Used car supply challenges and rising interest rates have impacted motor retailer group Vertu, though its continuing growth will see profits grow.
Ahead of half year results the North East-based firm said it had been unable to run its popular 0% finance offers on used vehicles. And coupled with a lack of supply experienced across the industry, Vertu's used vehicle like-for-like volumes declined 6.3%.
In an update to investors, Vertu pointed to Autotrader research that highlighted there are 27% fewer sub-five year-old cars in the market compared with 2019. The constraints have helped to prop up used car prices, also helping to keep Vertu's gross profits per unit above historic levels as it managed to build stock thanks to group's purchasing power.
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Meanwhile electric vehicle prices tumbled as an oversupply has led manufacturers to offering discounted prices and supported finance rates to stimulate demand. But fleet demand for electric vehicles remained robust.
Despite the headwinds, Vertu said it had delivered a trading profit above prior years, helped by the biggest deal in the firm's history, last year's £120m acquisition of 28 dealerships that were part of the Helston Group. Like-for-like volume growth was delivered across the group's new retail, fleet and commercial vehicle and motability divisions.
Elsewhere the listed firm said there had been strong demand for its high margin vehicle repair and service operations, driving revenue growth in its service and parts businesses along with accident and cosmetic repair operations. But the availability of mechanics for repairs and preparation of used vehicles had constrained growth. In a bid to promote recruitment and retention, Vertu said it had boosted pay in July.
Looking ahead, the group said its board was optimistic for the future despite the market outlook for used cars remaining "unclear" due to inflationary pressures and higher interest rates for drivers. The group said the roll out of agency distribution models is at an early stage and it will continue to monitor the impact on the business and financial returns.
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Robert Forrester, chief executive officer of Vertu Motors, said: "I am pleased to report that trading remains positive. The entire Vertu team has put in hard work and dedication once again, and I would like to thank them all. 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.
"The integration of Helston Garages remains on track to deliver the planned synergies. The board remains optimistic for the future, we anticipate that full year results will be in line with current market expectations, and we are excited about the opportunities our enlarged portfolio will create for Vertu Motors."