REG - Motorpoint Group plc - Interim Results
29 November 2018
Motorpoint Group PLC
("Motorpoint", the "Company" or the "Group")
Interim Results for the six months to 30 September 2018
Continued progress, good financial performance
Motorpoint, the largest independent vehicle retailer in the UK, today announces its unaudited interim results for the six months ended 30 September 2018 (FY19 H1).
Financial highlights
· Revenue increased 9.4% to £528.6m (FY18 H1: £483.2m).
· Profit before taxation and exceptional items up 13.3% to £11.9m (FY18 H1: £10.5m).
· Profit before taxation up 22.7% to £11.9m (FY18 H1: £9.7m).
· Adjusted earnings per share increased 11.6% to 9.6p (FY18 H1: 8.6p).
· Gross Margin to adjusted operating expenses ratio increased to 146% (FY18 H1: 140%).
· Cash flow from operations conversion of 118% (FY18 H1: 201%).
· Interim dividend declared of 2.5p (FY18 H1: 2.0p), an increase of 25%.
Operational highlights
· Record levels of repeat customers, increasing to 29.5% of total customers, up from 25.1% in FY18.
· Net Promoter Score performance of 74% (FY18 H1: 77%).
· Peterborough Preparation Centre development on track for opening in early CY2019.
· Intention to extend share buy back programme, reflecting ongoing strong cash generation.
Mark Carpenter, Chief Executive Officer of Motorpoint Group PLC commented:
"Over the first half of the year, the Group has delivered a good trading performance and we are pleased with our continued progress. In spite of the challenging market backdrop, our value-orientated, customer-friendly proposition combined with the strength of our people and quality of our multi-channel offering, has enabled us to grow and to welcome record levels of repeat customers through our doors.
"In line with our site opening strategy we are in advanced discussions on several premises, we expect to be able to announce contractual completion for at least one of these in the near future. We are also excited about the opening of our new preparation centre in Peterborough, expected early in the new calendar year, which will increase the efficiency of the Group's operations and maximise retail space at our neighbouring sites in Peterborough and Chingford.
"We have closed the period with a strong cash and balance sheet position, with operating cash conversion for the first half again over 100%. As such we are extending our buyback programme, with £10m earmarked for share repurchases over the forthcoming year.
"Current trading is consistent with market expectations for the full year. However, we remain mindful of the current political uncertainty and, as per Motorpoint's normal seasonal trends, our fourth financial quarter is the most material of our full year's performance. We believe that our unrivalled choice of nearly new vehicles and ongoing dedication to Choice, Value and Service positions us strongly to take advantage of any market disruption, and to continue to deliver as the Car Buyers' Champion."
A meeting for analysts will be held at 10:30am today at the offices of FTI Consulting, 200 Aldersgate, London, EC1A 4HD.
Enquiries:
Motorpoint Group PLC
Mark Carpenter, Chief Executive Officer
James Gilmour, Chief Financial Officer
via FTI Consulting
FTI Consulting (Financial PR)
Jonathon Brill
Alex Beagley
James Styles
Fern Duncan
020 3727 1000
Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) prior to its release as part of this announcement.
Notes to editors
Motorpoint is the largest independent vehicle retailer in the United Kingdom. The Group's principal business is the sale of nearly-new vehicles, the majority of which are up to two years old and which have covered less than 15,000 miles. Motorpoint sells vehicles from brands representing over 95 per cent of new vehicle sales in the United Kingdom, with models from Ford, Vauxhall, Volkswagen, Nissan, Hyundai, Audi and BMW being amongst the top sellers. The Group operates from 12 retail sites across the United Kingdom; Derby, Burnley, Glasgow, Newport, Peterborough, Chingford, Birmingham, Widnes, Birtley, Castleford, Oldbury and Sheffield of which four have opened in the last three years; together with a national contact-centre dealing with online enquiries.
More information is available at www.motorpointplc.com and www.motorpoint.co.uk.
Cautionary Statement
This announcement contains unaudited information and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward looking statements can be identified by the fact that they do not relate only to historical or current facts. Undue reliance should not be placed on any such statements because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward looking statements. Motorpoint undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations.
INTRODUCTION
Motorpoint is the largest independent vehicle retailer in the United Kingdom. The Group's retail proposition continues to be 100% on nearly-new cars, the majority of which are up to two years old and which have covered less than 15,000 miles. Motorpoint sells vehicles from brands representing over 95% of new vehicle sales in the United Kingdom, with models from Ford, Vauxhall, Volkswagen, Nissan, Audi and BMW amongst the top sellers. The Group operates from 12 retail sites, of which four have opened in the last three years; together with a national contact-centre dealing with online enquiries. The Group also offers ancillary products to customers, including customer finance packages, extended warranties, insurance products and vehicle protection treatments.
