Motorpoint Group H2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
June 12, 2025

Key Takeaways

  • Motorpoint delivered a full-year FY ’25 turnaround with 14% unit growth, a 12% market share gain and returned to profitability, boosting gross margins by 24% year-on-year.
  • Management reintroduced a progressive dividend (1p per share) and resumed share buybacks to deploy excess free cash flow and reward shareholders.
  • The adoption of automated dynamic pricing and emphasis on low days in stock (42 days) lifted metal margins to 7.7% and accelerated stock turn to drive higher profitability.
  • Uncertainty lingers around impending FCA finance commission litigation after the Supreme Court review, though Motorpoint expects no material liability to dealers.
  • The EV segment’s volatility has prompted a cautious sourcing and pricing approach, with doubled volumes but uneven margin trends in a still-maturing market.
AI Generated. May Contain Errors.
Earnings Conference Call
Motorpoint Group H2 2025
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, everyone, and welcome to Mokes Point's full year twenty twenty five results. Thank you for joining us. Myself, Mark Carpenter, CEO of Moves Point, and Chris Morgan, our CFO, will take you through our presentation. And just in terms of the slides, we will go through yeah. Sorry.

Operator

Oh, that slide. We should we'll have an introduction and talk a little bit about f y twenty five in the future from myself. Chris will take us through the financial highlights and an ESG update, and then I'll come back on, and we will look to do the, strategy update and the outlook. In terms of our progress in the financial year, we've talked previously about Brilliant Basics and ensuring that we've got a strong foundation for growth. I'm very pleased with our progress in FY '25.

Operator

It was a year of recovery and putting some of the basic principles emerge back in place, post the COVID disruption that we suffered and whether that be supply or inflationary pressures, interest rate pressures. Despite those can some of those continue in in FY '25? We have performed well, and more importantly, we've grown our volumes, and we've taken market share, which obviously is something we're always trying to achieve. Just in terms of our key investment highlights, we have talked a long time about the growth potential of the business. The market does remain fragmented.

Operator

We've had people exit the market, after, coming in and making quite a big and disruptive influence on the market. That feels like that's now subsided, but we are continuing to be focused on growing the business profitably going forward. We do continue to have a very broad range of stock available nationally. We have more stock now than, we've had mostly mostly in the past five years, and we are very pleased with how the supply dynamic is now shaping up going forward. Our approach to pricing has changed quite dramatically in the last, twelve to eighteen months.

Operator

We're now far more automated in our pricing using a pricing strategy, rather than any, specific opinion on price, and the the testing is done as we price the vehicle initially and then the changes going forward based on what we know, changes the run rate and make sure that we turn the cars as fast as we possibly can at the right profit levels. And that leads us to continue to have one of their lowest days in stock in the industry, with a leading stock turn. Our customer experience continues to be very strong. It does create a long term brand loyalty in our opinion. It is a infrequent purchase to customers.

Operator

It's very important that we give a great experience when we see them because we may not see that customer again for another three or four years. Our NPS, which suffered in initially in the start of the year, has recovered dramatically, through the second half of the year, which, is a consequence of a lot of process review and why our NPS wasn't going very well in the first half of the year. I'm really pleased that we managed to turn that around in the second half, and we're in a good position, again, in line with our long term average. We do believe still that we have the best in class products in terms of finance and the extras that we sell. We always look to make sure we have the best offerings in that arena, whether it's the warranty product, or the paint protection product.

Operator

We continue to provide very good prices, and we make sure that they've got all of the facilities, and features, and benefits of any other product on the market, but at a lower price to encourage customers to take them up. Our digital platform auctionforcars.com continues to sell our wholesale vehicles very profitably, which is a unique part of Motorpoint compared to our competitors. And we continue to have a very strong fiscal responsibility around our balance sheet with high free cash flows and return on capital employed. We continue to return that, capital to shareholders where we feel that it is excess. And as you will have seen on the RNS, we've reintroduced our dividend for the first time since 2019, giving indication of our confidence going forward.

Operator

Just taking through our virtuous circle, it remains at the heart of what we do. This is a key part of how we run the business. And certainly from my perspective, when we make decisions, we focus on these three groups, very strongly. Everything starts with our employees. If we get that bit right, leads to a high level of customer satisfaction.

Operator

If we get that bit right, leads to a high level of repeat and recommend business, which generates higher returns for our shareholders, allowing us to then grow our business and create opportunities for our employees. So it's a full circle and continues to turn. In terms of each one, the highlights for those in the year, our employees, we entered a new competition, the Sunday Times run, as a best company to work for, and we were named in the top a 115 big places to work in the country. So we're delighted to continue that that we've had previously with other surveys. Great to be in that top list showing just how engaged our team are.

Operator

In terms of customers, as I mentioned, the NPS recovered strongly in the second half and ended in q four on 84, which I think is very, very high. I think some people say that it's too high. It doesn't cost us money to remain at that level. It's just about making sure our team care about the customer and listen to the customer and remedy issues when they arise. And in terms of shareholders, obviously, we've had a much better financial performance, and we we continue to increase the profitability and therefore return cash to our shareholders.

Operator

In terms of our KPI progress in FY '25, you can see from this table, it gives you a lot of information, our market share, which is one of the key points that we've had to look at in the past because volumes were declining, and and then so our relative performance to market becomes more important. And but our naught to six year old, vehicles that we now stock mostly still naught to four, but we do create some price point product in the four to six year old, and that continues to increase. So the market share is up 12% in the year. As you can see, that leads to a revenue increase of 8%, so slightly lower average price product. And the retail units sold at 14%, Obviously, the total when you include auction for cars up 12%, but it's good to get close to that $60,000 record year.

Operator

It was almost 65,000, so we're still about 8% behind where we where we were pre COVID. But as noted, the supply disruption has been a huge influence on that. So the Brilliant Basics has led to a good profitability level as we've talked about, whether it be gross profit per retail unit, so focusing very hard on our training and our development of our sales teams, but also then our cost base as well. So those KPI improvements lead to an increased profitability of 4.1 given the disastrous, financial performance last year when market shifts and supply were very difficult, that led to a big loss. So we're really pleased to be able to turn that around and make a a decent profit in the year.

