Tyneside-based motor dealership Vertu Motors has announced record revenues but has warned that targets over electric vehicles could disrupt its market later this year.
The Gateshead firm - which has a network of 188 dealerships around the Ƶ - has released results for the year ending February 29 in which revenue rose from £4.01bn to £4.72bn. Adjusted profit before tax fell slightly to £37.8m, however, and this figure was more than half what was recorded two years ago.
Vertu said that used car margins fell in the second half of the year as the market corrected itself but that it managed to cut its relative operating expenses and had reduced its net debt to £54m, lower than market expectations. It said it had seen strong trading in March and April and gained market share with good volumes and margins in both fleet sales and used vehicle sales.
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But it said that the sale of electric vehicles had “stalled” and that Government targets on increase EV sales and potential fines on car manufacturers meant there was a risk of market volatility later in the year. In the results, Vertu announced a new £3m share buyback programme, and said it was well placed to continue growing in the Ƶ car dealer market.
Chief executive officer Robert Forrester said: “It was pleasing to see the group successfully navigating a difficult period of trading with declining used car values in the last few months of 2023. Used vehicle prices and margins have now stabilised and there has been strong cash generation from lower working capital reducing net debt below market expectations. During the year, record revenues of £4.72bn were achieved.
“Moving to the new financial year, March and April 2024 were successful months. The group delivered new retail like-for-like sales volumes ahead of the market decline in March and April. This demonstrates the robustness and strength of the group’s operations. The group remains focused and thoughtful around capital allocation.”
Under the Zero Emission Vehicle (ZEV) mandate, at least 22% of new cars sold by each manufacturer in the Ƶ this year must be zero-emission, which in most cases means they are pure electrics. The threshold will rise annually until it reaches 100% by 2035
Only 15.2% of new cars registered in March were pure electrics, down from 16.2% during the same month last year, leading to pleas from the automotive industry for electric car purchase incentives.
Mr Forrester said: “Retail demand for electric vehicles remains muted with no financial incentives from Government available, despite the onerous targets and fine regime. Most demand is coming from the fleet and business channels where Government tax incentives are in place. Manufacturers are seeking to stimulate retail demand for these vehicles through the offer of discounted prices and supported finance rates, yet these are clearly costly to their profitability.”
