Motorpoint Group Plc

Excellent. Well, good morning, everyone. Thank you, Alex. Welcome to our half one results and strategy update. Hopefully you're all keeping well. We look forward to taking you through some of our results. We start off with myself going through the first half. Chris will then give us more detail on the financial highlights and our performance. And then I'll round off with the strategy update and our outlook for the future. So just as a quick reminder, Motorpoint is a group focused on two distinct channels. We have our retail business, which is Motorpoint, an omni-channel vehicle retailer. We operate mainly under the three-year-old space, but we also operate a bit in three- to four-year-old cars and vans. And they are the two key channels. So nearly new is what we call that sector, and in cars and light commercials, which we call vans. Auctionforcars.com is a leading digital auction channel. We used that historically to dispose of part exchanges outside of our retail criteria. But increasingly, as we source cars from consumers, we use that channel to dispose of those vehicles that we bought from the public that are outside our criteria as well. So not just part exchanges anymore. We will continue to invest and increase our supply of product from consumers and it will go through the Motorpoint channel or the Auction for Cars channel, and both that we have strong ambitions for going forward. Going into the highlights then, just a reminder, so we are the UK's leading and largest omnichannel vehicle retailer. We operate in the physical space with a network of 15 branches, and with our websites, mostpoint.co.uk and auctionforcars.com, and increasingly continue to invest much more in the digital side of the business, but also increasing our footprint to access new markets. So our branch network increased again during the period with the opening of Manchester in October. Our strategic initiatives, which we announced last time we spoke, have been very successful through the period. So we've accelerated our online purchasing. So 37% of customers buy online since we reopened our branches. We've had four new sales and collection centres secured. Some of those are open. Manchester's open. And our preparation centre in Motherwell in Scotland is also open. We launched our car buying service from consumers in July. We continue to expand that and continue to improve it, making it totally seamless for customers early in 2022. And our NPS, our focus on our customers continues and our model of having a virtuous circle where engaged employees produce outstanding customer service, which produces record levels of sales, continues to evolve with our NPS of 84 years. As I mentioned, sales are at record levels. We had a record day, week, month in the first half, leading to our market share increasing. And we continue to aggressively invest in our strategic infrastructure, our people, and also our technology and marketing. And that will continue as we go forward, as we look to continue growing our market share and much more focused on revenue growth than we would be on profit growth, as we probably would have been in the past. This delivered excellent results. So our continued execution led to over 53,000 vehicles being sold. Our online percentage of sales is 60%. That, considering all of the branches were open for pretty much the entire period, we were very pleased to continue at that sort of level. We've increased our consumer purchases to almost 13% of our sales now. and our profit before tax despite the enormous increase in investment our profit before tax still grew which we're very pleased about we entered the three to four year old market in the period due to some of our vehicles going over three years old and they've been stopped for a while with lockdowns and that led to a 2.2 percent market share of that market not a market we've been in before so it probably shows how when we are going into any market our model still works which is to provide outstanding value to our customers And as I mentioned earlier, 15 branches now, all offering next day home delivery to customers with a free cost to consumer. So no cost to consumer to have the car or van delivered to you from your nearest branch. And despite the branches reopening, obviously, you'd expect a huge shift back to physical in-person sales. We continue to grow online. So our online retail units are up 40%. So 32,000 vehicles were sold online in the period when you include auction for cars, cars as well. And our online retail revenue was up 53% to £194 million. We continue to offer free home delivery to customers and over 4,000 cars were delivered in the period to customers free of charge. But I think the key thing for us is to make sure we continue on our mantra. We have a vision of being the UK's car buyers champion with unrivaled choice, value and service and quality. and making us very very easy to deal with for consumers is really important so car buying made easy is one of our marketing strap lines and making sure that we are easy to find easy to view easy to buy the car easy to collect from us or we'll collect to you and then if there are any problems afterwards making it easy to contact i think the reason we talk about this is because it is really important to understand that we do everything that we can to make things as easy as possible for customers So lots of cars to view, improved imaging on our vehicles, making our digital end-to-end journey as seamless as possible for customers, continued progress in that to make sure that we can really join up that connection. If you were researching online and you walk into branch, we want that to feel like the same experience and not that you're dealing with two different parts of the organisation. Being easy to collect, you can reserve and collect in store. You can turn up on the day and drive away on the same day. We're open seven days a week and we do home delivery seven days a week as well. And we continue to be easy to contact through being in branch or phone call, email, live chat. And we have a dedicated central team to help customers. Efficiency is going to continue to be important. Stock turn, we talk about a lot. That is really important. Probably having the fastest stock turn in the industry means that we probably don't benefit as much as some of those selling cars slower when they're increasing as rapidly as they did in the first half. Selling quickly and pricing aggressively probably leads to an overall lower level of profitability than people who sell cars much slower stock turn than us because obviously as they're appreciated, we're missing out on some of that gain by selling the car quickly. But we're happy with that because 99% of the time that's not the case. And we continue to be very