Operator

As you can see, the acquisition cost per customer, $170.10 pounds, that's come down again. So we've been far more diligent with our marketing spend, more targeted, using digital marketing more than brand marketing, and that's helping us to to bring that cost lower. And we ended the cash, the year with 6,600,000.0 of cash. A little bit lower, but we had a few opportunities to, to take some extra stock at the end of the quarter. We didn't want to miss those opportunities, so we're not as concerned about the year end cash position.

Operator

It's mainly about we've got the right balance of stock, that is available at the end of the year. You can see the market share outperformance I've referenced. So as you can see from quarter one throughout the rest of the year, we saw strong gains. At quarter one, we were pretty low on stock. As I mentioned, we feel that we've really got that supply under control now, and we're getting much more consistent levels of stock, which tells us that the market is normalizing in terms of supply.

Operator

So there will still be pockets of undersupply or oversupply, and EV product continues to be quite volatile, though it is stabilizing to some extent. But petrol, product is is very stable and diesel products probably increasing due to the scarce value of that product and not much of that being built at all. So seeing share gains and the norm to two year old in particular, we've highlighted because that is our historic core market. So the fleet market and that has definitely, really come through prior to that where the fleet market aren't defleeting. We don't see much of that product in the open market.

Operator

So it's good to see that coming back into the open market. Brilliant basics I mentioned in terms of volume growth, we've got good strong growth in new and returning customers. So again, focusing on that NPS to drive that part of the business. And we've also done a few stimulations in finance, so where we have a product that we think we've got a lot of this. What can we do?

Operator

So there's a big opportunity to buy, say, a thousand cars from a manufacturer, and we will stimulate that product to gain good traction on the run rate and lower the finance rate on that product to 9.9. Currently, we have a 9.9 APR on EV product, which is post year end, but we have done similar things through the year to try and stimulate that demand where we have a lot of the same thing. In terms of the digital capability, the website is now rated one of the best in market in terms of speed and responsiveness, and we continue to focus on that brand awareness. Our CRM journey, new technology being used there, embracing AI to drive that CRM harder. As I mentioned, customer acquisition cost is down, and our website and digital leads up 16% on the previous year.

Operator

So that's an area, that digital capability where we continued to invest through the downturn. We're a very strong team in that part of the business, and, and that's reaping dividends for us now. In terms of our reset in FY twenty four, delivering our profitable growth, so we've talked about margin improvement and stock turn. They are two key things. The margin and the stock turn are normally very closely correlated using the data now to inform not only the buying, but also the pricing decisions, and then the stock management decisions after that has become very important.

Operator

So I think there's more to go there, but we're certainly in a much better place than we were, a couple of years ago, far more consistent, far more balanced in terms of our margin, less volatility in margin, certainly from the the initial sort of six to twelve months that we've been using this in anger. Sell your car, we've continued to look at. It's not just sell your car. It's also part exchanges. So car sourced from customers continues to grow.

Operator

It is our most profitable channel as you would expect, and therefore, we are pushing that quite hard and looking at how can we increase our own capacity to receive those vehicles, and also how do we stimulate the demand for that. And we're not particularly marketing it just now, but we are planning to do that through the year. In terms of our cost base, we did reset our cost base in FY twenty four, took some structural decisions there. We do continue to appraise all of our headcount requirements and ensuring that they are productive people coming in, and really challenging hard where we don't see that that efficiency of the team is is at the right level. We have a good, cross section of stores where we can really KPI those and those requirements and understand deeply why we may need more or less people in a store, that works really well.

Operator

Talked about the website. So in terms of what we've done in the website, in the recent past is we've looked at actually driving customers to show them the stock that we've got coming, and that has performed very well. So we have at any one time, maybe five or 600 vehicles that are still in preparation, but they're gonna be on the website in the coming days. We would sell typically about 25% of that product in the in the week that it is, released as coming soon. I think that just tells you customers aren't particularly bothered about photos all of the time.

Operator

And if they think that that car is a great price and this is the exact car, the exact color that I'm looking for, they will commit to that car at that point. We've got a new cellular car gen. As I mentioned, we're continuing to optimize that journey. We saw quite a big dropout on customers in the cellular card journey if we ask for their address when they just want evaluation and they want to book an appointment to sell their car to us. That has to be a, an easier and quick journey than we had, so we made some amends there.

Operator

And in terms of our ability to flexibly change the finance that you may want on your car, and we've now added an ability to add in whatever ancillary products you may want to your to determine in your monthly payments. So if you if you just buy the car, the payment is x. If you wanna add a warranty to that, then the payment would be y. So it gives customer full transparency of what that cost per month is going to be. In terms of our continuation around the digital aspect, so Google launched vehicle listing ads.

Operator

They are their sort of typical shopping banner at the top of the search engine that you would normally see, that the cars went on to that during the year. And then we were obviously in the in the beta for that, and we're quite pleased with the results of that. It's showing to be cheaper than than than normally through Google. I'm sure they'll find that out and increase it, but we're quite happy with how we are performing on that offered. Photography is good, and therefore, you know, we we would look that we would look better in that arena than we would on just a plain text search.

Operator

In terms of paid social, we are able to use the AI technology to personalize those adverts to really be deeply linking into the customer, who they are, what they do. And mentioned already CRM investment. We've invested in new CRM platform. We moved away from a the prior platform, which is very expensive and quite clunky to use, called Salesforce, not surprising to anyone, I'm sure. And we're now in a much more agile platform that is easier to use and it's also cheaper, so we like that.

Operator

In terms of SEO, content and PR, we continue to invest in that area, growing our reviews on our websites, making sure we've got outreach through SEO and link building, but also then making sure that we are ranking really well for the keywords that we would like to rank for. So we're continuously making improvements in that arena through all of the above. But also, we now also have a, a YouTube channel, which the surprise subscribers are growing rapidly, and we have a lot of videos on there of our car reviews. And and, obviously, that's a far more richer content and creates a a stickier customer base to to look at our reviews, and, hopefully, at some point, we'll become in their consideration pool to buy a car from us. Price is always something we talk about.

