Vertu Motors: Pivoting to Chinese Brands and Aftersales as the ZEV Mandate Bites

The U.K. dealer reports resilient aftermarket, a new value-car push, and cost discipline despite a crumbling new-car profit pool.

VTU.L · Earnings Call · 2026-05-18

Introduction

Vertu Motors, the U.K.'s fifth-largest dealer group by market share, delivered a year of two stories: record revenue from acquisitions and start-ups, but lower profits as the ZEV mandate continued to gut the new-car margin pool. The company reported preliminary FY26 results on May 18, 2026, showing adjusted operating profit down year-on-year, driven by a £8.7m reduction in new-vehicle gross profit. Management's response has been to lean on the resilient aftersales business, execute another round of cost cuts, and pivot the portfolio toward Chinese brands.

Aftersales: the profit engine holds

The aftersales division remains the group's "star of the show," with gross profit growth across all channels. “We have seen what we think is startling growth again in our aftersales business with GBP 2.9 million more gross profit in the core business in the 2 months.” — Robert Forrester, Chief Executive Officer · 2026-05-18 This strength is partly organic—vehicle parc hits a record 42.5m on U.K. roads—and partly a result of internal rate increases that shifted £3-4m of gross profit from used cars to service. The group also introduced charging for wash-and-vacuum at volume dealerships, a move that helped deliver £10m of targeted cost savings for FY27. “We anticipate that we'll deliver GBP 10 million of cost savings in FY '27 for the current financial year as a result of this latest exercise.” — Karen Anderson, Chief Financial Officer · 2026-05-18

The Chinese pivot: a calculated, not hasty, move

With Chinese-owned brands now holding 14% of the U.K. market year-to-date, Vertu is expanding its representation with BYD, Geely, Chery, MG, and soon Leapmotor. CEO Robert Forrester is candid about the tactical choice to go slower than some peers. “I don't necessarily see this as massively taking share disproportionately actually from the volume players.” — Robert Forrester, Chief Executive Officer · 2026-05-18 He argues the Chinese entrants are converting used-car customers into new-car PCP deals, not eating into the group's traditional franchise volume. Still, the company acknowledges the risk to residual values if the flood of Chinese EVs returns in size. The strategy is designed to maximize long-term returns rather than chase market share. Chinese brand exposure is a deliberate portfolio shift.

Value cars: attacking the 7+ year segment

On April 1, Vertu launched a new initiative targeting the fastest-growing part of the used market: cars over seven years old. “It's not a completely different customer. Historically, 11% of our sales -- used car sales were in the bracket of over 7 years.” — Robert Forrester, Chief Executive Officer · 2026-05-18 The strategy simplifies preparation standards, uses cheaper parts, and pairs the vehicles with new finance and warranty products, aiming to lift margins from ~7% to over 20% on lower-priced units. used car volumes are expected to grow as the group captures more trade-ins that previously went to auction.

Capital discipline and the road ahead

Despite the profit dip, the balance sheet remains strong: net debt of £61.3m against £327m of freehold property, and tangible net assets per share up to 75.9p. The group announced another £12m share buyback, continuing a program that has returned over £100m to shareholders. Management's priority remains buyback program rather than acquisitions, citing low return visibility under current policy. They expect the ZEV mandate to be amended, which would unlock the sector's profit pool. Prior calls echoed these themes—the October 2025 call highlighted the same cost pressures and the need for policy change. “We have mitigated the GBP 10 million that we disclosed in relation to the last Autumn Statement.” — Robert Forrester, Chief Executive · 2025-10-09 And on Chinese expansion, Forrester had said, “We will engage with the Chinese manufacturers because I think they will take some share; that share will be limited by the number of showrooms available in the United Kingdom.” — Robert Forrester, Chief Executive · 2025-10-09 The consistent narrative suggests the market has yet to fully price in the optionality of a policy pivot or the compound value of the aftersales plus Chinese strategy.

The zero-emission vehicle mandate that the government has put in to target battery electric vehicles in the U.K. is weighing heavily across the U.K. automotive sector, including on ourselves.
Robert Forrester, Chief Executive Officer · 2026-05-18