Good morning. My name is Robert Forrester, Chief Executive of Vertu Motors plc. I'd like to welcome you to our webcast of our interim results for the six months ended 31 of August. I'm joined this morning by Karen Anderson, our CFO, who will also be involved in the presentation. Hopefully, you've got a copy of the presentation. Turning to slide one, our strategic highlights. This was a very interesting period for the sector in general, and I think the results that we're presenting show somewhat of a victory in a hard-fought fight by the group. We focused on what we could control rather than worrying about what we couldn't control, and I think that literally paid dividends. We built a business with a very strong set of business values and strong ethics, and I'll show you some evidence of that.
Really quite sophisticated unified systems from showroom through to financial analysis, which is helping us actually to manage what is clearly a scaled business. The group has firepower with which to not only grow the business with partnering with our major OEMs, but also to invest in a raft of initiatives on omnichannel retailing, which I'll go through in some detail. We're very focused on generating cash, which means controlling costs, controlling working capital, and I think that comes through. That then frees up resources to put through our capital allocation process. The board's very focused on capital allocation. We have a very strong balance sheet. We continue to generate cash from disposal of surplus properties, and we have been engaging in the share buyback program, because clearly the share price is below where we believe the intrinsic value of the business to be.
Turning to financial highlights. It's good to see revenues have grown on a like-for-like basis, and we saw stable margins with some movement within the different channels in terms of margin, which I'll come on to. Costs have really been very well controlled, and we've got a real focus on cost initiatives, to increase productivity and efficiency across the business and to use technology to do that. I think we've seen some successes, but there's clearly a lot more to come. The cost initiatives, though, cannot be at the expense of the customer experience in what is clearly a highly competitive marketplace, and I think we've got that balance right. We were delighted, to be honest, to see operating profit up GBP 200,000 on an adjusted basis, given the doom and gloom generally surrounding the sector. While overall profits dipped, they dipped due to increased stocking charges.
Our manufacturers saw some of their debt ratings come down, we saw increased interest rates, which Karen will go on to discuss. Interim dividend up 9.1%. That I think reflects the confidence in what we do and the future that we've got ahead of us, but also reflects the fact we have been very good at generating cash, and that's been bolstered by property disposals. We probably were in this room three years ago where free cash flow was under pressure due to high capital expenditure numbers. We've been forecasting out capital expenditure. That forecast have proved to be accurate, and our free cash flow increased to GBP 14.6 million in the six months. Strong control of working capital, lower CapEx, and clearly we've got a pension surplus, none of our free cash flows get eaten up by contributions to pension schemes.
One of the major things we'll be discussing with our investors over the next fortnight is our approach to omnichannel retailing. Just so everybody's clear what omnichannel retailing is, it's a multi-channel approach to retailing that seeks to provide customers with a seamless shopping experience, whether they're online, whether on desktop, mobile, telephone, or in a bricks- and- mortar business. The whole thing has got to be joined up, and we're making really good progress. We have a roadmap in terms of where we want to get to. We have in-house software developers, so we don't use any external software developers at all. It's all in-house. Has been since the inception of the group, and that's really putting us in a very good position. You can see on this slide three, social media reach up 355%.
We're now leading on Facebook in terms of number of followers in the sector. Online retailing, we've been pure online retailers of used cars since May 2017. It is clearly very low volumes in the context of our overall volumes. A conversion ratio of about 0.06%. It's very important in giving customers the choice, and they get a long way down that buying process and then come into the dealerships or go online and transact through another methodology. We're doing a lot of A/B testing to fine tune that online retailing. Probably one of the most exciting things that we've done in the last six months is the development of Leo the Bot. One of our software developing contingents has actually developed a robotic chatbot in-house, which can book people in for service using live chat robotics.
We're now up to 400 customers a month using Leo to book their car in for a service, and it's only in its third month. Overall, not just Leo, but other online bookings methodology, online bookings and service now represents 7% of bookings up from 5% six months ago. Clearly to become efficient and drive costs, we've got plans to increase that, Leo being a major part of it. There's also other things Leo can do, which we're working on outside of online service bookings. It sounds boring, but it isn't. We have reduced the time it takes for web pages to load by 43%, and we believe now we're second in the sector for speed of web loading.
