Motorpoint Plc Ord

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.

Thank you very much, gentlemen. If you stop sharing your screen, it's probably easiest so that people can see you. And yes, if people can, if you have a question, please raise your virtual hand and I can allow you to speak. So Clive, if you take yourself off mute. Yeah, our first question comes from Clive Black at Shore Capital.

Yeah, morning, guys, and well done on a fabulous first half. Two or three questions, if I may. I mean, firstly, on vans, could you give us a feeling of learnings from vans in terms of how it differs from the car market and your suitability to make progress in that vehicle channel? And then I'm just interested in where you see the participation in the older cars coming into your ecosystem and three to four year old cars you mentioned. Where do you see that resting and what does that mean for warranty opportunities as those cars clearly come to the end of manufacturing warranties in some respects? And then just lastly, guys, what's your plans for hubs or a hub rather to serve those new stores in the south of England, please? Thank you.

So on vans, it is a slightly different customer. What we do find, though, Clive, is that some of those white van drivers are also motor point customers of cars. So, you know, they don't only have a van, they actually have a car as well. So we view it as being complementary to what we do. And we don't particularly go into the big operators, you know, so we don't shift cars. dozens of vans at a time. That's not the idea. These are to individual users. There is finance opportunity. There is warranty opportunity with that product, therefore. So, you know, it's not always... It's not a true sort of B2B scale operation. Most big companies will take new vans. So this is the... you know, the handyman or the painter or decorator or whatever, but also we do do one or two smaller deals where there's a couple of vehicles or vans going at once. So it's not that different, but it is a bit different. So the opportunities are there. The margin is typically higher on the vehicle and lower on the ancillary product, but it broadly blends to a similar number. So... There's been shortages in the air, similar to what we've seen with cars, so there has been an opportunity, margins have been strong in that area. And it's something where typically we're dealing with the same supplier base, so we do feel it's very complementary. In terms of three to four, as we said, sort of accidentally, uh went into three to four with lockdown and cars going over into that period we saw the opportunity we saw that we were substantially cheaper than the existing market in three to four i think we keep naught to three used cars pretty pretty low in price as an industry you know you have to be lower than you otherwise would be because we are here And the same thing, I think, in three to four. So what we're always finding with three to four year old cars is that actually we're selling to a customer who normally buys a five year old car because our three to four is the same price as a five year old car because of our price aggression. So, again, we're able to go in, we're able to secure the supply. They do take longer to prepare. They do cost more to prepare. You know, we will always be as new as we can. But, you know, we're pretty agnostic, as you know, in terms of making sure that we just got enough product. And if it needs to be a three to four because there's not enough supply, of that make and model around in nought to three, then we will go into that avenue as well. So we will come in and out of that sector. It's not a strategic goal for us to go deep into that sector, but as and when we think it's a good idea to do it, we will do it. And usually that means it's where we see value in that sector. And then in terms of hub and spoke, the south will be serviced by the existing hub and spoke. So it doesn't really matter where you prepare the vehicles now. All of the cars move around the country. So obviously we want to be as efficient as we can. We don't particularly want to prepare cars in Scotland to move into the southeast. But actually, if that's how it happens, then so be it. We are quite open-minded on that. We don't see a large preparation centre being required in the southeast. We have Peterborough, we have the Midlands branches, and it is definitely cheaper to prepare vehicles up there compared to the costs of facilities and also people in the southeast. So we would view currently, certainly for the foreseeable future, we will be preparing from the existing hubs and moving the cars into the southeast.

Thank you very much, guys, and well done again. Thanks, Clayton.

Thanks, Clive. Our next question comes from Sanjay Vidyarthi at Librem. Sanjay, if you take yourself off mute, please go ahead.

Morning. Morning, Sanjay.

You're back on mute, Sanjay. Yeah, I think you're back on mute, Sanjay.

Not sure how that happened. You can hear me. Yeah. So the metal margin down about 40 pounds in the half. And I know it's still a relatively high level versus history. But are there any moving parts there? Is it about mix or? increase pricing activity. What's driven that decline and what's been a very strong market?

