Vertu Motors has asserted that ‘scale is a key success factor’ in automotive retail in a five-month trading update detailing its rapid expansion the addition of new dealership operations across the UK.
Today’s (March 2) trading update from the AM100 PLC included its growth to become the UK’s largest BMW Motorrad retailer, its acquisition of 27-site Helston Garages and the opening of new Toyota dealerships in a West of Scotland territory inherited from Arnold Clark.
In total, 37 sales outlets have been added to group’s portfolio of 191 sales and aftersales outlets since December 1, 2021.
During the reported period Vertu also added Vauxhall and Citroen alongside its Peugeot operation in Harlow and it recently announced that its BMW and Mini dealership in Malton, Yorkshire, would close at the end of March, with its operations consolidated into its nearby facility in York.
An outlook statement issued by Vertu’s board stated: “The board considers that scale is a key success factor in the UK automotive retail sector given the need for strong brands and investment in physical and digital capabilities and it continues to have ambitious growth aspirations for the Group as recently demonstrated with the acquisition of Helston Group.
“Our strong balance sheet and the ongoing support from lenders, our experienced leadership team and robust systems capabilities will ensure the group continues to capitalise on the significant growth opportunities that exist in the sector.”
Vertu’s trading update for the five-month period to January 31 said that group trading had been in line with management expectations.
Despite its series of acquisitions its reported year-end net debt was expected to be £80m to £85m compared to previous guidance of £100m to 110m.
Vertu reported that its new retail vehicle sales declined 5.4% against a strong market outperformance in the same period 12 months earlier as it claimed a 4% share of the total market.
Operational performance
Motability volumes grew 59.7% on a like-for-like basis, however, with gross profit per unit improving by 3.6% to £2,344, taking like-for-like gross profits from the sale of new retail and Motability vehicles up by £5.1m year-on-year.
Fleet car volumes grew by 13.2%, against a 33.4% growth in the UK fleet market.
Vertu’s used car sales volumes declined by 4.4% in the five-month period.
Used electric vehicle (EV) values declined 17% during the period as the group was prompted to source older used cars to bolster stocks.
The period saw gross used car margins “normalised” from 9.4% to 7.0% as the Core Group’s gross profit per unit reduced by £455 from the record £1,400 seen across 2022 as a whole, Vertu said.
New commercial vehicles grew 7.0% against a market decline of 8.5%, meanwhile, aided by the group’s online commercial vehicle sales operation Vansdirect, which grew its market share by 1ppt to 5.9%.
In aftersales, Vertu’s Core Group service revenue was £4.7m above 2022 levels after reducing its technician vacancy levels.
Like-for-like service gross margins reduced from 74.1% in FY22 to 72.5% in the period, however, reflecting the higher payroll costs that resulted.
Vertu’s smart repair operations have grown and now utilise 106 vans while, in its parts business, gross margins remained stable at 22.9%, resulting in an increase in core gross profit of £1.7m.
Overall, aftersales margins were 44.4% (FY22: 46.1%) with core gross profit generation up £4.9m in the Period on improved volume, it reported.
Sustainable progress
Group expenses increased £11.9m in the period, with energy joining salary inflation as “a cost headwind”.
An end to fixed rate energy contracts in September 2022 led to £2.7m of additional costs.
A focus on reducing energy usage delivered a 3.9% reduction in like-for-like electricity usage during the period, however.
The group has also completed seven of 46 planned solar panel installations which when complete in December 2023 should generate 10% of the Group’s electricity load with an expected total capital expenditure of £2.7m.
Commenting on today’s trading update, Vertu chief executive Robert Forrester said: “The entire Vertu team has put in hard work and dedication once again, and I would like to thank them all.
“Used car margins have normalised back towards historical levels as we had expected and there are tentative signs of improving new car supply. The performance of our service and repair business has been strong.
“We have been working at pace to integrate the recently acquired Helston Motors business and this is progressing well. We are excited about the opportunities our enlarged portfolio will create for Vertu Motors.”