Higher revenue and profit from auto servicing, parts, and repairs seemed to have given Vertu a bit of a boost as it tried to navigate through what they called “the lowest new retail car market for 25 years”. The dealer group, which decided to switch the name of its Macklin Motors outlets in Scotland to Vertu, showed a modest 1.7% increase in turnover to £4.8 billion over the year ending in February. Acquisitions contributed £124 million to this growth, but pre-tax profit took a hit, dropping by 15.8% to £29.3m due to zero emission mandates and consumer caution in the face of a weak economy.
Industry data revealed that overall UK car registrations saw a 1.2% growth in the 12 months leading up to February 28, driven mainly by lower-margin fleet sales accounting for almost 60% of all new vehicle registrations. Private market channel registrations in the UK, which are typically more profitable, saw a decline of 7.4%, with retail registrations lower than during the pandemic. Despite this, Vertu managed to keep its new retail car volume decline at 3.9%, which they proudly claimed was “significantly better” than the broader market.
On the other hand, used vehicle sales on a like-for-like basis dropped by 0.7% to 85,769. The shortage of used vehicles due to new car supply issues following the pandemic led to stable wholesale used car prices throughout the year. However, despite initial hopes for improved margins in used vehicle sales due to the supply shortage, subdued consumer confidence put a damper on these expectations.
Aftersales turned out to be a more robust business segment for Vertu, bringing in more revenue and gross profit through service, parts, and repairs. The group currently boasts around 208,000 customers with active service contracts, with parts sales seeing a growth of 6.2%. Although accident repairs took a hit, an increase in cosmetic repairs led to an overall growth of 3.8% in that category.
Chief executive Robert Forrester expressed optimism for the current financial year, noting a strong start with a notable increase in the UK new retail car market as manufacturers adjusted their fleet and retail mix. Profit overall was higher compared to the same period in the previous year. Trading in March and April showed improvement over the prior year, with the UK retail new car market picking up from its lows and the group maintaining its focus on operational excellence. The high-margin aftersales business continued to perform well, sustaining its robust performance.
Analysts at house broker Shore Capital shared their encouragement at the revenue growth at Vertu amid what they described as a “highly challenging backdrop”. They commended the consistent profitability and strong cash generation of the company, attributing it to the firm management and operational discipline. Despite ongoing disruptions from tariffs, the ZEV mandate, and a bleak macro-economic outlook, they saw the £29m in annual pre-tax profit as a foundation for future growth.
Vertu’s board of directors proposed a final dividend of 1.15p per share pending approval at its annual general meeting on June 25. By late afternoon, the shares were trading over 2% higher, reflecting some positive sentiment towards the company’s performance.