Yeah, so we had a very strong market this time last year, though. So the prices last year, we were putting up quite rapidly in that first half. They actually did come off quite hard in the second half, which led to the overall margin for last year not being as strong as it's been this year. But some of the preparation costs were a bit higher, Sanjay, in terms of the and the older vehicles. And so that's one of the reasons. And also, as I said, they do take time to prepare. So we maybe have a little bit more of the normal depreciation. But, you know, the market has been strong. It's not really a mixed thing. But also then the financing has obviously made sure that we can continue the margin at high levels as an overall. And the overall margin in auto cars has been strong as well. So reinvest in that to keep sales pace at the high level. is always going to be our priority.

Okay, thanks, understood. Same question, slightly devil's advocate. I understand the long-term strategy in terms of building the brand and the investment in marketing, but £150 per unit up in the half, in a half where if you've got the stock, it probably wasn't that difficult to sell it given the demand that's out there. So just a question in terms of could you have sold the same number of units without that level of marketing spend?

We're probably not the same number of units, but you don't spend double and get double deal. Definitely in the digital marketing, which is where quite a lot of it, we definitely can prove the acquisition of that customer. It is something we will reflect on because the cost per acquisition of customers has gone up a lot. We think there's a huge amount of competition in that space, particularly online for customers, as you know, with Kazoo and Cinch aggressively investing as much as they do. Then you can either try and compete on that space and invest more to make sure you are seen and heard or you can disappear and not worry about competition. whether your brand has a presence online so that's not what we're going to do we are going to make sure we still maintain our brand presence and but the other thing to say is that the brand investment we've made is is very much for the long term of the business so this is not all a spend that we expect to see an instant reward for brand marketing takes takes time and then we'll make sure that we we get that coming back through in terms of the does it work what's the attribution and lots of the data and stuff that will really help us understand that going forward but Definitely maintaining a share of voice in the first half was dramatically more expensive than maintaining a share of voice in the previous periods.

And I guess the aim is also to have a strong customer retention. So these customers have come back to you. Yeah, absolutely. And final question is just on Click and Reserve, where I see that if a customer chooses not to buy that car when they're in the store, then they get the £99 back. What portion of customers come into this store and end up buying a different car from the one that they've reserved?

Not that many. I think it's probably about 10% maybe. Not a number that we measure particularly. But, you know, I know anecdotally that there are some customers who come in and do switch when they come in to collect because they see, you know, they've all passed lots of vehicles on displays. They come to collect their vehicle and, you know, maybe our stock turns quite fast so there's new product that they've not seen online. And therefore, by the couple of days that they take to come in and collect their vehicle, they see what else we have on offer. So it's not a significant number.

And so are they even doing test drives?

Yeah, sometimes test drives, sometimes not a test drive. It depends on the customer. Some people want a test drive. Some people just drive away in the vehicle and quite happy.

So they are pretty pure in terms of being an online transaction in that customer is basically making a decision online and simply collecting in most cases, just coming to pick up and install.

Yeah, yeah, absolutely. No, it's not a ruse to get customers to branch and then deal them from there. Absolutely, the customer's coming in thinking, I'm collecting my vehicle now. I've paid in full before I collect, or I'm going to pay the balance on the day, or I've already arranged the finance with no point.

Okay, understood. Thank you very much.

Thank you, Sanjay. Our next question comes from George at Numis. George, if you take yourself off mute, please go ahead.

Thanks, morning team. The first one was kind of a multi-pronged question on supply. I guess just interested to hear what's kind of changed over the past couple of months that has made it slightly easier to get vehicles. And then if you could comment a little bit on what's going on in the industry, we're kind of hearing kazoo signing partnerships with some some fleet players you've kind of got lease plan and and um bca so just interested to hear how you think that changes anything if at all um and then also just thoughts on kind of more of the 12 24 month outlook in terms of the lower new car volumes will eventually flow through to nearly new market where do you think we're at on that and and kind of what should we be be looking out for um I'll have that as a first question and then I've got a couple of others if that's okay.