Operator

The value, you know, in terms of our mix of choice, value, and service, then value continues to be something we really focus on. So as you can see, we continue to be very aggressively, priced in terms of Autotrader. We will always be below market pricing and making sure that we've got a competitive offering versus all of the competitors, whether it's an online competitor or typical car supermarket business. We will be a lower priced vehicle and usually a at or low lower priced finance. So we're very pleased with how we, look at that and how we may continue to provide that even though our margins grown a bit, and we continue to be the cheapest.

Operator

We think that's important for the long term health of the business. We continue to look for new stores. We opened Norwich during the year. We've also refurbished Derby, during the year after the flood a year ago, and that store has now been, massively expanded and that should give us better opportunity in what was our first store. As you can see on the map on the left, we do still have quite a bit of white area.

Operator

I think it's becoming more difficult to find stores in terms of the the planning consents and the the ability to find the land in the first place at the right price, so we are far more minded to recondition and refurbish, properties than build from scratch, but we know that we wanna be in several of the big cities in The UK we still don't have presence in. So we're still looking for that infill, and we want to do one a year. If we could do two a year, we would, but these do tend to be quite challenging to find. And, obviously, we we'll continue to focus on growing our sales with or without those, but it's it's, better for us to be in all markets rather than some. Pass you over to Chris now for our financial highlights.

Speaker 1

Okay. Thank you, Mark. Morning, everybody. So on financial highlights, I think in terms of the the profit and loss, I think Mark's probably covered off actually in terms of the sort of the themes of the business and how we've been how we've been doing. But you can see retail sales up 13.9.

Speaker 1

It's probably fair to point out that the strong growth during the year didn't moderate in the final quarter simply because we started to lap some tougher comparatives at the back end of f y twenty four. And then even though retail units are up almost 14%, total revenue is 8%, and that's because of the mix of mix of product that we were selling and deflation. Inflation generally remained pretty stable, so pretty comfortable with prices subject to some the comments Mark mentioned about EVs and and and small areas of of diesel products. Gross margin, very pleased with the with the improvement at 7.7 for the gross profit, 24% increase, and that's fundamentally just driven by a metal margin. So I think we can really start to see the benefits now of data and the algorithm algorithms we're using, but both in terms of buying the stock at the right price, then very importantly, reacting really quickly to make sure that we've got it at a retail price, on our website for customers.

Speaker 1

And, you know, we look at that daily, which is much more dynamic than say where we were eighteen months ago. So I think that's really paying dividends. So we're now seeing a healthy metal margin, which is relatively stable as well. I think in the past, we have seen peaks and troughs, you know, as we as we buy some good product, buy some bad products, whatever. But I think it's much more stable now, so more confidence as we as we go through.

Speaker 1

We saw slight increases in prep and and transport. Preparation predominantly because of the age of the vehicles and mileage that we're preparing on the vehicles. But we should see some benefits of that going forward to start to MOT our own cars now. So we've now got MOT bays in in a number of number of sites and and continuing to get EVSA approval to roll those out across the estate. So so that will help.

Speaker 1

And transport, I mentioned slightly up, but, again, we're we're very conscious about overage stock and making sure that we get the stock in the right place where we believe it will sell, because there are some geographical geographical differences in terms of, let's say, an EV product or certainly higher higher costing product where it's where where it best sits across the country. So that's helped and and really lowered our overage stock. So stock provisions came down quite significantly in the year because we're we're we're writing off less stock, which is which is really good news. Operating cost, Mark mentioned that, you know, we had a big reset with with Brilliant Basics last year, so we're very, very cost conscious. That said, we've seen our FTEs grow.

Speaker 1

It's approximately seven eighty from from just over 700 a year ago, but that is predominantly in the stores and it's in the prep centers, and that's because the volume is up 14. Clearly, we need more people to, a, prepare the vehicle and sell the vehicle, but we are pretty much signing off every employee now. It comes to me and Mark, so we're we're keeping a really tight tight rein on that, and, so we we we keep focusing on the costs. Rent rates, some of the central costs have increased just because of, you know, rent, rent renegotiations, some of the rates, etcetera, that we see. But the local cost, which is really what we call the the variable cost that we see in store prep, is actually down year on year.

Speaker 1

So I'm really pleased about that. So we've we've got a real focus with the managers, you know, across across the, across the whole business to make sure that, you know I always say, and I probably said it before in these presentations, you know, treat MotoPoint's money as your own. Now, you know, I think that that does help over time when people do get into that mantra of thinking, if it was my money, would I spend it? So we've seen some really good decreases in in in energy costs, which is great. So we're just getting people to be a lot more prudent and frugal about how they think about, you know, simple things like closing doors, turning lights off, etcetera, and also run car car charges as well.

Speaker 1

So we're now sort of pushing customers to open banking solutions rather than us paying a a small fee on on card transactions. So, again, that that's paid dividends to the p and l. Marketing, think Mark's focused, as mentioned, we're about 10,000,000, which is broadly similar to to previous year, but we're getting a better return because we're getting much better insight now in terms of marketing and what returns the best for us. So that that really has some good focus. And then finance costs, unfortunately, remain high.

Speaker 1

9,470,000.00 of that is is stock in finance costs. But, you know, if if and when interest rates continue to fall, then then that number will fall off accordingly. But we'll continue to monitor that. K. Just moving on to the into the balance sheet.

Speaker 1

You can see almost a doubling actually of of fixed assets. Predominantly, that's Derby. So we spent on about 5,000,000 on acquiring the freeholds, purchasing more land, and refitting the showroom post the floods eighteen months ago. So the source is great now. We've got more more cars on pitch.

Speaker 1

We've got much better visibility from from main road as you enter Derby, and and to to sales so far are encouraging. So so that's that's really good news. We're also investing in in MOT equipment and ramps as as as I mentioned before, so we we push through with that. Inventory has gone up from a 100 to to a 150, and,

Operator

you

Speaker 1

know, we're we're more than happy that actually that has gone up. And the fact that today's in stock could continue to reduce or support that because we just need more stock to satisfy the demand It's clearly out of motorbike cars, so that's that's good news. Payables, you can see almost almost an identical movement, 107 to one five five. And, again, that's simply because the stock facilities, the amount that we've drawn down has gone up 50,000,000 roughly, 74 to 122 to support the inventory increase. Cash, I'll come back to in a second.