In addition to sales of nearly-new vehicles, the Group also operates Auction4Cars.com, a business to business online auction platform for vehicles acquired through the Group's part-exchange offering which do not qualify for retail sale as they are outside of the Group's target vehicle age or mileage.
Our vision is to be the Car Buyer's Champion by offering unrivalled Choice, Value and Service. We achieve this through our focus on our breadth of stock, data driven approach to ensuring our pricing is keen and continued focus on innovation and delivering outstanding customer service. Our people are at the heart of our business, not least in ensuring the quality of the customer experience; this is why we are determined to continually focus on our team engagement.
FINANCIAL REVIEW
The six months ended 30 September 2018 saw the Group achieve revenue growth of 9.4% to £528.6m and adjusted profit before tax of £11.9m, a 13.3% improvement from the comparative period.
The Key Performance Indicators for the Group for the current period and comparative periods are outlined below.
Group KPI
6 months to 30 September 2018
6 months to 30 September 2017
Change
Revenue
£528.6m
£483.2m
+9.4%
Gross Margin
£40.5m
£38.2m
+6.0%
Operating profit before exceptional items
£12.7m
£11.0m
+15.5%
Operating profit
£12.7m
£10.2m
+24.5%
Gross Margin to adjusted operating expenses(1) ratio
146%
140%
+4.3%
Adjusted Profit Before Tax (2)
£11.9m
£10.5m
+13.3%
Profit Before Tax
£11.9m
£9.7m
+22.7%
Cash flow from operations
£15.0m
£20.5m
-26.8%
Cash flow from operations conversion(3)
118%
201%
-41.3%
Adjusted Earnings per Share (p) (4)
9.6
8.6
+11.6%
Number of sites
12
12
-
(1) Calculated as Gross Margin / (Operating expenses minus Exceptional items)
(2) Profit before tax after adding back exceptional items.
(3) Calculated as cash flow from operations divided by operating profit.
(4) Calculated by dividing the earnings excluding exceptional items attributable to equity shareholders by the number of ordinary shares in issue at the reporting date.
There have been no exceptional items in the period. The exceptional item of £0.8m in the prior period relates to the rebates received from a single supplier over the four years prior and was paid during FY18. Volume rebates from this supplier are an area of specific focus from HMRC across the industry. We have submitted a claim, and had a notice of appeal acknowledged, noting a reliance on an existing case brought with HMRC. We continue to monitor this case and industry developments with interest. Volume rebates received from this supplier in both FY18 and FY19 have been accounted for in line with HMRC assessment, despite our ongoing claim, with underlying gross margin being adjusted accordingly.
The Group generated strong cash flow from operations of £15.0m, equating to a Cash flow from Operations conversion of 118%, demonstrating the strength of Motorpoint's cash generative model.
The Group's banking facilities include a £20m facility provided by Santander UK PLC which was undrawn as at the reporting date. As at 30 September 2018, the Group was supported by stocking facilities provided by Lombard of £20m and Black Horse Limited of £70m. The Black Horse facility was extended by £5m in October 2018 to further support growth.
OPERATIONAL REVIEW
Motorpoint's operations are delivered through its estate of retail sites and its Motorpoint.co.uk and Auction4Cars.com websites, supported by a dedicated contact centre. The Company's strategy is threefold; (i) to grow in their local markets (ii) to increase nationwide sales through the contact centre, and (iii) to open new sites to continue the expansion to new markets around the UK.
Four of our sites, Birtley, Castleford, Oldbury and Sheffield, have opened in the last three years. These new sites continue to mature in line with our expectations. Our medium term target remains to open at least 20 sites in the UK and we continue to evaluate opportunities for our next retail site locations, with a pipeline of new site options at various stages of progress.
The preparation centre in Peterborough, a dedicated 10-acre facility, continues its development, and is anticipated to open early in 2019. This facility will free up prime retail space from our existing Peterborough retail site in the near term, and support other neighbouring retail sites in the medium term.
Since our last update, the Worldwide Harmonised Light Vehicle (WLTP) programme has been introduced, leading to a short period of widespread supply disruption for new cars in the UK. The impact of the WLTP changes on the UK motor retail industry have been well documented. To date it has not impacted Motorpoint in any meaningful way, though some future impact on stock availability is possible. Our current stock position and the availability of further stock in the market is strong, positioning us well for this time of year.
DRIVING DREAMS
All of Team Motorpoint, regardless of role, is focused on a common goal, to drive dreams for our three key stakeholders: our employees; our customers; and our shareholders. Our vision and supporting business plans are aligned to this but what really brings the virtuous circle to life is the way in which we do things. All of our actions are underpinned by a common mind-set, our behaviours and our values of being proud, supportive, honest and happy.
Our values are our DNA and we are immensely proud of them. They epitomise what Motorpoint is about and are a very powerful tool in driving our engagement and performance levels.
TEAM
We champion employee engagement and believe that by ensuring our values are part of our everyday activity across the business, we will be successful in motivating and empowering our employees. This in turn will result in continual improvement in the customer experience that we deliver.
