Motorpoint reaches record revenue, warns of worsening market

Motorpoint shares were tumbling on Thursday morning even after it reported record revenue for its first half in a trading update, as the vehicle retailer warned of a worsening used car market.

The London-listed firm said revenue in the six months ended 30 September totalled £785m, up 30% year-on-year, helped by vehicle mix and price inflation.

It increased its market share of the up-to-four-year-old car market to 3.6%, from 2.9% a year earlier, with a record high reached in June at 3.8%.

In line with its stated growth strategy, the group invested an incremental £4m compared to the first six months of the 2022 financial year to grow its market share through price leadership and new openings, and was on track to grow revenue to £2bn in the medium term.

The board said the company made “meaningful” market share gains in the first half, although profitability was “significantly lower” than the record performance in the first six months of last year due to investment in new stores, digital and technology capability, and price leadership.

It said it remained cash flow positive, and had a strong balance sheet with no structural debt, and a net cash position of £4.5m at period end on 30 September, down from £7.8m a year earlier.

Motorpoint had unsecured loan facilities of £35m undrawn on 30 September, and stocking facilities of £195m.

During the period it opened its 18th location, in Edinburgh, at the end of September, with its 19th location at Coventry due to open at the end of October.

The company’s net promoter score remained at an “industry leading” 84 in the period.

“Macroeconomic conditions continue to worsen, which is causing increasing consumer uncertainty, and it is therefore likely that this will reduce used car sales volumes in the UK for the foreseeable future,” the board said in its statement.

“Although the company does not provide specific profit guidance, it believes these macro factors will continue to challenge financial performance in 2023, the extent of which is difficult to predict.

“In this environment, the group will carefully manage its cost base, align its consumer financing rates with borrowing costs, and continue to build technology and digital capabilities which increase automation, data-led decision making and customer self-service, thereby enhancing the agility of the group to proactively manage its cost base.”

The board said the company would also continue to invest in “important strategic capabilities”, but only to the extent that it remained profitable and cash generative, and maintained a strong balance sheet.

“As has been previously highlighted, the impact of rising inflation, interest rates, consumer uncertainty and worldwide vehicle supply chain challenges are significantly affecting the used car market.

“Whilst it is prudent to remain cautious given these short term headwinds, the group will continue to invest now for the longer term in a weakening competitor landscape, whilst also delivering appropriate levels of profitability and cash generation.”

At 1030 BST, shares in Motorpoint Group were down 13.84% at 153.8p.

Reporting by Josh White at Sharecast.com.