Good morning, everyone, and welcome to Motorpoint's Full Year 2025 Results. Thank you for joining us. Myself, Mark Carpenter, CEO of Motorpoint, and Chris Morgan, our CFO, will take you through our presentation. In terms of the slides, we will go through—yeah, sorry. Oh, we have a slide issue. We will have an introduction and talk a little bit about FY25 in the future. For myself, Chris will take us through the financial highlights and an ESG update, and then I will come back on, and we will look to do the strategy update and the outlook. In terms of our progress in the financial year, we have talked previously about Brilliant Basics and ensuring that we have a strong foundation for growth. I am very pleased with our progress in FY25.
It was a year of recovery and putting some of the basic principles of Motorpoint back in place post the COVID disruption that we suffered, whether that be supply or inflationary pressures, interest rate pressures. Despite those, some of those continuing in FY25, we have performed well, and more importantly, we've grown our volumes and we've taken market share, which obviously is something we're always trying to achieve. Just in terms of our key investment highlights, we have talked a long time about the growth potential of the business. The market does remain fragmented. We've had people exit the market after coming in and making quite a big disruptive influence on the market. That feels like that's now subsided, but we are continuing to be focused on growing the business profitably going forward. We do continue to have a very broad range of stock available nationally.
We have more stock now than we've had mostly in the past five years, and we are very pleased with how the supply dynamic is now shaping up going forward. Our approach to pricing has changed quite dramatically in the last 12-18 months. We're now far more automated in our pricing, using a pricing strategy rather than any specific opinion on price. The testing is done as we price the vehicle initially, and then the changes going forward based on what we know changes the run rate and make sure that we turn the cars as fast as we possibly can at the right profit levels. That leads us to continue to have one of the lowest days in stock in the industry with a leading stock turn. Our customer experience continues to be very strong. It does create a long-term brand loyalty, in our opinion.
It is an infrequent purchase for customers. It's very important that we give a great experience when we see them because we may not see that customer again for another three or four years. Our NPS, which suffered initially in the start of the year, has recovered dramatically through the second half of the year, which is a consequence of a lot of process review and why our NPS was not going very well in the first half of the year. I'm really pleased that we managed to turn that around in the second half, and we're in a good position again, in line with our long-term average. We do believe still that we have the best-in-class product in terms of the finance and the extras that we sell.
We always look to make sure we have the best offerings in that arena, whether it's the warranty product or the paint protection product. We continue to provide very good prices, and we make sure that they've got all of the facilities and features and benefits of any other product on the market, but at a lower price to encourage customers to take them up. Our digital platform, auction4cars.com, continues to sell our wholesale vehicles very profitably, which is a unique part of Motorpoint compared to our competitors. We continue to have a very strong fiscal responsibility around our balance sheet with high free cash flows and return on capital employed. We continue to return that capital to shareholders where we feel that it is excess.
As you will have seen on the R.S., we've reintroduced our dividend for the first time since 2019, giving an indication of our confidence going forward. I will just take you through our virtual circle. It remains at the heart of what we do. It is a key part of how we run the business. Certainly, from my perspective, when we make decisions, we focus on these three groups very strongly. Everything starts with our employees. If we get that bit right, it leads to a high level of customer satisfaction. If we get that bit right, it leads to a high level of repeat and recommend business, which generates higher returns for our shareholders, allowing us to then grow our business and create opportunities for our employees. It is a full circle and continues to turn. In terms of each one, the highlights for those in the year are employees.
We entered a new competition, the Sunday Times run, as the best company to work for, and we were named in the top 115 big places to work in the country. We are delighted to continue that that we have had previously with other surveys. Great to be in that top list, showing just how engaged our team are. In terms of customers, as I mentioned, the NPS recovered strongly in the second half and ended in Q4 on 84, which I think is very, very high. I think some people say that it is too high. It does not cost us money to remain at that level. It is just about making sure our team care about the customer and listen to the customer and remedy issues when they arise.
In terms of shareholders, obviously, we have had a much better financial performance, and we continue to increase the profitability and therefore return cash to our shareholders. In terms of our KPI progress in FY2025, you can see from this table, it gives you a lot of information. Our market share, which is one of the key points that we have had to look at in the past because volumes were declining, and then our relative performance to market becomes more important. Our 0-6 year old vehicles that we now stock are mostly still 0-4, but we do create some price point product in the 4-6 year old, and that continues to increase. The market share was up 12% in the year. As you can see, that leads to a revenue increase of 8%, so slightly lower average price product. The retail units sold at 14%.
Obviously, the total when you include Auction4cars up 12%, but it's good to get close to that GBP 60,000. Our record year was almost GBP 65,000, so we're still about 8% behind where we were pre-COVID. As noted, the supply disruption has been a huge influence on that. The Brilliant Basics has led to a good profitability level, as we've talked about, whether it be gross profit per retail unit. Focusing very hard on our training and our development of our sales teams, but also then our cost base as well. Those KPI improvements lead to an increased profitability of 4.1 given the disastrous financial performance last year when market shifts and supply were very difficult. That led to a big loss, but we're really pleased to be able to turn that around and make a decent profit in the year.