This culture runs throughout the business and is evidenced by Motorpoint being named as one of The Sunday Times Top 100 Mid-Sized Companies to Work For over the last four consecutive years. We were very proud to achieve our highest placing of 42 in the mid-sized companies section in the 2018 survey.
To support our team engagement we continue to offer a number of share schemes including an annual Performance Share Plan for senior staff, a Share Incentive Plan and an annual Sharesave scheme.
CUSTOMERS
The second part of the Virtuous Circle focuses on the customer and our vision to be the Car Buyers' Champion, by offering unrivalled Choice, Value and Service.
Our key measures of service are NPS (Net Promoter Score) and our Feefo and Google ratings, and to ensure our level of customer service is appropriate all commissions and bonus schemes throughout the business are tied to customer satisfaction.
Metric
6 months to
30 September 2018
12 months to
31 March 2018
6 months to
30 September 2017
NPS
74%
77%
77%
Feefo
4.5/5
4.6/5
4.6/5
4.6/5
4.6/5
4.6/5
Customer satisfaction dipped during the period from last year's record highs, in particular during the summer months. We responded by making several fundamental operational changes and have seen NPS climb significantly since the end of the period.
Our focus on the customer experience is evidenced by our record-breaking level of repeat business we generate, measured as a customer making a second purchase within a four year window, which increased to 29.5% of total customers, up from 25.1% in H1 FY18.
DIVIDEND
The Group is declaring a 25% increase in the interim dividend to 2.5p per share in respect of FY19 (FY18: 2.0p). The interim dividend for FY19 will be paid on 15 March 2019 for those shares recorded on 8 February 2019.
RECENT MARKET TRENDS
Motorpoint's core proposition is the sale of nearly new cars, the vast majority of which are up to two years old and have covered fewer than 15,000 miles.
We monitor available market statistics, notably from the SMMT, which give us transaction volumes for 0-3 year old cars but do not include recorded mileage. We therefore use the transaction volumes alone as a proxy for our available market.
We continue to predicate our business model on being relevant in a breadth of economic conditions. Despite the current uncertain market conditions and a challenging consumer environment we continue to believe that where consumer confidence is unsettled there will be increasing pressure on the weaker players in the market, allowing us to win market share through our focus on Choice, Value and Service.
OUTLOOK
Current trading is consistent with market expectations for the full year. However, we remain mindful of the current political uncertainty, and that the potential outcomes from the Government's Brexit negotiations could influence our future performance in unpredictable ways. We are particularly mindful of the potential impacts on stock supply and general customer confidence, resulting from, inter alia, exchange rate volatility, new import tariffs or other supply chain friction, employment and inflation or interest rate changes. As per Motorpoint's normal seasonal trends, our fourth financial quarter is the most material of our full year's performance, and is therefore a key focus to ensure we remain on track.
We believe our unrivalled choice of nearly new vehicles and ongoing dedication to Choice, Value and Service positions us strongly to take advantage of any market disruption, and to continue to deliver as the Car Buyers' Champion.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE FY19 INTERIM RESULTS
The Directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
A list of current Directors and their biographies is maintained on the Motorpoint Group PLC website www.motorpointplc.com
By order of the Board
Mark Carpenter James Gilmour
Chief Executive Officer Chief Financial Officer
28 November 2018 28 November 2018
Condensed Consolidated Income Statement
For the six months ended 30 September 2018
Unaudited Six Months ended 30 September 2018
Unaudited Six Months ended 30 September 2017
Audited Year ended 31 March 2018
Note
£m
£m
£m
Revenue
5
528.6
483.2
991.2
Cost of sales
(488.1)
(445.0)
(914.8)
Gross profit
40.5
38.2
76.4
Operating expenses
(27.8)
(28.0)
(55.1)
Operating profit
12.7
10.2
21.3
Operating profit before exceptional tems
12.7
11.0
22.1
Exceptional items
6
-
(0.8)
(0.8)
Finance costs
7
(0.8)
(0.5)
(1.3)
Profit before taxation
11.9
9.7
20.0
Taxation
8
(2.4)
(1.9)
(4.0)
Profit and total comprehensive
income for the period/year
attributable to equity holders of
the parent
9.5
7.8
16.0
Earnings per share
Basic
Diluted
10
10
9.6p
9.6p
7.8p
7.8p
16.0p
15.9p
Adjusted earnings per share
Basic
Diluted
10
10
9.6p
9.6p
8.6p
8.6p
16.8p
16.7p
The Company's activities all derive from continuing operations.
The Company has no other comprehensive income. Total comprehensive income for the period/year is equal to the profit for the financial period/year and is all attributable to the shareholders of the Company.
