Vertu Motors lowers expectations on profits

Vertu has a network of 190 sales and aftersales outlets across the UK, including Bristol Street Motors in Stafford and West Bromwich.

In a trading update for the three months ending November 30, the company said the impact of a number of negative external market factors has hit expectations.

The business said the period had witnessed a change in the used vehicle market with UK wholesale values experiencing a significant reduction in October and November.

This arose due to higher supply into the wholesale markets, in conjunction with retail demand being affected by the combination of higher interest rates and high vehicle prices impacting affordability.

Group like-for-like used vehicle volumes fell 2% in the period, an improvement on the 5.7% reduction in the first half of the financial year. Gross profit generation from used car sales were, however, below those anticipated.

An update said: "The Board consider that UK used vehicle values are likely to continue to weaken above historic norms in the near term.

"Once the current pricing correction has eased, used car prices in the UK will be more affordable to the consumer and margins should stabilise. Reducing interest rates in the medium-term would also aid affordability and provide a further stimulus to a market benefitting from increased supply.

"New vehicle supply to the UK continues to increase as production constraints diminish and lead times reduce. The calendar year to November 2023 has seen UK car registrations increase 18.6%, due to significant product flow into the fleet market, whereas new car retail volumes have only marginally increased.

"Retail demand has become increasingly muted in recent months, and this is particularly the case for Battery Electric Vehicles. The Group has seen like-for-like new retail and Motability volumes broadly in line with the UK market growth during the Period. New vehicle margins have continued to reduce towards more normalised levels due to increased supply, with the Group delivering higher overall core gross profit generation from the sale of new vehicles year-on-year."

Robert Forrester, Chief Executive Officer of Vertu, said: "The current consumer environment remains volatile and recent trends of sluggish new car retail demand and weakness in used car pricing are likely to persist for some months.

"Vertu remains very focused on delivering outstanding customer experience, tightly controlling inventory and being diligent on costs.

"The Group has a strong balance sheet and long track record of operational excellence and financial discipline. These attributes mean we remain very confident in our ability to take advantage of these challenging market conditions and the resulting increased opportunities in the sector."