Automotive retailer Vertu Motors lifted its full-year profit guidance on Friday following a strong performance in the year to date, as it announced a share buyback.
In an update ahead of its results for the six months to the end of August, Vertu said it continues to experience strong used vehicle gross margin retention, driven by “exceptional” UK used car market conditions.
As a result, it now expects to deliver an adjusted pre-tax profit of no less than £50m for the first half, up from previous guidance of no less than £40m.
The company also upgraded its pre-tax profit guidance for the current financial year to between £50m and £55m from between £40m and £45m, saying it remains “cautiously optimistic”.
“As a result of the strong performance seen in the financial year to date, the board intends to re-establish the payment of dividends to shareholders upon finalisation of the interim results. The board remains very confident in the prospects for the group, which is strategically well placed to capitalise on the changes and opportunities in the UK motor retail sector.”
Vertu said like-for-like new vehicle order take for the key month of September is currently running in excess of prior year levels. However, there is a risk that well documented new vehicle supply shortages will result in vehicle deliveries being delayed into future periods.
“As a consequence of reduced new vehicle supply, used vehicle supply may also be restricted in the coming months,” it said.
“Uncertainty also remains around the possible impact of Covid-19 from potential future restrictions and colleague absence. The current UK wide labour shortages, high vacancy levels and upward pressure on employment costs remain a risk for the business.”
Broker Liberum, which rates the stock at ‘buy’, said: “August is typically one of the quietest months of the year, so to see this level of upgrade in such a short space of time points to remarkable market conditions, as well as strong trading by the company.”
Vertu said in a separate statement that it plans to begin a £3m share buyback programme between now and 28 February 2022.
“The share price of the company for some time has traded at a discount to the tangible net asset value and in the opinion of the board below the intrinsic value of the business. As the company has a low level of debt and is considerably cash generative, the board considers it appropriate to allocate some capital to buy back shares,” it said.
