Motorpoint Group Plc

Good morning, everyone, and welcome to our full year results and strategy update for the year ending March 2022. Nice to see everybody. Just in terms of our agenda this morning, we will initially go through our full year results from last year, led by myself. Chris Morgan, our CFO, will then take us through some financial highlights. And I'll finally come back and update on our strategy progress and our outlook. So I think to summarize last year, we're very pleased with our results. We took significant market share. We continue to believe our omnichannel model is the leading used vehicle retailer in the UK. And we are now continuing to invest in our profitable medium and long-term growth. Just a quick reminder, Motorpoint Group PLC has two brands. Motorpoint is our consumer-facing brand, the retail brand. selling cars under four years old, under 30,000 miles. Lots of different channels being opened up through that sales platform, from distribution areas such as Sell Your Car, which is our consumer to business portion, and also diversifying our supply base further, given the absence of fleet product in the past couple of years. We also have Auction for Cars, which is an e-commerce wholesale platform And that disposes of motor points, part exchanges that are outside of our retail criteria. I think just looking at the table on page five, you can see what a fantastic year we had. Very successful. All of our KPIs moving the right way, particularly market share, which we believe will continue to grow as we strengthen our price leadership proposition. But more pleasingly for us, obviously, is opening new branches continues to take even more share in the local area within 30 minutes of a branch at 7.7% compared to our national share at 3.1%. Fundamentally believe the omnichannel model of having local representation within half an hour of a customer will dramatically increase our market share going forward. Revenue is up to over 1.3 billion and our e-commerce revenue is roughly half of that at 625. Total units retail and wholesale around 100,000. So dramatically up on last year's COVID disrupted period. And then our days in stock, one of our key measures, making sure we turn our stock as fast as possible down to 54 days again after the disruption of last year. Interestingly, with the increase in average selling prices, obviously drives up our gross profit per unit. Finance attachment rates have increased as well. So we're now almost at £1,450 per unit. And our new strategy to acquire cars from customers and sell them back to other customers, continues to progress with over 11,000 cars sourced from customers and retailed in the past year, all leading to a more than doubling of our profit before tax to 21.5 million. So just continuing into some of the strategic capability, building our marketing presence on our brand is very important to what we do. We are the cheapest, we are the price leader. We need to make sure people know about it. So continuing to invest in our brand is very core to what we want to do going forward. So you can see that increase of customer acquisition costs up to £300 as we build a brand for the medium and long term. It's good to see that we're making some efficiencies through some of the technology that we're deploying with our team. So being more efficient will allow us to maintain our price proposition and our people cost per retail unit comes down to £552, about a £40 reduction there. Opening in new markets, I've mentioned already, we now have got three more markets opened in FY22, another three to come in FY23. So we're now at 17 markets and a big part of changing the mix of what we sell And the inflation that we've seen around 30% of product last year required a big increase in our stocking facility. As our stock balance grew, despite not really having many more cars in stock, the value of the cars in stock was dramatically more, particularly towards the end of the year. We continue to focus on making sure our team and our customers are happy. It's great to see our MPS remain in over 80, hitting 84 in the previous year. and making sure also that our team are happy and we continue to be the number one company in terms of employee engagement within the automotive sector. So just a couple of summary bullets on the next slide, just underlining really that significant progress we've made. Supply challenge continues to be an issue for the whole industry. Cars are not coming into the market as new cars and therefore that feeds through to the supply base of used cars. So we obviously are now a zero to four retailer rather than zero to three, but making sure we focus on our core strategies. There's a couple of updates on that bullet in terms of accelerating our digital offering. 60% of transactions are now online. We talked about opening a new market and continue to do that. Really interested in leveraging our sell your car proposition to continue improving and increasing that as a supply channel. Our MPS leads to strong market share gains. Mark Adams- auction for cars is now an E commerce platform with third party vendors operating on they're selling their vehicles. Mark Adams- To auction for cars customers and again reinforcing the point that we are continuing our strategic investment in our infrastructure technology marketing. Just into technology, so website is clearly a very important part of what we do. A vast proportion of our customers start their journey online, and we are very conscious to make sure that our website is as good as any other one out there. We're not there yet, but we're making dramatic improvements, led by our chief digital officer who joined us in February. And you can see it's good to see that all of those positive trends across those website metrics, growth, conversion, interest and engagement from customers up in all those areas, as well as