Vertu Motors records £31.5m profit in H1 as its vehicle sales climb

Boosted by its Helston Garages acquisition and organic growth, Vertu Motors sold more than 95,000 new and used vehicles in the six months to August 31 2023 - an 11% uplift.

Its interim results statement shows a 20% year-on-year rise in revenues to £2.42 billion and an 11% increase in adjusted profit before tax to £31.5 million.

Trading under the Bristol Street Motors, Macklin Motors and Vertu Motors brands, the group continues to make progress in its strategies to optimise omnichannel retailing, generate efficient and customer-focused aftersales, make better use of technoo

Robert Forrester, chief executive, said: "The consistent strategies around digitalisation, cost efficiency, smart capital allocation and the development of our management and colleagues is providing a firm grounding to deliver value to our shareholders."

While the integration of Helston has added 31 sales outlets to the group, Vertu has been developing its existing portfolio, including leasing a former Cazoo car supermarket in Tamworth to introduce a Bristol Street Motor Nation used car outlet and leasing a former Stratstone Jaguar dealership in Newcastle which will be the new home of Vertu's Vauxhall dealership in the city, while its vacated current home will become a new Bristol Street Ford dealership for Newcastle.

Vertu opened its fourth MG showroom, at Chesterfield, in September and the group said it will ensure it has a "continued and increasing Chinese component to the portfolio" as it watches more ambitious Chinese brands enter the UK marketplace.

During the period Vertu closed its BMW and Mini dealership at Malton in Yorkshire and a Ford dealership at Stroud in Gloucestershire, both of which it describes as "sub-scale" businesses.

Aftersales

The group's service and repair operations grew like-for-like revenues by 5.7% or £4.6 million, and Forrester was particularly pleased that technician recruitment and retention is progressing, with just over 50 more technicians recruited to fill vacancies and pay packages have been revised.

Vertu said each technician in the business generates an average £115,000 of service and parts gross profit, so the reduction of technician vacancy levels is a key focus of management, in order to maximise the opportunity to the group.

Parts sales rose by 11.8% to reach £106.4m, and its bodyshop and SMART repair operations grew revenues by 23.5% to £11.9m.

New vehicles

Like-for-like new retail vehicle volumes grew by 1.1% in the period to 17,608 units, and including the Helston businesses overall new retail sales reached 20,027, a 13.3% increase.

Vertu's Motability sales rocketed up 78% like-for-like as car manufacturers restored more supply to this sector, but it noted that as supply issues have eased and the mix of lower margin Motability sales has grown, the group has seen a slight weakening of gross profit in new car sales to £2,016 (H1 FY23 £2,102).  Gross margin percentages saw a dilution from 8.5% to 8.2% due to a 3% increase in average sales prices and the slight weakening in gross profit per unit. 

Although fleet sales are driving the national market's growth currently, Vertu reported that its volume increase of 9.9% was behind the national fleet market as it focused on pricing disciplines and preserving margin, including avoiding large volume of rental business. In fact gross profit per fleet unit strengthened by 14.3%  to £1,126.

Used vehicles

To adapt to changing market dynamics, Vertu enhanced its used vehicle pricing and analytical tools to optimise profit generation, inventory turnover, and control. It initially reduced used vehicle inventory to maximise margins but later increased inventory levels to optimise sales volume. Despite supply constraints, Vertu has managed to secure additional used vehicle inventory, increasing stock levels by almost 13%. During H1, used EV sales represented 4.7% of group used vehicle volumes, and Vertu continues to buy used electric vehicles into stock "since they represent a market opportunity at lower prices".

Although overall used volumes rose 2.1% to 43,921 units due to the additional Helston dealerships, rising interest rates and changes in financing offers contributed to a 5.7% reduction in like-for-like used vehicle sales . Nevertheless, gross profits per unit remain significantly better than pre-pandemic levels, remaining stable compared to the previous year. In H1 2024, gross profit per unit even increased to £1,535, compared to £1,468 in H2 2023.

For this period, the core group generated £60.2 million in gross profit from used vehicle sales, a decrease of £5.9 million due to lower sales volume. The gross margin in the core group decreased slightly to 7.4%, reflecting higher average sales prices.