Motorpoint knuckles down as tough conditions continue

Used vehicle retailer Motorpoint said in an update on Wednesday that the challenging macroeconomic conditions experienced during the second half of the 2023 financial year had a negative impact on its growth and profitability.

The London-listed company, which was holding its annual general meeting, said that in response, it focussed on immediate strategies to increase margins, reduce costs, enhance cash generation, and ultimately improve profits.

As expected, the difficult macroeconomic conditions persisted into the first quarter of the new financial year.

Despite that, Motorpoint said it had maintained a net cash position of £2.2m as at 30 June, and held a favourable facility headroom of £35m.

The company attributed its cash position to a continued focus on working capital management and a reduction in capital spend.

Additionally, the group said it had taken decisive action to lower its breakeven volume, ensuring that it remained cash-generative during challenging times.

As a result, its trading performance improved progressively throughout the first quarter, and the company said it expected that trend to continue into the second quarter amid further improvements in margin and cost base reductions.

During the first quarter, Motorpoint Group said it implemented several strategic initiatives to address the challenges posed by market conditions, including improved retail margins, optimising selling prices through the increased use of data.

Motorpoint also secured a larger proportion of stock through direct supply channels rather than auctions, reducing auction fees and streamlining procurement.

The group said it undertook streamlining efforts within its organisational structure, leading to a 10% reduction in headcount.

That was expected to deliver annual savings of around £3m, in addition to the cost reductions made during the second half of 2023 period.

Finally, Motorpoint said it had paused the rollout of new stores and reduced discretionary capital spend during the first three months of the new period, aligning its investments with prevailing market conditions.

“As previously communicated, the impacts of high inflation, rising interest rates, and consumer uncertainty continue to affect demand for used cars,” the Motorpoint board said in its statement.

“However, like others in the industry, we are encouraged by the growing number of vehicle supply options which, coupled with our increased use of data to determine optimum selling prices, has resulted in an improvement in retail margin.

“This will, in part, be tempered by lower finance commission as consumer uptake for finance reduces due to increased APR rates.”

Motorpoint said it had also focussed on the costs of the business, to ensure they were aligned with current market activity and, using its investment in technology to date, it said it was able to maintain a lower headcount as it conserved cash and returned to profitability, while ensuring it was ready to invest for growth as more favourable market conditions returned.

“The group continues to be confident it will emerge in a normalised market as a leaner and more valuable business ready to seize a significant opportunity.”

At 0830 BST, shares in Motorpoint Group were up 5.88% at 108p.

Reporting by Josh White for Sharecast.com.