Vertu Motors reports that its trading performance for the last year will be ahead of current market expectations, with its retail car sales outstripping the national market.

It is due to reveal its results for the 12 months to February 28 this May, however the plc issued a positive pre-close trading update today and said the order-take at the start of the March plate-change campaign was running ahead of last year's levels .

In the five months to 31 January 2013 compared to the same period in the prior year, the group has grown like-for-like new retail volumes (excluding Motability sales) by 13.6%, which is ahead of the UK market growth achieved by those franchises the group represents during the period of 11.7%.

Overall volumes of new retail vehicles, including the impact of acquired businesses, increased by 22.0% in the five month period aided by improved performance as acquired businesses were turned around.

During this period, Vertu said, it strengthened its gross profit per unit on new car sales through a combination of pricing discipline in the sales process and earning manufacturer bonus income relating to volume targets at a high level.

Fleet and commercial vehicle sales declined by 6.8% on a like-for-like basis in the five months to 31 January 2013. The group’s car fleet volumes were ahead of market registration trends, however.

commercial vehicle volumes declined reflecting the relative weakness in the UK van market in the period, as previous pent-up demand for commercial vehicles has dissipated.

The volume of used vehicles sold in the five months to 31 January 2013 grew by 8.8% overall and 0.4% on a like-for-like basis, and Vertu warned that increasingly competitive new car consumer retail offers have led to some substitution of used car demand into new car business. 

Vertu said it has improved its gross profit per unit in the five months to 31 January 2013 and generated the highest level of gross profit per unit seen for three years.

It claimed this reflects Vertu's strategy to execute robust stocking processes and a sales process aligned to customer needs, with the result of a delivery of a return on investment from used cars in excess of industry norms.

In aftersales, the board said Vertu has continued to grow revenue, gross profit and operating profit on a like-for-like basis in the five months.

Vertu continues to implement strategies to improve customer retention and to increase spend per visit.

Gross margin in servicing declined slightly in line with the group’s strategy of attracting customers with older vehicles into its dealerships with a compelling pricing proposition, but sales of service plans have continued to grow which underpin this crucial area of the business and there remains considerable scope to increase service plan penetration further. 

Structural changes

In recent months Vertu has bought three Vauxhall dealerships, three Honda dealerships and a Seat outlet, and added an Alfa Romeo franchise alongside its existing Fiat operation in Cheltenham.

It also opened a Renault and Dacia dealership in Derby last month and will add Volvo there this month, and has relocated Northampton Vauxhall into a new-build freehold property and plans to similarly relocate its Harrogate Vauxhall business later this year.

It also closed a small Ford dealership in Birmingham and a used car supermarket in Widnes, two accident repair centres, and exited Fiat Professional van sales at Swindon, and its Mitsubishi sales at Hamilton will terminate on May 31.

Vertu said these actions reduced the number of franchises operated by the group by two and reflects management’s desire to represent franchises with the potential for future scaled relationships.