Condensed Consolidated Balance Sheet
As at 30 September 2018
30 September 2018 (unaudited)
30 September 2017 (unaudited)
31 March 2018 (audited)
Note
£m
£m
£m
ASSETS
Non-current assets
Property, plant and equipment
11
7.5
5.5
5.4
Deferred tax asset
0.5
0.4
0.5
Total non-current assets
8.0
5.9
5.9
Current assets
Inventories
93.2
90.4
104.0
Trade and other receivables
12
11.3
8.9
12.9
Cash and cash equivalents
14.9
21.4
15.6
Total current assets
119.4
120.7
132.5
TOTAL ASSETS
127.4
126.6
138.4
LIABILITIES
Current liabilities
Trade and other payables
13
(98.4)
(101.5)
(108.4)
Current tax liabilities
(2.5)
(1.8)
(2.0)
Total current liabilities
(100.9)
(103.3)
(110.4)
NET CURRENT ASSETS
18.5
17.4
22.1
Non-current liabilities
Trade and other payables
14
(0.9)
(3.4)
(1.6)
Total non-current liabilities
(0.9)
(3.4)
(1.6)
TOTAL LIABILITIES
(101.8)
(106.7)
(112.0)
NET ASSETS
25.6
19.9
26.4
EQUITY
Share capital
1.0
1.0
1.0
Capital reorganisation reserve
(0.8)
(0.8)
(0.8)
Retained earnings
25.4
19.7
26.2
TOTAL EQUITY
25.6
19.9
26.4
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 September 2018
Six Months Ended 30 September 2018 (Unaudited)
Note
Share capital
£m
Retained earnings
£m
Capital Reorganisation Reserve
£m
Total equity
£m
At 1 April 2018
1.0
26.2
(0.8)
26.4
Profit and total comprehensive income for the
period
-
9.5
-
9.5
IFRS 2 Share Based Payment
-
-
-
-
Buy back and cancellation of shares
-
(5.8)
-
(5.8)
Final dividend for the year ended 31 March 2018
9
-
(4.5)
-
(4.5)
At 30 September 2018
1.0
25.4
(0.8)
25.6
Six Months Ended 30 September 2017 (Unaudited)
Note
Share capital
£m
Retained earnings
£m
Capital Reorganisation Reserve
£m
Total equity
£m
At 1 April 2017
1.0
14.5
(0.8)
14.7
Profit and total comprehensive income for the period
-
7.8
-
7.8
IFRS 2 Share Based Payment
-
0.3
-
0.3
Final dividend for the year ended 31 March 2017
9
-
(2.9)
-
(2.9)
At 30 September 2017
1.0
19.7
(0.8)
19.9
Year Ended 31 March 2018 (Audited)
Note
Share capital
£m
Retained earnings
£m
Capital Reorganisation Reserve
£m
Total equity
£m
At 1 April 2017
1.0
14.5
(0.8)
14.7
Profit and total comprehensive income for the year
-
16.0
-
16.0
IFRS 2 Share Based Payment
-
0.7
-
0.7
Buy back and cancellation of shares
-
(0.1)
-
(0.1)
Final dividend for the year ended 31 March 2017
-
(2.9)
-
(2.9)
Interim dividend for the year ended 31 March 2018
9
-
(2.0)
-
(2.0)
At 31 March 2018
1.0
26.2
(0.8)
26.4
Condensed Consolidated Cash Flow Statement
For the six months ended 30 September 2018
Note
Unaudited Six Months ended 30 September 2018
Unaudited Six Months ended 30 September 2017
Audited Year ended 31 March 2018
£m
£m
£m
Cash flows from operating activities
Cash generated from operations before exceptional items
15
15.0
20.5
21.0
Cash flows from exceptional items
15
-
-
(0.8)
Cash generated from operations
15.0
20.5
20.2
Interest paid
(0.8)
(0.5)
(1.3)
Income tax paid
(1.9)
(1.9)
(3.9)
Net cash generated from operating activities
12.3
18.1
15.0
Cash flows from investing activities
Purchases of property, plant and equipment
(2.7)
(0.7)
(1.3)
Transactions with related parties
-
(0.4)
(0.4)
Net cash (used in) / from investing activities
(2.7)
(1.1)
(1.7)
Cash flows from financing activities
Final dividend for the year ended 31 March 2017
9
-
(2.9)
(2.9)
Interim dividend for the year ended 31 March 2018
9
-
-
(2.0)
Final dividend for the year ended 31 March 2018
9
(4.5)
-
-
Payments to acquire own shares
(5.8)
-
(0.1)
Net cash used in financing activities
(10.3)
(2.9)
(5.0)
Net (decrease)/ increase in cash and cash equivalents
(0.7)
14.1
8.3
Cash and cash equivalents at the beginning of the period
15.6
7.3
7.3
Cash and cash equivalents at end of period/year
14.9
21.4
15.6
Net cash and cash equivalents comprises:
Cash at bank
14.9
21.4
15.6
The notes form an integral part of these Condensed Consolidated Interim Financial Statements.
