Bristol Street Motors owner Vertu Motors reported a fall in first-half profits as expected as the dealership group incurred higher costs.
The car dealership chain revealed its adjusted pre-tax profit fell by around a quarter to £23.5 million in the six months to August due to rising costs.
Although the company's revenues rose by 2.9 per cent to around £2.5 billion, as expected its profits were hit by the recent rise in the national minimum wage and rising employment levels, which pushed up overall wage costs.
Results: Vertu Motors revealed its adjusted pre-tax profit fell by around a quarter to £23.5 million in the six months to August due to rising costs
In early September, Vertu lowered its earnings forecast, blaming falling demand for new cars, especially battery-powered electric vehicles, due to high prices and a lack of government financial incentives.
UK new vehicle retail volumes fell by 5.9 per cent to 18,847 over the half-year, although this was offset by a 23.9 per cent increase in motoring volumes to 10,688 cars.
The Gateshead-based group said a combination of weak retail demand and a strong supply of new vehicles had encouraged companies to apply “significant discounts” and offer better financing deals for electric models.
Vertu also said retailer margins were under pressure from many customers reaching negative equity and regulations requiring dealers to sell a higher share of zero-emission cars.
Under the ZEV mandate introduced in January, at least 22 percent of new cars sold by automakers this year must be zero-emission vehicles – a figure that will rise to 80 percent. in 2030 and 100 percent by 2035
Robert Forrester, Vertu's chief executive, said the changes “introduced market volatility and negative affordability impacts.”
However, he noted: “We have gained significant share in the new retail market and in particular the electric vehicle market, reflecting the group's adaptability and good operational execution.
Due to a stronger used car market, Vertu expects higher profits in the second half of the financial year.
Used car prices have soared as Covid restrictions ease in 2021 and 2022 due to pent-up demand and semiconductor shortages hitting global vehicle production.
They have since returned to more normalized levels thanks to a rebound in new car deliveries and dealers cutting prices in an attempt to lower inventory levels.
Vertu Motors shares rose 4.7 percent to 60.3 pence late Wednesday morning, although they are down about 16 percent this year.
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