15th Oct 2014 08:43
LONDON (Alliance News) - Vertu Motors PLC Wednesday said that pretax profit grew by almost half in the first half of its financial year, driven by revenue growth that was partly buoyed by acquisitions as well as lower finance costs, and said the strong performance continued into the second half.
The motor dealership company, which sells brands including Jaguar, Land Rover, Honda, Volkswagen and Ford, reported a pretax profit of GBP12.8 million for the six months to end-August, up from 8.6 million a year earlier, as revenue rose 30% to GBP1.08 billion, from GBP8372 million, and its finance costs fell due to lower vehicle stocking interest.
It raised its interim dividend to 0.35 pence a share, from 0.30 pence.
Vertu, which has a history of acquiring less profitable dealerships and quickly improving their returns, said the profit was a record and said it expects its full-year results to be in line with market expectations.
Panmure Gordon and Edison are both forecasting that Vertu will report a pretax profit of GBP21.9 million for the full year, according to data from Morningstar. Vertu reported a pretax profit of GBP15.8 million in its last financial year.
Like-for-like new retail car sales volumes rose 11.8% on the year in the first half of the current year, ahead of the market, while like-for-like volumes of fleet cars rose 12.4% and 28.6% for commercial vehicles, meaning its gained market share in fleet and commercial. Like-for-like sale volumes of used vehicles increased 11.6%.
However, its gross margin at dealerships trading for two full financial years fell, as a higher proportion of its revenue came from vehicle sales. It said service revenues were up 4.4% in dealerships trading for two years, reflecting the "success" of its customer retention strategy.
It said sales volume growth continued in September, the second-biggest month for car sales in the UK, with like-for-like new car retail sales volumes up 9.3% compared with a 5.9% rise in UK new car private registrations. Service revenue was up 8.6% in the dealerships trading for at least two years.
"The new car market saw further growth, the used car market maintained stable pricing with more modest growth, and the total vehicle parc, which drives aftersales activities in dealerships, has also started to grow again," it said.
Demand for servicing, which is the most profitable business to a car dealership, is increasing as the strong increase in new car sales in recent years flow back into service departments for regular service and warranty work, Vertu said. More used car customers are also being retained for servicing due to sales of increasing numbers of service plans where customers pay for services either upfront or on a monthly basis, it added.
"Recent acquisitions, the Farnell Land Rover business particularly, have made a strong contribution and the core business continues to benefit from management success in improving returns in the used car and servicing areas," Chief Executive Robert Forrester said in a statement.
Vertu bought or opened six sales outlets in the half, and said it has a "strong" pipeline of acquisition opportunities.
Still Vertu Motors shares were down 3.0% at 55.75 pence Wednesday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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