then increasing our database of customers that we can contact going forward and try and convert those customers further down the line. And continuing into that investment, if you create more traffic, get more engagement from customers, have more content on the website, if you can then increase that conversion from leads and into sales, then the future should look very good for MotorPoint. So I think we come from a position of improving that website dramatically in the past year. We've got lots more coming in the next couple of years, and we'll talk a little bit about that in a moment. In terms of that technology investment, what does it really look like? These are six different areas where we're looking. So building a capability capacity. So I mentioned the Chief Digital Officer now building out our squad-based approach to software engineering. and linking those teams straight into the product owners who now drive the website has meant that we have substantially improved our capability, but also our speed of change and improving that journey going forward. So very much a binary approach to test it. Does it work? Keep doing it and making sure that we drive really hard at that part of it. And new product features coming through like a fully automated reserve online journey. So none of our team touch any of those deals until the car's handed over. So very efficient from our perspective. very much what customers demand. They don't particularly want to speak to people or speak to people in person sometimes, and we need to make sure we accommodate all sorts of customer behaviors going forward. We've improved our search filtering and enhanced the product information page, so really increasing the engagement from customers as to what product they're looking at to make sure that they get all of the features and benefits they'd expect to see when looking for a new car. and being convenient as well. So making sure that our automated order management for a customer, they can do everything that they would need to do without needing now to talk to us. So they can go online and manage their own order, add or remove products, cancel their order, change the car that they're buying, and changing things like their collection dates, which negates the need for them to contact us. In terms of performance, lots of work going on around imaging and making sure we increase image count, getting the quality right, and improving that ability to merchandise the product on the website. And this is all about trading the website more effectively going forward, given the volume of searches and hits that we get on the website. We have a lot of opportunity there. Seller car we mentioned, but just to say that's a very, very important part of what we do is, as I mentioned, the speed at which we do things is really interesting there. Again, it's a fully automated journey. Customers get their money within seconds of handing their car over to us within a branch. And in terms of bidding on those vehicles, when customers enter their details onto our website, it's important that we bid correctly. We have algorithms determining what that bid should be, automatically adjusting the valuations up or down based on the information provided by the customer. And then based on a conversion metric and ensuring that we remain profitable, we convert the customer into a sell your car customer. And just finally, in terms of content, The head of content has joined the business, so lots more to come in terms of video and written content on the website, all of which will improve our USPs on the website with really engaging content and helping to build trust in the Motorpoint brand through our website. However, we do still also have a branch network, so we're focusing very hard on digital transformation, but we believe that that is much more positive when you have an omnichannel model. and that we will continue to open branches in new markets. We take dramatic share increases when we open in a new market, most recently in Manchester, Maidstone and Portsmouth. And these are slightly different models for us. So these are merged teams for sales and customer service. So they're more people light and therefore more efficient buildings for us to run. And they have a slightly smaller display space outside than they would have had historically. So these are places where customers can come in and buy a car, where they can receive their vehicle for handover, or where the home delivery team will be based from, ensuring that we have a true capability on the ground in each local market. And as I say, that really does drive our engagement locally. And as you can see in Q1, calendar Q1 this year, we had an 8.5% market share within 30 minutes of our branches. So really proving that omni-channel experience Just on to the next page in terms of some more detail on our cohorts. So if we look at market share by cohorts, we've got them on the left-hand side. So pre-13 and then three further cohorts. You can see the important thing here for me is that all of our markets are moving forward in market share gains. So it doesn't matter how long the sites have been open, we're still taking share even in some of the markets we've been opening for over 20 years. And I think that's a real testament to the brand continuing to resonate with customers. And price leadership will always resonate with customers, even more so in more challenging consumer backdrop. I think price always wins. Just to play some independent criticism or championing of that message. So we always look externally rather than just looking internally at what we believe. And if you talk to Water Trader, they showed us a presentation recently showing we've always consistently got a much larger proportion of our stock in their well-priced category, and that trend continues to grow. So MotorPoint is the cheapest by far on