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Vertu's profits slip, but beat its budget

Vertu Motors reported tough trading conditions for the four months to June 30, with profitability ahead of internal budgets, but below previous year levels.

In a stock market update it said new and used car volumes have been under pressure and the devaluation of sterling also resulted in pricing pressure on new cars and reduced levels of manufacturer support available to stimulate the retail market, causing margin pressure on dealers.

However, Vertu’s aftersales activities have put in a strong performance with like-for-like profitability increased, and like-for-like gross margins improved from 40.1% to 43.1%.

New car sales to private customers fell 6.6% like-for-like, but Vertu hailed its gain in market share against the 17.1% nationwide fall in the UK retail market.

Including acquired businesses, Vertu’s new retail sales volumes increased by 14.7%.

New car like-for-like margins fell from 7.9% to 7.4%, reflecting the competitive pricing required to ensure that the group delivered on its manufacturer volume targets at a high level.

After a 9% drop in used car volumes in March and April, Vertu gained ground to improve the decline to 5.8%. Margins weakened from 11% to 10.3%.

Paul Williams, chairman, said Vertu is confident of improving profitability.

“While UK consumer demand remains fragile and vehicle sales remain under pressure in the short term, further acquisition opportunities are likely to arise as a result of these market conditions.

“The board intends to take advantage of these opportunities in order to deliver future shareholder value.”

Expansion this year includes adding its fifth Mazda site, fourth Hyundai dealership and a third Nissan centre, taking it to 80 sites in total.

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