Car dealership Motorpoint’s shares fell 6.5 per cent this morning as it warned half-year profits will fall below the £12m it earned last year.
The FTSE-listed retailer blamed “unusually high supply levels” for hurting margins, which means the firm’s half-year profit will drop below last year’s £11.9m.
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“Gross margin has performed below last year’s strong comparative period, impacted by unusually high supply levels,” chairman Mark Morris said.
“This margin pressure is expected to result in Motorpoint reporting a profit for the six months ending 30 September 2019 below the same period last year.”
Revenue rose over the first three months of the financial year, Morris added “despite the challenging consumer environment and ongoing uncertain political backdrop”.
Motorpoint said margins have strengthened in July so far, and maintained its full-year outlook.
The dealership said it will take more market share throughout the year as the wider market declines.
That was not enough to appease investors, though, and shares fell 6.5 per cent to 200p.
Broker Liberum maintained a 277p target price and a ‘buy’ rating on the stock, however, pointing to margins returning to normal seasonal levels.
“We understand that demand levels have been broadly consistent, with conversion rates in showrooms holding up,” the broker added. “Motorpoint has seen sales growth in the period, which we think suggests market share has been gained.
“It is difficult at this stage to identify if the return to more normal seasonal margins in July is a sustainable trend. We think that some of this is about the market, but some is also about Motorpoint focusing on stock discipline.”
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Overall Liberum called the trading update, issued ahead of today’s annual general meeting, a “reassuring” one.
Main image: Getty