As you can see, the acquisition cost per customer, GBP 177, that's come down again. We have been far more diligent with our marketing spend, more targeted, using digital marketing more than brand marketing. That is helping us to bring that cost lower. We ended the year with GBP 6.6 million of cash, a little bit lower, but we had a few opportunities to take some extra stock at the end of the quarter. We did not want to miss those opportunities. We are not as concerned about the year-end cash position. It is mainly about having the right balance of stock that is available at the end of the year. You can see the market share outperformance I have referenced. As you can see from quarter one throughout the rest of the year, we saw strong gains. Quarter one, we were pretty low on stock.
As I mentioned, we feel that we've really got that supply under control now, and we're getting much more consistent levels of stock, which tells us that the market is normalizing in terms of supply. There will still be pockets of undersupply or oversupply. EV product continues to be quite volatile, although it is stabilizing to some extent. Petrol product is very stable, and diesel products probably increasing due to the scarce value of that product and not much of that being built at all. Seeing share gains, the 0-2 year old in particular, we've highlighted because that is our historic core market, the fleet market, and that has definitely really come through prior to that where the fleet market are not de-fleeting, and we do not see much of that product in the open market. It is good to see that coming back into the open market.
Brilliant Basics I mentioned. In terms of volume growth, we've got good strong growth in new and returning customers. Again, focusing on that NPS to drive that part of the business. We've also done a few stimulations in finance, so where we have a product that we think we've got a lot of this, what can we do? There's a big opportunity to buy, say, 1,000 cars from a manufacturer, then we will stimulate that product to gain good traction on the run rate and lower the finance rate on that product to 9.9. Currently, we have a 9.9% APR on EV product, which is post-year end, but we have done similar things through the year to try and stimulate that demand where we have a lot of the same thing.
In terms of the digital capability, the website is now rated one of the best in market in terms of speed and responsiveness, and we continue to focus on that brand awareness, our CRM journey, new technology being used there, embracing AI to drive that CRM harder. As I mentioned, customer acquisition cost is down, and our website and digital leads up 16% on the previous year. That is an area, that digital capability where we continued to invest through the downturn. We have got a very strong team in that part of the business, and that is reaping dividends for us now. In terms of our reset in FY2024, delivering our profitable growth. We have talked about margin improvement and stock turn. They are two key things. The margin and the stock turn are normally very closely correlated.
Using the data now to inform not only the buying, but also the pricing decisions and then the stock management decisions after that has become very important. We think there's more to go there, but we're certainly in a much better place than we were a couple of years ago, far more consistent, far more balanced in terms of our margin, less volatility in margin, certainly from the initial sort of 6-12 months that we've been using this in anger. Sell your car, we've continued to look at. It's not just sell your car, it's also the part exchanges. Cars sourced from customers continues to grow. It is our most profitable channel, as you would expect.
Therefore, we are pushing that quite hard and looking at how we can increase our own capacity to receive those vehicles and also how we stimulate the demand for that. We are not particularly marketing it just now, but we are planning to do that through the year. In terms of our cost base, we did reset our cost base in FY 2024, took some structural decisions there. We do continue to appraise all of our headcount requirements and ensuring that there are productive people coming in and really challenging hard where we do not see that efficiency of the team is at the right level. We have a good cross-section of stores where we can really KPI those requirements and understand deeply why we may need more or fewer people in a store. That works really well. Talked about the website.
In terms of what we've done in the website in the recent past, we've looked at actually driving customers to show them the stock that we've got coming. That has performed very well. We have at any one time maybe five or 600 vehicles that are still in preparation, but they're going to be on the website in the coming days. We would sell typically about 25% of that product in the week that it is released. That's coming soon. I think that just tells you customers aren't particularly bothered about photos all of the time. If they think that that car's a great price and it's the exact car and the exact color that I'm looking for, they will commit to that car at that point. We've got a new sell your car journey. As I mentioned, we're continuing to optimize that journey.
We saw quite a big dropout on customers in the sell your car journey. If we ask for their address when they just want a valuation and they want to book an appointment to sell their car to us, that has to be an easier and quick journey than we had. We have made some amends there. In terms of the ability to flexibly change the finance that you may want on your car, we have now added an ability to add in whatever ancillary products you may want to determine in your monthly payment. If you just buy the car, the payment is X. If you want to add a warranty to that, then the payment would be Y. It gives customer full transparency of what that cost per month is going to be.
In terms of our continuation around the digital aspect, Google launched vehicle listing ads. They are the sort of typical shopping banner at the top of the search engine that you would normally see, that the cars went on to that during the year. We were obviously in the beta for that, and we're quite pleased with the results of that. It's showing to be cheaper than the normal lead through Google. I'm sure they'll find that out and increase it, but we're quite happy with how we're performing on that. Our photography is good. Therefore, we would look better in that arena than we would on just a plain text search. In terms of paid social, we are able to use the AI technology to personalize those adverts to really be deeply linking into the customer, who they are and what they do.
I mentioned already CRM investment. We have invested in a new CRM platform. We moved away from the prior platform, which is very expensive and quite clunky to use, called Salesforce. Not surprising to anyone, I am sure. We are now in a much more agile platform that is easier to use and is also cheaper. We like that. In terms of SEO, content and PR, we continue to invest in that area, growing our reviews on our websites, making sure we have outreach through SEO and link building, but also then making sure that we are ranking really well for the keywords that we would like to rank for. We are continuously making improvements in that arena through all of the above.
