Motorpoint Plc Ord

results for FY23. We'll just skip straight into the agenda, which is we cover some highlights from last year. Chris will then take us through the financial highlights and an ESG update, and then back to me for a strategic update and outlook. So having finished the year in March, we remain the UK's leading omnichannel used vehicle retailer, and we continue to invest for our significant profitable and long term growth going forward. Just a quick reminder of what our focus is. We have two channels, Motorpoint, which is our retail business and then auction for cars, which is our wholesale business. And Motorpoint sells cars mainly in the four years and 30,000 miles, cars and commercial vehicles. And the sources of those are through part exchange for customers through the usual channels, and also sell your car, which is our C2B channel, and then auction for cars sources from the public, whether it be a part exchange or sell your car. One thing to always remember with the company is our focus on our people and our virtuous circle model continues to be at the forefront of what we do. Fundamentally believe a happy, engaged workforce drives outstanding customer satisfaction and that then leads to long term shareholder value. So we continue with that model, whether the trading cycle is good or not so good. And that's very important to us. Just to recap on FY23. So the results obviously are dramatically different to the previous year. partly because of the investment levels that we're making, but also I think it is important to look at the headwinds that we suffered in FY23. So well documented and continued nearly new vehicle shortages. We used to be a zero to two business, we're now a zero to four business, but that market still remains around 35% lower than the peak and still about 20% lower than the previous year in FY22. I think one of the key things going forward, but also had an impact in FY23, is that a rising interest rate environment for used cars is very bad. given that the cost of financing the vehicles that we hold in stock rises dramatically. We receive lower finance commission from our lenders, despite increasing the customer rate to 11.9, we receive less commission and obviously increasing the finance rate to 11.9 reduces customer affordability, which is impacted by that increased APR. So a triple whammy, which is a negative for our business. And obviously we're taking steps to respond to that. Rupert Clayton- A one off in fyi 23 was also the well documented fall in ev values and evs are now normalizing as a channel and so previously they were. Rupert Clayton- Maybe a niche product and they now becoming much more mainstream the US car market is the is the level playing field. And therefore EV values are having to align more like petrol and diesel vehicle pricing rather than the major premium they were previously. So we see that continuing. There is now stability in that product and we are now profitable in EVs as we sit here today. So how do we respond to that? Well, we want to be on the front step. We will prepare for the worst in terms of the consumer environment, what it may become with a continued rise in interest rates predicted. But given the investments we've made and the market share growth that we've achieved, we're now going to be more selective where we invest, and particularly around customer experience. We want to make sure that we can integrate the sales channels from the customer, be it online to offline, to being in store or at home, we want that to feel as seamless as possible to customer. Making sure that we use data to support our buying, selling and marketing activity. And I've learned quite a few things in the last couple of months around using different ways of looking at our data. We have a massive amount of data, as you can imagine, but making sure we use that in the right way certainly showed me a few things and got rid of some of my pre-assumptions in the last few months. and continue to make sure we get technology enhancements that either drive our volume of sales or make us leaner going forward. So that will be a total investment reduction of around £8 million, some of it capital, some of it revenue, and mainly caused by pausing the stall rollout and focusing on some of that technology spent to make sure it's well allocated on what we think makes an impact. Michael Kenyon- vehicle shortages, we do see to ease and there is supply around at the moment and we don't see that particularly changing. Michael Kenyon- However, sometimes when supplies is Okay, it means demand is falling so clearly this there's a challenge there for us, but we do expect, as I say. Michael Kenyon- Being prepared for the worst, and we are expecting macro conditions to remain difficult throughout this financial year and it's important to us to be. able to emerge from this predicament with a leaner business and ready for the market to recover. Just in terms of the progress we've made on our major KPIs through the year, our stated objective of growing our market share has proven successful, growing to 3.5%, continued to grow revenues, and our e-commerce revenues also up. But as you can see, the units are declining Clearly not as much as the market. We've outperformed that dramatically. However, we don't like to see our volume shrink, as you can imagine. We continue to source more cars from customers, which is pleasing because they are a cheaper channel for us. And you can see the strategic investment rising from a million to six million. That will