Vertu Motors has reported resilient trading in the five months to 31 January 2026, with strong aftersales performance and disciplined cost control helping offset the impact of the UK’s Zero Emission Vehicle (ZEV) mandate on the new vehicle market.
The AM100 group, which operates a network of 188 dealerships, said revenues increased 3.3% during the period, or 2.2% on a like-for-like basis, while service revenues – a key high-margin segment for the group – rose 4.8%.
Despite persistent pressure in the new car market linked to the rapid transition to electric vehicles, the company said full-year adjusted profit before tax for FY26 is expected to be in line with market expectations of around £21.6m.
Vertu Motors has reported resilient trading in the five months to 31 January 2026, with strong aftersales performance and disciplined cost control helping offset the impact of the UK’s Zero Emission Vehicle (ZEV) mandate on the new vehicle market.
The AM100 group, which operates a network of 188 dealerships, said revenues increased 3.3% during the period, or 2.2% on a like-for-like basis, while service revenues – a key high-margin segment for the group – rose 4.8%.
Despite persistent pressure in the new car market linked to the rapid transition to electric vehicles, the company said full-year adjusted profit before tax for FY26 is expected to be in line with market expectations of around £21.6m.
Chief executive Robert Forrester told AM that the group had delivered solid operational performance despite challenging industry dynamics due to the government’s ZEV mandate, which requires manufacturers to sell a growing proportion of new battery electric vehicles or face penalties of up to £12,000 per car.
“One of the biggest issues facing the automotive sector, for both manufacturers and retailers, is the UK’s Zero Emission Vehicle (ZEV) mandate,” he said, arguing that the targets are extremely challenging to meet, particularly in the commercial vehicle market with finance providers increasingly cautious about residual values for electric vans.
Commercial vehicle sales proved weak amid subdued business confidence with like-for-like sales declining 9.9%, slightly worse than the national market decline of 8.5%.
“The ZEV mandate is unachievable for cars and particularly unachievable for vans,” he said. “We’ve highlighted in the commercial vehicle section the challenges now facing the industry, particularly with major vehicle funders not wanting too many battery electric vehicles – especially vans – on their balance sheets.”
“It is reducing the overall profit pool in the industry, both for manufacturers and retailers, and it’s clearly having a big impact.”
To respond to these pressures, Vertu said it will continue to focus on improving operational efficiency and cost control.
“We’re trying to run the business as efficiently as we can,” he said. “We’ve identified over £10m of cost savings across about 35 different areas, and we’ve broadly delivered those ahead of the new financial year starting on 1 March.”
ZEV mandate weighing on new car market
The company is also aiming to maintain new car sales momentum despite the challenging market backdrop with Forrester describing the business’ March order intake as “shaping up nicely”.
The company’s like-for-like new retail vehicle volumes rose only 0.8% in the latest period, although total new retail registrations increased 2.4% due to expansion into new brands.
Battery electric vehicles accounted for 23.4% of UK registrations in 2025, according to the Society of Motor Manufacturers and Traders, well below the 28% required under the mandate. The target increases to 33% in 2026 and 80% by 2030.
To meet those targets, manufacturers have been forced to offer substantial incentives to drive EV demand. Industry data suggests more than £5bn was spent subsidising electric vehicle sales in 2025, with average discounts exceeding £11,000 per vehicle.
Vertu warned that the scale of such discounting is financially unsustainable for manufacturers and continues to put downward pressure on industry profitability.
“We’re in some sort of capitalist destruction process. Demand and supply is out of kilter due to government regulation and that is putting pressure on everybody now,” said Forrester.
Vertu reported that growth in the new car market had largely been driven by fleet sales rather than retail demand with a 25.8% like-for-like increase in fleet car volumes, significantly ahead of the 12.7% growth reported nationally.
Expansion into Chinese brands
The company continued to reshape its dealership portfolio during the period, expanding its relationships with Chinese manufacturers including BYD and Geely.
Vertu opened three BYD dealerships and its first Geely outlet during the period, with further Geely sites planned in the coming months. The company also intends to introduce the Chinese EV brand Leapmotor through its existing Stellantis dealership operations.
The new outlets and brand partnerships reduced FY26 earnings by approximately £0.8m due to start-up costs.
Used vehicles push, aftersales performance
Looking ahead, Forrester said Vertu plans to introduce a new initiative in its used car operations. “We’re going to implement an older used car strategy from 1 April focused on selling vehicles aged seven to 14 years old,” he said. “That’s quite a new innovation for us.”
Used vehicle sales have so far proved robust in despite consumer uncertainty impacting retail demand.
Over the latest trading period, the used vehicle market remained a stable contributor to the group’s performance, with like-for-like used retail volumes growing 2.8%. Margins were slightly lower, however, partly reflecting higher labour costs associated with vehicle preparation.
Aftersales operations meanwhile delivered the strongest performance during the period, with both revenue and gross profit increasing across service, parts and repair operations, supported by strong technician staffing levels and effective customer retention initiatives.
Cost control, restructuring programme
Vertu also announced a further £10m cost efficiency programme aimed at offsetting profitability headwinds in the new vehicle market.
The programme includes headcount reductions, operational efficiencies supported by technology and the closure of four sales outlets. One-off restructuring costs of between £4m and £4.5m will be recorded in FY26 results which will be partly offset by gains from property disposals and business sales.
The group also said its Jaguar Land Rover operations have returned to normal following the cyber attack that disrupted production and supply in September 2025.
The financial impact is now expected to be lower than the previously estimated £5.5m, with the company having agreed a £1m interim insurance payment.
Strong balance sheet supporting buyback
Vertu said it expects year-end net debt, excluding lease obligations, to be approximately £65m, broadly flat compared with £66.6m a year earlier.
Alongside the trading update, the group announced a new £12m share buyback programme after completing the majority of a previous £12m programme launched in February 2025.
Under the previous buyback programme, Vertu repurchased 18.8 million shares for £11.3m at an average price of 60p. The company has now bought back more than 21% of its share capital through programmes launched since FY18.
The group said strong working capital management and robust cash generation had supported both the buyback programme and ongoing investments in its dealership portfolio.
Outlook
Looking ahead, Vertu expects continued disruption in the new vehicle market as manufacturers balance internal combustion engine supply against rising electric vehicle targets.
“Despite the impact of the complex market dynamics on the short-term performance of the business, the sector presents opportunities for Vertu given our strong balance sheet, excellent manufacturer partnerships and reputation, robust and scalable systems, and a great team,” said Forrester.
“Our resilient aftersales business continues to thrive aided by higher technician numbers. The work that has gone into cost control, property disposals and optimising stock levels has contributed to an excellent cash performance.”
The group will publish its preliminary results for the year ended 28 February 2026 on 13 May.