Vertu Motors (VTU) Trading Update summary

Financial performance and outlook

• FY25 adjusted profit before tax is expected to be broadly in line with market consensus, with H1 profits lower year-on-year but H2 performance anticipated to improve due to a stronger used car market and higher used vehicle trade values.

• Group aftersales operations delivered robust revenue and gross profit growth, with service revenue up 8.4% and stable aftersales margins at 43.5%.

• Used vehicle like-for-like volumes grew 5.0% and gross margin increased to 7.2%, supported by stable UK used vehicle values amid constrained supply.

• New retail vehicle sales volumes declined 5.8%, outperforming the UK market's 12.1% drop, while fleet and Motability channels saw strong growth.

• Inflationary pressures persist in salaries and vehicle expenses, but energy costs have decreased and automation initiatives are underway to improve efficiency.

Market trends and operational highlights

• The UK new car market is increasingly driven by fleet and Motability channels, now nearly 60% of registrations, as manufacturers shift focus due to weak retail demand.

• Manufacturers are discounting and offering attractive financing, especially for BEVs, putting pressure on new vehicle margins.

• Used vehicle supply remains tight, supporting residual values and margins; Vertu's real-time pricing algorithm optimizes volume and margin.

• Aftersales business remains a key profit driver, with improved service conversion and higher average invoice values.

• Operating expenses rose due to wage increases and higher demonstrator costs, but marketing and energy savings were achieved.

Portfolio management and strategic initiatives

• Acquired Exeter Honda dealership for £1.1m, strengthening Honda relationship and expanding South-West presence.

• Opened new Peugeot, BYD, and Ducati outlets, with further BYD expansion planned.

• Cash receipts from property disposals in FY25 are delayed, with £2.7m deferred due to rent control legislation in Scotland.

• The dealership portfolio is actively managed, with strict investment return metrics guiding growth opportunities.

• Balance sheet remains below target gearing, providing flexibility for capital allocation and shareholder value creation.