We now also have a YouTube channel, which the subscribers are growing rapidly, and we have a lot of videos on there of our car reviews. Obviously, that is far more richer content and creates a stickier customer base to look at our reviews. Hopefully, at some point, we will become in their consideration pool to buy a car from us. Price is always something we talk about, the value. In terms of our mix of choice, value, and service, value continues to be something we really focus on. As you can see, we continue to be very aggressively priced in terms of Autotrader. We will always be below market pricing and making sure that we have got a competitive offering versus all of the competitors, whether it is an online competitor or a typical car supermarket business.
We will be a lower priced vehicle and usually at or lower priced finance. We are very pleased with how we look at that and how we continue to provide that. Even though our margins grow a bit, we continue to be the cheapest. We think that is important for the long-term health of the business. We continue to look for new stores. We opened Norwich during the year. We also refurbished Derby during the year after the flood a year ago. That store has now been massively expanded, and that should give us better opportunity in what was our first store. As you can see on the map on the left, we do still have quite a bit of white area.
I think it's becoming more difficult to find stores in terms of the planning consents and the ability to find the land in the first place at the right price. We are far more minded to recondition and refurbish properties than build from scratch. We know that we want to be in several of the big cities in the U.K. we still don't have presence in. We are still looking for that infill. We want to do one a year. If we could do two a year, we would. These do tend to be quite challenging to find. Obviously, we'll continue to focus on growing our sales with or without those, but it's better for us to be in all markets rather than some. I'll pass you over to Chris there for our financial highlights.
Okay. Thank you, Mark. Morning, everybody.
On financial highlights, I think in terms of the profit and loss, I think Mark's probably covered off actually in terms of the sort of the themes of the business and how we've been doing. You can see retail sales up 13.9%. It's probably fair to point out that the strong growth during the year did not moderate in the final quarter simply because we started to lapse in tougher comparatives at the back end of FY2024. Even though retail units are up almost 14%, total revenue is 8%. That is because of the mix of product that we were selling. Deflation or inflation generally remained pretty stable. Pretty comfortable with prices, subject to some of the comments Mark mentioned about EVs and small areas of diesel products. Gross margin, very pleased with the improvement, 7.7%. The gross profit, 24% increase.
That is fundamentally just driven by metal margin. I think we can really start to see the benefits now of data and the algorithms we are using, both in terms of buying the stock at the right price, then very importantly, reacting really quickly to make sure that we have it at a retail price on our website for customers. We look at that daily, which is much more dynamic than, say, where we were 18 months ago. I think that is really pain's evident. We are now seeing a healthy metal margin, which is relatively stable as well. I think in the past, we have seen peaks and troughs as we buy some good product, buy some bad products, whatever. I think it is much more stable now. More confidence as we go through.
We saw slight increases in prep and transport preparation, predominantly because of the age of the vehicles and mileage that we're preparing on the vehicles. We should see some benefits of that going forward, start to MOT our own cars nursery. We've now got MOT bays in a number of sites and continue to get TBSA approval to roll those out across the estate. That will help. Transport, I mentioned, is slightly up, but again, we're very conscious about overage stock and making sure that we get the stock in the right place where we believe it will sell because there are some geographical differences in terms of, let's say, an EV product or certainly higher cost product where it best sits across the country. That has helped and really lowered our overage stock.
Stock provisions came down quite significantly in the year because we're writing off less stock, which is really good news. Operating costs, Mark mentioned that we had a big reset with Brilliant Basics last year. We're very, very cost-conscious. That said, we've seen our FTEs grow to approximately 780 from just over 700 a year ago. That is predominantly in the stores and it's in the prep centers. That's because the volume is up 14%. Clearly, we need more people to either prepare the vehicle and sell the vehicle. We are pretty much signing off every employee now; it comes to me and Mark. We're keeping a really tight rein on that. We keep focusing on the costs. Rent rates, some of the central costs have increased just because of rent renegotiations, some of the rates, etc., that we see.
The local costs, which is really what we call the variable costs that we see in store and prep, is actually down year on year. I am really pleased about that. We have got a real focus with the managers across the whole business to make sure that I always say, and I have probably said it before on these presentations, treat Motorpoint's money as your own. I think that that does help over time when people do get into that mantra of thinking, "Well, if it was my money, would I spend it?" We have seen some really good decreases in energy costs, which is great. We are just getting people to be a lot more prudent and frugal about how they think about simple things like closing doors, turning lights off, etc. Also run car charges as well.
We're now sort of pushing customers to open banking solutions rather than us paying a small fee on car transactions. That has paid dividends to the P&L. Marketing, I think Mark's focused, as mentioned, we're spending about GBP 10 million, which is broadly similar to the previous year, but we're getting a better return because we're getting much better insight now in terms of marketing and what returns the best for us. That really has some good focus. Finance costs unfortunately remain high, GBP 9.4 million, GBP 7 million of that is stocking finance costs. If and when interest rates continue to fall, that number will fall off accordingly. We continue to monitor that. Just moving on to the balance sheet. You can see almost a doubling, actually, of fixed assets. Predominantly, that's Derby.
We spent about GBP 5 million on acquiring the freeholds, purchasing more land, and refitting the showroom post the flood 18 months ago. The store is great now. We've got more cars on pitch. We've got much better visibility from the main road as you enter Derby. Sales so far are encouraging. That's really good news. We're also investing in MOT equipment and ramps, as I mentioned before. We push through with that. Inventory has gone up from 100 to 150. We're more than happy that actually that has gone up. The fact that delays in stock continue to reduce supports that because we just need more stock to satisfy the demand. It's clearly out of Motorpoint cars. That's good news. Payables, you can see almost an identical movement, 107 up to 155.