Speaker 1

I'll I'll show you quite simple sort of waterfall of of how the cash has moved. And just finally on well, just a reminder, no structural debts. But the good news is our bank facility with Santander, the 6,000,000 overdraft, 40,000,000 RTF. That's being increased by for the year up to June 27. So just coming on to the cash flow, hopefully, this sort of simple waterfall sort of explains it quite well.

Speaker 1

So we've gone from nine at the start of the year to 6.6 at the end of the year. EBITDA doubled from about eleven, eleven and a half to to 24. So that's obviously that's obviously great great news, and, hopefully, that will continue as as we grow profitability. CapEx, 7.6. 4.7 of that was Derby, so that's a big chunk.

Speaker 1

Interest, 9.4, and I've already referred to that. Lease payments, which which will tie into the rents that's due to landlords at 6.4. But then we've got $8.08 and a half million of of share purchases both from the buyback. As you know, we've we've just started a further buyback in April, which is progressing well to buy another 3,000,000 shares back out back out of the market and cancel, and then also 4,000,000 for the employee benefits trust. And the good news there is that's decided to buy future save as you earn and share options with employees.

Speaker 1

And so we're now covered up to 2028. So so well ahead of ourselves and hopefully taking advantage of what we believe is a low share price or has been over the last twelve months. So, again, you can see quite significant outflow, but that sort of really given security to to to future of the business as well as the share buyback. And then another positive improvement around about 5,000,000 on working capital. Moving on to finance commissions.

Speaker 1

I mean, clearly, there's a lot of noise around this, and the unfortunately, it's been dragging on for for quite some time. Probably not a lot more I can say at this point to what's been said previously. I think as we all know, the supreme court reviewed the findings on the April 3, that week in April, and we wait results. We believe back end of the summer into the autumn that we'll we'll we'll see on that and and similarly any sort of further guidance from the FCA, but but our stand remains as as before that we don't believe there's any liability to dealers, obviously, Motorpoint. So and then also the final point is about giving new disclosures to customers in terms of the amount of commission.

Speaker 1

And, you know, we've had no adverse feedback around that. So I think the the summary for the year is no adverse impact on trading or profits. And, again, we don't believe that any further liability, will will fall on this point. Capital allocation, this is a a news line. Hopefully, it's quite helpful and I think quite simple as well.

Speaker 1

So we've got policy aligned strategy, and we wanna reward shareholders. We've talked about the buyback. We we've introduced in a progressive dividend policy. But what we believe is a modest dividend this year of 1 p per share, but we'll we'll look at that going forward. But our priorities remain organic growth is as our first priority.

Speaker 1

So any excess cash that we have will go into growing the business, whether it be new stores, technologically op technological opportunities, or whatever they might be. So growing revenue, growing margins, saving costs would be obviously the priority. Anything that falls out after that, we will return to shareholders via dividends or buybacks, and we'll continue to monitor those as we go forward. And then finally, acquisitions. So we're not we're not adverse to doing an acquisition, but I think as you all know, we haven't done the most part hasn't been in business.

Speaker 1

If something does come along at the right risk profile and there is logic and it's EPS driving, then then clearly we would consider it. But nothing nothing at the moment in that sphere. And finally, ESG. So, again, good good improvements here. I think we may remain good, very focused.

Speaker 1

We we do get good feedback from stakeholders, I think, around, you know, some of our disclosures in the annual report historically and some the things we've been saying in the market and what investors are telling us. As I mentioned, in emissions scope one and two, mainly gas and electric are down and also business travel. We see a five percent on a like for like basis. And waste is actually down 15%, 15.6% on group prior year. So, again, we are focusing on that, and that's around looking at things in terms of working with the managers, looking at how often pickups are done with stores, etcetera, and making sure we're efficient in all areas.

Speaker 1

From a people perspective, I think Mark's again mentioned, you know, the two real highlights here with a really, really good engagement score of 83%, which is well above the industry norm, which we conducted in January, February. And then we're really pleased to to to be named as the top, well, top 115, bit of a mouthful, best big place to work in in 2025. So so some really good things. But, again, we continue, you know, behind the scenes to focus with with our employees on engagements, making sure that we're meeting them face to face wherever we can. SLT make much more of a focus now to just getting out there, talking to our people wherever they might be.

Speaker 1

We're we're focusing hard on the developments. And, again, but not least, you know, focused on diversity, equity, and and inclusion. And we we we slightly modified our policy, and that was approved by the board in in March 2025. So we continue to, I believe, focus on the the right things in that area. Okay.

Speaker 1

Thank you. I'll now pass you back to to Mark. Okay.

Operator

Thanks, Chris. So going into our strategy update and outlook, we've we are focused on profitable growth as we've talked about. The, key thing for us is that the the headwinds that we've suffered pretty much since COVID, to be fair, a little bit of a lift in, in used car values post that, but then a decline, which has caused us a lot of problems than in the prior year. So good to see that that's now behind us. As I mentioned, the stability of pricing is as important as the, the increase in supply.

Operator

So pricing is stable. Feels like that's on a good trajectory. We're seeing some, some strong, what we think could become really good tailwinds for us in terms of metal margin improvement as we use the data. We have more targeting and efficient marketing as then the supply pressures ease, which we believe that they are, you know, becoming easier and is more normal supply chain now that we would have seen, which we've not really seen since pre COVID. So we're now able to access younger, lower mileage stock.

Operator

We cap out the the stock at around 40,000 miles, I mentioned, and the preparation costs, therefore, are lower. And the more that we source from direct from customer, the lower our auction fees will be if we have to source the car from a third party. The market should continue to increase, we believe, given that new car registrations are are better than what they were. That we'll, not seeing a huge increase in registrations, but flat to up is good for us in terms of the market size that we have. And that should also increase affordability, particularly with the Chinese manufacturers coming in with a EV product.