NOTES TO THE SET OF FINANCIAL INFORMATION
1. Basis of Preparation
Motorpoint Group PLC ('the Company') is incorporated and domiciled in the UK. The address of the registered office is Chartwell Drive, West Meadows Industrial Estate, Derby, DE21 6BZ. The Condensed Consolidated Interim Financial Statements of the Company as at and for the six months ended 30 September 2018 comprise the Company and its subsidiaries, together referred to as the "Group".
The Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim financial statements. The Condensed Consolidated Interim Financial Statements for the six months ended 30 September 2018 are unaudited but have been reviewed by the auditors.
New accounting standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim financial statements are the same as those set out in the Group's annual financial statements for the year ended 31 March 2018, except for the adoption of new standards effective as of 1 January 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not effective.
The Group applies, for the first time, IFRS 15 "Revenue from contracts with customers" and IFRS 9 "Financial instruments". The nature and effect of these changes are disclosed in Note 19. Several other amendments and interpretations apply for the first time in 2018, but do not have an impact on the condensed consolidated interim financial statements of the Group.
New accounting standards not adopted by the Group
IFRS 16 "Leases" will be effective for the year ending 31 March 2020 and has not been early adopted by the Group. The Group has a portfolio of leased properties; the minimum lease commitment on these at the financial year end is disclosed in Note 26 of the 2018 Annual Report.
On the adoption of IFRS 16, lease agreements will give rise to both a right-of-use asset and a lease liability for future lease payables both of which will have a material impact on the financial statements. The right-of-use asset will be depreciated on a straight-line basis over the life of the lease. Interest will be recognised on the lease liability, resulting in a higher interest expense in the earlier years of the lease term. The total expense recognised in the Income Statement over the life of the lease will be unaffected by the new standard. However, IFRS 16 will result in the timing of lease expense recognition being accelerated for leases which would be currently accounted for as operating leases.
There will be no impact on cash flows, although the presentation of the Cash Flow Statement will change significantly, with an increase in cash inflows from operating activities being offset by an increase in cash outflows from financing activities. The Group also plans to take advantage of the following practical expedients in adopting IFRS 16:
- application of a single discount rate to a portfolio of leases with similar characteristics; and
- electing not to apply IFRS 16 requirements to leases with a lease term that ends within 12 months of the date of initial application.
Significant work has been completed to date, including collection of relevant data and the determination of relevant accounting policies. The Group intends to apply the fully retrospective approach on transition and will restate comparatives. Given the complexities of IFRS 16 and the material sensitivity to key assumptions, such as discount rates, it is not yet practicable to fully quantify the effect of IFRS 16 on the financial statements of the Group.
2. Statement of Compliance
These Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union. The financial information included does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ('the Act') and do not include all the information required for full annual financial statements. Accordingly, they should be read in conjunction with the Annual Report and Financial Statements of Motorpoint Group PLC for the year ended 31 March 2018 which are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. These condensed consolidated interim financial statements were approved by the Board of Directors on 28 November 2018.
3. Significant Accounting Policies
The same accounting policies, presentation and methods of computation which were followed in the preparation of the Annual Report and Financial Statements for Motorpoint Group PLC for the period ended 31 March 2018 have been applied to these Condensed Consolidated Interim Financial Statements where applicable. The accounting policies and details of new standards adopted in the year ended 31 March 2018 are listed in the Motorpoint Group PLC Annual Report and Financial Statements on pages 66-70. The accounting policies and details of new standards adopted in the six months ended 30 September 2018 are disclosed in Note 19.
4. Comparative Figures
The comparative figures for the financial year ended 31 March 2018 are extracted from the Motorpoint Group PLC Annual Report and Financial Statements for that financial year. The accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Act.
The comparative figures for the six month period ended 30 September 2018 are as reported in the prior year and were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union.
5. Segment Reporting and Revenue
The Company's reportable operating segment is considered to be the United Kingdom operations. The Company's chief operating decision maker is considered to be the Board of Directors.
Revenue represents amounts chargeable, net of value added tax, in respect of the sale of goods and services to customers. Revenue is measured at the fair value of the consideration receivable, when it can be reliably measured, and the specified recognition criteria for the sales type have been met.
(a) Sales of motor vehicles
Revenue from sales of motor vehicles is recognised when the vehicle has been collected by the customer and the risks and rewards of ownership have passed.
(b) Sales of motor related services and Commissions
Motor related services sales include commissions on finance introductions, extended guarantees and vehicle asset protection as well as the sale of paint protection products. Sales of paint protection products are recognised when the product is supplied to the customer.
Vehicle extended guarantees and asset protection (gap insurance) where the Group is not contractually responsible for future claims, are accounted for by recognising the commissions attributable to Motorpoint at the point of sale to the customer.
