Vertu Motors profits hit by higher costs

Vertu Motors, owner of Bristol Street Motors, saw its profits fall as expected in the first half as the dealership group suffered higher costs.

The car dealership chain revealed its adjusted pre-tax profits plunged by around a quarter to £23.5m in the six months to August due to rising costs.

While the company’s revenue rose 2.9 per cent to around £2.5bn, its profits were hit, as expected, by the recent increase in the national minimum wage and the increase in staffing levels that their total salary costs increased.

Vertu cut its profit forecast in early September, blaming falling demand for new cars, especially battery electric vehicles, on high prices and the absence of government financial incentives.

Its UK new vehicle retail sales volumes fell 5.9 per cent to 18,847 over the half-year period, although this was offset by Motability volumes increasing by 23.9 per cent to 10,688 cars.

The Gateshead-based group said the combination of weak retail demand and strong new vehicle supply has encouraged companies to make “significant discounts” and offer better finance deals for electric models.

Vertu also said retailers’ margins have been pressured by many customers falling into negative equity and laws requiring dealers to sell a higher proportion of zero-emission cars.

Under the ZEV mandate introduced in January, at least 22 percent of new cars sold by automakers this year must have zero emissions; this figure will increase to 80 percent in 2030 and 100 percent in 2035.

Robert Forrester, CEO of Vertu, said the changes have “introduced volatility into the market and negative effects in terms of affordability.”

However, he noted: “We gained considerable market share in the new retail market, and the BEV market in particular, reflecting the group’s adaptability and strong operational execution.”

Due to the strengthening second-hand car market, Vertu expects to enjoy higher profits in the second half of the financial year.

Used car prices soared as Covid-related restrictions eased in 2021 and 2022 due to pent-up demand and semiconductor shortages impacting global vehicle production.

They have since returned to more normalized levels thanks to a recovery in new car supply as dealers cut prices to try to reduce inventory levels.

Vertu Motors Stock They rose 4.7 per cent to 60.3p on Wednesday morning, although they have fallen around 16 per cent so far this year.