Operator

The lowest the lowest price EV has just been launched at something like £18,000, And that BYD product, you know, that that looks like that's gonna become the dominant player in the EV market in, well, in the world, but also in The UK. So very good product, and we're excited about that as well. And then, obviously, interest rates, they've fallen through the year, and they are continuing to be predicted to fall. That is probably one of the biggest things that we suffered in the past two years, those rising interest rates than the monthly increase really damaging consumer confidence and also making big ticket items harder to purchase, making the the the household budgets lower, and therefore also affecting our ability to sell vehicles, but also we get lower finance attachment. We get lower finance commission.

Operator

So all of those things we now feel have reversed. And what what were tailwinds could quite easily become tailwinds, and we're certainly seeing signs that they are now becoming tailwinds, which makes us very excited to continue our growth journey and to do that profitably. In terms of a couple of areas where we focused on how we will accelerate our growth, we look to increase our supply channels. So we have a couple of new supply channels that we're looking through. I think the biggest one though is the is the c to b one.

Operator

So we are looking to expand that, but also we have new relationships with providers, whether that's a a manufacturer or finance company or a or a third party that acquires cars from consumers. In terms of store openings, we've opened Norwich. I mentioned earlier, we've got quite a few areas of the country where we're looking at, and we'd like to open another store this year if we can. Then also in terms of data and AI, which you've mentioned, the dynamic and automated pricing, approach to data sorry. The data approach pricing is, is very important in terms of stability of margin.

Operator

In terms of other parts that we've been using the data, we are now allocating our vehicles to the correct preparation or retail location based on data as well. So that's another algorithm that we're using. So, again, that's not a manual decision anymore. Still being tested and trialed and expanded. But that, again, should improve, the way that we do that, and we should therefore move cars less and remove a bit of resistance between the customer and the car because the car is in the right location based on the demand indicators we see it.

Operator

In terms of replacing our existing systems, we are, we have a couple of systems, whether it be after sales or our sales and customer service systems, they should all be replaced in the next year or two. And we're excited about the efficiencies that could bring. We've already, implemented and or sorry, are about to implement a new finance system, for the finance team. In terms of our brand, we continue to look at new channels to and how to reach consumers. So there's probably less above the line brand at the moment, and we think that we should focus our budgets far more on what can work today.

Operator

Customers are only in the market once every four years, I think that is a better use for our brand and making sure that therefore that our website is is best in class around the amount of research. And anyone looking for a car will and should see, all of those search engines retrieving Motorpoint as a result based on our content and our link building and everything else that we've been doing in the background. In terms of technique and technology, mentioned the website, but we continue to optimize the functionality on there and really looking at how we can continue to erode the link between the customer being on the website and the customer walking into the store. So we put a lot of personalization touches in there so that we know that customer is when they come in, they can retrieve their search journey. When they come in store, if they've been on the website and make sure therefore that we can make that feel like a very seamless journey between online and offline.

Operator

In terms of after sales, we talked a bit about that. We are now mostly completing all MOTs in house till we were previously sending that work out to third parties. That will have a good impact on days in stock, but also on cost to prepare the vehicle because we can do them more cheaply ourselves. Service plans and warranty, that work is about to launch in the summer, and we've taken quite a long time to get that off the ground because we were lacking in a a specific system to be able to do that. We now feel that we found our system and that's being trialed through the summer.

Operator

In terms of our our current trading outlook, so as I mentioned, we've got positive momentum. We've got volume growth in April and May and profitable growth on that, so increased profits on last year. Metal margins continue to to be strong stable to strengthening, and we continue to look at our supply from third party as from customers, sorry, and to continue focusing on NPS. So really focusing on what makes a difference to the business today and can help us going forward. But our our priority is profitable growth.

Operator

We want to generate the cash. We want to grow our profitability. We want to grow our sales. I think everything we do now, if it doesn't grow our profitability and make us more efficient or doesn't grow our sales volume, we should be challenging ourselves why we're doing that. So we are laser focused on growing sales, which should lead to growing profitability and growing cash generation, and therefore, that will lead to growing returns to our shareholders.

Operator

K. That's it, and then I think we'll turn it over to questions.

Speaker 2

Many thanks, Mark and Chris. So those in the audience, if you please raise your hand if you'd like to ask a question. So our first question comes from Alison Largo at Deutsche Numis. Alison, please take yourself off mute and go ahead.

Speaker 3

Morning. Thanks, guys. That was a super comprehensive presentation. A few questions for me. Would you prefer them one at a time or all in one go?

Operator

As our age, one at a time.

Speaker 3

Yeah. Okay. Cool. So, first one is just around metal margins. So, big step on in metal margins this year.

Speaker 3

How much further do you think there is to go in terms of metal margin improvement? Clear, it's still tracking a little bit behind where it was at its sort of pre COVID highs. And how should we be thinking about the the the the drivers of that?

Operator

So we think there's a little bit of a way to go. I think it's, historically was something I would be very reluctant to to say that, but I think that the the tools that we're using now is giving me more confidence that we've got a really good handle on it, and, you know, it's very transparent in the business as to how metal margins work in. I think the the channel of supply is what drives it further. I think, you know, in terms of days in stock, we're at a a pretty fast pace. Preparation costs may come down slightly, but you get inflationary pressures offsetting that as well.

Operator

And we are looking at automation in preparation to to try and reduce and be more accurate in our preparation. As an example, if you measure a tire using a gauge, you might decide to replace it. But if you measure it using a laser, a dedicated tire measurement system, then you may not need to replace it. So there are tools like that that could have an impact on that, which would help margin. I think when we look at, across the water to places like Carvana where they've got these absolutely unbelievable levels of margin.

Operator

I don't think that's anywhere near realistic for The UK market, because I think we're just you know, we're a much smaller country. We're much more, transparently competitive. I think water trader plays a big part in that transparency as well, whereas they don't particularly have as much of that in The US. So I think there's room to grow it. I think the supply channel is how we would grow it.