Fire me, George. That's a lot. Okay. So in terms of supply, so there's been an easing at a trade level. So the wholesale demand has fallen away, which means that obviously there's less competition for vehicles currently. That is a pretty standard time of year for that to happen. Obviously, you wouldn't expect maybe... it could be as open as it is right now given the summer that we've had but it does feel it's normalizing at the moment so there is product available on the ground and the wholesale demand is seasonally low like you would expect it to normally be and so it feels like maybe it is returning we expect supply to tighten again in the first half but you know we don't first half of next year but we don't know for sure In terms of the partnerships people are signing, we've always had those partnerships. They're not formal agreements. Formal agreements and partnerships can lead to inflexibility, in our opinion. We work with our suppliers. There's not any material partnerships out there that we're aware of, but there are obviously some people trying to secure supply going forward. I think one of the things we... making sure that we do is scale up our car buying service from, from consumers to make sure that we've got as much differentiation of supply channels as possible. And we've never really been dependent on any one channel. And it was always a question we used to get asked about, you know, what happens if fleet dries up or what happens if, um, something else happens. And we are agnostic, George. We are not bothered where we get the cars from. Cars do tend to find us because we've got the demand and we've got the ability to prepare at scale. I think that's really important. But also, in terms of the fleet market, the defleeting levels in the past six months have been almost nothing. So, you know, we've not really had the normal supply that we would have from our bulk suppliers. And therefore, you know, you see dramatically more single source cars on our website, you know, substantially more choice for customers. And that is something I expect to continue to see in the short term because the fleet providers are not getting any confirmations from the manufacturers on when they can have the supply for the bulk deals that they would have normally built. So that is clearly changing going forward. As you mentioned, the nought to three, you know, nought to three over the next three months, three years will be maybe, you know, 50, 60, 70% of what it would have been in the past. Again, as I say, diversifying that supply channel is important, but also making sure we're agnostic on what we sell. And so we don't envisage that we'll be going heavily into anything over four years. We've proven already we can go into three to four. So that was a bit of a trial to see, you know, how do we get on when we move into something we've not done before? The warranty opportunity Clyde mentioned earlier is important because those cars are out of warranty. We give a three month warranty to customers free of charge. But then obviously some of the customers then want to pick up a warranty to give them some assurance post the end of that three month warranty that we give. as part of the transaction so i think being agile and agnostic is is so just inbuilt into us as a business um and you know we find the supply we adapt we we morph into whatever we need to be going forward to keep growing great um you've spoken on bands in three to four kind of maybe prestigious vehicles is kind of i guess the other newer type of cars that you're going into so just kind of what's changed what's enabled you to go there is anything to kind of be aware of in terms of

Is it materially different margin? What are the puts and takes?

Yes, it's not material margin. We're doing more of those things, but they're still a relatively low part of what we do. We've sold Mercedes, Audis and BMWs for a long time, so they are not really a shift. But there's a few more unique cars on that website. I'd encourage everyone to go and have a look. Maybe there's something on there for you. But making sure that we look at that opportunity. So the 7.9 is really, really important because on a 50, 60 grand car, if you are borrowing at 7.9, not 10.9, 12.9, 14.9, like some of the manufacturer sites are, then that is dramatically different. And, you know, our cost proposition to a customer is, really, really comes through. The one thing to say that maybe a shift going forward is that the manufacturers are focusing on building more expensive cars. So they will be building, you know, the bigger engine vehicles, the electric cars that are a premium price compared to, you know, the smaller sort of traditional fleet market, which is why the fleet guys can't get much certainty on supply. If you were a manufacturer and you only had 10 microchips left, you're going to put them in a five series or a seven series, not a small BMW.

Okay, great. And then just one on wholesale. Units were down quite a bit. I presume that's kind of that you might as well retail a car at the moment rather than kind of stick it down the wholesale. Just any comments in terms of how that proposition is scaling? It sounds like there's a couple of recruits coming in. Anything that you can say in terms of how marketplace is scaling and where we're at on that?

