Vertu Motors profits hit by higher costs

Bristol Street Motors owner Vertu Motors saw profits fall as expected in the first half as the dealership group suffered higher costs. 

The car dealership chain revealed its adjusted pre-tax profits plummeted by around a quarter to £23.5million in the six months ending August due to rising costs.

While the firm’s revenue rose by 2.9 per cent to about £2.5billion, its earnings were hurt, as expected, by the recent national minimum wage hike and increasing staff levels boosting its total salary costs.

Vertu cut its profit guidance in early September, blaming a drop in demand for new cars, especially battery electric vehicles, because of high prices and the absence of government financial incentives.

Its new retail vehicle sales volumes in the UK fell by 5.9 per cent to 18,847 during the half-year period, although this was offset by Motability volumes jumping by 23.9 per cent to 10,688 cars.

The Gateshead-based group said the mix of weak retail demand and robust supply of new vehicles has encouraged businesses to engage in ‘significant discounting’ and offer better financing deals for electric models. 

Vertu also said retailers’ margins have come under pressure from many customers falling into negative equity and laws requiring dealerships to sell a greater share of zero-emission cars.

Under the ZEV mandate introduced in January, at least 22 per cent of new cars sold by automakers this year must be zero emission – this figure will rise to 80 per cent in 2030 and 100 per cent by 2035.

Robert Forrester, chief executive of Vertu, said the changes have ‘introduced market volatility and negative effects in terms of affordability’.

However, he noted: ‘We took considerable market share in the new retail market, and in the BEV market in particular, reflecting the group’s adaptability and strong operational execution.’

Due to a stronger secondhand car market, Vertu expects to enjoy higher profits in the second half of the financial year.

Used car prices soared as Covid-related restrictions loosened in 2021 and 2022 due to pent-up demand and a shortage of semiconductors hitting global vehicle production.

They have since returned to more normalised levels thanks to the supply of new cars rebounding and dealers cutting prices to try and lower inventory levels. 

Vertu Motors shares were 4.7 per cent up at 60.3p on late Wednesday morning, although they have slumped by around 16 per cent so far this year.

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