Motorpoint drives forward on record metrics

Motorpoint (MOTR) more than doubled revenue against its lockdown-hit comparative and zoomed to record first-half profit before tax. Gross margin was up by 10 basis points to reach a historic high of 9.2 per cent, driven by higher vehicle values and pricing controls.

The group, which sells vehicles both online and via branches to retail and trade customers, was helped by a robust digital performance. Online sales contributed 60 per cent of revenue despite branches reopening in April, with online retail sales up by more than half to £194m. Mark Carpenter, chief executive officer, said that he is “not overly bothered about the mix” between online and branch revenues. He expects online sales to grow steadily, but branches remain key to the group’s business model – most customers buy in-person at the group’s 15 sites.

Digital growth and technological advancement are priorities. An online car-buying service was launched – retail vehicles bought from customers for onward sale jumped to 13 per cent. Carpenter said that technology-driven growth aims will be helped by the experience of John Walden, former chief executive of Argos, who will join as chairman in January, and the arrival of Andrew Thomson, formerly of Boohoo (BOO), as chief digital officer.

Consensus forecasts suggest the shares trade on 18 times the one-year earnings estimate. This looks undemanding given growth expectations and a strong balance sheet, with only lease liabilities offsetting the cash position. October performance shot ahead of the past two fiscal years and management expects full-year profit before tax to be “significantly ahead of expectations”. Buy.

Last IC view: Buy, 280p, 17 Jun 2021