strong on our stock turn improving to 42 days. Finance penetration, one of the things MotorPoint's always done is continue to invest in the customer. And we did that further with our customers' finance rate being lowered from 9.9 to 8.9. And actually, if you borrow over £25,000, then that rate is 7.9. And that really does play into our strengths when you see the comparison to competitors later. Our average preparation time continued to improve. We were stocking some older cars, but on a like-for-like basis, our preparation time came down by four days. year on year which is something we're very pleased about again pointing to efficiency and that helps to protect our margin at over nine percent and our gross profit levels at over 55 million pounds so really pleased with our efficiencies in the group and maintaining what we've done in the past Our new branches continue to open. So we opened Manchester in October, as we talked about, target 10% market share in the medium term. Stockton, which we opened in December 2020 and was then closed promptly with lockdown for three months. And that business is profitable in half one. And more importantly, the strong pipeline is now in place for branches going forward. So we have secured branches in Maidstone, Milton Keynes and Portsmouth. You see the southern focus to our expansion. We will continue to open one or two branches in the Midlands and the north as required. But most of the focus is on the south of the country where we are underrepresented and the biggest opportunity lies with the population size. Future branches are under negotiation. We continue to expand that geographical spread. I think the important thing is that if you live within 60 minutes of our branch, you can get free next day home delivery. And that's something we're not aware of anyone else offering in the market. I mentioned finance. You can see the impact of that when you look at the historic finance rates were 35 and 43 percent for finance and warranty. In the past, we've lowered that APR. And if you look back in time, our finance penetration levels were in the 30s. quite a few years ago and we've gradually increased and reduced that offering to customer with lowering the cost leads to a higher penetration. We've also improved our warranty product and we've also improved the online journey for customers making it easier to finance your vehicle and buy a warranty over time. So really pleased with how that continues to increase our attachment levels. And we are obviously being choice value service and quality is core to what we do. So the choice in terms of the expansion of the footprint, we've got huge value for customers. You can see this comparison to Kazoo and Cinch on the smaller cars. £30 a month will make a big difference to some people. So this is the Fiat 500. And on the larger cars, over £25,000, as I mentioned, you can see the huge difference in monthly payment if you finance that car at Motorpoint. So under £400 at Motorpoint per month. over £529 at Cinch and £459 at Kazoo. So online players are clearly a new phenomenon in the industry. They're spending a lot of money investing aggressively. We're investing aggressively, but we also invest aggressively in price, which we think really defends us from what others can do, new or old competitors. But obviously, service and quality remain really high on our agenda. NPS is one of the key things we monitor our customer service levels by. That continues to be very high at 84. And our quality standard is something we've introduced also with a microservice application that really helps us get some ownership on quality during the period as well. And that leads to really strong levels of service with average handover times under 30 minutes. So again... really focusing on being easy for the customer. And our repeat customer levels maintained and grew slightly to just under 35%. We're very conscious with COP26 being in Glasgow in the period and also our journey that we're on in terms of sustainability. We do sell diesel and petrol cars, a lot less diesel cars now, much more petrol. And we sell a lot more now of the hybrid vehicles and electric cars as well. So lots of changes coming through in our website in terms of content and the way you can search for a vehicle because you search differently for an electric vehicle than you do for a diesel in terms of miles per gallon. It does not work with a battery car, of course. So in terms of the environment, we've recruited a head of sustainability that will really turbocharge our progress on this. We obviously have our ESG committee, which I lead. And we've also partnered with a business called iOffset to neutralize our carbon emissions and make sure that we can become carbon neutral in an offset fashion, at least in the short term. In terms of how we do work very hard with our communities, we have lots of regional charity partners. We're also the Global Radio Make Some Noise key partner this year, which leads to hundreds of thousands of pounds being raised for charities. We are a gold member of the Automotive 30% Club, which includes gender balance in the automotive industry to trying to encourage more non-males into the industry and we also pay the national real living wage to all our staff and that will increase again in April. So just in summary, back up for business, fantastic to get our branches back open. That really is the heartbeat of what people do in Motorpoint. You know, that's where our customers either collect their vehicles most of the time and the majority still buy in branch remember. So really important to have those back up and running and feeling like a Motorpoint branch. But really strong demand post reopening on April the 12th. Huge sales in that opening period. And then we've been really pleased since then with the momentum we've managed to carry into that period. and also then into october so despite the supply constraints which are very well documented we have been agile we have we are agnostic on what we buy and i think that really plays to our strengths when you have supply challenges like that we can actually dip in and dip out of what we think is the appropriate product to sell so hand you over to chris now super thanks mark morning everybody so uh so financial highlights i mean mark's already sort of touching a few of these

