REG - Vertu Motors PLC - Trading Statement

Vertu MotorsAnnouncement

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RNS Number : 9278X  Vertu Motors PLC  04 September 2025

4 September 2025

 

Vertu Motors plc ("Vertu Motors" or "the Group")

Trading Update:  Robust used cars, aftersales and cost focus offset by new
car market

Vertu Motors, a leading UK automotive retailer with a network of 195 sales and
aftersales outlets, announces the following trading update with regards to the
five-month period to 31 July 2025 ("the Period") ahead of its interim results
for the six-month period ended 31 August 2025.

HIGHLIGHTS

·    Full year FY26 adjusted(1) profit before tax expected to be in-line
with current market consensus(2).

·    Like-for-like used car volumes and margins are stable, a good result
given supply constraints and demand impact of lower consumer confidence.

·    Strong growth in high margin aftersales business due to improved
pricing and benefits of a number of Group initiatives.

·    New car market faces continued pressure from the Zero Emission
Vehicle ("ZEV") mandate and general consumer environment. Encouraging
developments in recent Government announcement on Electric Vehicle ("EV")
grants which are expected to improve demand for new EV cars in H2 and which
benefit many of the Group's franchises.

·    New retail car order book for the plate change month of September is
slightly ahead of the prior year.

·    The Group continued its strong focus on cost control in the Period
with like-for-like operating expenses level with last year despite
inflationary pressures.

·    The Group continues to develop its portfolio of sales outlets with
the announcement of the opening of three new BYD sales outlets by 1 November,
bringing the total number of BYD outlets operated by the Group to five.

·    The Group continues its share buyback programme with £6.4m of the
current £12.0m authority expended to 31 August, in the repurchase of 9.4m
shares. Since share buyback programmes began in July 2017, over £41m has been
returned to shareholders through the repurchase of shares, reducing the
Group's shares in issue by over 19%.

(1) Adjusted to remove non-underlying items.

(2) According to Company compiled data as of 3 September 2025, the current
consensus of three sell side analysts' expectations for FY26 Adjusted profit
before tax is £27.2m, with a range of £26.5m to £27.5m.

Robert Forrester, Chief Executive Officer, said:

"I am pleased with the Group's performance in the first half as we have
navigated a subdued consumer backdrop and continued uncertainty in the new car
market caused by the Government's Zero Emissions Vehicle mandate.  The Board
expects results for the full year to be in-line with expectations driven by a
continued strong performance from our high margin aftersales business, and
greater affordability in the new electric vehicle market with more sub
£20,000 new EVs available and a series of Government grants to stimulate EV
activity now in place.  Encouragingly, the September new retail order book is
slightly ahead of last year and likely to benefit from the new grants regime.

Vertu benefits from a strong balance sheet with low gearing, stable leadership
and motivated team such that when opportunities arise, we can allocate capital
in a disciplined and flexible way to benefit our shareholders".

TRADING UPDATE

New retail car and Motability sales

According to SMMT data, UK private registrations grew by 4.4% during the
Period despite continued pressure from the ZEV mandate and the impact of
declining consumer confidence.  2024 saw the new retail market hit a 25-year
low.  The Group's like-for-like volumes in the Period grew 1.4% with the
market data likely to be inflated by pre-registration and other tactical
activity as a result of supply levels exceeding underlying retail demand.
These trends also placed some pressure on retail margins.

Motability registrations are significantly down, with the UK market seeing a
19.8% decline in registrations via this channel with the Group's like-for-like
Motability volumes declining 21.7% in the Period.

As a result of the change in sales mix, with lower margin Motability sales
accounting for a smaller proportion of the Group's total new car volumes in
the Period, new car margins in the Core Group(3) have grown to 8.0% (2024:
7.8%).

Fleet & Commercial vehicle sales

The Group's like-for-like volumes in the fleet car channel grew by 13.6% in
the Period, slightly ahead of the market growth with sales, particularly of EV
vehicles, remaining strong in the fleet channel compared to the retail
channel.

