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Vertu Motors confident on delivering positive half year results

Vertu Motors has reported a rise in private new car sales volumes by 6.7% on a like for like basis according to the group’s half year trading update.

The dealer group’s half year results will be revealed on October 20.

Vertu’s overall private new car sales rose by 35.2% due to taking on more sales outlets over the last year.

The group’s board said it was confident it would “significantly outperform” the retail market since scrappage sales were disproportionately concentrated in franchises in which Vertu doesn’t have strong representation with.

While retail business is going well for Vertu, fleet volumes fell on a like for like basis by 7.1% in the five months to July 2010, which the group put down to undertaking lower volumes of low margin car fleet business.

Vertu said its historically loss-making Iveco business was continuing to make good progress in achieving profitability in the short term.

Used car volumes increased by 5.2% on a like for like basis over the period, but used car margins have softened in recent months with industry valuation guides indicating monthly falls of approximately 4% since May on cars less than four years old.

Vertu said: “Prior year comparatives of values and margins were at a high point reflecting constraints in the supply of used cars and as a consequence overall used car profitability is, as expected, behind last year’s levels during the period.”

Service and bodyshop revenues rose on a like for like basis by 2.4% and 2.1% respectively and Vertu said profitability increased in these areas due to both revenue growth and “strong cost control”. The group said it has seen a very strong performance from parts sales with revenue, margins and profitability all increasing.

Growth strategy

In this financial year to date eight dealerships have been acquired by Vertu, all of which are now in its “business improvement pipeline”, with group marketing, IT and management systems being put in place.

Vertu is opening a new Alfa Romeo site in Worcester next week alongside Fiat, and Mitsubishi is expected to open shortly alongside Ford and Mazda in Glasgow. Both these franchises are new to the group.
Vertu is still looking out for businesses to buy and expects to conclude a number of new acquisitions in the coming months with no goodwill payable.

Outlook

Pre-exceptional profit is expected to be materially ahead of last year in the six month period to August 31, 2010. No exceptional items are anticipated in the first half. The Vertu board expects the performance in the full financial year to be in line with market expectations.

Despite the confident outlook, Vertu’s board said it was still cautious about the second-half trading outlook.

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