Motorpoint Group shares dive after retailer warns consumer uncertainty will hit second-hand car purchases
- Motorpoint’s shares were the top faller on the FTSE All-Share Index on Thursday
- The firm’s total sales jumped to a record £785m in the six months to September
- But profits fell by over £10m due to investments in new stores and technology
Motorpoint Group has warned that worsening economic conditions are set to hit used car sales ‘for the foreseeable future.’
The automotive dealership chain said consumer uncertainty, increasing inflation and interest rates, and global supply chain problems are ‘significantly affecting’ the British second-hand car market.
It believes the current macroeconomic backdrop will continue to negatively impact its trading performance for the remainder of the financial year.
Challenges: Motorpoint said consumer uncertainty, increasing inflation and interest rates, and global supply chain problems are ‘significantly affecting’ the British used car market
Motorpoint Group shares plummeted 17.1 per cent to £1.48 on Thursday, making them the biggest faller on the FTSE All-Share Index. Over the past 12 months, the firm’s shares have halved in value.
The retailer also reported profits plunged to around £3million in the six months ending September, a drop of more than £10million from the previous year, due to investment in new stores, technology and competitive pricing.
This was despite the Derby-based company revealing its total turnover jumped by 30 per cent to a first-half record of around £785million.
Rising prices drove much of the growth as widespread semiconductor shortages dampened the production of new vehicles, thereby pushing up interest in older cars.
Motorpoint further credited the sales boost to higher demand for premium models and the opening of new branches, with the most recent launching in Edinburgh and a 19th store set to open in Coventry later this month.
The business was forced to shut its car dealership outlets during the UK’s national lockdown periods, which inevitably had a negative impact on sales.
Demand: Motorpoint Group revealed its total turnover jumped by 30 per cent from the previous year to a record £785million in the six months ending September
After restrictions started to be loosened, the firm achieved record sales in April and May 2021, as demand was buoyed by Britons who had built up extra savings and were warier of using public transport.
Revenues in the corresponding two months this year were weaker, given the release of pent-up demand when trading curbs were initially relaxed, though sales were stronger year-on-year over the subsequent three months.
However, they were around 9 per cent lower in September as a deteriorating economic outlook and the cost-of-living crisis damaged consumer confidence.
Motorpoint told investors: ‘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. ‘
‘Although the company does not provide specific profit guidance, it believes these macro factors will continue to challenge financial performance in FY23, the extent of which is difficult to predict.’
Analysts at Liberum have reduced their full-year pre-tax earnings estimate for the business by half to £7million due to the slowing trading climate and expected growth in interest costs.
Motorpoint has said it will remain cautious because of these headwinds but will still make strategic investments in order to benefit from a ‘weakening competitor landscape’ over the longer term.
Russ Mould, investment director at AJ Bell, said: ‘The market will not be reassured by the lack of any visibility from Motorpoint on what next year might look like.
‘Management deserve some credit for holding their nerve and continuing with strategic investments to grow market share, although at some stage, investors may look for a gear change to ensure the company has a healthy buffer with the road ahead unlikely to be a smooth one.’