come back down now as we pause the new store openings. We did slip into a small loss given the headwinds that we talked about, but our expenditure levels are being aligned in accordance with that. As you can see, the customer acquisition costs falling, so that's a result of the falling marketing spend as we get better at allocating our every pound that we have available. Cash improved to 5.6 million, and we continue to focus heavily on our customer experience, as I mentioned earlier, and it's good to see that staying at around 84. I think anything over 80 or around 80 in that number is acceptable to us. We believe price leadership will continue to be very important, particularly given the environment we expect. And therefore, it's very important for us to make sure that we can compare positively to main dealers and used car specialists. As you can see on here, we are cheaper in all three of those examples of various different products against various different competitors. I think the important thing for me is making sure that we are as cheap as we need to be to get the right run rate and to beat our competition and secure that customer. So some of the gaps on here are quite large. We will be using data and are using data to improve our margin and make sure that we are moving the cars through the system at the right margin at the right pace. And that's the key thing for us. Continued openings of new stores in the previous year as well. So we've opened in three markets, Edinburgh and Coventry. We've been seeking properties in those areas for a long time. Both of those were former dealers, Ips which was also a former car selling space. And I think it does show that as the contraction in the volume of dealers continues, then we will see opportunities going forward. So we don't expect to not open any sites going forward, just pausing for the time being until the macro environment has more clarity on where it's headed. In terms of the pipeline that we have, we've got none planned to be open for the further part of the year. We do have one location secured, which we can open when we're ready. But we are targeting a national share of our market at 10% of maturity at these locations. And as we continue our rollout post the pause that we're doing now. But we think we have a proven model. When we go into a market, we take share. Our brand resonates with customers. It's a big part of their monthly expenditure is a vehicle. And making sure we can make a difference to that is something we're very passionate about and leads us to win in the markets when we enter those markets. That comes through on this slide, which is the investment in our branches and our brand in the new branches. You can see here We've grown our market share in every area, which is great. Our brand awareness has also grown in the markets, as you can imagine, where we've opened new stores. So growing our market share from 1% to 3% in those markets is very important. And obviously we'd expect to see that now rise in line with the ones above in the different cohorts. The longer we're in town, the more that we grow. And usually it takes two change cycles for our brands to grow to the levels that we see at the top line. where customers have pretty much bought twice from us and are now very much talking about us and the average cycle to change a car remains around three and a half years. So you can see why that takes quite a long time to build in terms of market share. Now I'll hand you over to Chris to go through some financial highlights.

Okay, thank you. Thank you, Mark. So I'll just take you through to the highlight slide. So I think you've already seen these numbers in Mark's section. So revenue up. And about 9% you can see the big fall in the profitability measures. It's largely around the gross profit margin coming down. But expenses under good control. Now we've got a run rate of decreasing expenses year on year as we realign the business to match what's going on in the wider market. What was really pleasing though was to see a return to positive cash at the year end, so 5.6, so a big swing from where we were a year ago, so that is pleasing, so I'm comfortable with cash at the year end being under control. So just looking at the profit and loss account, you can see the record revenue and that to a degree was held by both vehicle mix with more expensive vehicles and also price inflation. However, as Mark said before, we did increase our market share quite significantly from 3.1% to 3.5%. We had the new stores and Ipswich opened successfully a few weeks ago. The loss before tax was down, reflecting strategic investments, supply constraints took in the second half, maintaining price leadership. The higher interest costs and then also the fall in EV values, which really impacted the final quarter, roughly between about two and a half million pounds of gross profit. So that was a shock, but as Mark said already, that seems to have flown its way through. So we're back to a bit more normality now from an electric vehicle perspective. which is really good news. So despite new store additions and the expanded digital and marketing team, the headcount fell down to 794 at the year end from 928 a year ago. And that's mainly around the retail teams, where we're seeing some of the benefits, particularly of automation and merging sales and customer assistant roles, but also in the back office areas as well, where we've got automation efficiency. So we're starting to see improvements coming through. That more effect of