Car dealership Vertu has reported a steadying in values and recovery in demand for used cars in recent months, as it reported withstanding a “challenging” year of price volatility to post growing profits.
The group saw used car prices drop by 10.3% between October and December as values tumbled following steep gains in the previous few years.
It warned in December that this would knock its profits, although it said it would also make used cars more affordable to buyers.
But the spring months have brought a steadying, helping like-for-like used car sales volumes to grow 5.8% year-on-year in March and April.
Meanwhile, Vertu maintained its previous warning that Government messaging on electric cars, along with cost-of-living pressures, had hit that portion of the market.
Late last year, Prime Minister Rishi Sunak pushed back the ban on the sale of new petrol and diesel cars in the UK from 2030 to 2035.
Vertu said the Government had caused confusion by announcing soon after delaying the ban that it will still impose stretching targets for car manufacturers to achieve specific zero emissions vehicle (ZEV) sales targets.
More than a fifth (22%) of new cars sold by manufacturers in the UK next year must be zero emission, under the new rules, rising to 80% in 2030.
In Wednesday’s update, Vertu added that Government targets on electric car sales increase over the coming years and “there is a risk the industry falls short of these targets”.
“With the threat of significant fines on manufacturers on missing targets, the risk of potential market volatility later in the year and medium term is elevated,” it added.
The AIM-listed company, which was founded in 2007 after buying Bristol Street Motors, posted growing profit and revenue for the year ending February 29.
That comes despite a warning on profits in December following the price volatility.
Before the profit warning, Vertu posted record revenue in a set of interim results.
Revenue at the dealership rose to £4.7 billion in the year to February 29 from £4 billion the previous year.
Pre-tax profit rose 6.5% to £34.6 million.
Robert Forrester, Vertu chief executive, said: “It was pleasing to see the group successfully navigating a difficult period of trading with declining used car values in the last few months of 2023.
“Used vehicle prices and margins have now stabilised and there has been strong cash generation from lower working capital reducing net debt below market expectations.
“Moving to the new financial year, March and April 2024 were successful months.
“The group delivered new retail like-for-like sales volumes ahead of the market decline in March and April.
“This demonstrates the robustness and strength of the group’s operations.
“The group remains focused and thoughtful around capital allocation.”