AutoTrader, and we focus very hard on making sure our price proposition is the very first thing that we look to do. It's really very much at the heart of what we do. And if you ask our customers, another independent third party, 95% of our customers in May agreed with the statement, MotorPoint is unbeatable on price. I think that's a huge testament to how important it is to be price leader, but also making sure that customers know that we're the price leader. They vote with their feet. They will come to us as their budgets tighten. We think that they will really look for that value in the marketplace. And a couple of customer comments below there. It's not just price leadership in terms of the absolute price of the car. It's also in terms of the finance rate that we charge. And so you can see there from a car over £35,000, we're at £7.9. APR 8.9 over 35, sorry, under £35,000. And as you can see, there's a real pressure on competitors to increase their APRs. Many of them have done so in recent months as cost of money increases, but we want to really maintain that competitiveness. And as you can see on the next page, it really plays through into the best value. So these are PCP comparisons. So Fiat 500 is probably one of the cheapest cars we sell. And as you can see, even on one of the cheapest cars we sell, we are £30 to £40 a month cheaper than some of our major competitors at under £200 a month for a Fiat 500. So I think that really resonates with customers when they're looking to reduce their monthly outgoings, come and buy a car from Motorpoint and you pay less monthly payment going forward than you would pay if you went to one of our competitors. For those of the environmentally conscious wanting to drive green, then even on a Tesla, you save dramatically more at MotorPoint. So under £700 at MotorPoint, £900 at Kazoo, £758 at Arlan Clark. I think you can really see for yourself that real focus on price leadership, making sure we continue to invest in our customer proposition, really resonates with our customers. And I'll hand you over to Chris, who's going to go through some of our financial highlights and give a quick performance summary. Great. Thank you.

Thanks, Mark. And morning, everybody. And I speak to people in the room for the first time, which is great. So I might touch on a few of these anyway, but just on to the financial highlights, but a reminder of the headlines. But I think for me, that revenue line really emphasises our market share growth and how that's benefiting the top line for us. And that's falling through. PBT, you can see in EPS, both over 120%. And that's notwithstanding the investment in particularly marketing, but also people in technology, as has already been alluded to. I think as well, just on return on capital employed, it really does sort of show that our capital light model is working. Rocky's now back up to about 75%. So I think that's more normalised levels, but that does show that the capital light model and increased profitability. So if we move on to the operating results. You can see that it started the year very strong, record months in April, May. And I think, as we all know, that vehicle shortages sort of kicked in really from sort of mid-June, about a year ago now, actually. So we are starting to go light for light. with those weaker comparatives. But that clearly did limit our growth in the second quarter and into the third quarter because the stock was harder to get. But notwithstanding that, we're still able to grow the top line significantly. Online, again, successful. 60% of our volumes in the year were online and that, as Mark said before, that's over 600 million, so almost half our revenue. I'm really pleased about the retail gross profit per unit. It's fair to say that was helped by the market in the first half, because we all know prices were going up almost like 5% every month, so clearly that helps. But we also focus very hard on things like preparation efficiencies, and those came down by just over two days for each vehicle, and that's got a big impact in terms of our stockholding and also getting the cars on the pitches for customers. And again, record levels of finance and warranty penetration. So again, really pleased to see those numbers. And hopefully that sort of echoes what we saw before in terms of the APR rates that Mark was alluding to. I think the other points that we'll highlight on this page really is the operating costs. Now clearly that's gone up 63%, about 50 to 80 million. Marketing is a big chunk of that, 12 million. We said that we would invest more to build a brand and that's what we will continue to do. So we spent around about 19 million at marketing as opposed to about 7 million for the last couple of years. I think the point to make about marketing as well, what we're not doing is tying ourselves up into long-term marketing commitments. But what we are doing is very variable. We can turn it on and off each month and we can see what's working, what's not working. And that seems to be successful for us. But it's really important to point out that that 19, 20 million that was found in, you know, a big chunk of that isn't tied up in long-term fixed deals that you're then struggling to get out of. People costs grew by about 9 million, 4 million of that is explained by the CJRS job relief that we had last year, about 4 million. But we did see in the year, Mark again talked about the digital marketing and our IT department as well, where we have invested in people experience and capability. Just a small point that we did receive some CJRS income in April, and that was for the branches we opened, which was in mid-April, but we repaid that back to HMRC. If we move on to the balance sheet, I think the balance sheet is clearly dominated by the increase in the inventory, which you can see has gone up by exactly 100 million, and