We've done a lot of work around making sure the customer experience online in terms of being able to stack deals and build deals is increasingly similar to the showroom to bring the showroom and online together. Marketing is clearly changing, not actually as fast as you might think. There is still a major role for TV, a major role for radio, and actually we still utilize the press, but it's within a unified marketing structure, and clearly digital is a big part of it. We have now embarked on attribution marketing technologies to make sure we fully understand where possible, what has made a customer inquire. We can really nail where we put our marketing spend and make sure we get an ROI. We have actually spent more on marketing as the period went on.
We've done a brand campaign on the TV, cinema, and radio, which has certainly helped. When we look at September, you will absolutely see that in good effect. If we turn to slide four, technological and network change. This slide puts a number of things together, and we've talked about these before. We hold the view that the number of outlets in the U.K. will decline. If we end up with some economic turmoil around Brexit, that would accelerate, but the end result will be the same. There will be less dealerships in the United Kingdom. We would envisage that the larger groups would have a higher share at the end of that process, and that sales per sales outlet would go up. We still believe physical dealerships are fundamental to delivery to the customer, digital is clearly important. That's why we're embarking on this omnichannel retailing.
The challenge I think we've got in the next 12 months, is how the manufacturers and the retailers jointly deal with the new EU rules around emissions, and the consequent fines that can be levied on the manufacturers if they get that emissions mix wrong from a CO2 perspective. We are envisaging a number of manufacturers actually targeting us on CO2 emissions to make sure they get that mix right, and that's an added complexity that we've not had before. We also are going to see some changes in vehicle supply, because it is likely, we think, that there will be change in mix. Bizarrely, smaller cars actually are disproportionately impacted by the emissions regulations, which strikes innately as odd.
Actually, the way the regulations work and the disproportionate cost of putting electric vehicle technology into a small car, actually means we'll probably like to see pressure on that small car segment and manufacturers seeking to actually sell more larger vehicles. How that plays out is going to be quite interesting over the next 12 months. We will see our way through that as a sector, as we always do. We are actually very good at flexibly moving what we do to meet targets. Clearly, that's a big item for the next quarter to see how those targets move. I referred in the opening section to the fact we were a values-driven business, and that in fairness, is a very easy statement for a Chief Executive to make. However, I'm confident that I can make it because we've got some evidence to back it up.
We set out to build a values-driven business when we started the business in 2007, and I think we've seen some success. We have a colleague satisfaction survey. We have 5,500 colleagues, 81% of them filled the survey in in August. 97% of them said they knew the Vertu values, which is our bedrock of integrity, professionalism, et cetera. If you've got a business where they are known, the only question is, does the business actually pay any attention to them? I'm pleased to report that 90% of the colleagues thought the directors actively practice the values. In terms of a regulated sector, particularly around the FCA, where customer outcomes are crucial and where the culture of a business is crucial in delivering customer outcomes, it's a good place to start in having the right values. We're very pleased with that.
In addition, we have set targets on colleague stability to increase levels of colleague stability. It's vitally important where you've got colleagues delivering to customers, that they know what they're doing, that they have the right attributes, that they're motivated. The high levels of colleague satisfaction clearly point to good things in that direction. We are seeing higher stability of colleagues in customer-facing roles, and that's helping us deliver customer experience. Our customer experience levels, as measured by the manufacturers, are substantially ahead of national average. 74% of our sales departments are above national average. 67% of service departments are above national average. On used cars, around 96% of our customers would recommend us, and they were talking massive sample sizes in terms of those surveys. We did win the Auto Trader Customer Experience Award a couple of months ago, which was externally verified.
I think overall, we do have a strong values culture. It is of vital importance for a number of reasons, but the only way this company will be successful is if we have colleagues who are motivated and do the right things for customers, and I think we are well on the way to delivering that. I'd now like to pass over to Karen, who will deal with regulation and also high-level view of the financials.
Thank you, Robert. On slide six, it just summarizes where we currently are with the FCA's investigations into both the motor finance sector and their review of general insurance sales. The group actively participated in the consultation with the FCA in both of these regards, and consultation's now closed, and effectively we're now in purdah awaiting the FCA's findings. Findings aren't expected to be published till later this year or indeed early into the next year. However, the group has always considered regulatory compliance as a vital part of what we do and vital indeed to putting the customer first. If you turn over to slide seven, we've set out some more detail as to how we approach our regulated activity in terms of a control framework.
