7:55 am, March 2, 2023
Dealer group Vertu Motors has said it’s trading ‘in line with expectations against a complex macro backdrop’.
The listed retailer updated the London Stock Exchange this morning (Mar 2) on its five-month trading period up to January 31, 2023.
It said it was performing in line with expectations, while cash generation was better than expected.
Analysts reacted to the update by upgrading profit before tax forecasts for FY24 by 8.6 per cent to £47m.
Revenue was up 9.4 per cent like-for-like while service revenues rose by 7.6 per cent.
Sales of used cars fell by 4.4 per cent and gross margins ‘normalised’ from 9.4 per cent to seven per cent. Vertu noted used car prices were ‘stable at high levels’, but profit per unit fell by £455 to £1,400.
A shortage of used cars less than three years old within the industry led Vertu to retail older vehicles than normal. It also noted ‘visible margin dilution’ from falling used electric vehicle values.
‘Core group’ gross profit on used vehicle sales was £16.9m lower than the ‘record’ levels achieved in FY22, Vertu said.
New car sales, meanwhile, dropped by 5.4 per cent compared to the same period last year.
Vertu put this fall down to it exiting lockdown periods stronger than the sector in general before.
New car sales through the Motability programme were up significantly to 59.7 per cent, however. Gross profit per unit on the sale of new retail and Motability units rose by 3.6 per cent to £2,344.
Sales of new commercial vehicles, meanwhile, grew by seven per cent against a market that was down by 8.5 per cent, according to the Society of Motor Manufacturers and Traders.
Vertu said this ‘significant market outperformance’ was aided by its online CV sales operation, Vansdirect.
The trading update highlighted the 5.2 per cent increase in ‘core group’ service gross profit, due to the hiring of more technicians and a gain in market share.
Vertu Motors said the integration of Helston Garages – which it bought the lion’s share of in December 2022 – was ‘on track’ and it confirmed a £3.2m ‘annual synergy target’ to be achieved by FY25.
Vertu’s dealership portfolio has been boosted by 27 locations from Helston and two BMW Motorrad sites from Saltaire Motor Company since December 1, 2022.
The trading update also revealed Vertu sold a Helston Garages Peugeot dealership – under the Truscotts name – to Snows Motor Group, which runs a Peugeot showroom in nearby Exeter; the business closed permanently on completion.
Meanwhile, Vertu also said it was to close its BMW and Mini showroom in Malton, Yorkshire, by the end of March 2023 and consolidate operations at its York facility.
The Malton dealership was one a glut of BMW and Mini businesses Vertu bought from Inchcape in 2020. Vertu paid £18.7m for the loss making showrooms, which were branded Cooper.
Vertu Motors now has a network of 191 sales and aftersales outlets.
Looking ahead, Vertu said: Clearly consumer confidence is volatile and higher interest rates and high vehicle prices may influence demand patterns.
‘The group will remain agile and dynamic in adapting to this environment.’
Commenting on the trading update, Vertu CEO said: ‘I am pleased to report that trading remains in line with expectations against a complex macro backdrop.
‘The entire Vertu team has put in hard work and dedication once again, and I would like to thank them all.
‘Used car margins have normalised back towards historical levels as we had expected and there are tentative signs of improving new car supply.
‘The performance of our service and repair business has been strong.’
He added: ‘We have been working at pace to integrate the recently acquired Helston Motors business and this is progressing well.
‘We are excited about the opportunities our enlarged portfolio will create for Vertu Motors.’
Reacting to the trading update, analysts Zeus Capital said it upgraded its underlying profit before tax forecast for FY24 by 8.6 per cent to £47m due to ‘improved supply and cost outlook’.
It reiterated its view that Vertu is ‘materially undervalued’.
Liberium said: ‘We make no change to our FY23E adj. PBT.’
It added: ‘Reflecting better supply, we raise our FY24E sales forecast, flowing through to a 10 per cent PBT increase.’
Vertu Motors will announce its preliminary results for the year ended February 28, 2022 on May 10, 2023.
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