the second half of the year, so we'll see the full year effect coming through in FY24 of those, so that is pleasing. Marketing costs, as Mark mentioned before, we've seen the cost of acquisition come down. Spent 14 million in the year just gone. It was 19 million the previous year. That was influenced by the fact when we reopened post-COVID in that April 2020, April 21 period, then we went quite heavy with marketing to support the volume that was out there. Much more targeted marketing, we're getting much better information now in terms of return on investment, what works, what doesn't work, whereas I think, you know, probably a couple of years ago, we were a little bit more blind in terms of more of a scattergun approach, so that's pleased. I'll talk about ESG in a minute, but energy consumption on a life-for-life basis was down 7.3%, so it's mainly electric and gas. and water was down 15.4% and that's for the total business. So like for like would have been a further improvement in terms of the store space. We've got small gain 1.3, which is that related to the finalisation of the B, selling these facts that we did at the beginning of the year on Stockton and Peterborough. And then you can see finance costs pretty much doubled in the year and that's clearly reflecting the rise in interest rates that we're all aware of. There's some IFRS numbers in there, about 2 million, but there's about 5.1 million of pure sort of facility borrowing costs, which was up from about 1.8 previous year. So you can see the interest rate is really hampering the finance cost line. So from a fixed asset perspective, we've got a growth in Fixed assets due to the new opens that we talked about and a couple of major refits we did at Burnley and Newport, which I guess most of you know are two of our oldest stores, so they're looking really good and not relatively expensive either in terms of what was done. So we're pleased with the outcome of those as our customers, which is really good. Intangible assets has grown by about 3 million, and that's a lot of the software website development that we've alluded to earlier. The assets held for sale, the 9.2 was the previous year and that came through in May, the beginning of this year, so those will be holding this back. Inventory drop, quite significant, partly due to supply constraints, particularly in Q4. And again, as we talked about earlier, we're starting to see that return to more of a normal supply chain. We're not there yet, but what we have seen is that stock improved. Stock days has improved from 54 to 51 days in stock. So we're certainly pleased on that. And that continues to be one of our key KPIs in terms of how we really manage the business, because that affects pretty much the whole thing through buying, supply chain, transport, and how quickly we can sell a vehicle through particularly price and ownership. We've got significant headroom on our stocking facility availability. So as you probably recall, it went up to 195 back ends in the previous year. uh largely because of the you know the significant rising inflation clearly that's uh that's more under control now so we've got we've got some headroom there should we need it uh receivables change just reflect simply the timing of finance commissions uh at the year end uh and payables reductions the drawdown in the finance stopping facilities um pleased to say that the loan extension that we have with with our bank sometimes there 35 million which is 29 rcf 6 million bank overdraft which was due to expire in May 24 that now runs out to June 26 and we've got the option of two one-year extensions as well if we both agree on that so pleased with that and largely on the same terms you've got a slight change in one of the covenants but yeah so that's secure now which is really good. okay on to the cash flow so we can see we've moved from a 21.2 million debt this obviously excludes the lease liabilities to a closing cash of 5.6 largely because of the working capital improvements around stock and the financing facility but we've also got 9 million of the 9.7 million of the proceeds from the sale of the lease pack which has gone through as well And then finally ESG, before we go through any of the, some of the bullet points on that, I'm personally really pleased with the progress on the ESG this year. What it does feel like to me is that the ESG activities are starting to be ingrained into the business, you know, as part of MotivePoint's DNA, both from an office perspective, but also the faucet stores and the craft centres. So I think that's really good. And I think that's part of the reason why we're able to do things like reduce electricity, reduce gas, reduce water. I think people are just becoming a lot more focused and conscious of what's going on in the market. So that's really good. I think also we've got a much better governance process now. We introduced the PLC-BSG board committee just over a year ago, so that's operating. And then we've got an exec committee as well that meets quite regularly through the year. So we've got a nice cycle now and a nice flow of meetings. Rolling out EV charge points. EVs were sold 137% more than we did the previous year, so I'd expect that to rise going forward. We have got energy champions across the business as well. We've got a new workplace communications platform, a bit like Facebook, if you like, within the business. It's where people can share ideas and talk about what works, what doesn't work. And again, that's developing interest across the