Vertu Motors shares slump following profit warning

Vertu Motors shares plummeted on Thursday after the retailer warned annual profits would likely miss market expectations.

Shares in the Bristol Street Motors owner had slumped 23.8 per cent to 64.6p by the early afternoon, making them one of the top five fallers on the Aim All-Share Index.

The Gateshead-based company blamed the downgraded forecast on a ‘number of negative external market factors’ that impacted the group over the three months ending November.

Used car values in the UK decreased by an average of 4.2 per cent in both October and November, a record monthly decline, with the largest drop observed in the premium brand segment.

Vertu blamed rising wholesale market inventory, as well as sluggish retail demand caused by continued high vehicle prices and interest rates straining customer affordability.

Its like-for-like used vehicle volumes contracted by 2 per cent, although this was an improvement on the 5.7 per cent decline over the previous six months.

Britain’s fourth-largest automotive retailer also said it was affected by new vehicle margins sustaining their downward trend as supply volumes began to ‘exceed natural demand levels’.

Robert Forrester, chief executive of Vertu, said: ‘The current consumer environment remains volatile and recent trends of sluggish new car retail demand and weakness in used car pricing are likely to persist for some months.’

But he added the group ‘has a strong balance sheet and long track record of operational excellence and financial discipline’.

‘These attributes mean we remain very confident in our ability to take advantage of these challenging market conditions and the resulting increased opportunities in the sector,’ Forrester said. 

Like other automobile dealers, Vertu’s trade took off when Britons started purchasing more secondhand cars again after Covid-related restrictions were gradually loosened two years ago.

Used vehicle prices grew significantly as semiconductor shortages forced motor manufacturers to scale back production and limited the volume of new vehicles coming to market.

While they remain above pre-pandemic levels, secondhand vehicle prices have fallen by approximately 18 per cent since April because of slowing demand, according to figures from trade price experts Cap HPI.

Vertu said secondhand vehicle values will ‘likely continue to weaken above historic norms in the near term.’

The group said reducing interest rates over the medium term would help enhance affordability and give ‘a further stimulus’ to a market witnessing increased supply.

Russ Mould, investment director at AJ Bell, said the ‘lagged impact’ of higher interest rates’ means appetite for big-ticket purchases is likely to be pressured for some time to come and could make Vertu’s road to recovery a bumpy one.’