8:18 am, April 4, 2024
Motorpoint is expecting to make a full-year pre-tax loss that is ‘at the favourable end of management expectations’, it announced this morning.
Last October, the used car supermarket chain posted an underlying loss before tax of £3.7m for the first half of the year but said actions taken to stem the flow were starting to pay off.
Issuing a trading update today for the fourth quarter ending March 31, it said the positive momentum it experienced at the start of the calendar year carried on through February and March, with the quarter’s retail volume increasing by some 9% year on year.
As a result, January, February and March were all profitable months.
Motorpoint said consumer demand had picked up and it had benefited from enhancements to its digital presence over the past year that led to strong website traffic.
Margins also improved gradually during Q4 as stock turn rose and it sold stock that had been ‘affected by the abrupt Q3 correction in used car values’.
In addition, it highlighted ‘savings achieved in people costs following FY24’s rightsizing programme’ – management-speak for job losses – as well as efficiencies from investment.in technology.
Motorpoint said in the update that its balance sheet was ‘robust with no structural debt’ and that it had some £9m of cash as of the end of March.
Its share buyback programme announced on January 26 with the aim of repurchasing and cancelling up to 5m shares has seen 220,255 shares bought as of March 31, 2024, it added.
Chief executive Mark Carpenter said: ‘I am delighted that the difficult conditions experienced in 2023 have eased in Q4 and, combined with our focus on driving operational excellence through a programme we call Brilliant Basics, has meant that Q4 was characterised by consistent profitability.
‘We are achieving growth, increasing stock turn and improving margins, and this is expected to continue into FY25 as supply improves following recent new car registration growth.
‘I am therefore optimistic for FY25 and look forward to Motorpoint making the most of the growth opportunities ahead.’
Today’s update was released ahead of Motorpoint announcing its final results for the year to March 31, 2024 on an unspecified date later this month.
Reacting to the update, investment management outfit Zeus Capital reduced its forecast losses for Motorpoint from £8.7m to £8.2m, acknowledging that the £9m balance sheet was ‘well ahead of our previous estimate of £4.2m net debt (ex. leases and used car stocking loans)’.
Zeus Capital said this was ‘likely due to better stock turn’ as well as assuming that the full share buyback would be completed by the end of the year.
It stated: ‘Our previously negative view on Motorpoint was primarily based on a structural vehicle supply shortage in its target market.
‘Now that UK new car sales are recovering, feeding into the supply of nearly-new used vehicles, we see improved prospects for the group.’
But it added that it was still neutral regarding Motorway’s shares.
This story was originally published at 8.18am on April 4 and updated at 3.42pm on April 5 with Zeus Capital’s forecast and comment
