Vertu Motors optimistic after positive recent trading

Automotive retailer Vertu Motors reported positive trading in the three months through May on Wednesday.

The AIM-traded firm, which was holding its annual general meeting, said it achieved a trading profit surpassing last year's levels, despite challenges associated with inflationary-driven cost increases.

Its board predicted that the full-year results for the 2024 financial year would meet current market expectations.

During the period, the company said it experienced notable growth in a number of sectors, with new car retail and Motability seeing significant like-for-like volume growth of 10.8%, particularly driven by robust Motability volumes.

Like-for-like new vehicle margins remained strong at 7.9%, only slightly lower than the prior year's 8.0%, despite the Motability mix, which typically yields lower margins.

Fleet and commercial vehicle performance also showed positive results, with like-for-like volume growth of 1.0%.

The company said it had strategically focussed on profitable fleet sales channels.

Moreover, the like-for-like gross margin for fleet and commercial vehicles improved to 5.0% from 4.3% in the previous year.

However, Vertu Motors experienced a decline in used vehicle like-for-like volumes, reflecting ongoing supply constraints.

The firm said it maintained pricing discipline in the segment, with stable gross profit per used unit sold at £1,648, similar to the prior year's figure.

Vertu said its gross margin for used vehicles slightly decreased to 7.8% from 8.1% in the prior year, mainly due to continued higher selling prices.

The company's services revenues also saw growth, increasing 4% on a like-for-like basis compared to the prior year.

All aftersales channels demonstrated improved gross profit on a like-for-like basis.

While gross margin declined due to higher technician salary costs, Vertu said it was planning to address technician capacity constraints with new initiatives to support revenue growth in the service sector.

Vertu said its operating expenses as a percentage of revenue were slightly higher than in 2023, which was expected, considering higher energy costs, pay actions, and investments in information technology.

Its acquisition of Helston was meanwhile continuing to perform in line with expectations, with progress being made towards planned improvements.

Looking ahead, the company said new vehicle supply was expected to improve, while constraints in the used vehicle supply were likely to persist.

The constraints might help maintain used vehicle values and gross profit.

However, uncertainty surrounding consumer demand due to inflationary pressures and higher interest rates was creating some ambiguity in the market outlook.

“I am pleased to report that trading remains positive,” said chief executive officer Robert Forrester.

“Used car pricing has remained firm and we have gained market share in the new car market.

“The performance of our high margin aftersales business has remained strong.”

Forrester said the integration of Helston Garages was progressing well, adding that it was on track to deliver planned synergies.

“We are excited about the opportunities our enlarged portfolio will create for Vertu Motors.”

At 1241 BST, shares in Vertu Motors were up 1.18% at 70.32p.

Reporting by Josh White for Sharecast.com.