Motorpoint prospects dim as discretionary spending tightens

Motorpoint (MOTR) has seen its market valuation slump by around 40 per cent since publication of its half-year figures in November. That may surprise some industry watchers given its annual sales are easily outstripping the pre-pandemic rate. The trouble is that it is now faced by the dual challenge of high fuel costs and falling discretionary spending. It’s a situation that the auto sales group admits has “worsened since the start of [its] new financial year”, sending the shares into reverse on results day.

It’s difficult to compare the group’s March year-end figures with FY 2021, given the extent of pandemic-linked commercial disruption in the prior year. What we can say is that management’s determination to build market share has held firm. Overall market share crept up by 70 basis points to 3.1 per cent, although it increases to 7.7 per cent for sales conducted within a 30-minute drive-time of a branch. That’s significant given that it has opened three new market area locations in what it terms “strategically significant regions”, namely Manchester, Portsmouth and Maidstone. That leaves it trading from 17 sales and collection branches, in addition to its B2C and B2B platforms. More physical branches are in the offing and the group is nearly two-thirds along the way to achieving its medium-term objective of generating £1bn in ecommerce sales.

Website traffic improved by 15 per cent year on year and the group has stepped up its marketing and AI competencies to capture market share. That may prove more difficult going forward as “several other large and well-capitalised players” have entered the used car market, no doubt attracted by surging prices over the past 18 months or so. Numis is guiding for a one-third fall in EPS to 12.6p in FY 2023, a reflection of increased competition amid a deteriorating market backdrop. Hold.

Last IC View: Buy, 356p, 25 Nov 2021