The chief executive of motor retailer Vertu Motors says the firm has developed a strategy to aid customers facing challenges of the cost-of-living crisis.
Robert Forrester said the business is looking to introduce a number of measures, which has already seen Vertu undercut supermarkets by selling fuel at cheaper rates from a little-known North West petrol forecourt.
He said: “Affordabilty is going to be everything. Finance rates, for example, are going up. But we will do our best to help our customers by being as competitive as we can, and we’ve got some plans for the next couple of months that will help customers with affordability. As an insight, we can play around with this. We do have a petrol forecourt which nobody really knows about in Widnes, Cheshire, and everyone thinks everyone has massively profiteered on petrol forecourts. We increased our litreage by 86% and increased our turnover by 93% because we took the decision to undercut the local supermarkets.”
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His comments come after Vertu Motors hailed strong first half results and revenue growth, despite seeing a substantial fall in adjusted pre-tax profit, which now makes it the fourth largest automotive retailer in the country.
The retailer, which runs 160 sales and aftersales outlets across the UK, said a tighter supply of new and used vehicles continued to keep prices high, which offset lower sales volumes. In its half-year report to investors the Team Valley firm indicated the Government’s recent action on tax cuts and energy prices could actually boost consumer confidence in the months ahead, but warned it remained cautious.
Pre-tax profit in the six months to the end of August was £28.2m, down compared with the same period last year in which Vertu posted an exceptional £51.8m driven by pent up demand. Revenue for the half year was £1.99bn, up from £1.94bn in the first half of 2021. Full year profits are anticipated to surpass market expectations.
Mr Forrester said: “Last year was extraordinary and we’re pleased with this performance - it’s the first time we’ve hit £2bn of revenues in the first half as well, which puts us the fourth largest in the UK and we were previously fifth, which I think is quite a milestone for the business.
“The first half has seen a strong trading performance with vehicle margin strength offsetting market driven volume shortfalls. The group continues to benefit from its focus on operational excellence around cost, conversion and customer experience aided by continued digitalisation initiatives.
“Cashflow generation has been strong and the dividend for the first half has increased again. The business is strategically very well placed with significant firepower to expand its footprint of franchised dealerships across the UK.”
He acknowledged that significant demand for used cars post-Covid restrictions had now stabilised and as prices remained relatively high, gross profit on used vehicles was £15.8m lower compared to the first half of 2021. Meanwhile, profits on new cars rose by £7.7m, despite a decline in volumes, thanks to what it called effective pricing disciplines.
He said: “New car sales have been down but margins are up - people are having to wait for their cars, so margins are high and we’ve actually grown our gross profit. Used cars were always going to be down because last year’s market was unbelievable.
“Interestingly, if you go back to 2017 the average price of our used cars was £14,500 – we’re now at £20,000. Some of that is franchise – we bought the BMW franchise in the North East – but actually that £20,000 includes the fact we are selling a lot more older cars which should be cheaper because there’s been a massive reduction in the number of cars which are less than three years old, so that’s quite a number.”
On expansion, the group said it could leverage its significant freehold and long leasehold property portfolio to provide the “firepower” it needs for future acquisitions.
Mr Forrester says the firm has also expanded in the North East, with more growth to come.
He said: “Our technology platforms, which are done out of Gateshead, are developing nicely. We’ve expanded Gateshead with more customer experience and contacts. We’ve grown our North East portfolio by opening a new motivation used car outlet in Stockton and I do envisage more growth in the North East in the next few months.”
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