Vertu Share News (VTU)

(Alliance News) - Automotive retailer Vertu Motors PLC predicted annual results will be in line with expectations, as it reported "positive" trading recently, despite encountering some margin pressure.

For the three months to the end of May, it reported new car retail and Motability like-for-like volume growth of 6.8%. Motability is a scheme which offers affordable motoring for disabled people, their families, and carers.

Vertu noted "increased discounting" hurt margins. Like-for-like new vehicle margins were 7.4%, falling from 8.1% 12 months prior. It noted an "increased Motability mix at lower margins and increased discounting".

Vertu added: "The board has been encouraged by the trading results for the period. The zero emission mandate to force the uptake of zero emission vehicles sold in the UK has the potential to create volatility in the new car market. This may include reduced supply of new petrol and diesel cars in the coming periods and would lead to a strengthening of petrol and diesel used car values."

The firm said it has been "encouraged" by recent trading. It did, however, warn of some "volatility" stemming from the uptake of zero emission vehicles sold in the UK. It cautioned this may hit the supply of new petrol and diesel cars, but could boost used car values in those types of vehicles.

Hargreaves Lansdown analyst Derren Nathan said some onlookers may take comfort from Vertu reporting some margin pressure.

"Softness in auto pricing is another sign that inflation is receding and will provide some comfort for those hoping for interest rate cuts in the near future," the analyst added.

Stifel labelled Vertu's trading update as "reassuring".

"We make no changes to estimates, whilst being encouraged by Vertu's momentum year-to-date. We are buyers, and view a one-year forward [price-to-earnings multiple of around 8.6] as undemanding for a leading UK automotive retail group with an experienced management team and a strong track record of consolidating the UK market," Stifel analysts added.

Vertu shares traded 0.6% lower at 78.07 pence each in London on Tuesday morning.

By Eric Cunha, Alliance News news editor

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