Matt Robertson- metrics but clearly record breaking performance post lockdown so particularly in April and May very strong but very pleasing over the half as a whole, then. Matt Robertson- Our volume retail volume growth group slightly over 46% which is well ahead of the used car market it's a smidgen over 30% mark such on the pbt. I think we're really pleased with the PBT because we've said back in June when we announced the strategy that we would be investing significantly in the likes of marketing, particular technology and people. We've done that, but the fact we've been able to grow PBT by close to 40% certainly gives us a lot of confidence and I'm very pleased with that result. Cash was flat with year end, but I'll come back to that when we come onto the cash movements. So if we take a bit more detail on the operating results, you can see there that retail was up, retail revenue was up slightly over 60, 60.6%, and wholesale was up close to 40%. I mentioned the record months. I think everybody knows that sales moderated from June due to the vehicle shortages. But we did see that demand clearly remained strong. And again, we're very pleased with how quickly we could turn the stock at just over 40 days. Online sales were about 60.6% of overall volumes. Online retail revenue was up 53%. So, again, these are all metrics that really sort of help reinforce our view about the omnichannel being the right model and the right way to go. Ditto, again, gross margin, very strong at 9.2. Clearly, it had some benefits in the first half around the market conditions and the vehicle appreciation. But at the same time, cost efficiencies, finance penetration, also warranty as well, which Mark touched on. And then, you know, better buying controls. We continue to evolve and learn and start to use data now in some of our decision-making processes. Now, that was quite hard in the first half because we only had a limited amount of vehicles to buy from. But I think because the market more normalises and the vehicles are out there to buy, then clearly data science then plays an increasingly important role in terms of what you buy and also where you put it as well and at what price. But we're already starting to use that data with some good results. Finance penetration over 50%. We further lowered our APR rates to 8.9 on the 1st of October. And October was another record month. And so it went up again. And you saw that on the graph that Mark showed a few minutes ago. And similarly, warranty penetration is now consistently over 50%. And again, really pleased with the new product that we launched in the summer. And again, it's certainly delivering results and value for customer, which is, of course, what we're here to do. Mentioned operating expenses, marketing investment grew significantly from sort of just under four to around about 10 million in the first half. So we have ramped that up. We've also ramped up people and technology. And there's a slide a bit later that we'll see. Clearly it's not a very true comparative, comparing 40 against 24 million last year. If you go back another year, it's obviously a more normal year pre-COVID, it was around about the 30 million mark. So again, still a big jumping cost, but they are strategic costs and they are costs that were planned, costs that we signposted, and we believe that they're costs which will grow the business and help us not just now, but clearly go forward in terms of delivering our medium, longer-term goals. The balance sheet, probably the key number on here to really sort of home in on is inventory. 100 million a year ago, that rose to about 128 million at the year end. Clearly at the year end, we were stopping up for the April launch, but we have seen significant inflation in the industry. It's well documented, up around about 30% from April through to the end of September. So that has an implication on our inventory. And we'll see that on the cash flow, cash is flat, around about 6 million from year end to half year. And you'll see that the inventory is really the main reason why cash didn't grow more in the first half. But that was because of this unprecedented inflation increase. Mark's mentioned the stock term, the 42 days, really pleased with that figure and a significant improvement from previous times as well. which is really good. One of the things that, because we have had a limited supply of vehicles, but it has meant that we can take the time to look at our SKU camp as well. What are really the vehicles that we want? And one of the things that we have done is we've moved further up the market into more prestigious vehicles. So if you go on our website this morning, for example, you'll see a number of vehicles more than, say, £50,000. And that's partly inflation, of course, but also you'll see some of the makes and models are probably moving the boundaries. So we've got a better mix of product for customer. And then we increased the Lombard stocking facility in early October by about £20 million on the same terms as previously. I mentioned the cash flow, 18 plus million EBITDA. And then you can see the first four sort of blue blocks show sort of three and a half on CapEx, probably expect to spend probably a similar amount again in the second half. Then you've got interest in tax, lease payments. And then there's about 2 million for shares purchased for the Employee Benefit Trust. So that's to satisfy future savers and employee share schemes. You can see the 11.7, and that's really the implication of the increased stock valuation, which has pushed up the inventory, and that's what's affected the working capital. And then the other, we've seen some slight improvements. So that's why we've seen that cash has stayed relatively flat from year end. Rocky stayed hovering around the 53%, still a high number. It is a capital-like model, as of course we all know. I think the point to make here is that FY21, there's obviously COVID, And effectively, half 1 FY22 is as well, because that's on the previous 12-month profit. And given that profits were flat in the second half of last year when we were closed down, then that 53% only really reflects half a year's worth of profit. So I'd expect that number to be significantly more, closer to 100% as we move towards year-end. I'm not going to go through all the lines on here, but I think this is something for you to take away, I think you know everyone who saw the slide at the year end sort of appreciated the sort of the detail that we've shown and I think it answered a number of your questions, but really it talks about volumes, it talks about retail wholesale, sort of the online, gross profit per unit, online branch, wholesale. Penetration, also prep costs, transport. It's probably just worth saying that prep costs have gone up per unit, not on a like-for-like basis, but this is because we've moved into the greater than three-year-olds vehicles. We've seen the marketing costs that have gone up, but that's not a surprise given that we're spending £10 million on the marketing. And you can see a break there at the operating expenses and then taking out the IFRS 16 impact and the rent, which is just under 3 million that we paid in the half year. Okay, so I'll hand you back to Mark. Thank you.

