REG - Vertu Motors PLC - Trading Update

Vertu MotorsAnnouncement

30/08/2023 07:00

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RNS Number : 7250K  Vertu Motors PLC  30 August 2023

30 August 2023

Vertu Motors plc ("Vertu Motors", "Group", "Company")

Trading remains positive - in line with expectations for the full year

Ahead of the announcement of its results for the six-month period ended 31
August 2023, Vertu Motors, a leading UK automotive retailer with a network of
189 sales and aftersales outlets is pleased to provide an update on current
trading.  The Group has delivered a trading profit above prior year levels,
aided by the Helston acquisition which was completed in December 2022.  The
Board anticipates that full year results for FY24 will be in line with current
market expectations.

In the New retail and Motability channel, like-for-like volume growth has been
delivered, as supply constraints continue to ease.  Supply is improving
overall which aids sales volumes. Recent increased supply of new electric
vehicles appears to be exceeding retail demand, creating an imbalance in
pipeline inventory coming into the key plate change month of September.
Manufacturers are reacting to this through the offer of discounted prices and
supported finance rates to stimulate retail demand.  Fleet sector demand for
electric vehicles remains robust and is currently critical to the
electrification of the vehicle parc.

Fleet and commercial vehicle like-for-like volume growth was delivered by the
Group, aided by strong demand and improved supply.  Fleet and commercial
vehicle gross margins remain strong.

Used vehicle like-for-like volumes declined 6.3% in the five months ended 31
July 2023.  Rising interest rates have meant that the Group has this year
been unable to run its popular 0% finance offers on used vehicles during event
periods as it did in the prior year.  This change in approach, along with a
continued lack of supply of used vehicles has driven the reduction in the
number of like-for-like used vehicles sold.  Autotrader has recently noted
these supply issues, highlighting that there are 27% fewer sub-5-year-old-cars
in the UK parc compared to 2019.  These supply trends have helped drive
stability in used vehicle prices, except for used electric vehicles which have
been impacted by substantial increases in supply into the used market.
Overall, used gross profits per unit have continued to be above historic
levels as anticipated and are comparable to the prior year.  Supply trends
have driven an increase in the mix of older vehicles being retailed by the
Group.   Despite the overall supply dynamics, the Group during the period
has successfully increased vehicle inventory levels to ensure future sales
volumes are maximised. This has been possible due to the strong procurement
capabilities of the Group in the used car area, including the close
partnership with its manufacturer partners and the benefits that come from
part exchanges derived from increasing new car sales.

The Group has seen strong demand for its high margin vehicle repair and
service operations, driving revenue growth in both service and parts.
Technician resource levels remain a constraining factor in meeting both retail
demand for work and in the preparation of used vehicles for sale (older
vehicles require more preparation).  Consequently, the Group has taken
further pay action in July to promote the recruitment and retention of
Technicians and this should aid further growth.  Improved gross profit was
delivered in all aftersales channels on a like-for-like basis.  As expected,
gross margin percentages in service declined due to higher technician salary
costs.

Good progress has been made in the Group's accident and cosmetic repair
operations, which have delivered revenue and profit growth compared to the
prior year.

Group operating expenses as a percentage of revenues are slightly lower than
last year despite higher energy costs, inflation, pay actions and investment
in the Group's Information Technology platforms.  A strong focus on driving
efficiency and productivity is in place, with growing use of technological
solutions to deliver efficiency and therefore cost reductions.  The Group
continues with its energy purchase strategy with 26 sites now having solar
panels installed.  12% of the Group's July electricity requirement was
self-generated, with installations at 14 further sites currently ongoing.

Interest expenses are higher than anticipated in the period due to increased
manufacturer stocking changes as new car pipeline stock increased and interest
rates rose.

The Group has continued to buy back shares, repurchasing approximately 7.4m
shares, representing 2% of opening shares in issue, in the financial year to
date, for a total cost of £4.8m.

Outlook

The Board remains optimistic for the future.  New vehicle supply is
increasing whilst constraints in used vehicle supply in the UK persist,
particularly in the sub-5-year-old parc, helping to underpin used vehicle
values.  The roll out of agency distribution models is at an early stage and
the Group will continue to monitor the impact on the business and financial
returns.  Whilst used vehicle purchases remain essential for many, the market
outlook remains unclear due to the impact of inflationary pressures and higher
interest rates for consumers.  Aftersales demand remains strong with actions
taken to increase available resource.

The Helston acquisition made in FY23 continues to perform in line with
expectations and remains on target to deliver on the planned improvements.

Management remains focused on operational excellence around cost, conversion
and customer experience and the delivery of the Group's strategic objectives
through enhanced performance coming from scale and technology.  The Board
anticipates that full year results for FY24 will be in line with current
market expectations.

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."

For further information please contact:

 

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

 Phil Clark, Investor relations                         PClark@vertumotors.com

 Zeus (Nominated Adviser and Broker)     Tel: +44 (0) 203 829 5000
 Jamie Peel
 Andrew Jones
 Dominic King

 Camarco                                 Tel: +44 (0) 203 757 4983
 Billy Clegg
 Tom Huddart

 Notes to Editors
 Vertu Motors is the fourth largest automotive retailer in the UK with a
 network of 189 sales outlets across the UK. Its dealerships operate
 predominantly under the Bristol Street Motors, Vertu and Macklin Motors brand
 names.

 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. The Group currently operates 185 franchised sales outlets and 4
 non-franchised sales operations from 139 locations across the UK.

 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.bristolstreet.co.uk (http://www.bristolstreet.co.uk) /
 www.macklinmotors.co.uk (http://www.macklinmotors.co.uk) /
 www.vertumotorcyles.com (http://www.vertumotorcyles.com)

 

 

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