Car dealer Vertu Motors is poised to expand its Scottish business after the strengthening economy helped profits jump by two thirds over the summer.
The firm, which trades as Macklin Motors north of the Border, said pre-tax profits were up 68.6 per cent to £8.6 million in its financial first half and it now expects to beat City expectations at the full-year stage.
Chief executive Robert Forrester told The Scotsman that recent trading in Scotland had been even more positive than in the UK as a whole, and he is hoping to add to the Macklin estate with acquisitions within the next six months.
“On a UK level, we are currently engaged in a number of discussion that I would envisage leading to transactions this year,” he added.
The firm was set up as a cash shell and built itself by buying a number of smaller dealership chains. It is now the sixth-biggest showroom chain in the UK, but Forrester said there was no end in sight for the group’s expansion ambitions.
Vertu raised a further £50m to add to its war chest in June, and Forrester said that much of that still remains to be spent. “We have got the management capacity and the financial capacity,” he said.
As well as buying businesses, the firm has been placing its growth on a firm footing by buying freeholds for some of the property it uses.
Its purchases, including two in Scotland over the summer, mean the firm’s property portfolio reached £104.5m by the end of August, up from £83.8m a year before.
As well as the ongoing expansion, Vertu also benefited from growing consumer and business confidence, which has boosted the car market as a whole.
Vertu’s revenues increased by 33.3 per cent to £837.2m in the six months to 31 August. Over the period, the group enjoyed a 19.6 per cent like-for-like increase in new retail volumes, while maintaining margins.
Fleet car volumes rose by 28 per cent thanks to market share gains.
Forrester says signs of a pick-up in the economy appeared last year but the figures have accelerated recently.
Like-for-like sales were up 28 per cent in September, could accelerate further with a TV advertising campaign lending a further boost in October.
While the UK market has been recovering well this year, the ongoing weakness of the wider European economy is likely to continue to lead manufacturers to direct higher volumes of new vehicles to the UK, as they seek to manage continental overcapacity in a declining market.
Vertu said that, while there is a risk that this trend may lead to pressure on new vehicle margins, “a higher volume environment normally benefits the group”.
Meanwhile, the supply of used cars remains tight, keeping prices in the second-hand market high.
The company raised its interim dividend by 20 per cent to 0.3p per share. It said the board “anticipates full-year results will be significantly ahead of market expectations”.