Thanks, Chris. So just straight into the strategic update and outlook. And just a reminder, our ambition remains to grow our revenues to over two billion pounds in the medium term. And just as a quick reminder of what that looks like, it was to double the revenue, as you can see, but mainly through our online channel. We imagine that's going to be well over a billion pounds in the medium term. Our margins, we don't see. We will continue to invest in a customer. So we don't see those growing dramatically. And I think the important thing is in the time between now and that growth being achieved, we don't know what the margin will be because it takes what it takes to invest in the company to grow the revenue. So we know in the medium term, our margins will return to where they were and probably higher potentially. But we certainly need to continue investing in our technology and marketing to grow the opportunity in front of us. We have an indicative margin breakdown here. This was shown at the strategy day, so we felt we should update it. And as you can see there, the PBT margin for the first half is 2.2%. You can see the marketing growing dramatically, but we think that will come down over the medium term. So huge potential remains is 8 million car and van market. We've got an industry level of customer satisfaction and trust being quite low. It remains quite low. There is a competitive landscape that is fragmented. Lots of dealers closing down, manufacturers retreating. from the market and shrinking the number of representation points they've got, that does create an availability of fulfillment branches for us as we look to expand. So that's really important for us. So in terms of our space, the under four year old market is a two million opportunity. And clearly we believe that the auction market can be disrupted with our online proposition with auctionforcars.com. But this is something that's not that new for us. We have always continued. We have always invested in our customer that continues to evolve. So we see lots of customers, even when they buy in branch, they have been online doing research. And as I mentioned earlier, connecting that journey to be really seamless is going to be really important as we progress. And the appointment of our chief digital officer who joins early next year would be a really key person in how we bring that all together. but we always focus on what matters to the customer. So customers want the best price. They want this choice with the make and model, and they want it near them if they can. They want the assurance on quality backed by a warranty, and they want good levels of service. So we obviously get ATE for NPS. We have a customer care process where we do separate sales and the back service when there's a post-collection issue to make sure that they get the same level of service level. So convenience and our environmental proposition continue to be important to customers as well. But this really does drive our investment in technology and e-commerce, our logistics, where we expand our network of home delivery and our ability to reserve and collect and move cars around the country quickly. And that's all backed by our data analysis, which includes our CRM and marketing as to where customers are and what they're looking to do. But it does underline the continuing shift of the consumer to online. So pre this, our retail sales online were about 28%, they're now 37%. They do feel very stable around that level at the moment, so we don't expect to see big leaps in that number from now until customer habits change further. And we will just always keep a very close eye on that. I think it's very important to understand that we are very agnostic as to how customers buy. We don't want to focus only online and lose the branch customer. And we don't want to focus only on branch customers and lose the online customers. We want to service both. And we are pretty unique in the industry in being able to do that. But the availability of smaller space, particularly in the south of the country, gives us the opportunity to enter new markets. We do need less space because we've moved to this hub and spoke model where we're preparing vehicles on our larger branches. And some of those branches are dedicated to preparation and great to see a pipeline of new locations. All of these coming together will continue to increase our market share. And how we meet that potential, you can see on here, where we need to be. You can see the gray in the lower part of the country, and that's where we're focusing. And the important thing is our market share increases the closer we are to customer. 66% of the population are now within 60 minutes of a motorbike branch, but we have an opportunity to grow. You can see some of the hotspots where the colors go into the orange and the red. They are where we've got branches that are very well launched. And obviously then we've got a purple patch in there in Burnley and Newport, which are two most successful branches that have very strong market share. The reason we do this is because we see that market share grows so much when the branches have been open eight years. So our market share for branches over eight years old is around 14 percent and below eight years old is around 8 percent. So lots to do for us to continue growing that. That's where the investment is required to make those branches in those markets, the household names that they are in the branches that have been open more than eight years. There's an indicative potential sales channel coming off the back of that spike in FY21. We see our sales channel switching more to online as we go forward. One of the things we're pleased about with our CRM and the way that we've been