That is simply because the stocking facilities, the amount that we have drawn down has gone up GBP 50 million, roughly GBP 74 million to GBP 122 million to support the inventory increase. Cash, I will come back to in a second. I will show you quite a simple sort of waterfall of how the cash has moved. Just finally, just a reminder, no structural tax. The good news is our banking facility with Santander is GBP 6 million overdrawn, GBP 40 million RTF. That has been increased by a further year up to June 2027. Coming on to the cash flow, hopefully this sort of simple waterfall explains it quite well. We have gone from GBP 9 million at the start of the year to GBP 6.6 million at the end of the year. EBITDA doubled from about GBP 11 million, GBP 11.5 million to GBP 24 million. That is obviously great news.
Hopefully that will continue as we grow profitability. CapEx, GBP 7.6 million, GBP 4.7 million, that was Derby. That is a big chunk. Interest, GBP 9.4 million, and I have already referred to that, lease payments, which sort of tie into the rents that is used to landlords, GBP 6.4 million. We have got GBP 8 million-GBP 8.5 million of share purchases, both from the buyback. As you know, we just started a further buyback in April, which is progressing well to buy another 3 million shares back out of the market and cancel. Also, GBP 4 million for the Employee Benefits Trust. The good news there is that is assessed by future savers you earn and share options with employees. We are now covered up to 2028. We are well ahead of ourselves and hopefully taking advantage of what we believe is a low share price or has been over the last 12 months.
Again, you can see quite significant outflow, but that's really giving security to the future of the business as well as the share buyback. Another positive improvement of around GBP 5 million on working capital. Moving on to finance commissions. I mean, clearly there's a lot of noise around this, and unfortunately, it's been dragging on for quite some time. Probably not a lot more I can say at this point to what's been said previously. I think as we all know, the Supreme Court reviewed the findings on the 3rd of April, that week in April, and we wait results. We believe back end of the summer into the autumn that we'll see on that and similarly any further guidance from the FCA. Our stand remains as before that we don't believe there's any liability to dealers and obviously Motorpoint.
The final point is about giving new disclosures to customers in terms of the amount of commission. We have had no adverse feedback around that. I think the summary for the year is no adverse impact on trade nor profits. We do not believe that any further liability will fall on Motorpoint. Capital allocation, this is a new slide, and hopefully it is quite helpful and I think quite simple as well. We have got policy aligned to strategy, and we want to reward shareholders. We have talked about the buyback. We have been introducing a progressive dividend policy. What we believe is a modest dividend this year of GBP 0.01 a share, but we will look at that going forward. Our priorities remain organic growth as our first priority.
Any excess cash that we have will go into growing the business, whether it be new stores, technological opportunities, or whatever they might be. Growing revenue, growing margins, saving costs would be obviously the priority. Anything that falls out after that, we will return to shareholders via dividends or buybacks, and we'll continue to monitor those as we go forward. Finally, acquisitions. We're not adverse to doing an acquisition, but I think as you all know, Motorpoint hasn't been the business. If something does come along at the right risk profile and there is logic and it's EPS driving, then clearly we would consider it. Nothing at the moment in that sphere. Finally, ESG. Again, good improvements here. I think we remain very focused.
We do get good feedback from stakeholders, I think, around some of our disclosures in the annual report historically and some of the things we have been saying in the market and what investors are telling us. As I mentioned, emissions scope one and two, mainly gas and electric, are down, and also business travel. We see 5% on a like-for-like basis. Waste is actually down 15%, 15.6% on prior years. We are focusing on that. That is around looking at things in terms of working with the managers, looking at how often pickups are done with stores, etc., and making sure we are efficient in all areas. From a people perspective, I think Mark has again mentioned the two real highlights here. We had a really, really good engagement score of 83%, which is well above the industry norm, which we conducted in January, February.
We are really pleased to be named at the top, well, top 115, a bit of a mouthful, best big place to work in 2025. Some really good things. Again, we continue behind the scenes to focus with our employees on engagement, making sure that we are meeting them face-to-face wherever we can. That is our team at much more of a focus now in terms of getting out there, talking to our people wherever they might be. We are focusing hard on learning and development. Again, and not least, focusing on diversity, equity, and inclusion. We slightly modified our policy, and that was approved by the board in March 2025. We continue to, I believe, focus on the right things in that area. Thank you. I will now pass you back to Mark.
Thank you, Chris.
Going into our strategy update and outlook, we are focused on profitable growth, as we've talked about. The key thing for us is that the headwinds that we've suffered pretty much since COVID, to be fair, a little bit of a lift in used car values post-that, but then a decline, which has caused us a lot of problems in the prior year. Good to see the vast now behind us. As I mentioned, the stability of pricing is as important as the increase in supply. Pricing is stable. It feels like that's on a good trajectory. We're seeing some strong, what we think could become really good tailwinds for us in terms of margin improvement as we use the data. We have more targeting and efficient marketing.
As the supply pressures ease, which we believe that they are becoming easier and it is a more normal supply chain now than we would have seen, which we have not really seen since pre-COVID. We are now able to access younger, lower mileage stock. We cap out the stock at around 40,000 mi, as I mentioned, and the preparation costs therefore are lower. The more that we source direct from customer, the lower our auction fees will be if we have to source the car from a third party. The market should continue to increase, we believe, given that new car registrations are better than what they were. We will not see a huge increase in registrations, but flat to up is good for us in terms of the market size that we have.
