief executive of a successful and hugely respected dealer group, you have to be tenacious.
Being outspoken and forthright aren’t a prerequisite, but that’s exactly how you could describe Robert Forrester. The 50-year-old chief executive of Vertu Motors plc – a company that includes the illustrious Bristol Street Motors business – has character with a capital ‘C’.
‘I’m fairly outspoken on this subject, but you have to give customers what they want,’ says Forrester. He’s speaking to me on the day when Vertu has issued a stunning interim trading update with record profits for the first half of 2021 (see panel), and the talk has turned to Cazoo, the purely online used car retailer.
‘I was listening to the radio this morning and I heard a Cazoo advert. They are clearly spending millions and millions and millions of pounds. I mean, you could almost name the football club they aren’t sponsoring and it would be a lot easier.
‘However, when you look at the economic reality, we have a conversion ratio in car sales of about 30 per cent – so we convert about 30 per cent of inquiries. Online e-commerce – these are their numbers and actually mirror our numbers – has a conversion ratio of point eight of one per cent.
‘So, if you go and spend millions on marketing and you get 100 customers at the top of the funnel, you will sell not one car – because you can’t sell point eight of a car, actually, so broadly let’s call it one. Now, you’ve got to spend a lot of money to sell one car. And that doesn’t look like a good business model to me.’
He adds: ‘I think we’re pretty good at pure online retailing. We’ve sold 681 out of 50,000 used cars. There is no point [Cazoo] having dealerships dotted around the country if they don’t like people to visit them and do test drives – that’s what the customers want. You can go down this online route all your life, but the bottom line is you’ve got to give what the customer wants. Customers want a test drive, particularly with a change of powertrain like electric cars.
‘I think the world’s going to be quite interesting, because I think we’ll see a complete conversion of the online experience and the offline experience – and we will make that completely transparent.
‘But I think you’ll see the online operators becoming exactly the same as bricks and clicks, test drives, you know – online/offline. I think it’s going to be very interesting – sit on
VERTU MOTORS
Position: 6th 2019 turnover: £3bn 2019 EBITDA: £40.7m ROS: 0.6%
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the sidelines, open your sandwich box and watch.’ Forrester also explained how he feels there are some real advantages to being a traditional franchise retailer – and that’s support.
‘We are backed by global brands,’ he said. ‘I was watching telly last night and an advert for a Mercedes EQ came on. Now this is a good thing, as it drives traffic into our Mercedes dealerships. We’ve got these massive global brands investing massive amounts of money in technology to build fantastic cars, and you can only buy new cars from dealerships, or online and then delivered to the dealership.’
He added: ‘This morning, Vertu Motors plc had over 8,000 used cars advertised online. Motorpoint had 3,000, Cazoo also had 3,000 and Cinch had 5,000. There is an advantage to being a franchise retailer where you get access to a manufacturer’s supply of used vehicles.
‘A lot of the manufacturers, in fact I would say all the manufacturers, are going to adopt closed-loop retailing in the coming years. I’ve been saying it for a couple of years and no one really believes me.
‘They will do fleet business but they’ll do buybacks and they’ll recycle the cars back through the franchised dealerships – they will not sell it to independent retailers if they can absolutely avoid it.
‘They will want the retailer then to make a used car sale with a service plan to retain that customer, and then maybe upsell them into a new car later on and keep absolute control. I am really positive about that.’
Conversation soon moves on to the inevitable – new car supply and dwindling stocks of new metal coming through from factories to the showroom floors. With a network of 154 sales and aftersales outlets and representing some of the most desirable car brands in the business, this must be causing Forrester and his team sleepless nights, mustn’t it?
‘This has been the best thing that’s happened to the motor retail sector for 50 years. This is not a problem,’ he retorts.
‘We have been in a position of massive oversupply. I did some sums the other day and I think it has reduced our gross profit at a group level by two per cent – and you apply two per cent to £4bn and it’s a big number. The profitability you’re seeing now is because supply and demand are nicely in balance. People are willing to wait for a car and they’re willing to pay good prices for the cars, because if they don’t, they won’t get one.
‘I’m not saying it should be as extreme as this, but I think we need to learn as a wider sector. Certainly, some of the manufacturers are learning that actually producing one less car than the market actually wants is a good thing. Reverting back to massive oversupply and margin destruction destroys our profit and destroys the profit of the manufacturers.’
Despite admitting on ITV’s Undercover Big Boss that he’s never sold a new car to a customer, Forrester isn’t a CEO who sits behind a desk out of touch with the market. Through his social media, he reveals he’s constantly out on the road visiting his network – and even when he’s not working, he’s buying the occasional used car.
‘I’ve bought two used cars off people in the past 10 days,’ he says. ‘I dropped my daughter off as a fresher at Durham University and I quickly discovered the chap who parked his car behind me had a new Hyundai Kona on order. So I bought his car while he was unloading it. And then I went to Burnley football club with my lad and the chap on the table having lunch with us was selling his Discovery, so I bought it off him.
‘We have to have everyone focused on buying used cars. If the chief executive can buy two used cars in 10 days, why can’t everybody else?’ Robert Forrester with Eagles Community Foundation CEO Sam Blake after Vertu bought the Eagles arena naming rights
INTERIMS
Half-year pre-tax profit of £51.8m smashes records
VERTU’S interims for 2021 smashed all previous records.
It finished the half-year to August 31, 2021 with an adjusted profit before tax of £51.8m – up considerably from the £4.7m it made in the same half-year period in 2020 and the £16.9m that it made the year before.
Revenue for the company went up to £1.9bn – rising from £1.1bn in the same period last year. Meanwhile, gross margin was at 11.6 per cent.
Analysts at Zeus Capital have now revised Vertu’s full-year forecast from £50m-£55m to ‘at least’ £65m.
In our interview with Forrester, which you can watch on the Car Dealer YouTube channel, the chief executive said: ‘Vertu is a good business. We’ve got good management, we work very hard and we’ve got good strategies.
‘But you have to accept that the sector has seen unprecedented tailwinds.’
