Vertu hikes profit outlook but warns over new car supply woes

Car dealership Vertu Motors has upped its profit outlook amid an “exceptional” used car market, but warned over new car supply issues.

The firm said strong trading trends seen in March and April had continued, which is set to see better-than-expected underlying pre-tax profits, in the range of £28 million to £32 million.

This is being driven “largely by the exceptional used car market environment”, it added.

However, the group said new car supply woes due to component shortages were becoming “increasingly apparent”, which poses a risk to the rest of the financial year.

Vertu – which is holding its annual general meeting on Wednesday – said delivery times to customers across some of its franchises were being hit by delays.

“The reduction in new car supply is contributing to a reduced supply of used vehicles, with a resultant exceptional wholesale pricing environment,” it added.

Rival car dealership Inchcape also recently cautioned over the impact of a global shortage of microchips used in vehicle electronics.

Manufacturers pulled back on supplies and orders for microchips after sales fell in the early stages of the pandemic.

Car production has since ramped up again as demand starts to grow, but chip manufacturers have been unable to keep up, causing a global shortage.

Mercedes was forced to pause production and Mini had to close its Oxford plant for a short period.

Jaguar Land Rover also had to stop production for a time at its own plants.

Manufacturers have also suffered from global shipping delays as demand increases and some have reported Brexit-related problems as companies get to grips with new paperwork and rules

But shares in Vertu lifted 3% as investors focused on the profit cheer.

It comes after the group recently revealed that underlying profits lifted to £24.6 million for the year to February 28, up from £23 million the previous year, despite revenues being hit by lockdowns.

The group said at the time that underlying profits since the year end were surging ahead, up 30% to £19.2 million in March and April, after showrooms reopened.