recontacting customers through the period is we've managed to reduce our repeat cycle, so that's ahead of our ambition. We've moved it down from 3.5 years to 2.75 years. Hopefully we can keep it at that level, but the goal is to be under three. And that obviously helps our market share because we're taking people out to the market before they are thinking to look to replace their vehicle. But our continued investment in key areas will accelerate the future growth. And to be clear, you know, that is mainly around technology and marketing and also around our e-commerce capability and our data understanding. But the four key pillars remain the same. So upscaling our e-commerce capabilities. So lots of new technology roles have been recruited. We've expanded our marketing team. As I mentioned, the chief digital officer will join and lots of partnerships in addition to the recruitment process. to help make sure we can scale quickly rather than recruiting all of the resources in-house, which would be slower, but also then focusing on our customer acquisition and retention. So we have implemented Salesforce for CRM and Marketing Cloud and also for customer later this year, which will really join up our communications with customers and then moving through that to increase our share of voice to drive that acquisition of new customers. We continue to expand the wholesale channels. We invest in auctioncars.com. We've brought new people in to help us grow that. And also the new functionality we'll be launching next year. As I mentioned, we've launched the car buying service from the general public, which launched in July, and that continues to be improved. to be more effective and become more scalable going forward. But operational efficiency really continues to be important as well. So we're always looking at process and quality to make sure we continue to grow our efficiency levels and moving cars through the system quickly at the right quality is always going to be really important. And obviously, all of this is powered by our people who have been fantastic with what we've asked of them in the last six months and as they continue to expand. But our people, really important. So culture is an extremely important thing to us as a business, to make sure we continue to grow and perform at the levels with a strong reputation, making sure we have that org design correct. So lots of change in the org design around the structure, moving to product teams, moving to be far more like a digital organization than a physical organization. And then making sure that we get our goals to bring the more and more employees to be shareholders, maintaining our leading position as number one in automotive on the Sunday Times Best Companies list and making sure we really focus on that ESG agenda and hit our targets. But we need support to help us fuel this growth. Most of us have been in technology and marketing focus. We've recruited more software engineers, data insights, project managers also to make sure that we've got a change and transformation department. And that is a very important thing to make sure that we actually deliver on the fantastic ideas and opportunities we have ahead of us. We've restructured our branch managers to be more regional and heads of retail. That's helped us to bring succession through the branches, which is really important as well. And then making sure that we've got the right structure in place from a people perspective, but also in marketing and ensuring we have the right level to focus on things like A4C and commercial vehicles, which we've never really had much marketing presence in before. and so expanding that also expanding the leadership in auction because as i mentioned to to really evolve that website into a marketplace and we've taken our first intake of graduates so we brought our graduate program to life and brought our first few graduates through into the business so just in summary we are a really proven and profitable growth business and we are full of opportunity so today we already have a high online sales content around 60 percent of sales online We have leading NPS at 84. We're not aware of anyone else in the industry at that level. We are the leading value retailer in nearly new cars. We believe that's a really defendable position that we have. And again, no one really comes near us on price as we keep showing. We have auctionforcars.com, probably a jewel in the crown. We haven't realized in the past, but we will now realize the ambition for that and make sure it realizes its opportunity. And we also believe, like commercial vehicles, We're pretty strong in that and we've got big aspirations for how much we can grow that part of the business as well. In terms of opportunities, we will continue to focus on e-commerce. We will continue to focus on growth. That means the investment levels will be there for us to continue realizing the opportunity. And as the shift moves to online, more and more of these opportunities become available. We're really happy with the infrastructure that we have in terms of the hub and spoke branches that really does meet All of our ambitions going forward, and as I mentioned, auction cars and light commercial vehicles will be areas where we can continue growing as well. In addition to the historic focus on the retail business, that provides a great opportunity as well. So just in summary, really pleased with the half, you know, the branches reopening in April was a key moment for us and really felt like we were back to our full strength as a team. and really excited about the future opportunities. And obviously the investment required will be made to ensure we achieve our growth aspirations. So we'll hand over to you guys now for questions.