(c) Deferred guarantee Income
Vehicle extended guarantees where the Group is contractually responsible for future claims are accounted for by deferring the guarantee income received, along with direct selling costs, and then releasing the income on a straight line basis over the remaining life of the guarantee. Costs in relation to servicing the extended guarantee income are expensed to the income statement as incurred. The group has not sold any of these policies in the current or prior period but continues to release income in relation to legacy sales.
Six Months ended 30 September 2018
Six Months ended 30 September 2017
Year ended 31 March 2018
£m
£m
£m
Revenue from sale of motor vehicles
505.1
459.9
945.6
Revenue from motor related services and commissions
21.8
21.7
42.3
Deferred Guarantee Income
1.7
1.6
3.3
Total Revenue
528.6
483.2
991.2
6. Exceptional Items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature and/or amount.
Six Months ended 30 September 2018
Six Months ended 30 September 2017
Year ended 31 March 2018
£m
£m
£m
VAT liability
-
0.8
0.8
-
0.8
0.8
There have been no exceptional items in the period. The exceptional item of £0.8m in the prior period relates to a VAT assessment by HMRC over rebates received from a specific supplier over a period of four years. The VAT charge has been paid in FY18. Volume rebates from this supplier are an area of specific focus from HMRC across the industry. We have submitted, and had a notice of appeal acknowledged, with HMRC, noting a reliance on an existing case brought with HMRC. We continue to monitor this case and industry developments with interest.
7. Finance Cost
Six Months ended 30 September
2018
Six Months ended 30 September 2017
Year ended 31 March 2018
£m
£m
£m
Interest on bank borrowings
-
-
0.1
Interest on stocking finance facilities
0.8
0.5
1.1
Other interest payable
-
-
0.1
Total finance costs
0.8
0.5
1.3
8. Taxation
The tax charge for the period is provided at the effective rate of 20% (FY18 H1: 20%) representing the best estimate of the average annual tax rate for the full year profit.
9. Dividends
Six Months ended 30 September 2018
Six Months ended 30 September 2017
Year ended 31 March 2018
£m
£m
£m
Final dividend for the year ended 31 March 2017
-
2.9
2.9
Interim dividend for the year ended 31 March 2018
-
-
2.0
Final dividend for the year ended 31 March 2018
4.5
-
-
Total dividends
4.5
2.9
4.9
10. Earnings per Share
Basic and diluted earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of ordinary shares at the end of the period. Adjusted earnings per share are calculated on the same basis but adjusting earnings attributable to equity shareholders for exceptional items.
Six Months ended 30 September 2018
Six Months ended 30 September 2017
Year ended 31 March 2018
Profit Attributable to Ordinary Shareholders (£m)
9.5
7.8
16.0
Exceptional Items (£m)
-
0.8
0.8
Adjusted Profit Attributable to Ordinary Shareholders (£m)
9.5
8.6
16.8
Weighted average number of ordinary shares in Issue ('000)
98,937
100,194
100,193
Earnings per share (pence)
9.60
7.78
15.97
Adjusted Earnings per share (pence)
9.60
8.58
16.77
Diluted Number of Shares in Issue ('000)
99,272
100,341
100,556
Diluted Earnings per share (pence)
9.57
7.77
15.91
Adjusted Diluted Earnings per share (pence)
9.57
8.57
16.71
The difference between the basic and diluted weighted average number of shares represents the dilutive effect of the SAYE scheme. This is shown below.
The shares for the SIP scheme were purchased ahead of issue and the PSP has performance criteria which have not been met as at the date of these interim financial statements so the options are not yet dilutive.
Six Months ended 30 September 2018
Six Months ended 30 September 2017
Year ended 31 March 2018
Weighted average number of ordinary shares in Issue ('000)
98,937
100,194
100,193
Adjustment for share options ('000)
335
147
363
Weighted average number of ordinary shares for diluted earnings per share ('000)
99,272
100,341
100,556
11. Property, plant and equipment
WIP
Land
Short term leasehold improvement
Plant and machinery
Fixtures and fittings
Office equipment
Total
£m
£m
£m
£m
£m
£m
£m
At 1 April 2018
Cost
-
1.7
5.2
1.0
1.0
2.5
11.4
Accumulated depreciation
-
-
(2.7)
(0.8)
(0.6)
(1.9)
(6.0)
Net book value
-
1.7
2.5
0.2
0.4
0.6
5.4
Opening net book value
-
1.7
2.5
0.2
0.4
0.6
5.4
Additions
1.9
-
0.5
0.1
0.1
0.1
2.7
Disposals
-
-
-
-
-
-
-
Depreciation
-
-
(0.3)
(0.1)
(0.1)
(0.1)
(0.6)
Closing net book value
1.9
1.7
2.7
0.2
0.4
0.6
7.5
At 30 September 2018
Cost
1.9
1.7
5.7
1.1
1.1
2.6
14.1
Accumulated depreciation
-
-
(3.0)
(0.9)
(0.7)
(2.0)
(6.6)
Net book value
1.9
1.7
2.7
0.2
0.4
0.6
7.5
12. Trade and other receivables
30 September 2018
30 September 2017
31 March 2018
Due within one year
£m
£m
£m
Trade receivables
6.6
4.3
6.5
Other receivables
0.2
-
0.8
Prepayments
3.2
3.8
4.4
Accrued income
1.3
0.8
1.2
11.3
8.9
12.9
The Directors' assessment is that the fair value of trade and other receivables is equal to the carrying value.