That should also include affordability, particularly with the Chinese manufacturers coming in with their EV product. The lowest price EV has just been launched at something like GBP 18,000. That BYD product, that looks like that is going to become the dominant player in the EV market, in the world, but also in the U.K. Very good product, and we are excited about that as well. Obviously interest rates, they have fallen through the year, and they are continuing to be predicted to fall. That is probably one of the biggest things that we suffered in the past two years, those rising interest rates through the monthly increase, really damaging consumer confidence and also making big ticket items harder to purchase, making the household budgets lower, and therefore also affecting our ability to sell vehicles. We get lower finance attachment, we get lower finance commissions.
All of those things we now feel have reversed, and what were headwinds could quite easily become tailwinds. We are certainly seeing signs that they are now becoming tailwinds, which makes us very excited to continue our growth journey and to do that profitably. In terms of a couple of areas where we focused on how we will accelerate our growth, we look to increase our supply channels. We have a couple of new supply channels that we are looking through. I think the biggest one though is the C2B one. We are looking to expand that, but also we have new relationships with providers, whether that is a manufacturer or a finance company or a third party that acquires cars from consumers. In terms of store openings, we have opened Norwich.
I mentioned earlier, we've got quite a few areas of the country where we're looking at, and we'd like to open another store this year if we can. In terms of data and AI, which you've mentioned, the dynamic and automated pricing approach to data, sorry, the data approach to pricing is very important in terms of our stability of margin. In terms of other parts that we're doing using the data, we are now allocating our vehicles to the correct preparation or retail location based on data as well. That's another algorithm that we're using. Again, that's not a manual decision anymore. It's still being tested and trialed and expanded. That again should improve the way that we do that.
We should therefore move cars less and remove a bit of resistance between the customer and the car because the car is in the right location based on the demand indicators we see. In terms of replacing our existing systems, we have a couple of systems, whether it be after-sales or our sales and customer service systems. They should all be replaced in the next year or two. We are excited about the efficiencies that could bring. We have already implemented, or are about to implement, a new finance system for the finance team. In terms of our brand, we continue to look at new channels to how to reach the consumers. There is probably less above the line brand at the moment. We think that we should focus our budgets far more on what can work today. Customers are only in the market once every four years.
I think that is a better use of our brand and making sure therefore that our website is best in class around the amount of research. Anyone looking for a car will and should see all of those search engines retrieving Motorpoint as a result based on our content and our link building and everything else that we have been doing in the background. In terms of technology, I mentioned the website, but we continue to optimize the functionality on there. Really looking at how we can continue to erode the link between the customer being on the website and the customer walking into the store.
We put a lot of personalization touches in there so that we know that customer is, when they come in, they can retrieve their search journey when they come into store if they've been on the website and make sure therefore that we can make that feel like a very seamless journey between online and offline. In terms of after-sales, we've talked a bit about that. We are now mostly completing all MOTs in-house. We were previously sending that work out to third parties. That will have a good impact on days in stock, but also on cost to prepare the vehicle because we can do them more cheaply ourselves. Service plans are more, indeed that work is about to launch in the summer.
We have taken quite a long time to get that off the ground because we were lacking in a specific system to be able to do that. We now feel that we have found our system and that is being trialed through the summer. In terms of our current trading outlook, as I mentioned, we have positive momentum. We have volume growth in April and May and profitable growth on that, so increased profits on last year. Metal margins continue to be stable to strengthening. We continue to look at our supply from third party, from customers, sorry, and to continue focusing on the NPS. We are really focusing on what makes a difference to the business today and can help us going forward. Our priority is profitable growth. We want to generate the cash. We want to grow our profitability. We want to grow our sales.
I think everything we do now, if it does not grow our profitability and make us more efficient or does not grow our sales volume, we should be challenging ourselves why are we doing that. We are laser-focused on growing sales, which should lead to growing profitability and growing cash generation. Therefore that will lead to growing returns to our shareholders. Okay, that is it. I think we will turn it over to questions.
Many thanks, Mark and Chris. Those in the audience, if you can please raise your hand if you would like to ask a question. Our first question comes from Alison Lygo at Deutsche Numis. Alison, please take yourself off mute and go ahead.
Morning. Thanks, guys. That was a super comprehensive presentation. A few questions for me. Would you prefer them one at a time or all in one go?
At our age, one at a time.
Yeah, okay, cool. First one is just around metal margins. Big step on in metal margins this year. How much further do you think there is to go in terms of metal margin improvements? Clearly, it's still tracking a little bit behind where it was at its sort of pre-COVID highs. How should we be thinking about the drivers of that?
We think there's a little bit of a way to go. I think historically it was something I would be very reluctant to say. I think that the tools that we're using now is giving me more confidence that we've got a really good handle on it. It's very transparent in the business as to how metal margin is working. I think the channel of supply is what drives it further.
I think in terms of days in stock, we're at a pretty fast pace. Preparation costs may come down slightly, but you get inflationary pressures offsetting that as well. We are looking at automation in preparation to try and reduce and be more accurate in our preparation. As an example, if you measure a tire using a gauge, you might decide to replace it. But if you measure it using a laser dedicated tire measurement system, then you may not need to replace it. There are tools like that that could have an impact on that, which would help margin. I think when we look across the water to places like Carvana, where they've got these absolutely unbelievable levels of margin, I do not think that's anywhere near realistic for the U.K. market. Because I think we're just a, we're a much smaller country. We're much more transparently competitive.