As Robert has already pointed out, the group places a very strong emphasis on values, and this is the bedrock of our regulatory control environment and to ensure our colleagues apply the right behaviors and indeed act in the spirit of the regulations. Training colleagues is also very important. We require the Specialist Automotive Finance qualification to be passed by all of our sales-facing colleagues and by approved persons. Indeed, over 1,500 of our colleagues hold this qualification. It's not easy. I know, I've done it. There's a lot of reading material, and you do have to study for it. We test the effectiveness of what we do and how we control our regulated activity through both what our internal audit team are tasked with, and also through examination of customer feedback, be that from customer satisfaction surveys, be that analysis of complaints, or through our extensive mystery shopping program.
Our regulated activity is controlled via our single bespoke electronic showroom system, which is in place and been used throughout the group and has been in place for many years. This system ensures consistency in terms of our regulated process, capture of electronic signatures included. All sales-facing colleagues are also required to sign up to our group finance policy annually or if it changes. Finally, oversight is provided by the group's compliance committee, which formally reports to the board. Detailed monthly reporting on our regulated activity is provided to that committee and to all approved persons for review. If we turn over then to financial performance on slide eight, the group has applied IFRS 16 leases for the first time this period. We've used the modified retrospective approach, which means we don't impact the prior year numbers.
For the purposes of presentation, we've presented all our numbers both before and after the impact of IFRS 16, to aid comparability. Revenue grew GBP 86.7 million, aided by acquisitions. Like-for-like revenue growth was GBP 35.6 million or 2.3%. Overall gross margins were stable year-on-year, with growth in operating profit delivered despite some of the sector headwinds. PBT reduced compared to last year due to growth in finance costs, driven by both increased bank borrowings and consignment vehicle stocking charges. Consignment vehicle stocking charges grew for a number of reasons. Firstly, higher interest rates from some manufacturers, the high volume of vehicles that were brought into the start of this financial period as manufacturers started to stockpile against the original Brexit date, and indeed, the impact of exchange rates increasing average values of cars that are on funding.
We expect the comparatives to ease in this regard in H2. Strong cost control, including the use of systems to enhance efficiency, resulted in a decline in operating expenses as a percentage of revenue. Turning to the balance sheet on Slide nine, the group has a strong balance sheet underpinned by real estate assets and a conservative debt and funding structure is in place. The group had adjusted net cash of GBP 29.1 million before deduction of used car stocking loans at the end of the period. As shown in the table on the right of this slide, this also excludes the lease liabilities that arise under IFRS 16. Tangible net assets per share were GBP 0.461 after adoption of the new standard, which actually had the impact of reducing overall net assets by GBP 9.4 million at the end of August.
Turning to the cash flow on slide 10, the reduced capital expenditure previously flagged, together with the pension scheme requiring no contributions, generates a strong free cash flow performance for the group for the period. In terms of working capital movements, new vehicle consignment inventory and the associated creditor reduced significantly in the period as that high level of stock brought into the start of the year declined. Discipline over other working capital captions resulted in a very small cash inflow for the balance of those captions. Property disposals for the year to date have generated GBP 3 million, including a post-period end disposal, and each of these has been achieved at or above net book value. The profits bridge is set out on slide 11. PBT in the period reduced from GBP 18.1 million to GBP 17.1 million before application of the new leasing standard.
Interest is obviously a major part of this overall decline because incremental gross profit generation more than offset increased costs in the period. Movement in core gross profit will be explained in more detail later, but do include an impact of an increase in the internal rate charged by our service departments into our vehicle departments, which has the effect of moving some profit from vehicles into aftersales. More detail on the movement in operating expenses are set out on slide 12. Tight cost control drove a reduction in operating expenses as a percentage of revenue. Overall, like for like, we did see cost increases as a result specifically of investment in aftersales capacity, including the cost of additional colleagues, vehicles, and depreciation. This investment, however, as evidenced on the profits bridge, drove incremental profit in aftersales. Occupancy costs rose due to higher insurance rates and energy costs.
