- Motorpoint warned annual profits could be £5-6m below expectations
- Its profits were also hit by the temporary closure of its Derby showroom
Motorpoint Group expects annual profits to be lower than previously forecasted following a significant drop in used car prices.
Britain’s largest independent vehicle retailer warned earnings could be £5million to £6million below expectations for the 2024 financial year.
Secondhand vehicle prices have decreased considerably in the UK over the past year due to a weaker economic backdrop and diminishing supply chain disruptions.
Profit forecast: Britain’s largest independent vehicle retailer warned earnings could be £5million to £6million below expectations for the 2024 financial year
Pent-up demand and a shortage of semiconductors hitting global motor production when governments began loosening Covid-related lockdown restrictions saw prices boom in 2021.
Because of the downturn in prices and cost-of-living pressures, Motorpoint is looking to sell cheaper vehicles and has widened the type of products it offers to include cars under five years old and 50,000 miles towards the end of their design life.
The Nottingham-based business sold used vehicles for an average of £19,750 at the beginning of the current financial year but now sells them for £14,750.
Its profits have also been affected by the timing of the company’s seasonal stock expansion and the temporary closure of its Derby showroom due to Storm Babet in October.
However, Motorpoint noted that retail volumes started improving during the final three months of 2023 and have continued increasing into the new year.
The London-listed firm, which runs 20 stores across England, Wales and Scotland, anticipates retail volumes in January will be at their highest levels for 17 months.
At the same time, the UK inflation rate has fallen by more than half since late 2022, from 11.1 per cent to 4 per cent, and analysts broadly predict the Bank of England will soon reduce interest rates.
Mark Carpenter, chief executive of Motorpoint, said: ‘At last, there are signs that the macroeconomic headwinds are easing, leading to renewed consumer confidence.
‘As a result, the market size is expected to increase as demand grows, and supply is bolstered by new car registrations feeding into the used car market.
‘The actions already taken to right-size the business, protect cash and improve unit economics mean that Motorpoint is well placed to seize the significant growth opportunity despite this correction in used car values.’
Motorpoint further announced a share buyback programme worth up to £5million on Friday, which it claimed was an ‘attractive use of the company’s resources and beneficial for all shareholders.’
Motorpoint Group shares were 2.55 per cent up at 100.5p during the afternoon but have plunged by around 30 per cent over the past 12 months.
