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Vertu Motors' sales are up, but profits are under pressure in 2018

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Vertu Motors has said its sales volumes and revenues are up across the business during the four month period to 30 June 2018, but its overall profitability is down year-on-year.

Group revenues increased like-for-like by 7%, service revenues are up 6.5%, used retail sales are up 6% and new retail sales are up 2.1%.

In an annual general statement to the London Stock Exchange today, Peter Jones, Vertu chairman, said: “The group's trading result for the period is in line with the board's expectations, albeit with overall profitability lower than in the comparative period.

“The board remains cautious for the near term but is confident in the medium term outlook for the group.  The board expects that trading for the year ending 28 February 2019 will be in line with market expectations.”

The dealer group has seen lower new retail, fleet and commercial vehicle margins as manufacturers continue to react to currency weaknesses. However, Vertu saw a strong performance from aftersales with growth in like-for-like revenues and its used car business also so revenues and gross profits increase over the four months.

Vertu is experiencing longer lead times on new car orders from some manufacturers as a result of WLTP on September 1. This has resulted in short term new car supply volatility.

Jones said there is the potential for these supply constraints to extend from Q3 into Q4 as manufacturers balance supply, production and the availability of testing capacity on either side of the implementation of the new WLTP testing regime.

Slightly reduced margins, particularly in premium franchises, in addition to the very strong performance delivered in March of last year, resulted in slightly lower overall gross profits.

Jones said the 6.5% growth in Vertu’s like-for-like service revenues was driven by high levels of retention of vehicle sales customers, growth in warranty and used vehicle preparation work and price increases to customers, reflecting increased costs.

Portfolio management

Vertu sold off surplus land at Newcastle-under-Lyme for £2m, with a £0.6m profit on disposal. The group also closed a loss-making Cheltenham Mazda business on March 31, which has left a vacant freehold property that is due to be sold.

Vertu also ceased operation of its Volvo Sheffield franchise on April 30, leaving Nissan as the sole brand at that location.

The group acquired Hughes Group Holdings on June 30 this year for £21.8m and Vertu said the integration of the business is on track to be earnings enhancing before the end of the year.

Vertu also recently acquired the freehold at its Newcastle Vauxhall dealership for £7.4m to give it more control on the future flexibility of the site.

Jones said Vertu is still looking for suitable acquisitions to expand the business. Vertu currently operates 122 franchised sales outlets and three non-franchised sales outlets from 106 locations across the UK.

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Comments

  • John - 06/08/2018 12:08

    When oh when are we going to see a big merger in the car dealership sector?. What is preventing a merger say, between, Vertu and Lookers?.

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