Speaker 3

Great. That's clear and helpful. Thank you. The second one, just around sell your car in that channel. Could you talk a bit about how you're finding the market and kind of the competitive environment there in terms of getting those those cars from from customers?

Operator

Yeah. So we've done a lot of work on the the the website to prepare us for becoming much better at that. I think one of the challenges that we have at the minute is this is the capacity constraint within stores because the stores these these cars, obviously, we normally buy from a a big fleet company. They will send a 100 cars into us on 10 car transporters, and they've received it to the preparation area. It was sort of back of house.

Operator

The cellular car channel comes into the front of house, so they come into the reception. The sales team, are the only team in the front of house, of course, and they are obviously trying to sell, not receive vehicles. So that we do have a bit of a conflict of interest in that that sales team need to be the ones who receive the vehicle, and we are now trialing multiple ways of how can we grow our capacity and continue to sell the volume we want. What we don't want is sales teams not selling and receiving vehicles, and equally, we want them to be able to receive vehicles, at the same time. So I think we'll probably put dedicated resource in to receive these vehicles, and and allow people to focus on the selling, to focus on the selling, and the and the people who are not selling to to focus on receiving the vehicles.

Operator

So that that's a challenge. I think we haven't even marketed this, above the line or even digitally particularly. And so we do think there's a lot of, opportunity for us here. Like I said, we wanna make sure we've got that, capacity constraint resolved. So I think we're further down the line than we are than we were a few months ago, but we are now looking to grow that capacity, make sure that there's no sort of blockers to it at all.

Speaker 3

Grant, that's helpful. Thank you very much. And then just finally, on the improvements that you've made to the site and your customer acquisition capabilities, how much of the have you built in house versus working And I guess interest in terms when you look to the to the year ahead, are there any areas you're particularly focused on in terms of seeing an opportunity for for for improvement?

Operator

So it's all internal. So that's led by the chief digital officer on the on the IT team, so there's no third party. The only third party things we use are for things like CRM and, you know, leveraging that customer database. And then going forward, I think one of the things is around making sure we we're converting more. So we do get a lot we get a lot more people researching and looking at the content on the website, it's then how do we continue to drive that journey for that customer who's just researching to convert and then into an inquiry or or or better sell into a sale.

Operator

So I think it's more about optimizing the small parts of the website going forward. We're very happy with the look and feel of the website, the functionality. It's practically all now on on one platform. So there's a little bit of technical debt on the website, which we're now finishing off. But, yeah, we're we're focusing on just, you know, speed improvements, the basic things that really drive, you know, the the the rankings of the website on the natural search engines because, obviously, they're nuts free.

Speaker 3

That's great. Thank you very much, guys.

Speaker 2

Thanks, Alison. Our next question comes from Darren Shirley of Shaw Capital. Darren, please take yourself off mute and go ahead.

Speaker 4

Yeah. Morning morning, gents. I've got a few, and I'll go one at a time as well. In terms of you you talk about supply supply improvement. How would the customer see this in terms of on-site?

Speaker 4

Is it is it better availability? Is it broader availability? Is it pricing? How how how would the customer see that?

Operator

Yeah. I think it's it's it's better and broader. And so not not specifically pricing. I think that the price is, you know, it's always the market price. But, yeah, we you will see, you know, rather than at times in the past

Speaker 3

where geography thousand thousand stock,

Operator

but there may be a thousand of the same thing. So this would now be, you know, a broader range of vehicles. If we do have a thousand of one thing in stock, that would take our stock from five to six rather than remaining at five. So that that depth and broadness of stock. And that's one of the reasons why we continue to hold that four to six year old product because it provides a lower price point for customers.

Operator

And quite a lot of our customers when they first purchase from MotoPoint are buying in the sort of sub 12 thousand pound bracket, and there's a it's very hard to get cars under four years or three years old to be under £12,000 as well. So cars are still, you know, expensive. They still probably sit in a little bit above where you'd expect them to be, and that's partly down to the supply restrictions that we've seen in the last couple of years. I think maybe the the Chinese lower price brands coming in may actually give us a little bit of a of a a a a fillip there that they will, you know, naturally compete downwards. And

Speaker 4

in and in terms of that improved availability, are you see it's you've seen that noticeably in EVs or in or in Yeah. High sphere console. Yeah.

Operator

There's a lot of EV around. It's it's been you know, it's quite sensitive. If you think a lot of that product is quite new. Oh, no. Historically, when, you know, let's say a new Fiesta comes out or a new one series comes out, we wouldn't really touch that car for the first sort of six months because you've only got the new car price to compare it against, and then it can be quite volatile in the first sort of when it first comes into the used car market.

Operator

So we have been quite cautious on EV. Right now, when we sit here today, probably got two and a half times the amount of EVs on the website that we had through last year, so we are now more confident with it. And it is, like I said on the call, it is more stable than it has been, but there are pockets of it. So particularly some of the the higher end EV products, you know, you have anything over sort of $3,040,000, and there's plenty of it over that is quite hard work and can be quite volatile. It it can be up $5 and down $5 K.

Operator

The next month because it's quite a limited supply and not a massive market either. So the run of the mill EV stuff, the smaller vehicles, the stuff $30, they are far more predict, and that's where we're focusing our attention.

Speaker 4

Thank you. I was interested in your your comments around sites. Still looking to expand, but maybe more around sites availability becoming a bit more constrained. Yeah. Is that just the function of the nature that the site you're looking for, or is that just a bit more competition a lot?

Operator

Yeah. I think it's the it's the nature. So, you know, we want we don't want to do anything really stuff three acres. So, you know, the three acre plots don't grow on trees. Sometimes, you know, you're competing against drive throughs and things like that, which are far more lucrative for for landowners, I think, to get permission on.

Operator

Hence, you know, we're looking for sort of medium sized boxes on big three acre to four acre plots, which which are not easy to find. And we like I said, we'd rather refurbish than build our own just because it's a lot easier and cheaper to do that. So that's another constraint, but we're not that. You know, we can't just sit here for the next three years and not not do anything. So we have to have a look at some point.

Operator

But if it's in the right market, the right location, the right opportunity, we will do it.

