Vertu Motors boasts of strong start to the year as steep demand and short supply of cars keeps gross margins resilient
- Vertu owns the Bristol Street Motors and Macklin Motors dealership chains
- Gross margins across all channels remain high due to production shortages
- The firm said new car volumes will ‘improve gradually’ in the coming months
Vertu Motors has recorded a solid start to the financial year due to continued supply chain troubles creating a shortfall of vehicles for sale.
Since reporting its annual results in May, the automotive retailer said the shortage and steep price of motors across all channels had enabled its gross margins to remain significantly high.
The Gateshead-based company, which owns the Bristol Street Motors and Macklin Motors dealership businesses, admitted the volume of used cars had experienced a ‘significant decline’ on a like-for-like basis last month.
Performance: Automotive retailer Vertu Motors said the shortage and steep price of vehicles across all channels had enabled its gross margins to remain significantly high
This was largely because of the release of pent-up demand during the comparative period in 2021, when the loosening of travel restrictions by the UK Government led to a resurgence in automobile purchases.
Yet it noted that the profit on each used car purchase was greater than last year’s levels, while its high-margin aftersales departments were aided by the expansion in the number of working days.
Gross margins in its new retail and fleet channels have also stayed strong following the disruption in global vehicle production, a phenomenon that is partly down to a worldwide shortage of semiconductors.
Vertu said the volume of new motors is set to ‘improve gradually’ in the coming months even as it warned that consumer demand and vehicle supply forecasts remained uncertain.
Alongside the trading update, the group revealed that investors had overwhelmingly approved all the resolutions at its annual general meeting.
However, more than 17 per cent of its shareholders had each voted against re-electing chairman Andrew Goss and the firm’s proposed dividend.
A final dividend of 1.05p per share was recommended by board members in May when Vertu reported its best ever yearly trading results.
Revenues for the year ending February 28 jumped ahead of pre-pandemic levels after skyrocketing by over £1billion, helping profits increase by 268 per cent to £60million.
The AIM-listed company said it ‘has had a strong start to the financial year, but it is premature at this stage to indicate any changes to market expectations of the full-year trading profits.
‘Management remains focused on the delivery of operational excellence around cost, conversion and customer experience.
‘In addition, the group continues to evaluate and execute acquisition opportunities as it seeks to deliver its core strategic objective of growth.’
To this effect, Vertu is engaging in a multi-franchise strategy, which has seen it acquire Toyota franchises covering the west of Scotland, Loughborough and Leicester, along with franchises belonging to Honda Bikes, Citroen and Vauxhall.
More recently, the business bought the freehold and long leasehold interests of a site in Derby, where it operates outlets selling cars built by Nissan, Skoda, Renault & Dacia and Peugeot, and a Bristol Street Motors dealership.
Vertu Motors shares rose by 4.1 per cent to 55.3p on Wednesday, although their value has plunged by around a fifth since the start of the year.