13. Trade and other payables due less than 1 year
30 September 2018
30 September 2017
31 March 2018
£m
£m
£m
Trade payables
- Trade creditors
- Stocking finance facilities
8.8
65.4
11.0
70.0
13.8
69.0
Other taxes and social security
- VAT payable
- PAYE/NI payable
4.7
0.6
2.6
0.7
4.5
0.6
Accruals
16.4
13.8
17.0
Deferred extended guarantee income
2.5
3.4
3.5
98.4
101.5
108.4
The Directors' assessment is that the fair value of trade and other payables is equal to the carrying value.
14. Trade and other payables due over 1 year
30 September 2018
30 September 2017
31 March 2018
£m
£m
£m
Deferred extended guarantee income
0.9
3.4
1.6
0.9
3.4
1.6
The Directors' assessment is that the fair value of trade and other payables is equal to the carrying value.
15. Cash flow from operations
Six Months ended 30 September 2018
£m
Six Months ended 30 September 2017
£m
Year ended 31 March 2018
£m
Profit for the year, attributable to equity shareholders
9.5
7.8
16.0
Adjustments for:
Taxation charge
2.4
1.9
4.0
Finance income
-
-
-
Finance costs
0.8
0.5
1.3
Operating profit
12.7
10.2
21.3
Share Based Compensation Charge
-
0.3
0.7
Exceptional items charged to operating profit
-
0.8
0.8
Depreciation charge
0.6
0.6
1.3
Cash flow from operations before movements in working capital and cash flow on exceptional items
13.3
11.9
24.1
Decrease/(Increase) in inventory
10.8
8.0
(5.6)
Decrease in trade and other receivables
1.6
0.5
(3.5)
(Decrease)/Increase in trade and other payables
(10.7)
0.1
6.0
Cash flow from operations before exceptional items
15.0
20.5
21.0
Payments in respect of exceptional items
-
-
(0.8)
Cash generated from operations
15.0
20.5
20.2
16. Share buybacks
Movements in the issued share capital during the period are shown in the table below:
30 September 2018
Shares '00030 September 2018
£m31 March 2018
Shares '00031 March 2018
£mShares in issue at start of period / year
100,154
1.0
100,194
1.0
Shares purchased for cancellation in the period / year
(2,516)
-
(40)
-
Shares in issue at end of period / year
97,638
1.0
100,154
1.0
The total cost of shares purchased for cancellation as shown in the Statement of Changes in Equity was £5.8m (FY18 H1: £nil).17. Related Parties
During the period ended 30 September 2018 rental payments totaling £1.1m (FY18 H1: £1.4m) were due to Shoby Properties Limited, a related party and none of this was outstanding as at the 30 September 2018 (FY18 H1: £0.5m).
18. Risks and uncertainties
There are certain risk factors which could result in the actual results of the Group differing materially from expected results. These factors include: failure to deliver on choice, value and service, a negative implication to the Motorpoint brand and customer perception, inability to maintain relationships with suppliers, fluctuation on exchange rate having an impact on vehicle pricing, economic conditions impacting trading, market driven fluctuations in vehicle values, litigation and regulatory risk, failure of Group information and systems, availability of credit and vehicle financing.
All other principal risks are consistent with those detailed in the Motorpoint Group PLC Annual Report and Financial Statements. The Board continually reviews the risk factors which could impact on the Group achieving its expected results and confirm that the above principal factors will remain relevant for the final six months of the Financial Year ended 31 March 2019.
19. Changes in accounting policies
This note explains the impact of the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on the Group's financial statements that have been applied from 1 April 2018.
Impact on the financial statements
As a result of the changes in the entity's accounting policies, prior year financial statements have not had to be restated. As explained in the note below, IFRS 9 and IFRS 15 were adopted without restating comparative information.
IFRS 9 Financial Instruments - Impact of adoption
IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement of financial assets and financial liabilities, de-recognition of financial instruments, impairment of financial assets and hedge accounting.
The adoption of IFRS 9 Financial Instruments from 1 April 2018 resulted in changes in accounting policies but no adjustments to the amounts recognised in the financial statements.
IFRS 9 Financial Instruments - Financial assets Impact of Adoption
IFRS 9 classifies assets according to the business model for their realisation, as determined by the expected contractual cashflows. This classification determines the accounting treatment, and the new classification under IFRS 9 is by reference to the accounting treatment i.e. amortised cost, fair value through other comprehensive income or fair value through profit and loss. No restatement is required in order to comply with IFRS 9.
