Vertu thrives in used cars, aftersales despite sluggish new car market

Vertu Motors has reported strong performance in its used car and aftersales segments, despite a challenged new car environment.  

The dealership group, which operates 192 sales and aftersales outlets nationwide, provided a trading update for the five months ending 31 July, ahead of its interim results expected in October.

Vertu said it anticipates that its full-year FY25 adjusted profit before tax will be in line with market expectations although profits for the first half of the year are expected to be lower than the previous year,

The anticipated improvement in the second half will be driven by a stronger used car market and enhanced vehicle trade values.

Vertu Motors recorded a 5.0% increase in like-for-like used vehicle sales volumes, with gross margins rising to 7.2%.

 This growth is largely due to stable used vehicle values in the UK, which have been bolstered by constrained supply.

“A weaker new retail market has led to reduced numbers of three- to five-year-old used vehicles coming in part exchange whilst increasing supply of nearly new vehicles from demonstrator and pre-registration channel is evident,” it said.

“Reduced overall used vehicle supply should continue to underpin residual values and therefore wholesale price stability in the months ahead, supporting used car margins.”

It said it had exploited real time pricing algorithms to be able to react quickly to market conditions to optimise volume and margin and speed of inventory turn.

The company’s aftersales operations also performed robustly, with revenue and gross profit increasing across all areas. This success is attributed to a higher number of technicians and the effective execution of the group’s vehicle health check system.

In contrast, the group’s new retail vehicle sales volumes declined by 5.8% during the period.

However, it pointed out that this still outperformed the broader UK market, which saw a 12.1% drop due to weakening demand.

“The UK new car market is increasingly driven by Fleet and Motability channels, which made up almost 60% of all new vehicle registrations in the period, compared to 52% in 2023, “ it adding, noting that manufacturers are increasingly turning to such lower margin channels in an effort to shift stock.

Despite these challenges, Vertu continued its strategic expansion.

In July, its Peugeot franchise opened in Carlisle, alongside the group’s existing Vauxhall, MG, SEAT and Cupra dealerships.

In August, the first of the Group’s BYD outlets opened in Worcester, its Ford and Citroen dealerships. A further two BYD outlets are expected to open in the coming months. The group opened its first flagship outlet for Ducati motorbikes in Sunderland.

The company said its strong balance sheet provided it with the flexibility to pursue further growth opportunities and make strategic investments.

Looking ahead, Vertu said it remained optimistic about its long-term prospects. The used car market is expected to remain stable, supported by lower interest rates and constrained supply, which should help maintain strong margins.

The company will announce its interim results for the six-month period ending 31 August on 16 October.

Robert Forrester, chief executive of Vertu Motors said: ‘’I am pleased with the group’s performance against a fast-shifting market backdrop.  Our high margin, resilient aftersales business continues to thrive aided by higher technician numbers and strong execution of the group’s vehicle health check process.

“The retail new car market remains weaker as the Government’s regulation to transition to battery electric vehicles causes market volatility and negative impacts. The current dislocation in the market presents opportunities for Vertu Motors to capitalise on, assessed using strict investment return metrics, with our strong balance sheet providing financial flexibility, an excellent portfolio of strong brands, robust and scalable systems, and a strong and experienced leadership team with motivated colleagues.”