The group has put a lot of effort into its risk management processes in order to secure a reduction in its insurance costs going forward. Things such as analysis of accidents, ensuring very tight and quick reporting of any accidents that happen, have all benefited us in securing that reduction. We've also benefited from movements in energy markets, which will lock in some rate reductions for the second half in terms of energy costs. H2 is likely to see some additional investment in marketing in order to boost market share, and in particular, in September, where marketing spend was in excess of last year. I'll hand over to Robert to go through some detail. Thank you.
If we go through each of the major channels in turn. If we take aftersales to start off with, aftersales remains the powerhouse of group profitability, clearly. 42.3% of gross profit was actually generated in the aftersales departments. If we take service first, which is concentrated on Slide 13, it's great to see like-for-like revenues up 8.5%. There is a change, though, which has to be recognized in terms of the internal rate charges that Karen referred to. 3.5% of the 8.5%, was actually due to the service departments charging our vehicle departments more for preparing new and used vehicles, predominantly actually in used vehicles. You can see in the reconciliation, that equated to GBP 2.2 million of additional revenue, which flows straight through into the bottom line of the service departments in terms of gross profit.
Overall gross profit in the service departments was up 4.6% on a like-for-like basis, but of which 2.2% came from those changes in internal charges. The thinking behind that increase is that by charging the sales departments more, they would actually fight to retain the same margin levels and therefore would retain more profitability. This is a one-off change that we've made. It probably brings us in line with the rest of the sector, but I actually think has worked, as you will see. Service actually also saw growth in gross profit from a number of other things. We've seen greater technician stability in the period, which is we have more resource to actually sell hours. We've got greater capacity, which Karen alluded to, due to investment. That's the capital expenditure coming through in higher activity. We've got very effective CRM.
I've already talked about Leo the Bot, but our contact centers are, we believe, very efficient in generating bookings. Our vehicle health check process in the dealerships, where the technicians are identifying work that needs to be done on vehicles and therefore our service advisor is selling it, is increasingly effective, actually, and that's driving up average invoice values. We're also clearly still plowing through on service plan sales, particularly on used cars to drive retention, and we are increasing the penetration of our service plan sales into used cars. It's a major focus of the group because it drives future service retention, which is just so important. Overall gross profit up 4.6%, of which 2.2% was due to the rate rise. Parts is a really interesting thing this year because clearly we flagged last year there was a reorganization of the Ford distribution network.
That has reduced PBT in the period by 0.6. We'd expect that to be far flatter actually in H2, the bulk of the variance has come through in H1. The way those changes work has taken out turnover from the parts departments but maintained gross profit. Overall, our margin in aftersales has actually increased by 360 basis points, and we think that is a sticker, that that will actually continue. Actually, our aftersales margins have increased partly due to the parts, partly due to internal rate, partly due to greater efficiency. We think that's good. Our aftersales margin actually rose from 43.5% to 47.1%. When we say high margin aftersales, we're now talking about higher margin aftersales going forward, which clearly is very pleasing. If we turn to used cars.
Used cars had the ability to be very difficult in this period, due to probably softening consumer demand, which we certainly saw, and certainly for periods, we saw Google automotive searches in the U.K. fall below last year's levels, which indicates a softening consumer environment. We saw significant reduction in used car residual values in the market, in the period from April to August. You can see that on the bottom left chart, where clearly the green line is substantially below. That has the ability to reduce used car margins. What's pleasing about these results is the resilience, actually, of our gross profit generation in used cars. Our gross profit was down GBP 1.9 million, but GBP 1.6 million of that was the impact of the increasing charges coming out of the service department.
Broadly, we actually held our own in a period of some quite significant problems, actually, in the wholesale markets. I mean, the conversion ratios and the values we were getting in the auctions in that period were very weak indeed for a period. I'm pleased to say, actually, we're seeing far more resilience now with regards to residual values. You can see the cap data for October is actually an increase in values and a higher increase than most years. Certainly seeing more stabilization now, which is very much helpful. Auctions are working very well. Wholesale values are picking up. We are still seeing weakness in the premium, nearly new segment. That is where actually the margins are under pressure, and they have been for the last six months.