So marketplace requires a new technology stack. So we've got a solution to that that will launch hopefully by the end of the financial year. But that will allow other people to put their vehicles on our website. We're obviously just in discussions with people at the moment as to putting their cars on there and creating more of a marketplace. We are excited about that part of the business. The wholesale market generally has eased off. So again, as I said earlier, with wholesale demand, has eased off during the period so wholesale margins for us in auctionforcars.com are now easing back to probably more normal levels still high for this seasonality but more normal levels on a long-term basis thank you thanks very much thanks george

Thanks, George. Our next question comes from Mike Allen at Zeus Capital. Mike, please take yourself off mute. Go ahead. Morning, guys.

Yeah. A couple for me if I may. Just a couple definition questions first. Just online definition and online sale. Is that where the customers interacted online as part of the customer journey or the complete customer journey was taking place online? I.e. did they go to the physical site to pick up the car but decided to buy the car online? Just to get a feel for that metric in terms of your online experience.

Yeah, so of the 37%, so broadly our mix is 63% of customers walk into a branch, buy the vehicle in the branch. About 27, 28%. contact us on email or live chat or phone, do the deal, reserve the vehicle, pay the deposit, complete the deal prior to collection, or some choose to complete as in make the final payment or sign the paperwork. They can do it prior to coming in, which we're trying to push people towards because it's easier and quicker for them, or they can, if they choose, they can make the final payment on collection once they've seen the vehicle. So again, trying not to force customers one way or the other, uh because you know if you want if you're paying a 30 grand car and you you want to see it before uh you make the 30 000 pound payment after you've paid your deposit then um you know some people want to check the car before they make that payment so we're okay with that we want to be all things to all people and then the other circa nine ten percent are entirely online not spoken to the customer place the order made the payment arrange the finance book their collection slot and just turned up and collected or have had a home delivery

yeah okay okay no that's useful and then second definition definition question just in manchester when you say you've got to uh or you're looking for a 10 market share is that within the delivery radius for free delivery that's within half an hour within half an hour mike within half an hour radius of the city center yeah halfway the branches yeah okay okay um And then next question is on stock turns. So clearly, you know, made masses of progress and, you know, probably suppressed some of the profitability you could have shown today, but obviously being disciplined. I mean, clearly, you know, are you looking to improve on that metric even more in a supply constrained environment? Are you happy with where it is going into next year?

I mean, I'll take this. Thanks. Hi, Mike. Yeah, I mean, yeah, we're really pleased to have it, you know, around about 42 days. I think the point, we haven't got a target in mind because at the end of the day, what we want to do is get the cars as quickly through the preparation process, as quickly as we can on pitch and sell those cars as quickly as we can. So if that comes down as a result, because we can sell more vehicles to customers then, then so be it and we'll be happy. So, yeah, I mean, clearly if it was going the other way, then I'd be concerned, but I'm happy where it is. And if we can improve it even further, then good news for customers, hopefully.

Okay, great. And then final one for me, just in terms of prep site capacity, clearly you've seen Kazoo make a number of moves in that area and seemingly buying up some capacity there. Is that, you know, I assume you've got good capacity as well, what you've done, I think in Scotland, etc. But is that an area of concern where your competitors might be getting better or not? Are you not seeing that at the moment?

No, it doesn't particularly impinge on what we do. So, you know, we've got about 120 capacity now and that's on one shift. So, you know, if we needed to work the workshops and their preparation spaces for longer shifts through the evenings, the evenings, overnight, whatever we do, we know we've now got the ability to have that capacity. Clearly, that would take more people as well. But definitely getting the cars prepared in bulk and moved to the branches quickly is part of that. So the flow is as important. has the capacity but we would always look to sweat that asset quite hard you know you don't want to run only working six hours a day when it can work 18 hours a day so that's what we'll end up doing i think but we've got a good regional preparation now we'll probably consolidate some of the other branches into um larger single centers because they we can get better efficiencies and better capabilities on those and it's not not of concern to us what other people are doing

And sorry, the last one, just the supply question may be asked in a different way. So were there any sources of supply that you got in this period that you definitely won't get next year? I don't know, daily rental, et cetera, which might be definitely closed off going into the next six months. So what other levers can you pull to offset that? I mean, clearly you've just started the... you know, the consumer buying channel, et cetera. But I'm just trying to think what's closed off for you going into next year and how you might be able to offset that.