Conversely, there has been reduced demand in new commercial vehicle sales
throughout 2025 with UK registrations down 9.0% in the Period. This is likely
to reflect weakening business confidence. The Group outperformed the market in
this channel, gaining market share with Group like-for-like volumes declining
4.1% over the Period.

The Core Group's margins in this combined channel have declined slightly to
5.1% (2024: 5.3%) reflecting the Group's desire to increase volumes to manage
Manufacturer vehicle stocking charge levels.

Used vehicle sales

Due to the well-documented new car market supply constraints in recent years,
the Group continues to see market shortages of three-to five-year-old used
vehicles, while there is an increasing supply of nearly new cars coming from
the pre-registration channel and daily rental channels. This latter market
dynamic reflects new car market features of oversupply and tepid demand.
 Despite these challenges, the Core Group delivered sales volumes slightly in
excess of the prior year over the Period.  The latter months showed
improvement compared to the earlier part of the Period, driven by a highly
successful ten-day Group-wide sales event in July that resulted in a
significant rise in sales volumes and the benefits of the Group's Insights
used car pricing algorithm.

Used car values in the UK market have shown considerable stability over the
Period driven by this shortage of desirable stock leading to well-balanced
supply and demand (source: CAPHPI, Car Market Overview, August 2025). Margins
in used cars are under some pressure due to retail prices not growing to the
same degree as trade prices.  Aggressive new car offers are also impacting
margins of younger used cars especially in the premium sector. Despite these
market trends and discounting in the Group's July sales event, the Core Group
over the Period saw stable margins.

Overall, used car gross profits rose year-on-year on a like-for-like basis.

 

Aftersales

In its high margin vehicle repair and servicing operations, the Group has
delivered significant like-for-like growth in gross profit in the Period. The
Group has successfully focused on initiatives to enhance average invoice
values including focus on the Group's vehicle health check process and
increased use of the Group's Pay Later product.  These initiatives combined
with upward pricing action, reflecting cost pressures that led to a
year-on-year improvement in like-for-like labour sales and a rise in
like-for-like service gross margins to 73.6% (2024: 72.5%).  Aftersales gross
profit in the Core Group increased as a consequence.

Operating expenses

As a UK business, it was inevitable that the Group faced cost pressures in the
Period, particularly in respect of changes to the minimum wage and National
Insurance contributions which took effect in April 2025. As previously
announced, the Group undertook various cost cutting measures in the year ended
28 February 2025 to offset these headwinds. The Group continued its strong
focus on cost control in the Period and made progress in reducing energy costs
and vehicle running costs, in particular. These actions helped to keep
operating expenses in the Core Group in line with the prior year, which the
Board considers a major achievement.

The Board has approved a further £900k capital expenditure investment in
solar panels in an additional portion of the Group's freehold property estate
in order to continue to exert downward pressure on energy costs.

PORTFOLIO MANAGEMENT

The Group continues to actively manage its dealership portfolio to enhance
shareholder value.

The Group will open three new BYD sales outlets in the coming months, in
Hartlepool, Macclesfield and Morpeth adding to its existing BYD representation
in Gloucester and Worcester. This initiative is part of the Group's strategy
to reflect the likely increase in market share taken by Chinese manufacturers
in the years ahead.

A Citroen dealership in Nottingham which operated from a leasehold premises
was closed in June 2025 and will be refranchised to the Skoda franchise in
November 2025.

The Group has generated proceeds of £3.3m from the sale of surplus properties
held for resale in the Period which aids future returns.

FINANCIAL CONDUCT AUTHORITY & SUPREME COURT RULING ON COMMISSION
DISCLOSURE

In August 2025, the Supreme Court issued its judgement relating to Court of
Appeal rulings in October 2024 around historic finance commissions in the
sector.  The Supreme Court dismissed the claims regarding bribery and
fiduciary duties owed by motor retailers to customers.  It upheld one of the
Court of Appeal decisions relating to an unfair relationship between the
customer and the lender, albeit based on the facts of that case alone.

Following the judgement, the Financial Conduct Authority (FCA) confirmed that
it will issue a consultation document in October 2025 regarding a proposed
redress scheme for motor finance customers, with payments to consumers
expected to start in 2026.  The Group has, along with others in the sector,
been involved in calls with the FCA to provide information and views as part
of the development of the redress scheme.

