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On Monday, Vertu Motors (LSE:VTU) saw a decline in its share price following the release of a trading update that highlighted a challenging environment for new car sales, although the company reported resilience in the used vehicle market. The update covers the first five months of the fiscal year and provides insights into the company's financial performance.
According to the update, Vertu Motors anticipates that its full-year adjusted profits will align with current market predictions. However, first-half profits are projected to be lower compared to the previous year. This decline is attributed to the weaker new car sales environment. Despite this, there is an expectation of improvement in the second half of the fiscal year, driven by a stronger used car market and increased trade values for used vehicles. For the five months ending 31 July, the volume of used vehicle sales was up by 5.0% on a like-for-like basis.
The company’s aftersales operations, which include servicing, parts, and MOTs, showed a strong performance, with both revenues and profits surpassing those of the previous year. In contrast, new retail vehicle sales during the same period were down by 5.8% year-on-year. Chief Executive Robert Forrester attributed this decline to market volatility and negative impacts caused by government regulations aimed at transitioning to battery electric vehicles.
Despite the challenges in new car sales, Forrester expressed satisfaction with the company's overall performance. He highlighted the success of Vertu Motors' high-margin aftersales business, which benefits from an increased number of technicians and effective execution of the vehicle health check process.
Forrester also noted that the current market dislocation presents opportunities for Vertu Motors. With a robust balance sheet, strong brand portfolio, scalable systems, and a skilled leadership team, the company is well-positioned to navigate these challenges and seize potential opportunities.
As of 0837 BST, Vertu Motors' share price had decreased by 3.1%, trading at 69.4p. This drop reflects market reactions to the trading update and the broader challenges facing the new car sales segment.