business, which is really good. I think the other point just to make is we've got much better visibility now on data, awareness and measurement. And as you know, when you look at some of the annual reports coming out now, in terms of some of the measurements that are required as part of the CFC and those sort of disclosures. There's a lot of information that's required, so we work very hard on that and that's really helped. We've also done an ESOS audit, a government-based audit, in terms of energy management, so we've got a number of recommendations for that, which hopefully will continue to reduce consumption in various areas as we go forward. And then pretty much zero waste of landfill again. EDI is getting much more focus in the business as well. The SLT are now engaged. We've got a specialist who's working with us on EDI measures and what we can do better. Talked about workplace. We've got a new international security officer in place. We've got a new third party health minister of health and safety. So raising the bar there as well. And then also you know we're proud of being a real living wage employer and we chose to bring forward the pay increases from March to January 23 as a result of that. Okay, thank you, so I'll hand you back to Mark.

Thanks Chris. So we're just going to go through our strategic update and outlook now. Our progress on our strategic targets will be limited going forward in terms of FY24 and making sure that we are investing in the areas that give us the best near-term returns given the short-term headwind we envisage. But if we go through the first aspect of our strategy, which was to upscale our e-commerce capability, we now have a fully recruited internal digital team. And big increase in digital sales leads and a lot more information coming through around things like the marketing effectiveness of our digital spend. And that's working very well for us. We've now internalized also our SEO and content teams that will have a long term benefit to the business, increasing our organic leads, which means we can spend less on customer acquisition. We've opened a digital and tech hub in our Manchester store. Lots of that team are based in that area. So it's great for them to have a space where they can collaborate and helps us to attract the best talent. We've already mentioned data a few times, but our data science is increasingly driving our decisions around customer acquisition, pricing and stock allocation. And as I said earlier, surprised me with some of the things and patterns, some of the patterns that we've seen and some of the decisions we've taken to improve the business going forward, which will have a benefit in their short, medium and long term. And obviously, we spent a lot of time improving our website. The aesthetics of the website and the content capability are dramatically enhanced from where they were a year ago. And I think it's important that we have a website that's acceptable to customers to generate leads. And that is primarily the function of that website. When we've seen customers given the opportunity to buy digitally entirely online, customers particularly seem to prefer to secure the vehicle online and then complete the purchase on us in a store. So we're seeing a return to probably pre-COVID behaviours from our customers. Just continuing on the digital capability, what have we actually done? So as a new homepage, using lifestyle imagery, the navigation is easier, much better content. We have a new headroom footer, which is the top and bottom of the homepage, which enhances the look and feel, builds trust with customers. and making sure also that the search results that they are requiring are much more presented in a much better way. So we've upgraded that page as well. We continue to improve, make improvements to the search capability. So there's a lot more sort and filter options for customers. We've played around with how we list vehicles to see what's more effective in terms of how we sell the vehicles and what vehicles sell. We've advertised for the first time to customers the previous price and the new price because, as you know, we reduce our prices if the car isn't selling. We will reduce price and therefore showing the customers the reduction in the price maybe increases their appetite to purchase the vehicle. We're also building wishlist and vehicle comparisons tools just to make sure customers have full visibility and transparency on the product they're actually buying and are able to compare to other cars that we have in stock, but also create wishlists to make it easier for their journey when they come back to the website. We spell out our proposition a lot better around choice, value, service and quality. and we do that through showing better imagery of the cars so again making sure we present our product in the best possible light we've improved our checkout journey for customers and that includes the post purchase experience making sure that customers prior to collection have done as much of their administration because there is administration buying a car as much of that has been done prior to them arriving in store which therefore means we can have a smaller team in store because the customers have completed most of the work online prior to visiting us. And we've also then improved things like how we present finance to make sure that we're very clear on what we're doing on the finance and how that works for customers. Still, some customers don't quite understand the difference maybe between a PCP