that's been driven, as we know, by inflation due to our mix of vehicles. And to compensate that, you can see that the stock finance facility which is in the trade and other payables, and that increased from £106 million to £195 million. So of that increase in the stock financing facility, £30 million of that was received in the last week in March, so that we weren't able to use that to fund the stock increase. Subsequently in April and May, and please say that that's exactly what did happen, and so the RCF, the borrowings of the £29 million has been eradicated by May, so by the 23rd of May, we were debt free from that perspective so it just shows that it's just simply a timing of when we received the stock finance and facility support okay the other points really on that to note are on the fixed assets and right of use assets so clearly we bought sorry we acquired three new leaseholds from the branch perspective and also the prep centre in Motherwell in Scotland opened in August last year and that is great news really because it means that we can service Scotland region more efficiently and it supports the likes of Edinburgh which we've now secured and will be open later this year so so that's really good in terms of the sort of efficiencies north of the border we move on to the cash flow I mean the cash flow again it's really dominated by those two the red and the blue line you can see the 29 million of the RCF and then the 40 million of the stock financing facilities or netted stock financing facilities and again because we managed to switch out the RCF in April and in May then effectively those two lines are being eradicated so you can see it was a really a timing blip in terms of the stock financing. Return on capital employees, I think I've already mentioned this, it went up from 50% to 75%, some of that's driven by the operating profit improvements, but it really does highlight to me the capital-like model, leasehold properties, and also the reflection of the stock funding, vehicles are paid for on delivery or collection, so there's no significant debtors in the business. One point on the leasehold model, Stockton on Tees and Peterborough Prep Centre were both freeholds. We've been negotiating to sale and lease those back. Those were in advanced stages at the end of March, year end, hence they were in the asset sale number, the 9.2. Subsequent to that, Stockton was successfully sold and leased back for five million proceeds and no gain or loss. That went through about a month ago and Peterborough was in the final flings various dots in the i's and crossing the t's uh then there's two pages on financial kpis i don't propose to run through these i think it's picked up uh on a lot of them but i think you know uh some of the feedback we've had before i think people like these slides because it does give a good sort of useful reference point uh to various elements of the business but again i think you know some really good stats in there you know not least something about track time uh for vehicles which is which is very strong Okay, and then, finally, slightly away from the finances, partly because I own the ESG agenda on behalf of Motorpoint, so I'll just quickly touch on a few things here. I mean, clearly we're taking responsibility towards the environment and communities very seriously, as I think most businesses are, so of course we would say that. But just to sort of support that, we've now got a ESG board committee that was set up at the end of the year. So Adele Cooper, among others, is chairing that. We brought in the head of sustainability started in October we're partnering partnering with a number of experts out there, I offset go green and it's really about reducing business reducing the emissions and targeted energy savings. we've also written to a number of our stakeholders, that includes some of our investors. as well as other people closely involved with Notify and our people as well internally to see what's important with them. So we've got a top 10 of things that they want us to look at and so we're progressing those plans now. And then finally on that, we're fast tracking our electric vehicle strategy. I mean, clearly at the moment, still electric vehicles are a relatively small portion of what motor points sell, but we know that will change over time quite clearly. So making sure that our operation is right for customers, how we prepare the cars, how our branches look, how our charging points look, as well as the vehicles that we get, making sure that they're at the right price, prepared in the right way, of the right financing. So we're working really hard around that EV strategy to make sure that we stay ahead of the curve as that really evolves. And then just two final points for me. One is that we're carbon neutral on scope one and two emissions, We're working hard on scope three. Scope three is the bigger one because that's all about fuel, business usage, moving vehicles around. But what we have done is that we are leading the way in the industry as we purchase carbon credits to fully offset the customer's first year of driving. So I think that's a really good message. We're now communicating that to customers, pushing it through on our website. And again, it's an education, not both in terms of within the business, but how our customers react and see the most point. So I think that's a very strong message. So we're really going to push that hard this year. And then just finally, for me, there's some points on the communities. But again, I think Mark really sort of drives this on a on a face-to-face basis with a number of people in the business and you can see it doesn't matter people's mix, race, ethnicity, whatever it might be that everybody's treated equally and we make a real effort to ensure that's the case. Okay that's it for me thank you so I'll pass you back to Mark.

