Dealer group Vertu Motors has issued a positive trading update but has stopped short of revising its full-year expectations.
The listed company posted an AGM trading update to the London Stock Exchange this morning (June 22). In it, Vertu said it had had a strong start to the financial year, following the record profits it made in 2021, which were revealed in its year-end results published last month.
On May 11, Vertu’s 2021 results showed it had made £80.7m in pre-tax profits – a figure that was eight per cent ahead of forecasts published by analyst Zeus Capital.
At the time, Zeus Capital said it expects Vertu’s profit before tax for 2022 to more than halve to £35.4m.
While Vertu today said it was too ‘premature’ to ‘indicate any changes to market expectations of the full year trading profit’, it did say that it was experiencing strong momentum since posting its full-year results on May 11.
For new cars, it said, while there was constrained supply, margins in new retail and fleet channels have ‘remained strong’, and it expects supply to ‘gradually’ improve in the coming months.
Supply constraints continue in used cars, too, it said in the trading update.
Like-for-like used car volumes declined in May 2022 compared with the same month last year, as expected, while gross profit in second-hand cars was strong.
In fact, in May 2022 per-unit profit on used cars was ‘above prior year levels’ due to stabilising used car prices.
Extra working days in May 2022 saw Vertu return strong revenues above prior levels in aftersales as well.
The update also made clear that the listed dealer group remains on the acquisition hunt to fulfil its growth objectives.
Commenting on the trading update, Zeus Capital said: ‘Vertu has had a strong start to the year, but there is not enough visibility to upgrade full year numbers, so Zeus forecasts are unchanged today.
‘The latest monthly Cap HPI data on used car prices shows trade values decreased 0.7 per cent in June, a slower pace of decline than in April and May (2.1 per cent each).
‘This supports our thesis that used car prices will continue to stabilise, but supply constraints should limit the risk of a crash in prices.
‘Vertu anticipates a gradually improving supply situation in the coming months.
‘Inflation and low consumer confidence are expected to be headwinds to consumer demand, but we think large order books for new vehicles, coupled with the strong trading so far this year, supports our forecasts.
‘The group has a strong balance sheet, with net cash of £16.2m at FY22 year-end that is forecast to grow to £31.2m by FY23 year-end.
‘Cash balances, debt facilities, and strong cash generation provide the firepower for Vertu to execute future M&A that could provide upside to our numbers.’