or a higher purchase product. In terms of stuff coming through, so still work being done with our engineering team and our product team. A product detail page, so how we actually present the vehicle. When somebody clicks on the vehicle off a list of vehicles, they go into the specific vehicle they're looking at. That page is about to be launched in the coming weeks, which will have a much better look and feel, but also improve calls to action for customers. and much more clear messaging in terms of cost finance and inquiry and put in as much information on that page as possible so make sure customers have as much or all of the information they need when they're trying to make the decision In terms of the store pages, so when you click on one of our branch pages, that look and feel will also be improved. Currently, we're spending money to drive customers away from that page because it's not a very well-built page. That will obviously be eliminated as we upgrade that page with a much better SEO benefit going forward. and including a new store location map and also building new stock alert functionality. So when we don't have something in stock, customers will be able to receive alerts when that car is now in stock as we go forward. In terms of customer acquisition and retention, we've launched a customer experience project. We've sold cars broadly the same way for quite a long time in terms of our sales process. We're looking to connect that experience back to what customers actually want, which is quite an interesting project that we're doing, listening to customers as much as we possibly can and make sure that we align our process to be much more what the customers want rather than what we think they want. We have a customer board which has been introduced to make sure we're listening to customers in terms of the pre and post purchase experience. So how can we improve that? And there's always something that we can do better and making sure that we involve customers in that journey is really important. And that part of those projects have launched already and we've seen an increase in customer retention up 11% from FY22. So we're pleased with that. As I mentioned, we've upscaled our e-commerce capability that continues. Our brand proposition was revamped at the end of last year. So a focus on our quality and also unbeatable prices. So the campaign being there's no car like a Motorpoint car generates that trust in our brand. And also the way that we use that messaging is not just about the quality. It's also about there's no car like a Motorpoint car because it's the best value in town. We've opened six stores since October 2021 and three since the start of last year. Our brand awareness in those markets, as I mentioned earlier, increases and that ultimately leads to growth in our market share in those markets, which helps our national market share growth overall. And as you can see, our spontaneous awareness in those new markets more than doubled by 117%. We continue to use CRM as that customer base builds. We do dramatically more and much better communication with our customers that generates more inquiries, more leads than it has done in the past. But making sure we've got that improvement in conversion is really important and very, very low unsubscribe rates as well, because we're basically targeting the customers with what we think they want to listen to. In terms of our wholesale channels, we have auction for cars, as you know, and also sell your car, which is our customer acquisition channel. That's fully automated, over 5,000 cars acquired from customers. There is a balance to that. We can drive that number up even more, but we can also then get caught out with vehicles with customers where we pay too much for that vehicle. So we're obviously cognizant of not acquiring a car and then losing a lot of money on it. we want to make sure we acquire the car at a similar cost to what we can acquire it through other channels and being um mindful of that we have increased our our cars acquired from customers so now um 20 23.8 that's an increase of a third so again focusing on that channel making sure that we're acquiring the vehicle but but at the an appropriate price is important We've refreshed the auction for cars website and the brand and redefined that proposition around value, transparency and service. It's been well received by our wholesale customers. We still have lower fees than the main auction channels, albeit we have increased those. I think we were too cheap at one point and we've increased those fees to be something where we can generate more revenue from. But the process has been dramatically easier for customers now, given our digitized administration process. So that was probably part of the business which was still quite paper-based and quite administratively intensive. That's been dramatically improved with investment from the technology team. which has improved efficiency and also leads to cars being sold quicker on that wholesale channel and therefore reducing days in stock which on a wholesale car can be very important so even a couple of days can have a big impact on the margin we generate from that car as you can see there the self-service registration is another example of the tech team getting involved so rather than being a manual process that's now automated and is done automatically within a few hours so using technology to make things quicker and simpler for us, but also for our customers, an important strand. In terms of our continuing