I think Autotrader plays a big part in that transparency as well, whereas they do not particularly have as much of that in the U.S. I think there is room to grow it. I think the supply channel is how we would grow it.
Great. That is clear and helpful. Thank you. The second one, just around sell your car on that channel, could you talk a bit about how you are finding the market and kind of the competitive environment there in terms of getting those cars from customers?
Yeah, so we have done a lot of work on the website to prepare us for becoming much better at that. I think one of the challenges that we have at the minute is the capacity constraint within stores because the stores, these cars obviously we normally buy from a big fleet company.
They will send 100 cars into us on 10 car transporters, and they are received into the preparation area. The back of house. The sell your car channel comes into the front of house. They come into the reception. The sales team are the only team in the front of house, of course. They are obviously trying to sell, not receive vehicles. We do have a bit of a conflict of interest in that the sales team need to be the ones who receive the vehicle. We are now trialing multiple ways of how can we grow our capacity and continue to sell the volume we want. What we do not want is sales teams not selling and receiving vehicles. Equally, we want them to be able to receive vehicles at the same time.
I think we'll probably put dedicated resources in to receive these vehicles and allow people to focus on the selling, to focus on the selling and the people who are not selling to focus on receiving the vehicles. That's a challenge. I think we haven't even marketed this above the line or even digitally particularly. We do think there's a lot of opportunity for us here. Like I said, we want to make sure we've got that capacity constraint resolved. I think we're further down the line than we were a few months ago. We are now looking to grow that capacity, make sure that there's no sort of blockers to it at all.
Grand. That's helpful. Thank you very much.
Finally, on the improvements that you've made to the site and your customer acquisition capabilities, how much of that have you built in-house versus working with partners? I guess interest in terms of when you look to the year ahead, are there any areas you're particularly focused on in terms of seeing an opportunity for improvement?
It's all internal. That is led by the Chief Digital Officer and the IT team. There is no third party. The only third party things we use are for things like CRM and leveraging that customer database. Going forward, I think one of the things is around making sure we're converting more. We do get a lot.
We get a lot more people researching and looking at the content on the website and saying, how do we continue to drive that journey for that customer who's just researching to converting then into an inquiry or better sale into a sale. I think it's more about optimizing the small parts of the website going forward. We're very happy with the look and feel of the website, the functionality. It's practically all now on one platform. There's a little bit of technical debt on the website, which we're now finishing off. Yeah, we're focusing on just speed improvements, the basic things that really drive the rankings of the website on the natural search engines because obviously then that's free.
That's great. Thank you very much, guys.
Thanks, Alison. Our next question comes from Darren Shirley of Shore Capital.
Darren, please take yourself off mute and go ahead.
Yeah, morning gents. I've got a few and I'll go one at a time as well. In terms of you talked about supply improvement. How would the customer see this in terms of on-site? Is it better availability? Is it broader availability? Is it pricing? How would a customer see that?
Yeah, I think it's better and broader. So not specifically pricing. I think that the price is, it's always the market price. But yeah, you will see rather than at times in the past, you only want geography or was it? 1,000 stock, but there may be 1,000 of the same thing. So this would now be a broader range of vehicles. If we do have 1,000 of one thing in stock, that would take our stock from five to six rather than remaining at five.
That depth and broadness of stock is one of the reasons why we continue to hold that four to six-year-old product because it provides a lower price point for customers. Quite a lot of our customers, when they first purchase from Motorpoint, are buying in the sort of sub GBP 12,000 bracket. It is very hard to get cars under four years or three years old to be under GBP 12,000 as well. Cars are still expensive. They still probably sit a little bit above where you would expect them to be. That is partly down to the supply restrictions that we have seen in the last couple of years. I think maybe the Chinese lower price brands coming in may actually give us a little bit of a flip there, that they will naturally compete downwards.
In terms of that improved availability, are you seeing that noticeably in EVs or in race vehicles?
Yeah, there's a lot of EV around. It's quite sensitive. If you think a lot of that product is quite new, historically, when let's say a new Fiesta comes out or a new one series comes out, we wouldn't really touch that car for the first sort of six months because you've only got the new car price to compare it against. It can be quite volatile in the first sort of when it first comes into the used car market. We have been quite cautious on EV. Right now, when we sit here today, we've probably got two and a half times the amount of EVs on the website that we had through last year. We are now more confident with it.
It is, like I said on the call, more stable than it has been. There are pockets of it. Particularly some of the higher-end EV products, anything over sort of GBP 30,000-GBP 40,000, and there is plenty of it over that, is quite hard work and can be quite volatile. It can be at GBP 5,000 and down GBP 5,000 the next month because it is quite a limited supply and not a massive market either. The run-of-the-mill EV stuff, the smaller vehicles, the sub GBP 30,000, they are far more easy to predict, and that is where we are focusing our attention.
Thank you. I was interested in your comments around sites still looking to expand, but maybe more around sites availability becoming a bit more constrained. Is that just the function of the nature of the site you are looking for?
Is there just a bit more competition in the market?
