In a trading update, bosses nudged up their expectations for adjusted profit before tax for the year ending February 28 to “no less than” £70 million, compared with previous guidance of no less than £65m. It follows a “robust” trading performance for the year to date.
But the firm added: “The board remains cautious on the future outlook with the potential of further disruption from Covid-19 to our resource levels, consumer confidence and global supply chains.”
Vertu, which has a network of more than 150 sales and aftersales outlets across the UK, said shortfalls in the supply of both new and used vehicles have continued due to “ongoing dislocation” in supply chains impacting global vehicle production. Supplies of new cars have been hit hard in recent months due to a global shortage of semiconductors.
However, the firm noted that new vehicle supplies to its showrooms in October and November had been better than envisaged, with cars sold at “enhanced margins”.
It told investors: “Customer demand has remained positive, with strong future order banks in all new vehicle channels being evident. Used vehicle supply constraints continued to underpin vehicle values, which have now plateaued and are starting to follow more normalised seasonal trends.
“This, together with the application of robust pricing disciplines in the Group, led to above normal margins being retained in used cars.”
The group also said it had made progress in its response to UK-wide labour shortages. Amendments to reward packages have now been rolled out across the business and a reduction in the number of live colleague vacancies is now evident though they remain above historic levels, it added.
At the time of its interim results in October, the firm warned that supply constraints continue and cost pressures remain - particularly those related to staffing, which are set to increase by £12m.
It said the extra cash for workers was to ensure employees do not leave at a time of high vacancy levels and wages going up across various sectors.
The first-half results showed that pre-tax profits hit £51.1m In the six months to the end of August 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 per cent on 2019 levels.
As a result, adjusted full-year profit expectations were pushed up to no less than £65m, ahead of previous forecasts of between £50m and £55m.
Shareholder dividends were re-established with an interim payment of 0.65p per share declared, payable in January.
Chief executive Robert Forrester said: “We have again generated significant free cash flow 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.”