7:51 am, October 5, 2023
Used car supermarket Motorpoint racked up losses of £3.7m for the first half of the year – but it says actions taken to stem the flow are beginning to pay off.
The group has made a swathe of redundancies that have resulted in a hefty £1m one-off cost to the business and it says it has now ‘streamlined’ its organisational structure.
The used car dealer group has also paused new store openings, reduced capital spend and worked hard to increase its retail margins during a tough first half of the year.
In an announcement to the London Stock Exchange this morning, the group said its underlying loss before tax was £3.1m in the first quarter, but that has narrowed to a £600,000 loss in the second quarter.
Overall the business made a £3.7m underlying loss for the period.
The dealer group pointed out it made an underlying operating profit of around £1.6m, but that was before an interest expense of £5.3m and the £1m redundancy costs had been included.
The used car supermarket group. which operates from 20 sites across the UK, has suffered from what it calls ‘macroeconomic conditions’.
The firm said it was forced to take ‘swift, decisive action’ in the first quarter to ‘right-size’ its business. This was to ‘reflect the reduced market size and ensure cash generative trading at lower levels of group sales’.
No sales volumes were given in the brief statement the used car supermarket group made to the stock market.
Motorpoint added: ‘Some of our actions included increasing retail margins supported by the use of data to optimise selling prices, reducing auction fees by securing a greater proportion of stock through direct supply channels, streamlining our organisational structure, pausing new store roll out and reducing discretionary capital spend.
‘Our right-sizing programme proved helpful to our performance in Q2 as these difficult macro conditions continued.’
The used car dealer group said it had been ‘adversely affected’ by high used car prices and the rising cost of finance as interest rate rises filter through. This, Motorpoint added, was ‘against the backdrop of continued consumer uncertainty’.
‘In response, we have recently taken further action by broadening our selling criteria to include vehicles up to five years old and 50,000 miles, to help our customers find the right vehicle in accordance with more constrained household budgets,’ added Motorpoint.
‘We anticipate used values will gradually align to historic levels as new car supply continues to improve which will further enhance affordability for our customers.’
Motorpoint pointed out in the update that despite the challenges the group generated net cash of £11m in the first half of the year. It said it had further banking facilities of £35m available too which ‘demonstrates its resilience in difficult markets’.
Mark Carpenter, CEO of Motorpoint, added: ‘The impacts of high inflation, interest rates, and consumer uncertainty continue to affect demand for used cars.
‘We have responded by reducing our cost base and expanding our retail criteria to help customers find the car of their choice at a price they can afford.
‘We have successfully preserved cash while making progress on selective strategic initiatives, and are well positioned to emerge from this difficult macroeconomic cycle a leaner and more agile business, ready to seize the significant opportunity as market conditions improve.’
Motorpoint shares have fallen by a third in the last six months and were trading at 88p this morning.
