Car dealership chain Vertu has issued a profit warning due to what it says are “a number of negative external market factors”.
The Gateshead-based firm, which is one of the region’s largest companies by turnover, has issued a trading update in which it says its profits for this year will fall below market expectations due to significant changes in the used vehicle market. Vertu said that used car values had fallen in recent months, particularly in the higher priced models and electric vehicles. The Government delayed a switch to electric cars earlier this year.
The company said it expected the value of used cars to continue to weaken in the coming months and this would reduce previously expected profit levels. It also noted that the recent increase to the National Living Wage would cost it “low single digit millions”.
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But Vertu said that the pressures on its short-term profitability would not change “the longer-term underlying attraction of the business and do not have a significant negative impact on its intrinsic value.”
Chief executive officer Robert Forrester said: “The current consumer environment remains volatile and recent trends of sluggish new car retail demand and weakness in used car pricing are likely to persist for some months. Vertu remains very focused on delivering outstanding customer experience, tightly controlling inventory and being diligent on costs.
“The group has a strong balance sheet and long track record of operational excellence and financial discipline. These attributes mean we remain very confident in our ability to take advantage of these challenging market conditions and the resulting increased opportunities in the sector.”
In a trading update, Vertu said that vehicle sales fell 2% in the three months to the end of November, with profit generation from used car sales below those anticipated. It added that an increase in production of new cars as manufacturers solved recent issues in their supply chains had not been matched by demand from the public.
“Retail demand has become increasingly muted in recent months, and this is particularly the case for battery electric vehicles,” Vertu said.
As recently as October, Vertu had toasted record half-year revenues of £2.4bn, with profits rising by 32.3%.
