Half year profits have slipped at car dealership group Vertu owing to increased costs, despite record revenues.
The Tyneside-based business says it has well outperformed the market with like-for-like new car sales up 5.2% against a countrywide backdrop of new car registrations falling 1.8%. Chief executive Robert Forrester said conditions were right for continued expansion of the 193 outlet strong network in the months ahead following a flurry of acquisitions and new showroom openings - including Vertu's first site for Chinese electric vehicle maker BYD.
New unaudited half year results posted to the London Stock Exchange show Vertu grew revenues to £2.49bn in the six months to the end of August, up from £2.42bn in the same period the year before. Adjusted pre-tax profits fell from £31.5m to £23.5m as inflation drove up costs, including higher depreciation on electric demonstrator and courtesy cars, as well as the cost of a bigger workforce designed to drive growth. The results came as a fresh £3m share buyback scheme was announced.
Vertu operates showrooms and aftersales sites under its own name as well as the Bristol Street Motors and Macklin Motors brands but plans to trade all of its º£½ÇÊÓƵ-wide network under the Vertu brand from April next year - a move that chairman Andy Goss said would bring efficiencies. During the period the group opened a new Honda dealership in Exeter via an acquisition from Hendy Group Limited, and launched Peugeot, Renault Dacia, Toyota, Ducati motorbike and BYD sites.
It told investors there would be further openings in the second half, including five outlets for another Chinese brand, Leapmotor. The move is part of a strategy to increase º£½ÇÊÓƵ buyers' exposure to Chinese cars as the º£½ÇÊÓƵ is the only major western country not to have significant tariffs on the vehicles.
Vertu warned that while falling interest rates would benefit it, there could be potential "volatility" in the pipeline created by Government Zero Emission Vehicle mandate which threatens manufacturers with fines if they do not adhere to battery electric volumes.
Speaking to BusinessLive, Mr Forrester said: "The good news in the results is that despite the new car retail market being down 11.2%, we were only down 5.9%. And a lot of that outperformance actually came from battery electric vehicles - which are obviously flavour of the month at the moment.
"Interestingly, in the six months, retail sales of battery electric vehicles - bearing in mind they're being pushed by the Government through regulation - actually fell in the º£½ÇÊÓƵ by 7%. That's quite a staggering statistic. I'm pleased to say that while the market fell 7% we grew 10.9% so we've seen massive outperformance in the business as we've focussed on selling battery electric vehicles."
Vertu blamed the new car market woes on the stretching targets for car manufacturers to achieve specific zero emissions vehicle (ZEV) sales targets. More than a fifth (22%) of new cars sold by manufacturers in the º£½ÇÊÓƵ next year must be zero emission, rising to 80% in 2030, under rules brought in by the former Conservative government. This is leading to a strong supply of electric vehicles as manufacturers aim to meet government targets, but this comes amid weaker demand from more cost-conscious buyers.
Mr Forrester added: "The aftersales business continues to execute very well - there was a big increase in gross profit. Used cars were steady - up 3.9% in volume and gross margins better. So, I think in the circumstances it is a creditable performance and we expect to be in line with year market expectations.
"The balance sheet is very good: gearing is 23% which is low and we've announced a new share buyback. We've actually spent £33m on share buybacks over the past few years and also £56m in dividends since we started paying a dividend, so we have generated a lot of cash for shareholders and that should continue."
