Vertu Motors focuses on cost management and operational efficiency despite inflationary pressure

Key Points:

1. Vertu Motors reported a 2.9% increase in total group revenue for the first half of FY24, despite a challenging market environment, with aftersales operations contributing significantly to gross profit.
2. The company successfully grew its retail BEV sales volumes by 10.9%, positioning itself well in the electric vehicle market, even as overall BEV sales in the UK declined.
3. Vertu Motors is streamlining its operations by unifying all retail outlets under one brand by April 2025, while focusing on cost efficiency to mitigate inflationary pressures.

Vertu Motors plc (LSE:VTU), a prominent automotive retailer with 193 sales and aftersales outlets across the UK, has released its interim results for the six months ended 31 August 2024. Despite facing headwinds in the market, the company demonstrated resilience with a series of positive performance indicators.

Key Highlights

• Revenue Growth: Total group revenue for the period increased by 2.9% compared to the first half of FY24, reflecting solid demand across the business.
• Aftersales Performance: The group’s aftersales operations performed strongly, contributing a gross profit growth of £7.1 million to the core business.
• Used Vehicle Sales: Vertu reported a 3.9% growth in like-for-like used vehicle volumes, with gross margins improving to 7.3%, showcasing a successful strategy in this segment.
• New Vehicle Sales Challenges: The group faced a 5.9% decline in new retail vehicle sales volumes during the period, aligning with an 11.2% downturn in the overall UK market. However, Vertu managed to gain significant market share amid these challenges.
• Electric Vehicle Focus: While overall new battery electric vehicle (BEV) sales in the UK fell by 7.0%, Vertu achieved a notable 10.9% increase in retail BEV sales volumes, reflecting the company's commitment to expanding its electric vehicle offerings.
• Partnerships with Chinese Manufacturers: Vertu has made key strides in strengthening partnerships with Chinese manufacturers, positioning itself to leverage emerging opportunities in the automotive sector.
• Cost Management: As anticipated, profits for the first half were lower than the previous year due to inflationary pressures and an increase in headcount aimed at driving operational activity.
• Strong Balance Sheet: Vertu's balance sheet remains robust, with a gearing ratio of 23.1%, below target levels. Tangible net assets per share have increased to 73.7p, up from 70.9p in H1 FY24.
• Share Buybacks and Dividends: The company has repurchased 3.3 million shares, representing 1.0% of its share capital, at a cost of £2.4 million since 1 March 2024. An additional buyback program of £3 million is underway, along with £0.6 million remaining from the existing authority. The board has also declared an increased interim dividend of 0.90p per share, set to be paid in January 2025.

Current Trading and Outlook

Vertu's trading performance in September was consistent with previous year levels, with the board anticipating that full-year profits will align with market expectations. In a key month for plate changes, like-for-like new retail sales volumes increased by 5.2% despite a 1.8% decline in the overall retail market, indicating strong market outperformance.

The group saw a remarkable doubling of like-for-like retail BEV sales volumes in September compared to the previous year, amidst a largely static UK market. Profitability in the second half of the fiscal year is expected to improve over the previous year, bolstered by a stronger used car market and enhanced trade values for used vehicles.

Despite ongoing inflationary pressures in salaries and wages, Vertu is maintaining its focus on cost management and operational efficiency. By the end of April 2025, all UK retail outlets are set to operate under the unified Vertu brand, which is anticipated to enhance marketing ROI and deliver cost savings.