Motorpoint Group (LON:MOTR) reported higher first-half volumes and profit growth as the used-car retailer outlined plans to expand its store network and use automation to support further sales.
Revenue rose 6% and gross profit increased 12%, while operating expenses grew 6.6%, Chief Financial Officer Chris Morgan said on the company’s earnings presentation. The gross profit-to-operating expense ratio improved to 127% from 120%.
Chief Executive Officer Mark Carpenter said Motorpoint’s volumes grew 7.6% in the half, compared with market growth of 0.6%. Morgan said the company sold more than 50,000 vehicles across retail and trade, a record for the period.
Margins improve as costs rise
Morgan said the increase in operating expenses included the opening of a new Leeds site in July, as well as additional staff to support store growth. Motorpoint is also hiring warranty technicians and MOT testers to bring some work previously carried out by third parties in-house.
Metal margin per vehicle rose to £1,266 from £1,063, helping retail gross profit per unit reach £1,430. Turnover per unit declined slightly, which Morgan attributed to lower finance commissions after the company reduced annual percentage rates to improve affordability.
Motorpoint announced an interim dividend of 2 pence per share. Debt increased by about £5 million to approximately £14 million, reflecting capital expenditure and investment in stock, among other items, Morgan said. The company has £225 million available through stocking facilities to fund vehicle purchases.
Technology supports expansion
Carpenter said Motorpoint’s internally developed technology platform, called MotoAI, uses company and external data to guide decisions including which vehicles to buy, where to allocate them and how to price them. The company sees the platform as a way to add stores without a comparable increase in head-office costs.
So far in the financial year, 62% of vehicles had been allocated using an algorithm, Carpenter said. The company’s artificial intelligence tool Lily generated almost 1,000 incremental sales in the half, while its Sell Your Car channel supplied 11% of stock.
Carpenter said Motorpoint plans to develop Lily into a sales assistant that can handle customer contact and other administrative work for salespeople. The company also plans to test additional Sell Your Car drop-off locations, including at supermarket car parks, within the next 12 months.
Store pipeline and medium-term ambitions
Motorpoint is targeting a network of 30 to 35 stores, up from 21 currently, and annual retail sales of more than 120,000 vehicles. Carpenter said both ambitions would probably take at least five years, depending on the pace of store openings.
Morgan said the company’s model for new stores targets at least 4,000 units a year and a £3 million profit contribution per site. He pointed to Swansea, which he said already sells more than 4,000 retail vehicles annually and generates more than £4 million in profit.
The Leeds store is trading ahead of plan and is expected to make a few hundred thousand pounds of profit in its first year, Morgan said. Motorpoint closed its smaller Ipswich site in October after another party bought out its lease and is expanding its Norwich site.
Carpenter said four large-format sites had been secured and were in the planning process, with two more in advanced negotiations. He cautioned that planning consent and finding suitable large sites can slow expansion.
Trading outlook
Morgan said volumes grew 9.7% in October. Carpenter said the company was well stocked and confident in its current trading outlook, although he noted some pressure on vehicle margins from plentiful supply and uncertainty in the wider economy.
He added that January through March is Motorpoint’s largest quarter, leaving a significant portion of the year’s trading still to come.
About Motorpoint Group (LON:MOTR)
Motorpoint is the UK’s leading independent E-commerce led omnichannel vehicle retailer, focused on giving retail and trade customers the easiest, most affordable and seamless way of buying, selling and financing their car whether online, in store or a combination of both. Through its leading B2C platform Motorpoint.co.uk and UK network of 20 sales and collection stores, the Group provides an unrivalled offering in the nearly new and used car market, where consumers can effortlessly browse, buy or finance their next car and collect or have it delivered directly to their homes.
