Motorpoint Group PLC (LON:MOTR) was knocked into reverse on Friday after the used car seller warned it had endured a tougher second half.
The company, which sells used and nearly new cars from 12 sites across the UK, said growth was “more modest” in the final six months of its fiscal year, which runs until the end of March.
READ: London's car dealers edge lower as new vehicle sales drop in March
Gross margins also softened slightly as Motorpoint was forced to cut the price of its cars, given the huge number of second-hand cars currently on the market.
Still, even with the pressure on sales and margins in the second half, bosses remain confident of posting a 10% rise in pre-tax profits for the year just gone.
Revenue is expected to grow 6% year-on-year, below the 9% analysts had forecast.
“The group experienced a slower second half, but I am pleased that we have achieved double-digit profit growth for the full year and executed strong cost disciplines,” said chief executive Mark Carpenter.
“Our resilient model is demonstrated through a gross profit to overheads ratio of 144% and a robust closing balance sheet which is again absent of any structural debt.”
Bosses more cautious on year ahead
Looking ahead, Motorpoint said it “remains cautious on the outlook for the year ahead”, citing Brexit and the effect it is having on consumer confidence.
The Derby-based company still expects to make “further progress” in revenue and underlying profits this year, although it warned investors that there will be a £2mln non-cash profit headwind from historic deferred extended guarantee income.
“The agility of the group's business model enables management to react swiftly to the evolving political and economic situation and the board believes that the group is well placed to continue building on its compelling customer proposition,” concluded Carpenter.
Resilient performance
“Motorpoint has continued to take market share, but experienced a tougher H2 with pressure on sales and gross margin,” said City broker Liberum in a note to clients.
“However, cost savings keep FY19 profit before tax expectations intact. Guidance for FY20 is more cautious, given the sales run-rate, and we cut our FY20 PBT by 5.8%.
“In the scheme of things, we see this as a very resilient performance. We maintain our view that Motorpoint has an excellent business model, with strong margins, a high return on capital and excellent free cash flow, combined with a disciplined roll-out model.”
Liberum repeated its ‘buy’ recomendatio0n for the stock, although it trimmed its price target to 277p (from 285p) to reflect the changes to its estimates.
Motorpoint shares fell 6.5% at the opening bell on Friday.