Vertu profits slip as consumer demand softens
09 October 2019
Vertu has seen a 6.9% drop in pre-tax profits for the six months ended 31 August on a turnover up 5.6% to £1.6 billion, against the same period last year.
Profit before tax slipped £1.2 million to £16.1m in first half of the group’s financial year. However, Vertu, which operates 123 sales and aftersales points, reported that September profitability was “ahead of prior year levels”.
The results come as Vertu reported falling new car retail volumes (-7.9%) but increased fleet volumes (+19.6%) as well as a 2.8% rise in used car volumes and a 12.2% increase in service revenues. However, analysts described the group as “well positioned to cope with market uncertainty given its strong balance sheet”.
In its trading outlook the group reported used car values had stabilised in volume franchises but premium franchise residual values continue to be impacted by new car oversupply in certain franchises.
Robert Forrester, Vertu chief executive, said: “The Board is pleased to see continued growth in high margin aftersales revenues and the continued growth in used car volumes. Cost and excellent working capital control has again been exhibited.”
Commenting on the shift to online retailing, Mr Forrester added: “The Board envisages a significant reduction in the number of franchise outlets in the UK between now and 2023 as networks are restructured, made fit for purpose for the digital age and reflect the changing economics in the European automotive sector in general. Given strong relationships with the Group’s Manufacturer partners, the Board is confident the Group will be a net beneficiary of these changes, particularly if scale can be further enhanced to drive cost and marketing efficiencies.”
He also warned that new EU CO2 targets could create a supply and demand imbalance next year.