Thank you Chris and so just back to me now to update on our strategy progress and our outlook and so as we've spoken already about our progress to to grow our revenues to over 2 billion in the medium term and our desire to continue investing to realize that ambition and price leadership is going to be absolutely vital and while we we talk about it a lot in this presentation to make sure that we continue taking market share just a couple of um bullets for you so 32 progress on our growing our additional uh revenues to be a billion pounds taking our total revenues to 2 billion we're at 1.32 billion as we've mentioned Our e-commerce run rate is revenue targets at 80%. We've got that digital sell your car platform up and running. Auction for Cars is operating as a marketplace and we've secured these new markets, which we've mentioned that is a big part of what we want to do going forward to increase our reach to customers. Just another part on market share. So we believe price leadership, brand awareness, Will continue to take market share in this market. We see others retreating from some of the marketing that needs to be done to build brand in the long term. And we continue to invest in that, believing it's fundamentally important if you are the price leader that people know about you, they understand your brand, they understand what you stand for. And we're seeing great results in that. As you can see on this slide, it shows that the higher the brand awareness of our business within our markets, the higher our market share is. Not really rocket science. Make sure that everyone knows about you. Make sure you're the price leader. You will take market share from others. So we believe others will be retreating, as I mentioned. And during this period of probably a slightly worse macro outlook, we believe we can aggressively take share by responsibly investing. Just a reminder on our strategic pillars. This is the slide that we showed this time last year. Basically around four key areas of our strategic pillars. So number one, rapidly upscaling our e-commerce capability. Number two, to increase customer attention and acquisition. Number three, to grow our wholesale channels. And finally, to make sure we're operationally efficient through using technology and innovation. Just an update on the first one. I mentioned we've recruited our chief digital officer joined in February. We've also appointed a technology advisor to the board who will now lead our technology strategy, making sure that we recruit a new chief technology officer. Us, George Goley, who has experience at Microsoft, Amazon Home Retail Group, worked previously with John Walden, our chairman. But building that new technology capability is really important. Focusing really hard on making sure our product is fantastic. We've got the software engineering capability and moving stuff into cloud where it's the right thing to do in the short, medium and long term. Our technology stack is being replaced, starting with auction for cars platform, but lots of other things happening around the way the business works, using third party software in some instances, but also building our own capability as well at the same time. Using data much more effectively to drive some business decisions, whether it's pricing, whether it's bidding, Mark Adams- On what we pay for cars and looking at customer patterns and behaviors replacement cycles for customers lots of things happening in that sphere, to make sure that we continue driving our business decisions using using data. Mark Adams- And things like paid search a good example of that where we've actually reduced our paid search spend and by really looking at what is actually converting and being very scientific about. going dark in certain areas, upgrading in certain areas, and that test and learn mentality really coming through, certainly in that technology marketing part of the business. We're doing lots more targeted activity around CRM. We've got lots of improvements coming to the retail and the wholesale websites, which I've mentioned already. And we launched an auction cars app in April with vendors able to load their vehicles straight onto our website within a few minutes, which is a much better way for them to retail, sorry, for them to wholesale their cars using the auction for cars platform. So continuing to invest in our technology data capability, we believe will continue to accelerate our future growth. Just in terms of our acquisition and retention of customers, we've talked a lot about opening in new markets. We continue to do that. We believe fundamentally that's a big part of where we should be investing, growing our representations and reach in new markets. Price leadership, we fundamentally believe really does drive market outperformance. You've seen evidence of that In FY22, it continues, particularly in Q4 for us, and we believe continues into this year. Repeat customers continue to return. So that's the CRM driving customers to turn their cars a bit earlier. That would have been 41 months a few years ago. It's now 35 months. We can grow our market just by increasing the speed at which customers come back to us, even if the market is falling. Lots of product choice for customers. So unfortunately, the fleet market is still very subdued. So the days of us having a thousand of a certain car, like a Ford Fiesta, are certainly some distance away still. And fleet markets continue to be pretty short of