Actually, the margin changes in the year have been pretty stable in volume, but quite weak in certain premium franchises. We don't necessarily see that changing. That's due to supply push by manufacturers, leading to a bubble of nearly new product which then has to be discounted. These bubbles tend to work themselves out over time. It does raise a question as to how we saw those big declines in residual value over the summer, but we didn't see a great impact on our margin in the business. I think the only way I can try and explain why that didn't really impact is we were very quick to try and drive volume through. We didn't want to be sat there with a lot of cars that would depreciate at different rates.
We had special events, increased marketing, real focus in the business to drive stock turn and to get out of those cars before they became too painful. That's what we've done. We've actually grown our like-for-like volumes in the period 1.6%, and I think that's a tale of very tight control on stock, control on aged cars. We have very few aged cars in our business. We have a 36-hour report which keeps coming out highlighting them all. I think that strong control really put us in a very good position to actually generate a very resilient used car performance, which could have been much worse. If we turn to new vehicles, I think there is a very interesting debate to be had as to why the new car market is down in the U.K.
The SMMT for sure always put it down to Brexit consumer confidence and uncertainty. I think it's actually a lot more complicated than that. I think we are in the middle of a cost to change issue, which I know certain analysts have picked up on. We have had a Brexit-related currency devaluation, which is pushing prices up. In order for manufacturers to maintain margins, particularly in the volume side of the business, and that's been there for two years and continues, average sales prices go up. At the same time, that residual value weakness reduces the value of the part exchange. The cost per change and the monthly payment goes very much higher. I think that is leading to consumers just not changing on as quick a cycle as they were four years ago. I think that's particularly the case in the new car market.
We're seeing elongation of customer change times, and that's what's driving the softness of the new car market on the retail side. I think it's far more complex than just simply blaming it on Brexit, though Brexit has an impact through the currency. It is actually due to cost of change. The volumes franchise are certainly much more down on volume than premium. Actually, that then ties into why we've got a nearly new glut of premium product. You can see there from SMMT, this is business and private registrations combined. Volume down 11.4%, premium down 2.7%. Clearly, volume has been more affected. That would always be the case because with less margin, the volume manufacturers are always more affected by currency. They have to react much quicker and probably much sharper.
We have seen some just on the SMMT, I think we have seen some reclassifications of business registrations into private registrations. The private registration data you see in the SMMT, in my opinion, is overstated. I just think the retail market's actually weaker than the SMMT is actually broadcasting it at the moment. Overall, our gross profit was down 1.9%. That is pretty well down to volume. Our like for likes were down 10.1%. We are actually seeing higher gross profit per unit, and that's due to mix, more premium. Clearly, our premium dealerships grew share relative to our volume dealerships. That would make sense. Similarly, impact on margin percentages. Fleet and Commercial, we've always been a significant player in the Fleet and Commercial, so that's fleet car supply and van supply. We've always been big in it.
Where we saw weaknesses in new retail, and I think pressure in that area, which may continue, we actually see B2B as a major opportunity. We have invested heavily in the last 18 months in the B2B channel, more business centers. We got a fleet director for the first time about 18 months ago, and all that is working really well. You can see that actually in the numbers. We also acquired Vans Direct, which is an online van retailer, that clearly is impacting the numbers positively. Gross profit overall in this channel in the six months was up GBP 3.3 million, which is a big improvement, of which GBP 1.2 million was on a like-for-like basis. Obviously, Vans Direct being a big delta with that.
Gross profit per unit getting up to historically very high levels of GBP 600 a unit, aided by Vans Direct, also aided by the real growth we've seen in premium fleet. We are becoming very good at premium fleet in areas like Mercedes-Benz, in Jaguar, Land Rover. That is coming through. Actually, that's coming through into strengthening percentage margins as well. One of the reasons why our overall gross margin was strengthened was partly because of the service improvements, also because of fleet and commercial. Margin going from 2.8% to 3.4%, despite higher selling prices, is a very good performance. You'll also note in the detail of our announcement, we refer to agency volumes. We include agency volumes in our overall volumes.
Agency is where the transaction is actually dealt with directly between the customer and the manufacturer, which is how some of the manufacturers operate, and we take a handling fee, which actually augments margin, clearly, but we've been very successful in that channel. If you look at the year, the six months, fleet car up 13.8% on a like-to-like basis, a very strong performance in a market that was actually down. Vans was always going to be peculiar in this period because we had WLTP EU regulations coming into effect on the 1st of September. We saw very strong market growth in registrations prior to 1st September. A lot of that was direct fleet supply not really coming through to the other channels and also pre-registrations. There was a disconnect between sales and registrations.