Speaker 4

And then the the purchase of the freehold at Derby slightly goes against where the business has been maybe for the past well, not since I've known it. Is that is that something specific to Derby, or is that something you like to do?

Operator

Yeah. It was the, the lease was coming there wasn't much long, sorry. There wasn't much time left for the lease, and we had to refurbish it for the, just the flood damage. So we want to make sure that Yeah. Refurbish and then end the lease.

Operator

And so we've got your ten year bike purchase in it, but we will sell any stuff back at some point.

Speaker 4

Yeah. Okay. Well, because when

Speaker 1

the shares Alex, somebody's, we can hear some back quite a lot of background noise. Who's that?

Speaker 2

Sorry, Chris. That was on Darren's line, I think. I can hear you.

Operator

Sorry. Sorry. Sorry. Sorry. In the background.

Operator

Sorry now.

Speaker 2

Our next, our next question comes

Operator

from Sorry, Alex.

Speaker 4

I was

Speaker 1

just gonna say on Derby. I'm sorry. We've expanded the site and bought some land by acquiring the freehold. It also gives us that gave us more scope to to develop the site as well rather than being a a tenant. So that was the other reason, but we'll we'll we'll look we'll look to that going forward.

Speaker 1

Sorry. Thank you.

Speaker 2

No. Thanks, Chris. Our next question comes from Carl Smith of Zeus Capital. Carl, if you could take yourself off mute, please go ahead. You there, Karl?

Speaker 5

Hi. Can you hear me now? Yes. Yes. There we go.

Speaker 5

Sorry about that. Yeah. Morning. Just two questions. The first one, in terms of developing the after sales capability, do you see this as a sort of revenue and profit opportunity, or do you see it more at the moment as a sort of increased cost and time efficiency sort of strategy?

Speaker 5

What's what's sort of driving the rationale to go into that?

Operator

Yes. It's, hi, Carl. It's it's it's the latter. So it's more about how can we help our customers and and keep control of the customer. Because, know, in the past, we've not done it, the customer leaves, buys a great price car, then gets off to the main dealer to get it serviced.

Operator

So, you know, as you would if you were the main dealer, you would then try and get that customer, to buy the next car from you. So there's an element of that. I think the the system that we're looking at to put in place to allow us to do this is, will also give us some good productivity statistics and things from our workshop, which we don't particularly historically focus on, and I think that'll be good for us now given that we are looking to be as efficient as possible.

Speaker 5

Yeah. So it might it might also sort of speed preparation time on some things as well? Or Yeah.

Operator

More visibility on preparation.

Speaker 5

Yeah. Yeah. The second question was quite a small one. So I saw some asset disposals of home delivery vans. Is this something you'd sort of are you purely online sales being sort of less and less of a thing now?

Speaker 1

Yeah. Not really. This this related back to f y twenty four, and it was all part of the the reset that we did in Brilliant Basics. So we did have at the time, we had a home delivery team, which we we decided we didn't really need. And and if we did need to, you know, we we've got a transport provider anyway.

Speaker 1

So the in house people, they they went as part of the of the program, and and obviously the vans, we didn't we therefore no longer needed as well, but but they went quite a long time ago. So

Operator

I think we think it's better as a variable cost than a fixed cost Yeah. Given the given the scale of the demand.

Speaker 5

Yeah. Makes sense. Thank you.

Speaker 2

Thanks, Carl. Our next question comes from, David O'Brien at Equity Development. David, if you could take yourself off mute. Please go ahead.

Speaker 6

Yes. Good morning, and, a great set of results, fantastic recovery. My first question really is on the outlook. You seem reasonable reasonably upbeat. Obviously, you've had a very good start to the new financial year, which is excellent.

Speaker 6

If I look at the other commentators bearing in mind that they're predominantly new car focused, they seem to have less of an optimistic outlook on used cars. I mean, the difference in your view and what they're saying, is that just because you're ramping up the number of trade ins or are there other reasons in terms of availability of supply, which which gives you cause for optimism?

Operator

Yeah. I think they have problems more around new cars and the natural level of new car demand from consumers. So there, you know, there is new car demand risk. More of it is going into fleet, and therefore that they then see distress on the value of those cars that they they have to sell them at lower margins than they would like. Obviously, they had it away post COVID when supply was restricted, and they could sell new cars at at list or maybe even over list.

Operator

That's all now gone away, they've now got more new cars than they need for natural demand, for consumers, and therefore, they don't push into fleet. That is good news for us because we see more of the product that is nearly new coming through. So we've got cars on our website now, which are pretty pretty brand new with barely any miles in them at half the list price. If you look on the website, we haven't seen that for probably since pre COVID. So I think that is partly why we are, optimistic.

Operator

We we've been supply constrained for some time, and I think due to our internal actions around pricing and making sure, you know, we are ensuring that we secure the car, as much as anything and then determining the price automatically, we are therefore getting more of the supply than we otherwise would, but there is more of it available as well, and we are getting good inbound, supply offers from multiple channels, which tells us there's enough cars out there for us. So I think they've got the same channel opportunity. They've just probably got more new cars that restricts their ability to do, what we can do on used, They follow-up on new, which means they've got less capital available.

Speaker 6

That's encouraging. Thank you. If we turn to average days that vehicles are in stock, Obviously, it was encouraging to see you move that down to forty two days. Do you feel that there's further to go there, or would that impact profitability to take it lower?

Operator

Yeah. I think we I think when it's definitely a factor that the lower your stock, the faster your stock turn. We are looking to grow our stock levels, so I expect that we we may give away a day or two of that to to have higher stock and greater choice for customers. But we are focused on Stockton because, obviously, that's very linked to the depreciation and stuff around the vehicle. So we're not massively obsessed with, you know, kinda get to 41.

Operator

Sort of is what it is, but if it's if it if we run with higher stock and stock date stock days starts rising, we will probably reduce stock a bit and think, well, there's not much nudge enough natural demand for this level of stock. But because we were so low last year, hence, it was it was down again. It it probably should be around forty five days, but, know, we're we're quite happy for it to be between forty and fifty, but the lower the better provided we've got the right choice and range and enough cars to sell as many cars as we want.