to automation, so as you can see, Chris mentioned earlier, the headcount reduction, we see that coming down a bit more and making sure that the digital capability and new stores are also being productive and making sure that we're getting our focus on driving our volumes and increasing our leanness to the right balance. As Chris mentioned also, we've merged our salesperson and customer service assistant roles. So our salespeople now hand over all of our vehicles and that will continue. And our outbound payments, which is basically refunds to customers for deposits or small payments like that, was quite administrative. We've now made that fully automated. Again, rather than going into an accounts team and somebody manually processing that, that is now fully automated. Similarly, payment reconciliations, which again is a benefit for our administration functions and stock loading. So lots of automation being improved there. So ingesting data into our system rather than manually keying it. And also similarly, our integration with our main finance lenders around the customer finance and proposition has been dramatically slicker as well. So working very hard with our partners in that area means that we do less administration and they can support us better as well. implemented new telephone and web chat systems gives us dramatically better mi but also our ability to distribute calls means that we need less people at the center and we can distribute calls and generate leads much more efficiently going forward and also our improvement to our customer journey i mentioned a little bit earlier around self-serve so reducing that customer time in our stores on handover We continue to make progress in our preparation function as well, so improving our quality and identification of any issues on a vehicle, a new quality control application which has helped us to reduce our time to prepare vehicles by just over a day. And that will continue to be a focus for us with stock turn. Days in stock is a really important measure for us, particularly if we see any depreciation in used car values, which we're expecting to probably be an issue as affordability challenges continue. And a procurement review across the company has realised some savings in other areas as well. So real focus on cost and real focus on efficiency, whilst also trying to improve our volumes. In terms of outlook, we continue to see that price leadership, we believe, is absolutely the best way forward for us, making sure we are the cheapest in the market, giving our customers the best value as well as the best choice and service as well. We do have a strong track record of resilience in a downturn. The business has always done well in periods where the economy has been into a downward cycle. But we're obviously very conscious that we need to prepare for what may happen and therefore we're efficiently managing our cash resources as you'd expect. In terms of the macro environment of inflation, rising interest rates and consumer uncertainty, we do see that impacting the market and certainly in the next 12 months of the near term, we see headwinds continuing with potentially interest rates rising to 5.5 or even 5.75. uh you know that does have an impact on our business we have a higher borrowing cost for the stock that we hold we have a lower commission share from the finance that we sell and we also therefore that passes on to the consumer through affordability challenges for consumers I think as an example, we used to always try and get a monthly payment for a vehicle under £99. It's now a struggle to get it under £199 due to vehicle price inflation and then the APR increases that we've had to pass through to customers. So affordability is a real challenge, I think, for the consumer going forward. Growth in new car sales, however, will start to be supply challenges. So supply has been a problem for a couple of years now. The market still remains quite subdued at probably 35% lower in the nought to four than it was at a peak. However, we do now start seeing, expect to start seeing that improve as new car registrations have been on an upward trajectory for six months or so. That will come through. It's just a question of when and in what form. The short-term rental market still remains relatively flat. But the leasing companies are taking some stuff, so we will see that product come through into the channels. What we don't know is it six months, 12 months, is it 18 months, but clearly it's a positive indicator going forward. Our investment in technology has created lots of efficiencies that I mentioned. We have lowered our non-strategic costs and the business will be leaner. And as the market recovers, we are dramatically better positioned than we otherwise would have been for that technology spend. And some of it you don't need to spend twice. We have made changes. We've integrated processes. We've made ourselves leaner and we will benefit from that going forward to help us become a much more profitable business going forward. In terms of our short term, as I mentioned, we will align our cost base depending on what the market does. But we're in a good position to be able to take advantage of that market, but also being mindful of conserving cash, as I mentioned. But fundamentally, the business is in good shape. We're in a better place than we were a few years ago in terms of our cost base and our efficiency. And as volumes recover, we will emerge a dramatically more profitable business and more successful for the long term.