Vertu sees signs of life in new car market

published 16 May 2012

Sales and profits were slightly ahead of expectations last year at car dealer Vertu Motors, while the new fiscal year has started well on the back of a reviving new car market.

Revenue in the year ended February 29th rose 8.9% to £1,088m from £999m the year before, a share ahead of market expectations of £1,051m.

Adjusted profit before tax eased 13.15 to £7.3m from £8.4m the year before, but was better than the £7.03m the market had been anticipating.

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Adjusted earnings per share of 3.19p were just below market forecasts of 3.20p and were down 1.2% on the 3.23p seen the year before.

Net cash tumbled 74.35 to £3.5m from £13.6m the year before but tangible net assets per share improved by 3.7% to 41.6p from 40.1p at the end of February 2011.

A final dividend of 0.4p has been proposed, taking the full year pay-out to 0.6p, up 20% on the year before and ahead of expectations of 0.53p.

The group said March and April trading performance was significantly ahead of prior year and budget levels; used car like-for-like volumes were up 9.8% year-on-year in those two months. The new car market is also beginning to show signs of life after declining in 2011.

"March is the most important month for the profitability of UK motor retail as a consequence of the plate change and its impact on new car demand. UK new car registrations to private buyers ... in March and April increased by 9.1% as consumer confidence recovered - a trend seen from January 2012 onwards," the group's Chairman, Paul Williams, noted, referring to the industry as a whole.

"The group's like-for-like new retail volumes increased by 4.1% and manufacturer targets were achieved at a high level reflecting the strong penetration of the local retail markets. Profitability from new retail sales moved forward strongly as a consequence," Williams added.

Service profitability since the fiscal year-end has run ahead of the prior year and continues to benefit from the customer retention initiatives being executed by the group. The accident repair sector continues to exhibit significant volume and margin weakness and this is having a knock on impact to trade parts volumes, Vertu said.

"Notwithstanding the challenging and volatile economic backdrop, the improved market conditions seen in 2012 coupled with increasing evidence of the sustained turnaround of acquired businesses give the board confidence in the group's prospects for the remainder of the financial year," Williams said.

The shares rose 0.25p to 28.5p on the figures.