Motorpoint shares plunge after dealership warns economic downturn will hit used car purchases
- Motorpoint shares topped the FTSE All-Share Index list on Thursday
- The company’s total sales hit a record £785million in the six months to September
- But profits fell by more than £10m due to investment in new stores and technology
Motorpoint Group has warned that deteriorating economic conditions are expected to hit used car sales “for the foreseeable future”.
The car dealership chain said consumer uncertainty, rising inflation and interest rates and global supply chain issues are “significantly affecting” the UK car market opportunity.
He believes that the current macroeconomic environment will continue to negatively impact his business performance for the remainder of the year.
Challenges: Motorpoint said consumer uncertainty, rising inflation and interest rates and global supply chain issues are ‘significantly affecting’ the UK used car market
Motorpoint Group shares fell 15.4% to £1.51 late Thursday afternoon, making it the biggest drop on the FTSE All-Share Index.
The group also announced that its profits fell to around £3m in the six months to September, down more than £10m from a year earlier, due to investments in new stores and technologies.
This is despite the Derby-based company revealing that its total revenue jumped 30% to a record first half of around £785million.
Rising prices drove much of the growth as widespread shortages of semiconductors dampened production of new vehicles, sparking interest in older cars.
Motorpoint further attributed the increase in sales to increased demand for premium models and the opening of new branches, with the most recent launch in Edinburgh and a 19th store due to open in Coventry later this month. this.
The company was forced to close its car dealership outlets during periods of UK national lockdown, which inevitably had a negative impact on sales.
Demand: Motorpoint Group has revealed its total revenue jumped 30% on the previous year to a record £785million in the six months to September
After restrictions began to ease, the business achieved record sales in April and May 2021, with demand buoyed by Britons who had accrued additional savings and were more reluctant to use public transport.
Revenues for the corresponding two months of this year were weaker, given the release of pent-up demand when trade restrictions were initially eased, although sales were stronger year-on-year during of the following three months.
However, they were around 9% lower in September as the deteriorating economic outlook and the cost of living crisis rattled consumer confidence.
Motorpoint told investors: “Macroeconomic conditions continue to deteriorate, leading to growing consumer uncertainty, and so this is likely to reduce UK used car sales volumes for the foreseeable future. .” ‘
“While the company is not providing specific earnings guidance, it believes these macro factors will continue to challenge FY23 financial performance, the magnitude of which is difficult to predict.”
Analysts at Liberum halved their estimate of the company’s full-year pre-tax profit to £7m due to weaker business sentiment and expected growth in interest charges.
Motorpoint said it would remain cautious due to these headwinds, but would still make strategic investments to benefit from a “weakened competitive landscape” in the longer term.
Russ Mould, chief investment officer at AJ Bell, said: “The market will not be reassured by Motorpoint’s lack of visibility on what next year might look like.
“Management is to be commended for keeping its cool and continuing to invest strategically to grow market share, although at some point investors may be looking for a shift to ensure that the company has a healthy buffer, the road ahead is unlikely to be smooth.”