Vertu Motors has reported a stabilisation in used car values and an increase in sales in recent months despite withstanding a "challenging" year marked by price volatility that has seen the firm's profits grow.
The automotive retailer witnessed a 10.3% decline in used car prices from October to December, as the market corrected following significant increases over the past few years. In December, Vertu warned of an impact on its profits due to the falling prices but noted it would make cars more affordable for consumers.
However, the arrival of spring has seen a turnaround, with like-for-like used car sales volumes climbing by 5.8% year-on-year in March and April. Vertu has also reiterated its concern that Government communications regarding electric vehicles, coupled with the cost-of-living crisis, are affecting this segment of the market.
Last year, Prime Minister Rishi Sunak postponed the ban on new petrol and diesel car sales in the UK from 2030 to 2035. Following this delay, the Government announced ambitious targets for carmakers to meet specific zero emissions vehicle (ZEV) sales quotas, leading to confusion, according to Vertu.
Under the new regulations, car manufacturers must ensure that 22% of the new cars they sell in the UK next year are zero emission, with this requirement jumping to 80% by 2030. In its Wednesday update, Vertu Motors warned of the risk that the car industry might fall short of Government targets for electric car sales in the coming years.
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The company, listed on AIM and founded in 2007 after acquiring Bristol Street Motors, highlighted the threat of significant fines for manufacturers who fail to meet these targets, leading to potential market volatility later this year and in the medium term. Despite issuing a profit warning in December due to price volatility, Vertu posted growing profits and revenue for the year ending February 29.
Before the profit warning, the company had reported record revenue in its interim results. Revenue at the dealership increased from £4billion the previous year to £4.7billion in the year to February 29. Pre-tax profit also saw a rise of 6.5% to £34.6million.
Vertu's chief executive, Robert Forrester, commented: "It was pleasing to see the group successfully navigating a difficult period of trading with declining used car values in the last few months of 2023. Used vehicle prices and margins have now stabilised and there has been strong cash generation from lower working capital reducing net debt below market expectations."
"Moving to the new financial year, March and April 2024 were successful months. The group delivered new retail like-for-like sales volumes ahead of the market decline in March and April. This demonstrates the robustness and strength of the group's operations. The group remains focused and thoughtful around capital allocation."
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