Shares in Vertu Motors (VTU:AIM) accelerated 4.1% to a one-year high of 47.8p after the UK’s fifth biggest automotive retailer raised pre-tax profit guidance for the year to February 2022 amid ‘very robust’ demand for used cars.
With vehicle supply constraints and strong demand pushing up used car prices and gross profit per unit, Vertu now expects annual adjusted pre-tax profit will be above current expectations and in the range of £28 million-to-£32 million.
That’s up from the £24 million-to-£28 million guidance range given alongside last month’s better than expected results for the year to February 2021, where Vertu also indicated it is likely to restart dividends in January 2022.
STRONG TRADING CONTINUES
In a brief AGM update, Vertu Motors said the strong trading trends witnessed in March and April, where group like-for-like sales increased by 134.8% against lockdown comparatives, have continued, driven largely by ‘the exceptional used car market environment’.
However, the group behind the Bristol Street Motors, Vertu, Farnell and Macklin Motors brands also flagged risks ahead in the form of potential Covid-19 disruption and tighter new car supply driven by component shortages.
Nevertheless management, led by CEO Robert Forrester, remains confident in Vertu’s prospects.
‘With its strong asset base, scale, manufacturer relationships, well invested systems including the Click2Drive sales technology platform and experienced leadership team,’ said Vertu, ‘the board believes that the group is strategically very well placed to capitalise on the changes and opportunities in the UK motor retail sector.’
17.6% UPGRADE
Sticking with its ‘buy’ rating and 80p price target, Liberum Capital insisted Vertu Motors ‘remains well-positioned to lead consolidation in the market, both organically and through acquisition’.
The broker increased its full year 2022 pre-tax profit forecast by 17.6% to £31.1 million, ‘modestly above the mid-point of management’s guidance’, although it left its 2023 taxable profits estimate unchanged for the time being.
‘Clearly, as supply improves gross profit per unit will moderate and the question then will be if there is sufficient demand to drive volume growth to compensate for more normalised gross profit levels’, explained Liberum.