The carrying value of certain financial assets has changed as they are now measured on an expected credit loss approach rather than the incurred loss approach as applied under IAS 39. Trade and other receivables do not contain a significant financing element and therefore expected credit losses are measured using the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from the initial recognition of the receivables. The Group has quantified the adjustment necessary to comply with IFRS 9 for the 2018 financial year and have concluded that due to its amount being immaterial then no restatement is necessary to the financial statements for the year ended 31 March 2018. No restatement is required in order to comply with IFRS 9 as this is not expected to have a material impact on the condensed consolidated interim financial statements.
IFRS 9 Financial Instruments - Financial liabilities Impact of Adoption
IFRS 9 largely retains the classification requirements of IAS 39 so there are not expected to be any material differences.
IFRS 9 Financial Instruments - accounting policies applied from 1 April 2018
Financial assets
Recognition and initial measurement
Trade receivables are initially recognised when they originated. All other financial assets are initially recognised when the Group becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for a financial asset not at fair value reported in profit or loss, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
Classification and subsequent measurement
A financial asset is classified either as being; measured subsequently at fair value (either through other comprehensive income or through profit or loss), or measured at amortised cost. The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.
All financial assets of the Group are classified as measured at amortised cost. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value reported in profit or loss:
• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairments are recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss.
Impairment of financial assets
The Group recognises loss allowances for expected credit losses (ECL) on financial assets measured at amortised cost. ECL are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). An assessment of the ECL is calculated using a provision matrix model to estimate the loss rates to be applied to each trade receivable category.
ECL are discounted at the effective interest rate of the financial asset. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.
IFRS 15 Revenue from contracts with customers - Impact of adoption
The Group has adopted IFRS 15 and has undertaken a detailed review of its revenue recognition policies. The main areas affected have been considered in further detail below.
IFRS 15 supersedes IAS 11 "Construction contracts", IAS 18 "Revenue" and related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
The Group has adopted IFRS 15 using the fully retrospective method of adoption. There was no impact on revenue, profit after tax or retained earnings on adoption of IFRS 15.
Sale of motor vehicles
For the sale of motor vehicles, revenue is currently recognised when vehicles have been supplied. Under IFRS 15, revenue will be recognised when a customer obtains control of the goods and the Group's assessment indicates that this will not result in any change to current practice and therefore no adjustment will be required.
Sales of motor related services and commissions
Motor related services sales include commissions on finance introductions, extended guarantees and vehicle asset protection as well as the sale of paint protection products. Sales of paint protection products are recognised when the product is supplied to the customer.
Vehicle extended guarantees where the Group is contractually responsible for future claims are accounted for by deferring the guarantee income received, along with direct selling costs, and then releasing the income on a straight line basis over the remaining life of the guarantee. Costs in relation to servicing the extended guarantee income are expensed to the income statement as incurred. The group has not sold any of these policies in the current or prior period but continues to release income in relation to legacy sales.
Vehicle extended guarantees and asset protection (gap insurance) where the Group is not contractually responsible for future claims, are accounted for by recognising the commissions attributable to Motorpoint at the point of sale to the customer.
Where the Group receives finance commission income, primarily arising when the customer uses third-party finance to purchase the vehicle, the Group recognises such income on an 'as earned' basis.
Under IFRS 15, the assessment will be based on whether the Group controls the specific goods and services before transferring them to the end customer, rather than whether it has exposure to significant risks and rewards associated with the sale of goods or services.
The Group has considered if any adjustments are necessary to comply with IFRS 15 for the year ended 31 March 2018 and have concluded that adoption of this standard will not impact revenue, profit after tax or retained earnings. As such no restatement is necessary to the financial statements for the year ended 31 March 2018.
Independent review report to Motorpoint Group PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Motorpoint Group PLC's Condensed Consolidated Interim Financial Statements (the "interim financial statements") in the FY19 Interim Results of Motorpoint Group PLC for the 6 month period ended 30 September 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
· the Condensed Consolidated Balance Sheet as at 30 September 2018;
· the Condensed Consolidated Income Statement for the period then ended;
· the Condensed Consolidated Cash Flow Statement for the period then ended;
· the Condensed Consolidated Statement of Changes in Equity for the period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the FY19 Interim Results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The FY19 Interim Results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the FY19 Interim Results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the FY19 Interim Results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the FY19 Interim Results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
East Midlands
28 November 2018
a) The maintenance and integrity of the Motorpoint Group PLC website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR BLBDBXBDBGII
Recent news on Motorpoint
See all newsREG - Motorpoint Group plc - Transaction in Own Shares
AnnouncementREG - Motorpoint Group plc - Transaction in Own Shares
AnnouncementREG - Motorpoint Group plc - Transaction in Own Shares
AnnouncementREG - Motorpoint Group plc - Transaction in Own Shares
AnnouncementREG - Motorpoint Group plc - Transaction in Own Shares
Announcement