8:47 am, January 26, 2024
Motorpoint says its profit for the year is likely to be £5m to £6m below expectations.
In a trading update issued today for the three months to December 31 – its third quarter – the used car supermarket group blamed pricing corrections made worse by the timing of its seasonal increase in stock, as well as disruption caused by its Derby store’s temporary closure as a result of the Storm Babet floods.
However, it still anticipates a strong final quarter.
Profitability was hit by a sharp drop in used car prices, it said. The average selling price of cars fell from £19,750 at the start of its financial year to £14,500 after its stock mix was ‘proactively de-risked’ in order to reduce the effect ‘of volatile higher priced vehicles’.
Retail volumes this month are, however, expected to be at their highest levels since August 2022.
Motorpoint said in the update: ‘Macroeconomic conditions remained difficult in Q3 and were further compounded by the sharp falls in used car values and reduced selling prices.
‘Encouragingly, retail volumes improved through Q3 and ended the calendar year roughly consistent with the previous year, reversing the trend of H1.
‘This momentum has continued into Q4 and volumes are growing year on year.
‘Costs remain closely controlled, with further savings achieved in people costs and efficiencies resulting from technology investment.’
It added that net cash was still positive as at December 31.
Looking ahead, it said: ‘The board believes that the corrective cost and efficiency actions taken in FY24, combined with the positive signs that economic headwinds will ease in FY25, will ensure the group is well placed to deliver an improved financial performance in FY25 as the market returns to a more normal trading environment.’
Chief executive Mark Carpenter, pictured, said: ‘I have previously commented on Motorpoint’s agility and resilience in difficult times, and that I am confident the group will emerge from this depressed consumer environment a much more efficient business.
‘Now, at last, there are signs that the macroeconomic headwinds are easing, leading to renewed consumer confidence.
‘As a result, the market size is expected to increase as demand grows and supply is bolstered by new car registrations feeding into the used car market.
‘The actions already taken to right-size the business, protect cash and improve unit economics mean that Motorpoint is well placed to seize the significant growth opportunity, despite this correction in used car values.
‘I therefore look forward with renewed optimism and am excited as to what the business can achieve in FY25 and beyond.’
Motorpoint also announced today that it would be starting a share buyback programme soon to repurchase up to 5m ordinary shares of 1p each in the company’s capital – about 5% of the its ordinary shares.
The combined purchase price of all ordinary shares bought under the programme will be no more than about £5m, excluding stamp duty and expenses.
Numis Securities will be managing the programme.
Motorpoint’s share price was 98p as the stock market opened this morning.