stock. But it's good for us in terms of our uniqueness of our product is now over 70%. So lots of choice for our customers to reach and get from Motorpoint. In terms of our CRM with Marketing Cloud, so making sure our marketing decisions are way more informed and that CRM being much more intelligent about who we talk to in our customer base and when, and really driving that personalization is very important as well. Part of that is our My MotorPoint strategy where customers can self-serve. So that gives us a lot more information about customer behavior and will eventually turn into an app, hopefully next year. And that will also then really engage customers, I believe, and help to retain them going forward. but also making sure that we really understand that customer journey. So customer retention acquisition, if we understand what they're trying to do on our website, if we can then keep talking to customers, get feedback and really look to enhance that experience further, we believe combined with price leadership, we will really continue to take share. In terms of wholesale channels, so this is the Auction for Cars platform and that's been upgraded, as I mentioned, fully automated marketplace. Matt Lodge – sell your cars now fully up and running working really well, as I mentioned, no fees for customers payments made on collection. Matt Lodge – Some brilliant feedback from customers on how easy it is to use, whether it be the website or the handover process with us. Matt Lodge – And so that's very, very resonant with customers at the moment and making sure that we continue to increase that channel and 200% up last year, but we want to double it again. Matt Lodge – This year, and really grow that supply channel for us. One of the parts of that is to make sure that we can collect vehicles from customers' houses. So we've built our own in-house logistics capability to be able to launch that later this year. So we'll be collecting cars from customers' homes as well as delivering cars to customers' homes later this year. And just finally, in terms of efficiency, it's really important. We are a very well organised business, very operationally adept, we're very flexible and agile, making sure that we're also efficient and productive is a big part of what we're doing this year. We want to make sure we keep our costs, certainly our non-strategic costs, to a minimum so we can offer the best value to our customers, but making sure we've got that scale of preparation capability, really pushing that hub and spoke to be able to feed cars into some of these smaller locations we're opening, making sure our quality is high, so we've launched the QC app again, built in-house, really helping to reduce any vehicle faults that we have and improving the quality of handover to a customer. And as Chris mentioned earlier, really still pushing to move cars even faster than we do. I think we're one of the leaders in preparation speed in the country, but continuing to move that. We want to get that down even further in the coming years as well to reduce that car sitting and awaiting preparation by more. Lots of other things coming through in terms of automation, but fundamentally we want to touch the transaction with the customer as little as possible manually and do everything as much as possible in an automated way. Just in terms of outlook, I think it's really important to say really we're on the front foot. We really feel there's an opportunity for us to take share in this market and this consumer backdrop. We are a responsible organisation. We are profitable. We will remain profitable. We are cash generative. We are capitalite. We have a high return on capital employed. So we come at this from a position of strength. We fundamentally believe, as I've mentioned many times, price leadership is absolutely key. In a shrinking consumer budget scenario, we believe that customers will look a lot harder for value when they are changing their cars, the second biggest expense in a household typically. And therefore, we believe that our marketing push and also continuing to lead on price will be very attractive to consumers going forward and will help us to take share by offering the best value. making sure that we want to continue that strategic investment as Chris mentioned it's important to note that that is variable we can dial it down if we need to and that's part of being a responsible organisation ensuring we're not tying ourselves into very long-term commitments in terms of the cost base and making sure we do remain flexible and agile rolling out those new branches is a good example where we are very cap to light in rolling those out and making sure that they are structured appropriately for the opportunity that they have is important as well so we're not having too much resource in those branches and we're building the resource gradually over time as demand increases. I think all of this is against the backdrop of the past few years where some very noisy competitors have entered the space. It's our ecosystem. We know what we're doing. We are the experts. We are the market leaders on price and we will continue to grow our market share. That's our track record. We've always taken market share in difficult times and we're very confident that we're well placed to do so going forward. So that's it from me. We'll open the floor now to questions. Alex, I'm not sure whether you need to get involved or we'll just take them from the room.