Used car boom fuels bumper profit at Macklin Motors owner
Vertu Motors, the car dealership group with more than a dozen Macklin Motors showrooms in Scotland, said fullyear profits are set to be ahead of hopes after bosses were able to take advantage of supply chain problems and raise prices.
The company said drivers were able to pay more after saving money during lockdowns, and more workers are looking to drive to offices rather than take public transport.
In the six months to the end of August, pre-tax profits hit £51.1 million compared with £3.9m in the same period a year earlier, during the height of the pandemic restrictions. Revenues jumped 71.9 per cent to £1.9 billion, though on a like-for-like basis they were up a more modest 4.5 percent on 2019 levels.
As a result, adjusted full-year profits are likely to be more than £65 m, ahead of previous expectations of between £50 ma nd £55m. Shareholder dividends have been re-established with an interim payment of 0.65 pp er share declared, payable in January. However, bosses warned that supply constraints continue and cost pressures remain - particularly those related to staffing, which are set to increase by £12m.
The company, which has a network of 154 sales and after sales outlets across theuk, said the extra cash for workers is to ensure employees do not leave at a time of high vacancy levels and wages going up across various sectors.
Growth was particularly strong in the used car market, with sales up 67.3 per cent, year on year. By comparison, new vehicles were up 44.8 per cent.
Vertu noted :" The used vehicle market in the UK has experiencedunprecedented market dynamics, resulting in record vehicle pricing levels.
"The reduced new and used vehicle market in lockdown, together with new vehicle production disruption due to Covid-19 and parts supply disruption (particularly semi-conductor shortages), has caused used vehicles to be in increasingly short supply. This tightness in supply has coincided with a period of strong customer demand for used vehicles.
"The reasons for this include increased savings levels by consumers during lockdown and the absence of alternative spending options( such as holidays ), and also consumers wishing to avoid public transport.
"The benefits of the private motor car have been firmly reestablished in the consumer's mind, which is much to the long-term benefit of the group ."
New cars have struggled to roll off production lines due to the chip shortages, but the group said customers are" increasingly accepting of long lead times ".
There was also strong demand for aftersales services, adding to the boost in profits.
The strong performance has continued into the second half with a record trading performance delivered in the key plate-change month of September, with a trading profit of £20m.
Chief executive Robert Forrestersaid:“wehaveagaingeneratedsignificantfreecashflow and have a very strong balance sheet making the group very well placed to benefit from the changes and significant opportunities which are ahead of it.
“The resumption of paying dividends to shareholders shows the board's optimism in our strategy and its execution,” he added.