Shares in Vertu Motors (LON:VTU) moved higher after the automotive retailer delivered a surprise FY27 profit upgrade. In an AGM update covering the three months to May, Vertu said it is trading ahead of market expectations.
Despite pressures facing the consumer, the resilient car dealer is delivering like-for-like volume growth in all channels.
Broad-based momentum
Gateshead-headquartered Vertu now expects FY27 adjusted pre-tax profits to top the £24.5 million consensus estimate. On the back of the update, Shore Capital raised its FY27 profit forecast from £25.1 million to £26.1 million.
Drivers of the upgrade included positive year-to-date trading. Vertu has seen like-for-like volume growth in new retail, Motability, used vehicle and fleet and commercial. The aftersales business continues to drive profit growth. And group margins have remained stable.
Positive portfolio churn
CEO Robert Forrester also pinned the upgrade on changes to the dealerships portfolio. Vertu is growing its exposure to the leading Chinese brands, with two openings, on existing Vertu sites, planned for Omoda and Jaecoo. By October, 15 of the group’s sales outlets will be with Chinese automotive brands.
‘Cost benefits will arise from portfolio changes,’ explained Vertu, ‘such as the relocation in the coming months of Sheffield Mazda from a stand-alone site to a multi-franchise operation alongside the Nissan franchise in the city. Group operating costs remain tightly controlled.’
Showing its resilience
Forrester commented: ‘While we remain mindful of wider consumer pressures and the ongoing impact of the Zero Emission Mandate, we are confident in the resilience of the business and our ability to capture growth opportunities, including through the launch of our first Omoda and Jaecoo dealership in Burton.’
Vertu continues to showcase its resilience in the face of low consumer confidence and uncertainty related to the transition to electric vehicles. Higher-margin aftersales continue to drive earnings. And the addition of further Chinese OEM representation should fuel future growth.
The company’s undemanding valuation is underpinned by a strong asset base. In fact, Vertu currently trades slightly below its net tangible asset value.
‘Given site disposals in recent years have gone for a circa 10% to 20% premium to book value, this points to a business which is fundamentally undervalued,’ observed Shore Capital. ‘With Vertu demonstrating that it can continue to grow volumes even in an uncertain market, we expect today’s update to be positively received by investors.’
Sharesify also notes that Constellation Automotive recently upped its stake in Vertu from 11.02% to 19.15%. This move has fuelled speculation that Constellation could launch a takeover bid for Vertu. Constellation already owns Marshall Motor, We Buy Any Car, Cinch and BCA. And it previously made a tidy £22.6 million profit from its stake in Lookers following a takeover of the automotive retailer.
Disclaimer: James Crux has a personal investment in Vertu Motors.
Read the press release here: https://investors.vertumotors.com/