So I think the only one that's closed off next year is probably already been closed. Like I say, you know, those bulk deals from the daily rentals are just not there. We've not had those though for probably a year now. And they've just been, you know, we've not done those big bulk deals. And as I said earlier, we've done much more of the smaller deals you know there's probably an opportunity for those channels to come back um as they you know as they go back into those markets when they get some comfort comfort from the manufacturers uh that they can get the build slots confirmed and and start receiving those vehicles i think there'll be some of them will make the push to to electric and you know which would mean we'll be one of the first into electric as well so you know when you sell the newest cars the newest used cars, then you are going to be the first to sell used electric vehicles as well. So we see that as a real opportunity for us. We're already doing it, as I mentioned earlier. We've done hybrids for a long time. We are ready for it. We've retrained all our team already. We've got the charging points going in. But, you know, that is a capability I think will be really positive for us going forward. So I think it's probably easier going forward than it's been in the last 12 months.

OK, that's great. Well done.

Thanks, Mike. Cheers, Mike. Our next question comes from Darren Shirley at SureCap. Darren, if you take yourself off mute, please go ahead.

Yeah. Morning, gents. Just one from me, if you don't mind. You've obviously been investing in the period and the highlights of the... A number of new roles that you've filled. I mean, where are you now in terms of in-house capability? Are there any major gaps that you need to fill or maybe smaller gaps? And how long do you think you've sort of had that full suite of capability that you need to deliver on your online plans?

So I think in the technology side, there's more to do. We're bringing in software engineers. We're bringing in partners, as I mentioned, because some of these changes are temporary resource requires, which you don't want to go and recruit people permanently to get over a bit of a hump. So using third parties and contractors is part of the solution. But we definitely got more to do in that side of the business. And then on performance marketing, we need to build out that capability. So we've got an interim performance marketing director in, you know, so making that into a permanent and building that team up below them. They're probably the two of us in terms of the areas we need to strengthen. I think in data, there's more to go at as well. So, you know, when you start getting some of the information through, you realise that there's more to be had here. So, you know, investing into that capability as well would be probably the three areas. So all three areas, I think, we've invested a lot already, but we believe that there's more opportunity and where we can see opportunity, we will invest further as required.

When you look at the step up in operating costs, I mean, how far are you through that journey in terms of should we see another major move on in the next six months or is it over the next 18 months? How should we be thinking about that? Yeah, I think you're gone.

Yeah, I mean, you certainly will over the next six months, Darren. So you'll have a fuller effect on some of the new recruits we've brought on board anyway. So that will come through in the second half and indeed into the start of next year. As Mark said, we're continuing to recruit. We're certainly not there by any means, although we've made some good progress. So I'd expect certainly in the second half and probably the first half of next year for those costs to increase significantly. um to a fair degree and then we'll see where we are but the other point probably to make is we'll probably never finish because i think you know the business keeps moving so quickly and it's very hard to predict what's going to look like in a couple of years time in certain areas and you know this journey will continue but i think over the next 12 months we've still got So a bit of heavy lifting still to go, but we've done some of it, but some to go, yeah.

I think the good thing though, Darren, is that as we invest, as you can see, we've invested substantially more in it and it's paying back relatively quickly. Some of the brand marketing clearly will take time to come through, but we've been really pleased to be able to maintain profitability levels, but growth is the key priority for us.

Okay, that's useful, James. Thank you.

Thank you. Thanks, Darren. We've had a couple of questions, written submissions, which I'll just read out if that's okay. So how did finance and warranty penetration rates develop separately in branch and online channels? Number one. What is the size of the opportunity to buy cars directly from retail consumers? Number two. And will the three to four-year-old market stay or will you refocus back to nought to three-year-olds?

