Significant pressure on latest and used automobile margins because of the continuing impact of the Zero-Emission Vehicle (ZEV) Mandate has forced Vertu Motors to warn that full-year pre-tax profit will probably be substantially below market expectations.
Despite energetic cost-reduction measures and despite having outperformed market trends in battery electric vehicle (BEV) sales and like-for-like retail volumes, the group said in a trading update that its lacklustre performance has been hit by record fleet sales which have significantly impacted gross margins.
“The Government’s ZEV Mandate is causing severe disruption to the UK latest automobile market,” said Robert Forrester, chief executive of Vertu Motors. “The buyer environment is subdued, yet our team has delivered significant market share gains in BEVs in the ultimate quarter of the yr.”
The group identified that heavy manufacturer discounting geared toward stimulating BEV demand, registrations still fell in need of the government-mandated 22% goal, reaching only 19.6% of total sales.
This shortfall, coupled with an 8.7% decline in private market sales, will place further pressure on latest automobile margins especially because the industry is bracing for further disruption because the ZEV Mandate increases the required proportion of BEV sales to twenty-eight% in 2025.
Forrester called for presidency and industry collaboration to deal with market distortions, stating, “The UK automotive sector needs urgent support to return to its role as an economic growth driver.”
Used Automotive Market
Vertu’s used automobile operations have performed higher than latest automobile sales, with year-on-year profitability improvements. Nevertheless, anticipated gross margin expansion was lower than expected because of subdued consumer confidence and the impact of recent automobile discounting.
“The used automobile market stays resilient, however the pricing environment is difficult,” noted Forrester. “With manufacturers offering aggressive incentives on latest models, particularly BEVs, nearly-new vehicles face stiff competition, affecting our margins.”
Despite these challenges, Vertu said its strategy has helped sustain used vehicle profitability, particularly as wholesale supply constraints have kept trade values stable.
The group said it was also facing cost headwinds from the Autumn Budget, which can add roughly £10 million in labour costs because of increases in National Insurance contributions and the National Minimum Wage.
To totally offset these expenses, Vertu has implemented cost-cutting initiatives, including reducing headcount, technology-driven productivity improvements, closure of most retail operations on Sundays and consolidation of all dealerships under the Vertu brand by April. An exceptional restructuring cost of as much as £4 million is anticipated in FY25 as a part of these measures.
Share Buyback Expansion
In response to stock market inefficiencies, the board has also authorised a £12 million capital return through an expanded share buyback programme, marking the corporate’s largest annual buyback allocation. This follows £4.1 million spent on share repurchases earlier in FY25 and £7.5 million in FY24.
“The Board believes our shares are trading at a fabric discount to intrinsic value,” Forrester stated. “This expanded buyback programme underscores our confidence in the corporate’s long-term value and ensures remaining shareholders profit from increased ownership.”
Since January 2011, Vertu has returned over £94 million to shareholders through dividends and buybacks. The corporate said its strong balance sheet, with over £320 million in freehold and long leasehold property, will remain central to its financial stability during market turbulence.
Looking ahead, Vertu anticipates further pressure on latest automobile volumes and margins because of the ZEV Mandate, with broader economic uncertainty weighing on consumer confidence. Nevertheless, the corporate said it stays committed to navigating these challenges through strategic cost management, operational efficiencies, and capital allocation measures.
This Article First Appeared At www.am-online.com
