Vertu Motors (AIM:VTU) PLC reported robust trading for the half-year to end-August and predicted that profits for the year will be ahead of current market forecasts.
Revenue for the six months to 31 August 2022 was £2bn, a rise of 3.9% on the same period last year.
The car dealer said it saw market share grow in all new vehicle channels during the period and it now anticipates being the fourth-largest automotive retailer in the UK by revenues.
Adjusted pre-tax profit came in at £28.2mln in the first half, compared with £51.8mln, with gross margin of 11.2% (H1 FY22: 11.6%) reflecting “strong pricing” in all areas.
The company raised its interim dividend to 0.70p from 0.65p.
Vertu said ongoing supply constraints in the automotive retail sector are being offset by higher margins and that it achieved a strong performance in September, which is a key month for the industry.
Profit levels in the month, as expected, were behind last year, but profitability was still the third-highest recorded for September in the group's history, it noted.
"The first half has seen a strong trading performance with vehicle margin strength offsetting market driven volume shortfalls,” commented Vertu chief executive Robert Forrester.
“The group continues to benefit from its focus on operational excellence around cost, conversion and customer experience aided by continued digitalisation initiatives. Cashflow generation has been strong and the dividend for the first half has increased again.
“The business is strategically very well placed with significant firepower to expand its footprint of franchised dealerships across the UK."
The company noted pressure from rising costs, particularly energy prices, and said cost is a key management focus
However, government action on energy costs and National Insurance rates will benefit the group in the second half of this year, it pointed out.
It also said it has a strong acquisition pipeline in place.
Free cash flow was £23.2mln in the period and net cash stood at £17.8mln at end-August.