Vertu Motors PLC (LON:VTU) shares dropped in late-morning trading Wednesday after it reported a drop in pre-tax profits for the first half as weakness in sterling and new EU emissions regulations put pressure on its margins.
The car retailer reported an adjusted pre-tax profit of £18.1mln for the period, down from £20.9mln a year ago despite revenue growth to £1.5bn from £1.4bn previously.
However, the interim dividend was maintained at 0.55p per share, however, its gross margin for the period contracted to 10.7% from 11%.
Vertu said supply side issues in the market had led to a decline in new car volumes during the first half, with registrations in September being their lowest since 2011.
The month had also been impacted by new EU emissions standards that were expected to cause issues into early 2019, while new car margins were also under pressure from the weakness in the pound.
While the demand side of the market had been “robust” during the period, the group said the political uncertainty in the UK may create customer uncertainty and volatility for the remainder of the financial year.
In its outlook, the group said that cost pressure would continue to impact its trading performance and remained “a crucial focus” for its management. However, a period of significant capital expenditure was coming to an end and that it expected to have “materially lower levels” of capex and higher free cash flow from March 2019.
Vertu added that it expected its full-year results to be in line with current expectations.
In a separate announcement, the company unveiled a share buyback programme using its existing cash reserves up to a maximum value of £2mln.
The buyback would take place at “appropriate times”, adding that it considered a buyback to be “in the best interests of all shareholders”.
Shares were down 4.1% at 39.3p.
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