Car retailing group Vertu Motors has warned the rising cost of living and long running vehicle supply issues are likely to impact its performance.
In a sobering pre-trading update that marked a major contrast from recent announcements from the Gateshead firm, Vertu said it was mindful of its rising energy costs as a below market rate fixed contract comes to an end this month. The North East-based firm operates 160 showrooms and aftersales sites around the country and said it would turn to a new energy purchasing strategy which includes the use of off-grid power.
The removal of Government business rates - which had previously saved Vertu £5.2m in the first half of 2021 - was also said to be a factor in rising costs.
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Vertu said difficulty in getting new and used vehicles had been caused by the impact of Covid on supply chains, with global semiconductor chip shortages resulting from long-running capacity issues and made worse by the pandemic. Vertu said volumes across its new retail and fleet businesses had consequently seen year-on-year declines.
It reported an order book of almost 13,000 customers waiting for deliveries, and "strong" fleet and commercial orders too. Despite the fall in volumes, gross profit generation was higher than last year thanks to stronger margins.
Across the group's used car business, sales declined like-for-like compared to the flurry of demand the country saw post-lockdown. Vertu said used prices had stopped growing so that while gross profits per car had remained above normal levels, they were reduced on the levels seen in the financial year to the end of February.
Meanwhile, the group's aftersales business delivered high revenues on a like-for-like basis. Increased customer retention and more servicing of older cars - including those to be sold by the group - meant Vertu's servicing departments grew revenue. That was counterbalanced by higher technician costs.
Despite the headwinds, Vertu signalled it was still looking at acquisitions. Within the update, Vertu told shareholders: "Management remains focused on the delivery of operational excellence around cost, conversion and customer experience. In addition, the group continues to evaluate and execute acquisition opportunities as it seeks to deliver its core strategic objective of value accretive growth.
"The group has more franchise relationships than any other UK group and yet discussions are moving positively with a number of franchises the group does not currently represent which are likely to lead to further growth in scale."
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