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Vertu Motors shows little concern about Brexit and reports profits uplift

Vertu Motors chairman Peter Jones

The UK’s exit from the European Union could in theory give carmakers an opportunity to change their franchise contracts and the way they drive the UK markets.

However Vertu Motors said yesterday it expects no major changes to franchise agreements as a result of the Brexit. Currently, regulations concerning carmaker’s franchise contracts are determined at an EU level.

The top 10 AM100 dealer group also anticipates that manufacturers will be keen to support their franchised dealers through any period of uncertainty.

Vertu Motors chairman Peter Jones pointed out that the UK is the second largest new vehicle market in Europe and told its AGM: “The majority of the group’s new vehicle sales are imported to the UK from the EU.

"Our manufacturer partners clearly have a vital interest in ensuring continued free trade access to the key UK market and the board will be monitoring the negotiations of the trade relations between the EU and UK.

“The sterling-euro exchange rate is important to manufacturer profitability on the UK sales and is a factor in determining the level of supply push of vehicles into the UK market. Whilst sterling has declined against the euro following the referendum result, it remains at levels above the lows seen in 2008/9, and more recently throughout much of 2013, and at levels which the board believes remain attractive for European Manufacturers to export vehicles to the UK.

“This should help to underpin the UK new car market which is currently at record levels.”

Jones said it is possible business and consumer confidence in the UK may also come under some pressure as a consequence of the uncertainty in the next few months.

“In line with trends in recent months, since the referendum new retail vehicle sales volumes have been behind last year. However, the important revenue streams of used cars and aftersales have not seen any negative impact to date.”

In a trading update at the AGM, Vertu said its profitability in the four month period to June 30 was ahead of the prior year and in line with the board’s expectations.

Group total revenues have increased by 21.5%, aided by higher revenues from acquired dealerships and continued organic growth with like-for-like revenues up 8.4%.

Total gross profit increased by 23.6% with like-for-like gross profit increasing by 8.7%.  Group and like-for-like gross margins improved due to higher used car and service margins.

The group’s aftersales operations grew gross profits by 24.9% (7.0% on a like-for-like basis).

Used vehicle volume was up 19.2% (like-for-like 10.2%), and gross profit rose 27.4% (17.6% like-for-like).

Total new retail vehicle sales volumes grew by 8.9%, but like-for-like new retail sales volumes reduced by 3.8%.

Fleet car sales volumes rose 7.5% (like-for-like 3.1%), and new commercial vehicle sales volumes grew by 27.5% (like-for-like 25.0%).



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Comments

  • Jonathan - 28/07/2016 12:22

    Headline figures for Vertu are good, but we need to start seeing margins growing significantly. I do hope as a shareholder we see some common sense in the acquisitions in future and that these are not financed not equity. The share price for Vertu was nearly 80p in the last 12 months. Although Brexit has added uncertainty, the recent fall also reflects investors concerns about whether Vertu is not generating the efficiencies and synergies it should be from its acquisitions. Many investors also felt let down by the way the £35 million was raised.

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