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Vertu outperforms dwindling market

Vertu Motors has bucked a trend for plc profit warnings and swung its half-year financials from a £100,000 operating loss to a £3 million operating profit.

Vertu chief executive Robert Forrester said success was all about the basics: “Do we have the right stock? Are customers happy? Are they taking test drives?” 

“We’re focusing on having good general managers that can get people motivated,” he said. “It also helps that we’ve got a manageable 44 dealerships.”

That said, Forrester is still planning to grow the business next year – a decision that has been praised by some analysts.Vertu’s half-year results showed turnover at £423.5m, compared to £290.3m in its first five months of trading.

The results did not include VAT returns on demonstrators. 

Vertu has outstanding claims but these are unlikely to feature in its full-year results.

Although much of the growth was through acquisitions, £26m was organic from its Bristol Street Motors sites.

New car registrations

New car registrations rose 13.5% like-for-like, and used car volumes rose 15.1%.

Michael Vassallo, assistant director, equity research, at Brewin Dolphin Investment Banking, said: “Vertu outperformed the market in terms of sales in new, used achieved its manufacturer targets and it had a good performance from aftersales.”

However, Vassallo expects the auto retail market to be loss-making over the winter and has downgraded his profit-before-tax estimate for Vertu by £0.8m to £3.4m.

He is also expecting UK car volumes to be up to 10% lower next year with residuals weakening further.

The Motor Nation used car superstores were one blot on the balance sheet. Volumes fell 8.8% and it slipped from breakeven to a £100,000 loss.

Following a review, Vertu closed its Coventry Motor Nation site at the start of September due to significant losses. It also closed a used van centre in Birmingham, and said cost review programmes were in place.

Forrester said: “We had to close Coventry because it was performing poorly and dragging down the rest of the business but I’m happy with the progress of our other Motor Nation sites.” 

He does not expect to close any more outlets.

Forrester is optimistic about the car market as a whole. “By the latter half of 2009, the average man on the street with a job is going to feel a lot better off,” he said.

“The used car market is stabilising and things will settle before the end of 2009.”

Vertu will continue to invest in training, which Forrester believes is vital in times of a recession. 

A 12-month management development programme will involve 16 individuals from different departments within Vertu.

It will include internal sessions where delegates learn from each other and exterior training to improve management and leadership skills.

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