Speaker 6

Great. Thank you. If we look at the proportion of EVs that you sold in the year just ended and the proportion that you expect to sell in the current year, how how should that move?

Operator

We think it'll probably double in the year. Yeah.

Speaker 6

Okay. Is there an issue with depreciation, or are you buying at such a low level that it isn't an issue for you?

Operator

Yeah. Well, it well, no. We're like I said on the call, we are, it is volatile, so we've gotta be careful. We don't really touch many cars over 35,000 pounds anyway, and some of the more choppy EVs are over that level. So we are cautious with them, I would say, and they need more specific attention.

Operator

So we are not as an example, we're not pricing the EVs using algorithms at the mint at the moment because the data is just too unreliable. And so we're not we're not comfortable to sort of let that ride right now. I think that we will be more than happy to have as many EVs as possible provided we think that they, you know, they are stable and we are monitoring it closely enough. But they they definitely need their hand holding even at this stage. There there are, like I said, the the the potential for EVs could be quite different in a year's time when there's more and more of these Chinese manufacturers bringing EV product in.

Operator

As I said on the call, they are they are good product, great quality, lower priced, and you you do fear for, businesses like Tesla when you see the BYD product and how ambitious and aggressive they are looking that they're going to be. I think that'll be by far and away the biggest player.

Speaker 6

Is there not, some risk to depreciation on traditional ice stock when you've got the Chinese invasion of Bevs?

Speaker 2

Yeah. I think I

Operator

think it's I think there is. Logically, there is. I agree. I think because they are reducing in number, then they are you know, the the there's not a 100% of the market willing to drive EVs yet, so that shrinking petrol product primarily is probably going to have, you know, a growing demand because the the shift to EV isn't as isn't as fast as people want it to be in terms of natural consumer behavior. So I I don't see that there's a massive risk there.

Operator

But listen. We we one of the reasons we move the cars quickly is because we can see those patterns, and therefore, we suffer less. You know, obviously, the longer you hold it, the more you suffer the depreciation. So that's one of the reasons we move things quickly to avoid that. But, yeah, we keep we keep in a close eye on it.

Operator

I don't think there's a a correction in petrol product due. If you look at the data on that comes out of the market data, petrol product's quite robust, and EV is the one that's falling. So even though price is stable, there's a there's a there's a few nuances within the data.

Speaker 6

Okay. That's very helpful. Thank you. And final question. It's very encouraging that you're back on the dividend list.

Speaker 6

Well done. And could you say what your target dividend cover is, please, moving forward? Yeah. Well, it's three year period rather than immediately?

Operator

I think we'd just say that we'd look for it to be progressed as we'd like to increase it. Obviously, it's our first one for five years, so we're a bit cautious about committing to specifics going forward. But as profits grow, you can imagine that the dividend will grow.

Speaker 1

Yeah. We'll we'll we'll link it to, hopefully, EPS progression. I mean, we don't want to say a number now just so people will write it down, but we'll we'll see what we get to up here in November. So we'd expect, yeah, the further increase.

Speaker 6

That's very helpful. Thank you.

Operator

Thank you.

Speaker 2

Thanks, David. We've had a couple of written questions, which I'll ask, and then I think we're we're done. So one of the key investment propositions for motor retailers and you in particular is the phenomenal return on capital employed. You mentioned it in the first slide, Mark, but not subsequently. Is there any reason?

Operator

No. It's it's certainly something that, that we know is was something we've always been focused on, and it's been very difficult and frustrating to not have it at the historic levels. I think it was almost a 100% at one point. So, you know, we would be looking to get back progressively towards those levels. I don't see in the long term why the business cannot do that.

Operator

There's there's every reason it can do that. I think we just need you know, we're still sort of 9% below our peak volume with a higher cost base, you know, there's gonna take some time to be able to leverage that fully. But that is our ambition to get back to that level. So it's it's very important to me, that that captain employed number return on captain employed number continues to grow.

Speaker 1

Yeah. And it's still it's still very healthy, and the the question reminds me, I wonder if we should reflect it, hardest. I think it's a it's a really good question and and one I'll take away, actually. Yeah. But but, yeah, no.

Speaker 1

We're we're we're comfortable the way it's moving.

Speaker 2

Thanks. And lastly, could you ever imagine bringing the financing of cars in house like CarMax? This is a very large cost to the business and therefore a large opportunity. If not, why not?

Operator

Yeah. I think that, if you look at the returns that we generate due to our our purchasing power in the in The UK, We must be one of the biggest brokers in terms of car financing. So the when we looked at it, there wasn't much more skin to be had in the game, by taking all of the risk yourself when you work out the team lead up to set up the cost of funding, obviously, then the risk profile, the capital reserves that you need to retain if you were a lender. And so now it was, something we have looked at. We've each look.

Operator

We look every couple of year not much more to the p and l, over time, and therefore, we've, opted out a bit. It's very different in The US, and they are they don't have the the ability to have the relationship that we have with Black Horse as an example, where we get very healthy share of the commission. I think the shares of commission in The US are very are a lot lower, and hence, they have to go and do it themselves in order to get anywhere near a reasonable share.

Speaker 2

Great. Thanks very much, gents. That's it for questions. So, Mark, over to you for any closing comments.

Operator

Okay. Yeah. Thank you everybody for listening. As I mentioned at the start, we are really focused on continuing to grow. We want to do that profitably, and we believe that our low level of capital employed and our ability to leverage the cost base should lead to higher returns going forward.

Operator

You can see that we are using that money when we do have that cash flow. We are using it to buy back shares, we're using it to, to pay dividends over and above what we need for our, our our expansion plans to the business. Historically, the business hasn't needed capital to expand. We are a leasehold model, as you know, a low capital employed model, and therefore, I do see that our our returns to shareholders will continue to grow, something that I'm very aligned to as well personally, as you know. So, yeah, we've had a good year.

Operator

We're, we're looking to have an even better year this year and continuing our our path to recovery and back to the levels that we were. Thanks for your time, and have a good day.

Speaker 1

Thank

Operator

you. Thank you.

Powered by Quartr