Yeah, I think it's the nature. We don't want to do anything really sub three acres. Three-acre plots don't grow on trees. Sometimes you're competing against drive-throughs and things like that, which are far more lucrative for landowners, I think, to get permission on. Hence, we're looking for sort of medium-sized boxes on big three-acre to four-acre plots, which are not easy to find. Like I said, we'd rather refurbish and build our own just because it's a lot easier and cheaper to do that. That's another constraint. We're not that. We can't just sit here for the next three years and not do anything. We'll have to do it at some point. If it's in the right market, the right location, the right opportunity, we will do it.
The purchase of the freehold at Derby slightly goes against where the business has been maybe for the past months since I've known it. Is that something specifically Derby, or is that something you've got to do?
Yeah, the lease was coming. There wasn't much time left on the lease. And we had to refurbish it for the flood damage. We want to make sure that we refurbish and then end the lease. We have got a tenure by purchasing it, but we will sell any stuff back at some point.
Okay.
Alex, we can hear quite a lot of background noise.
Sorry, Chris, that was on Darren's line, I think. I can hear his voice. Oh, sorry, sorry. Probably in the background. Our next question comes from.
Sorry, Alex.
I was just going to say on Derby, we have expanded the site and bought some land by acquiring the freehold. It also gives us, that gave us more scope to develop the site as well rather than being a tenant. That was the other reason. We will look to that going forward. Sorry, thank you.
No, thanks, Chris. Our next question comes from Carl Smith of Zeus Capital. Carl, if you could take yourself off mute and please go ahead. You there, Carl?
Hi, can you hear me now?
Yes.
There we go. Sorry about that. Yeah, morning. Just two questions. The first one, in terms of developing the after-sales capability, do you see this as a sort of revenue and profit opportunity, or do you see it more at the moment as a sort of increased cost and time efficiency sort of strategy?
What's sort of driving the rationale to go into that?
Yeah, it's hi, Carl. It's the latter. So it's more about how can we help our customers and keep control of the customer? Because in the past, we've not done it. So the customer leaves, buys a great price car, and then goes off to the main dealer to get it serviced. As you would if you were the main dealer, you would then try and get that customer to buy the next car from you. There's an element of that. I think the system that we're looking at to put in place to allow us to do this will also give us some good productivity statistics and things from our workshop, which we don't particularly historically focus on.
I think that'll be good for us now, given that we are looking to be as efficient as possible.
Yeah, it might also sort of speed preparation time on some things as well, or yeah.
More visibility on preparation, yeah.
The second question was quite a small one. I saw some asset disposals of home delivery vans. Is this something you'd sort of purely online sales being sort of less and less of a thing now?
Yeah, not really. This relates back to FY2024, and it was all part of the reset that we did in Brilliant Basics. We did have, at the time, a home delivery team, which we decided we didn't really need. If we did need to, we've got a transport provider anyway. The in-house people, they went as part of a program.
Obviously, the vans, we therefore no longer needed as well.
They went quite a long time ago. I think we think it's better as a variable cost than a fixed cost, given the scale of the demand.
Yeah, makes sense. Thank you.
Thanks, Carl. Our next question comes from David O'Brien at Equity Development. David, if you could take yourself off mute, please go ahead.
Yes, good morning and a great set of results. Fantastic recovery. Congratulations. My first question really is on the outlook. You seem reasonably upbeat. Obviously, you've had a very good start to the new financial year, which is excellent. If I look at the other commentators, bearing in mind that they're predominantly new car focused, they seem to have less of an optimistic outlook on used cars.
I mean, the difference in your view and what they're saying, is that just because you're ramping up the number of trade-ins, or are there other reasons in terms of availability of supply which gives you cause for optimism?
Yeah, I think their problems are more around new cars and the natural level of new car demand from consumers. There is new car demand, but more of it is going into fleet. Therefore, they then see distress on the value of those cars that they have to sell them at lower margins than they would like. Obviously, they had it away post-COVID when supply was restricted, and they could sell new cars at list or maybe even over list. That's all now gone away, and they've now got more new cars than they need for natural demand for consumers, and therefore they're having to push into fleet.
That is good news for us because we see more of the product that is nearly new coming through. We have cars on our website now which are pretty brand new with barely any miles in them at half the list price if you look on the website. We have not seen that for probably since pre-COVID. I think that is partly why we are optimistic. We have been supply constrained for some time. I think due to our internal actions around pricing and making sure we are ensuring that we secure the car as much as anything and then determining the price automatically, we are therefore getting more of the supply than we otherwise would. There is more of it available as well. We are getting good inbound supply offers from multiple channels, which tells us there are enough cars out there for us.
I think they've got the same channel opportunity. They've just probably got more new cars that restrict their ability to do what we can do on used because they've followed up on new, which means they've got less capital available.
That's encouraging. Thank you. If we turn to average days that vehicles are in stock, obviously it was encouraging to see you move that down to 42 days. Do you feel that there's further to go there, or would that impact profitability to take it lower?
Yeah, I think it's definitely a factor that the lower your stock, the faster your stock turn. We are looking to grow our stock levels. I expect that we may give away a day or two of that to have higher stock and greater choice for customers.
We are focused on stock turn because obviously that's very linked to the depreciation you suffer on the vehicles. We're not massively obsessed with can it get to 41. It sort of is what it is. If we run with higher stock and stock days start rising, we will probably reduce stock a bit and think, well, there's not much enough natural demand for this level of stock. Because we were so low last year, hence it was down again, it probably should be around 45 days. We're quite happy for it to be between 40 and 50, but the lower, the better, provided we've got the right choice and range and enough cars to sell as many cars as we want.
