The UK’s largest independent vehicle retailer Motorpoint Group has issued a profits warning, expecting 2024 profits to fall up to £6 million following a significant drop in used car prices.
Motorpoint has traditionally focused on retailing nearly-new and young-used cars now in short supply, forcing it to widen its selling criteria to include vehicles up to five years old and 50,000 miles.
It said the move would help customers ‘find the right vehicle in accordance with more constrained household budgets’, and is now seling such cars for an average £14,750. At the beginning of the current financial year, the average price of a vehicle sold by Motorpoint was £19,750
However, Motorpoint noted that retail volumes started improving during the final three months of 2023 and have continued.
The 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.
Last year Mark Carpenter, chief executive of Motorpoint, said the impact of high inflation, interest rates, and consumer uncertainty in 2023 had severly impacted demand for used cars.
In a November trading update, the business said it was halting its new store programme after opening its 20th store in Ipswich, said it was reducing capital spending and was launching a £1m job reduction initiative, measures which it termed ‘decisive action to right-size the business to withstand a potentially extended depressed market’.
Now with analysts broadly predicting the Bank of England will reduce interest rates in 2024, Carpenter said the business was optimistic: “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 also announced a share buyback programme worth up to £5m, which it claimed was an ‘attractive use of the company’s resources and beneficial for all shareholders’.
Motorpoint Group shares have fallen by around 30% over the past 12 months.