Car firm Vertu motoring ahead despite downturn

Jul 22 2008 by Chris Knox, The Journal

ONE of the region’s car dealers is defying the downturn in the sector after recording double-digit growth over the second quarter.

Newcastle firm Vertu Motors has said that while its sales of used cars has slowed, its new car operations and after sales services have performed well and have allowed them to maintain their upward path.

The firm said in a trading update that it was performing in line with market expectations despite highlighting that the outlook “remains challenging as a variety of external forces impact the sector”.

Its chief executive Robert Forrester said that the business had been forced to slash prices in order to maintain its growth, with some of its used cars bearing discounts of up to £1,000.

The firm posted £677m of sales in its inaugural results in May after accelerating from a standing start to become the UK’s 10th-largest motor retailer, employing 2,300 staff nationwide.

Although Mr Forrester is keen to stress Vertu’s impressive performance in light of current conditions, he is nonetheless unsure of what the rest of the year holds for the company.

Mr Forrester said: “It is extremely difficult for a number of dealerships out there at the moment. Although we have seen our used car margins soften, we have continued to sell new cars as a result of our growing reputation in the industry.

“However, I couldn’t say whether this will continue at the rate it has been over the coming months. It’s a very unpredictable time for anybody without a crystal ball.”

The firm, which employs 200 staff in the North East, also said that it was seeing growth in its after-sales service as a direct result of tightening consumer spending.

“Those people that can’t afford to buy a new car are making do with what they have and that means servicing their existing vehicles,” Forrester said. “This is a side of the business we expect to continue trading well in the coming months.”

Mr Forrester, former Reg Vardy managing director, created Vertu in late 2006 with former non-executive director of the Sunderland company Bill Teasdale.

It was floated on AIM in December 2006 to raise a £25m war chest and has since become the UK’s 10th biggest dealership after spending more than £50m on buying other businesses across the country. Vinay Bedi, divisional director of Brewin Dolphin stockbrokers in Newcastle, said: “When you look at the kinds of business that would naturally suffer in the wake of weaker consumer spending, car dealerships would be up there. That’s what makes Vertu’s growth all the more impressive.

“However, a lot of investors will be wondering how long they can keep this up if the market continues in its current direction.”