Great, thank you.
If we look at the proportion of EVs that you sold in the year just ended and the proportion that you expect to sell in the current year, how should that move?
We think it'll probably double in the year.
Okay. Is there an issue with depreciation, or are you buying at such a low level that it isn't an issue for you?
Yeah, like I said on the call, it is volatile. We have to be careful. We do not really touch many cars over GBP 35,000 anyway. Some of the more choppy EVs are over that level. We are cautious with them, I would say. They need more specific attention. We are not, as an example, we are not pricing the EVs using the algorithms at the moment because the data is just too unreliable.
We're not comfortable to sort of let that ride right now. I think that we will be more than happy to have as many EVs as possible, provided we think that they are stable and we are monitoring it closely enough. They definitely need their handholding even at this stage. There are, like I said, the potential for EVs could be quite different in a year's time when there's more and more of these Chinese manufacturers bringing EV product in. As I said on the call, they are good product, great quality, lower priced. You do fear for businesses like Tesla when you see the BYD product and how ambitious and aggressive they are looking that they're going to be. I think they'll be by far and away the biggest player.
Is there not some risk to depreciation on traditional ICE stock when you've got the Chinese invasion of BEVs?
Yeah, I think there is. Logically, there is. I agree. I think because they are reducing in number, then there's not 100% of the market willing to drive EVs yet. That shrinking petrol product primarily is probably going to have a growing demand because the shift to EV isn't as fast as people want it to be in terms of natural consumer behavior. I don't see that there's a massive risk there. Listen, one of the reasons we move the cars quickly is because we can see those patterns and therefore we suffer less. Obviously, the longer you hold it, the more you suffer the depreciation. That's one of the reasons we move things quickly to avoid that. Yeah, we're keeping a close eye on it.
I don't think there's a correction in petrol product due. If you look at the data that comes out of the market data, petrol product's quite robust. EV is the one that's falling. Even though price is stable, there's a few nuances within the data.
Okay, that's very helpful. Thank you. Final question. It's very encouraging that you're back on the dividend list. Well done. Could you say what your target dividend cover is, please, moving forward?
Yeah, it's in
something like that three-year period rather than immediately?
I think we'd just say that we'd look for it to be progressive. We'd like to increase it. Obviously, it's our first one for five years. We're a bit cautious about committing to specifics going forward. As profits grow, you can imagine that the dividend will grow. Yeah, we'll link it to hopefully EPS progression.
I mean, we do not want to say a number now just so people will write it down. We will see what we get to at half year in November. We would expect a further increase.
That is very helpful. Thank you.
Thank you.
Thanks, David. We have had a couple of written questions, which I will ask, and then I think we are done. One of the key investment propositions for motor retailers, and you in particular, is the phenomenal return on capital employed. You mentioned it in the first slide, Mark, but not subsequently. Is there any reason?
No, it is certainly something that we know is something we have always been focused on. It has been very difficult and frustrating to not have it at the historic levels. I think it was almost 100% at one point. We would be looking to get back progressively towards those levels.
I do not see in the long term why the business cannot do that. There is every reason it can do that. I think we just need, we are still sort of 8%, 9% below our peak volume with a higher cost base. It is going to take some time to be able to leverage that fully. That is our ambition to get back to that level. It is very important to me that that capital employed number, return on capital employed number, continues to grow.
Yeah, and it is still very healthy. The question reminds me, I wonder if we should have flagged it harder. I think it is a really good question and one I will take away, actually. Yeah, no, we are quite comfortable the way it is moving.
Thanks. Lastly, could you ever imagine bringing the financing of cars in-house like CarMax?
This is a very large cost to the business and therefore a large opportunity. If not, why not?
Yeah, I think that if you look at the returns that we generate due to our purchasing power in the U.K., we must be one of the biggest brokers in terms of car financing. So when we've looked at it, there wasn't much more skin to be had in the game by taking all of the risk yourself when you work out the team that you'd have to set up, the cost of funding, obviously then the risk profile, the capital reserves that you'd need to retain if you were a lender. No, it was something we have looked at. We've continued to look. We look every couple of. That much more to the P&L over time. Therefore we've opted out of it. It's very different in the U.S.
They do not have the ability to have the relationship that we have with Black Horse as an example, where we get a very healthy share of the commission. I think the shares of commission in the U.S. are a lot lower, and hence they have to go and do it themselves in order to get anywhere near a reasonable share.
Great. Thanks very much, Gents. That is it for questions. Mark, over to you for any closing comments.
Okay, yeah. Thank you, everybody, for listening. As I mentioned at the start, we are really focused on continuing to grow. We want to do that profitably. We believe that our low level of capital employed and our ability to leverage the cost base should lead to higher returns going forward. You can see that we are using that money when we do have that cash flow.
We are using it to buy back shares, and we're using it to pay dividends over and above what we need for our expansion plans for the business. Historically, the business has not needed capital to expand. We are a leasehold model, as you know, a low capital employed model. I do see that our returns to shareholders will continue to grow, something that I am very aligned to as well personally, as you know. We have had a good year. We are looking to have an even better year this year and continue on our path to recovery and back to the levels that we were. Thanks for your time and have a good day. Thank you.
Thank you.