We actually were up 2%, but the market was up 12.4%, but I was not overly concerned by that. If we actually turn to September, and I think some of those trends we've discussed there will certainly come through here. Despite dark clouds, which to be honest, as an organization, we generally tend to ignore on the grounds I can't do anything about dark clouds. Let's focus on the business itself and make sure our business is right. We actually had a very successful month in September. We actually saw higher overall profitability in September this year compared to last year, which we were absolutely delighted with. Backed clearly up by a strong aftersales performance, 11.4% increase in service in the month.
We actually opened all our aftersales operations fully on Saturday and Sunday on the last weekend of September, which is actually the first time we've done that because we were getting lots and lots of part exchanges in as we delivered the new cars, and we wanted them on the forecourts to sell early in October to hit the market. We actually had all our aftersales departments fully open, which clearly helped the numbers and was a very good thing. I'd just like to thank our aftersales colleagues for doing that because we had a lot of fun opening that weekend. On new cars, the market actually was up 0.1% in retail, but actually if you take into account the business reclassification into retail, it was actually down in September marginally. We were down 1.6%, which I think was a result.
In used cars, despite the fact we were really pushing hard to hit new car targets, obviously our new car volumes were, I think, pretty good. We actually grew used car volumes by 3.5%. Karen made the comment about marketing. Clearly, we were concerned coming into the summer about where consumer demand would be, where would we be with Brexit, and we took what was possibly quite a brave decision of actually having a strategy to drive September. We launched in August a brand new brand campaign across our two major brands in England and Scotland, actually focusing on giving the customers a choice between coming to dealerships and going online. We hit the cinemas and TV with that. We actually spent, in September, GBP 600,000 more on marketing than in the previous year, which is a brave shout.
It clearly worked because we are absolutely seeing more traffic, and I think we are taking share. GBP 600,000 is a big number. We'll not be replicating that every month for the next five months. Clearly, if we have the right marketing, we think we get a good ROI on it, so we will be continuing that as flagged up. On the sales side, I think we were happy. The fleet performance was something. The market in fleet cars was up 8.6%, and we grew our like-for-like sales volumes 42.8%, which in a mature business is quite a number. I think that reflects the investment and the effort we've put into growing our fleet volumes, and we were clearly very happy with that. Just on vans, because I had quite heavily negative.
Obviously, with WLTP coming in, this was entirely predictable actually, insofar as there were loads of registrations of non-compliant vehicles pre-September, then a dearth of product in September. A lot of that was franchise related as well in terms of mix. I wasn't too worried. It was pretty well where we thought we were going to get to. In terms of outlook, I think we've got momentum in the business. I think people are confident with the approach we're taking within the business. We are very focused on the basics of making sure a customer is looked after when they come in, that we actually do sell them a car, and we listen and make sure their needs are met. The after-sales businesses are doing well. I think we've got good momentum. We'll be very focused on tightening up processes within the business.
We'll be very focused on more cost control. That's not a negative thing about blindly reducing headcount. Far from it, actually. It's about becoming a lot more effective and productive and having high productive roles and making sure we use technology to the max across the business. There are long-term projects in place which will deliver good things in the next couple of years. A very strong control of cash. The business systems that Karen has developed are exceptional. Our ability to quickly get a grasp of where the issues are within an individual business or an individual department are first class. With graphical presentations of individual lines and trends are brilliant and really paving the way to great control both of cash and cost. I think all that really gives us confidence, despite the fact there clearly are challenges.
On the new vehicle supply, we've clearly got Brexit. We've got consumer confidence probably linked to that. Despite the fact we are still growing as an economy and we have the highest levels of employment we've ever had, there's no we should forget that. Exchange rate movements coming out of all that I think clearly impact the business. There's no doubt. We've got the emissions legislation and the fines coming in the new year, that's another hurdle that we've got to get over. Overall, the board believes we remain on track to meet expectations for the full year, which means we can say we're in line. Thank you very much. We're now going to have Q&A in the room. If you're watching the results presentation on the webcast and you'd like to ask a question, please email Violet Wilson at violet.wilson@camarco.co.uk.