Although the structure and details of the redress scheme are not yet known,
redress is expected to be based on a definition of unfair relationships
between some customers and lenders with the redress payable therefore expected
to be initially levied on lenders, rather than on motor retailers as credit
brokers.

The Board does not currently consider that provisions are required to be made
in respect of any exposures in this area and will update shareholders as the
position becomes clearer.

OUTLOOK

Full year FY26 adjusted profit before tax is expected to be in line with
current market consensus.  H1 profits will be lower than prior year
reflecting the relative strength of comparative profits in H1 last year
compared to the year as a whole.

The new retail car market registration remains under pressure due to
regulatory actions around electrification and the general consumer environment
in the UK. The Board is pleased to note that the Government has reacted to
this weakness announcing in mid-July, a new series of grants to stimulate EV
sales in all channels.  This announcement, ahead of confirmation of the exact
nature and extent of the grants, undoubtedly led to some customers in July and
August deferring purchases until model availability on the scheme and pricing
was clarified.  So far, EV grants have now been confirmed as available in a
significant number of brands which the Group represents with some other
Manufacturers making similar discounts available to match this offering.

This enhancement of consumer offers will be helpful in stimulating demand for
new cars in H2 and the very important September plate change market in
particular.  There have been further pleasing developments in affordability
of electric cars with more sub £20,000 new EVs coming to the market.
Against this backdrop, the Group has a new car order book slightly ahead of
the prior year as it heads into the important trading month of September which
bodes well for a strong September trading result.  September underpins
profitability in H2.

In the important Motability market, which has seen volume decline
year-on-year, the Board expects the market to stabilise in H2 due to weakening
comparatives.

Group aftersales performance remains encouraging, driven by strong focus on
customer retention and improved conversion of identified work.

The used vehicle market has been remarkably stable due to inherent used
vehicle supply constraints.  This is expected to continue for the remainder
of the financial year helping to underpin used vehicle values. Volume and
margins are anticipated to be stable.

The Group remains well-positioned with stable management and a strong balance
sheet with low gearing.  The Board actively manages the portfolio, pursuing
growth opportunities while ensuring disciplined capital allocation through
strict return metrics.  The share buy-back programme continues and these
purchases will increase earnings per share.

The Group will report its interim results for the six-month period ended 31
August 2025 on 8 October 2025.

(3) Core Group represents dealerships that have traded for the full period
March 2024 to July 2024 and March 2025 to July 2025

 

 Vertu Motors plc

                                                                              Tel: +44 (0) 191 491 2121
 Robert Forrester, CEO
 Karen Anderson, CFO

 Phil Clark, Investor Relations

 Stifel (Nominated Adviser and Joint Broker)               Tel: +44 (0) 207 710 7688
 Matthew Blawat
 Nick Harland

 Shore Capital (Joint Broker)                                                 Tel: +44 (0) 20 7408 4090
 Mark Percy / Sophie Collins (Corporate Advisory)
 Isobel Jones (Corporate Broking)

 Camarco                                                                      Tel: +44 (0) 203 757 4980
 Billy Clegg
 Tom Huddart

 Notes to Editors
 Vertu Motors is the fourth largest automotive retailer in the UK with a
 network of 195 franchised sales outlets across the UK.

 Vertu Motors was established in November 2006 with the strategy to consolidate
 the UK motor retail sector.  It is intended that the Group will continue to
 acquire motor retail operations to grow a scaled dealership group.  The
 Group's acquisition strategy is supplemented by a focused organic growth
 strategy to drive operational efficiencies through its national dealership
 network.

 Vertu's Mission Statement is to "deliver an outstanding customer motoring
 experience through honesty and trust".

 Vertu Motors Group websites - https://investors.vertumotors.com
 (https://investors.vertumotors.com) / www.vertucareers.com
 (http://www.vertucareers.com)

Vertu brand websites - www.vertumotors.com (http://www.vertumotors.com) /
 www.vertumotorcycles.com (http://www.vertumotorcycles.com)

 

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