Motors firm sees 50% profits drive

Oct 14 2009 By Karen Dent, The Journal

FAST-growing Newcastle motor dealer Vertu says the Government’s scrappage scheme has helped lift its profits by almost 50%.

The group, which trades as Bristol Street Motors, made a pre-tax profit of £2.8m in the six months to the end of August compared to £1.9m last year.

Vertu, which has opened 10 new dealerships since the start of March, sold 1,686 cars under the scrappage scheme during the first half of its financial year.

The better than expected results are further signs of recovery in the car market, which was hammered by the credit crunch.

Chief executive Robert Forrester said: "Following the very challenging market conditions of the 2009 financial year, this financial period has been much improved, aided by the introduction of the highly successful scrappage scheme and rising used car values.

"Our profitability has risen significantly as we continue to expand and drive higher margins from our existing business."

Used car sales increased by 3.7%, driving up profitability in what is a declining market. According to figures from business information group Experian, Britain’s second hand car market is down by 6.6% this year but Vertu said it has benefited from the higher prices caused by fewer used cars on the market.

The group, which has 50 franchised, four non-franchised and two stand-alone bases around the UK, raised £30m in a rights issue to shareholders to fund its £7.9m takeover of several of the sites from Brooklyn Motors which went into administration in June.

It has also opened an extra call centre in Newcastle to deal with the group’s car servicing plans.

Mr Forrester said: "We would anticipate further expansion in the coming months to consolidate out position in the market."

Looking ahead, Vertu is confident of continuing to beat its own expectations. September’s new car sales - a plate change month and the second most important in the car industry - were 16.3% higher than last year. The group said there still challenges ahead but it expects to continue expanding.

"The ending date of the newly extended scrappage scheme, the impact of January’s VAT rise on new car sales and the wider economic outlook present uncertainties," Vertu said.

"However, the board believes that, whilst the trading environment will continue to be challenging, the group has an asset-backed balance sheet and the structure and platform in place to take advantage of opportunities to scale the business as they arise."