Okay, so finance and warranty, both have improved. They've both improved by quite a lot. I'm not sure whether we've got that in that financial, non-financial KPIs. So we've only got the finance one, but finance has gone from high 40s into early 50s. And in the online one, it's gone from 34 to 37% finance penetration. We haven't got the split on warranty, but they've both gone up because obviously it's gone up overall. In terms of sell your car, the answer is hundreds of thousands. So there's many, many cars. being purchased direct from consumer now. So you're obviously competing with the peer to peer market. You know, if you can make that more acceptable to sell to a dealer and to sell to us. So that's one part of it. So we don't expect or plan that it's going to be hundreds of thousands of cars to buy. But the opportunity is pretty big for us to find a supply channel that is not limitless, but a very big supply channel. and then the third one was three to four yeah we've talked about that already but you know as and when we go into it how deeply we go into it we'll um we'll do as and when we need to um it's a it's a tactical thing we'll do it'll probably become a permanent feature in the business uh going forward but um but something that we'll you know we'll always not really focus on we need this many three to four and this many not three it'll be what's available what's good value for customers

Great, thank you. And one last one is, to what extent do you worry about online competitors with deep pockets and an investor base that's happy to finance loss-making unit economics?

So I worry about all competitors, but I worry more about making sure we give our customers outstanding value and that we've got a team that's really engaged and can deliver that superb customer satisfaction that we've done for the last five to 10 years. So that's more of a challenge. So we're not obsessed with competitors. We're obsessed with customers, but making sure that we continue to offer that. Unrivaled choice, value, service and quality is really important. So there'll always be competitors. We've always competed with billion-dollar brands because we've competed with the manufacturers for a long time in terms of their main dealer networks. So it doesn't scare us. We think we've got a really... really defendable business model, but it's very, very hard to compete against. And you can ask most of UK motor retail how hard MotorPoint is to compete with. And I know that we are hard to compete with. We always focus on improving and I think we've got a pretty defendable position going forward.

You're on mute, Alex. Apologies. Thank you. We just have one more question in. Investment in inventory net of trade payables is higher than normal. Chris, will this continue?

No, it's sort of on a cycle. So I was just looking at some of the people we've got on the call. So some of our supporters who sort of provide the facilities are on the call. And, you know, they've been hugely supportive, both from the stocking and also the banking facility as well. So that really helps. But what you will see is that over time is that those facilities, we've seen that the Lombard increased by 19 million in October. And what I'd hope and expect is that with the other providers and again with Lombard at some point, is the facilities will keep increasing as we grow the business. What's happened in the first half of the year, which is no surprise, is that values have gone up from cars of 30%. So that's put pressure on the current facility that we've had. So, you know, we look to expand that as we go through the process going forward. So I wouldn't expect that to sort of repeat itself in the short term. But, you know, I think it's part of the cycle of doing business and hopefully those facilities will expand as we continue to grow with our partners.

Fantastic. Well, gents, it's back to you for any closing comments. Thank you.

Well, thank you for your hosting this, Alex, and thank you to everybody for listening. I'm super excited about the journey we're on. We've doubled in the size of the business in the medium term. This year will be a big step towards that, achieving that goal. Lots of the infrastructure and technology and the marketing capability are being built out. We're also building out our branch network to make sure we can access new customers. whilst also focusing on opportunities around commercial vehicles and, of course, auction for cars, which we've talked a lot about. So delighted with that. I would like just to say finally, thank you to our outgoing chairman, Mark Morris, who I've known for a long time. Mark's been a really instrumental person in MotorPoint's development, obviously, helping us through the the ipo in 2016 as well so we wish him a long and healthy retirement and obviously to welcome in john john walden so really important addition to the team i think in terms of somebody who's been there and done that in terms of converting argos from a catalogue business to a digital player that's exactly the challenges that we're going through and how can we do it as efficiently and effectively as possible as we really look forward to his chairmanship which which starts in january so Without further ado, we'll let you go and enjoy your day. Thanks very much for joining us.

Thanks, gentlemen. Thanks, everyone, for joining.

Bye.