Vertu Motors profit hit by higher costs

Bristol Street Motors owner Vertu Motors saw profits decline in the first half of the year as expected, as the dealer group faced higher costs.

The car dealership chain announced that adjusted pre-tax profits fell by around a quarter to £23.5m in the six months ended August due to rising costs.

While the company’s turnover rose 2.9 per cent to around £2.5 billion, profits were, as expected, negatively affected by the recent national minimum wage increase and increasing headcount, pushing up overall salary costs.

Vertu cut its profit forecasts in early September, blaming a drop in demand for new cars, especially battery-electric vehicles, on high prices and the lack of government financial incentives.

New retail vehicle sales volumes in Britain fell 5.9 percent to 18,847 during the half-year period, although this was offset by Motability volumes rising 23.9 percent to 10,688 cars.

The Gateshead-based group said the mix of weak retail demand and robust supply of new vehicles has encouraged companies to offer ‘significant discounts’ and better financing deals for electric models.

Vertu also said retailers’ margins have come under pressure as many customers have fallen into negative equity and laws requiring dealers to sell a greater share of zero-emission cars.

Under the ZEV mandate introduced in January, at least 22 percent of new cars sold by automakers this year must be zero-emission – this figure will rise to 80 percent by 2030 and 100 percent by 2035.

Robert Forrester, CEO of Vertu, said the changes had “introduced market volatility and negative affordability impacts.”

However, he noted: ‘We have captured significant market share in the new retail market, and in particular the BEV market, which reflects the group’s adaptability and strong operational execution.’

Due to a stronger market for second-hand cars, Vertu expects to achieve higher profits in the second half of the financial year.

Used car prices soared as Covid-related restrictions were eased in 2021 and 2022 due to pent-up demand and a semiconductor shortage that negatively affected global car production.

They have since returned to more normalized levels thanks to the recovery of new car supply and dealers cutting prices to try to reduce inventory levels.

Vertu Motors shares were 4.7 percent higher at 60.3p late Wednesday morning, although they are down about 16 percent so far this year.