Vertu Motors warns FY profits will miss expectations, shares tank

(Sharecast News) - Vertu Motors tanked on Thursday as it warned that full-year adjusted pre-tax profit would be "significantly below" current market expectations as the UK government's zero emissions vehicle (ZEV) mandate is causing severe disruption in the new car market. The automotive retailer noted that for the year ending 28 February 2025, the current Stifel estimate for adjusted pre-tax profit is £34.5m.

In new cars, Vertu said it has delivered like-for-like retail volumes and battery electric vehicle (BEV) sales ahead of the market trends in the five-month period to the end of January.

UK volumes overall in the new retail channel were the lowest for 25 years including the pandemic period, it said. A record proportion of fleet sales across the UK market has adversely impacted gross margin.

It also said the ramp-up in the ZEV mandate target to 28% for 2025 is likely to lead to further ongoing discounting activity in the new car market, continuing the margin pressure seen during the current year. Volumes are also likely to be under pressure, Vertu added.

It said trading in the aftersales segment remains resilient and continues to track ahead of the prior year.

Vertu also said on Thursday that its cost base it set to rise by £10m due to changes in National Insurance contributions and national minimum wage announced in the Budget last October. Actions have been delivered to fully offset this £10m cost which will incur an exceptional restructuring cost of up to £4.0m in FY25.

Chief executive Robert Forrester said: "The group's high margin aftersales business is performing strongly. However, the Government's ZEV mandate is causing severe disruption to the UK new car market, and the consumer environment is subdued.

"Despite these headwinds, the Vertu team is delivering, as seen by our significant market share gains in BEV new cars in the final quarter of the year. We now have award winning BEV dealerships with Citroen, MINI and VW."

He said the government and the industry need to get together to address the root cause of the issues to allow the automotive sector in the UK to return to its "traditional role of stimulating economic growth", which is a catalyst for employment.

Vertu also announced a new £12m share buyback programme.

"The board believes that this is an appropriate use of capital and will continue a programme of buybacks as a relevant element of returns to shareholders, alongside dividend payments," it said.

At 1445 GMT, the shares were down 10.5% at 51p.