4:25 pm, February 6, 2025
Vertu Motors has declared profits for the year ending February 28, 2025, will be ‘significantly below’ market expectations, due to the ZEV Mandate causing ‘disruption’ and higher national insurance payments, along with other external factors.
In a trading update issued this afternoon (Feb 6), the dealer group warned that it won’t hit previous expectations of £34.5m profit before tax.
Vertu also said it had already taken steps to reduce its workforce to make savings ahead of a soaring wage bill following the chancellor’s move to hike national insurance contributions and the minimum wage.
It is thought the number of jobs being axed is minimal, but that the group will reduce roles by not replacing workers when they leave.
Boss Robert Forrester said the government and the industry need to ‘get together’ to allow the automotive sector to stimulate economic growth.
The update said overall volumes of new cars in the retail channel were at their lowest for 25 years – even including the pandemic period.
Vertu warned that the ZEV Mandate will likely lead to even further discounting in the new car market if manufacturers are to meet the 28% quota this year, only further the margin pressure on its business seen so far.
The business said it has delivered like-for-like retail volumes and battery-electric sales ahead of the market, while record fleet sales across the UK market had ‘adversely impacted gross margin’.
Subdued consumer confidence and heavy discounting of new cars has impacted Vertu’s potential to expand gross margins on used cars, too. It said that in the five months to January 31, 2025, like-for-like gross profit had exceeded prior levels, though.
Thanks to the Autumn Budget, Vertu said its cost base will rise by £10m as it forks out more in National Insurance Contributions and takes into account rise in the National Minimum Wage.
It said that it has acted to ‘fully offset’ this £10m cost ‘which will incur an exceptional restructuring cost of up to £4.0m in FY25’, while most of its 193-strong outlets will close on Sundays.
Meanwhile, Vertu’s aftersales trading remains ‘resilient’ and ‘continues to track ahead of the prior year’.
Along with the trading update, Vertu also announced a £12m share buyback on top of the £4.1m spent so far during the year – its largest annual allocation to share buybacks ever.
CEO Robert Forrester said: ‘The group’s high margin aftersales business is performing strongly. However, the government’s ZEV Mandate is causing severe disruption to the UK new car market, and the consumer environment is subdued.
‘Despite these headwinds, the Vertu team is delivering, as seen by our significant market share gains in BEV new cars in the final quarter of the year. We now have award winning BEV dealerships with Citroen, Mini and VW.
‘The government and the industry need to get together to address the root cause of the issues to allow the automotive sector in the UK to return to its traditional role of stimulating economic growth, which is a catalyst for employment.’
He added: ‘Vertu’s strong balance sheet, underpinned by over £320m of freehold and long leasehold property, is a comfort to our colleagues, manufacturer partners and shareholders in these times.
‘We have returned over £94m to our shareholders since January 2011 in dividends and share buybacks and I am delighted that the board has authorised our largest share buyback to date, with £12m allocated to a buyback programme over the period to 28 February 2026.’
Vertu’s shares fell 6% after the profit alert.
Story updated: 6:29pm, February 6
