REG - Auto Trader Grp - FULL YEAR RESULTS FOR THE YEAR ENDED 31 MARCH 2023
01/06/2023 07:00
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RNS Number : 2542B Auto Trader Group plc 01 June 2023
Embargoed until 7.00am, 1 June 2023
AUTO TRADER GROUP PLC
FULL YEAR RESULTS FOR THE YEAR ENDED 31 MARCH 2023
Auto Trader Group plc ('the Group'), the UK's largest automotive marketplace,
announces full year results for the year ended 31 March 2023
Strategic overview
* Auto Trader's core marketplace business grew revenue by 9%, operating profit
by 10% and maintained 70% operating profit margins. Despite constrained new
and used vehicle supply, revenue from retailers grew 10%, with strong adoption
of our additional products and services.
* Our annual pricing and product event took effect from 1(st) April 2023,
underpinning revenue growth expectations for the coming year. We continue to
see further adoption of our Auto Trader Connect platform, which enables better
connected buying experiences and improved operational efficiencies for our
customers.
* Retailer forecourt numbers were up 1% after adjusting for the disposal of
Webzone Limited in October 2022. The number of UK forecourts continued to be
at record levels, with over 800 more retailers paying to advertise on Auto
Trader than before the pandemic.
* The number of visits continued to be significantly above pre-pandemic levels
and were up 1% year-on-year. Robust consumer demand has led to cars selling
faster than at any time since our IPO in 2015, which has suppressed the
average number of cars listed on Auto Trader.
* We completed the initial development of our Deal Builder product allowing car
buyers to value their part-exchange, apply for finance and reserve vehicles
online. We are now growing customer numbers with over 50 retailers trialling
the service at the end of March. Autorama operating losses were as expected
and the integration is progressing well.
Financial results
£m (unless otherwise specified) 2023 2022 Change
Auto Trader(1) 473.0 432.7 9%
Autorama 27.2 - -
Group revenue 500.2 432.7 16%
Auto Trader(1) 332.9 303.6 10%
Autorama (11.2) - -
Group central costs(2) - relating to Autorama acquisition (44.1) - -
Group operating profit 277.6 303.6 (9%)
Auto Trader operating profit margin 70% 70% 0% pts
Group operating profit margin 55% 70% (15%) pts
Basic earnings per share (pence) 25.01 25.61 (2%)
Cash generated from operations(3) 327.4 328.1 (0%)
Adjusted EBITDA(4) 328.0 307.9 7%
Adjusted earnings per share (pence)(5) 27.12 25.61 6%
* £225.0 million was returned to shareholders (2022: £237.1 million) through
£147.3 million of share buybacks and dividends paid of £77.7 million.
* Proposed final dividend of 5.6 pence per share (2022: 5.5 pence per share)
giving total dividends of 8.4 pence per share for the year (2022: 8.2 pence
per share). The dividend increase takes into consideration the transition to a
significantly higher corporation tax rate from April 2023.
Operational results
* Over 75% of all minutes spent on automotive classified sites were spent on
Auto Trader(9) (2022: over 75%). Cross platform visits(7,8) were up 1% to 69.6
million per month (2022: 68.9 million) and cross platform minutes(7,8) were
down 8% to 513.6 million minutes per month (2022: 556.3 million minutes). Both
visits and minutes were up significantly versus pre-pandemic levels (up 24%
and 16% respectively versus 2020).
* The average number of retailer forecourts(7) in the year was broadly flat at
13,913 (2022: 13,964). After removing the impact of the Webzone Limited
disposal in the year (a loss of 245 retailers over the period), like-for-like
retailer numbers were up 1%.
* Average Revenue Per Retailer(7) (ARPR) per month was up £227 (or 10%) to
£2,437 on average per month (2022: £2,210). This was driven by both price
and product levers, with the stock lever being flat.
* Physical car stock(7,10) on site was up 2% to 437,000 cars (2022: 430,000) on
average, within which our listings product for new cars declined to 25,000 on
average (2022: 29,000).
* We delivered 6,895 new vehicles under lease agreements, at an average yield of
£1,624, whilst facing continued new vehicle supply constraints.
* The average number of employees (FTEs(7)) in the Group increased to 1,160
during the year (2022: 960), with a net increase of 148 from the acquisition
of Autorama and the disposal of Webzone Limited.
Cultural KPIs
* 91% of employees are proud to work at Auto Trader(11) (March 2022: 95%)
* We believe diverse and inclusive teams improve our ability to attract, retain
and maximise the potential of our people and business, which is made as
follows:
o Board: We have more women than men on our Board (March 2022: five women
and four men) and one ethnically diverse Board member.
o Leadership: 40% of our leaders are women(12,14) (March 2022: 38%) and 8%
are ethnically diverse(12,13,14) (March 2022: 6%).
o Organisation: 43%(14) of employees are women (March 2022: 40%) and 15% are
ethnically diverse(13,14) (March 2022: 14%).
* The majority of our CO(2) emissions are Scope 3, predominantly attributable to
our suppliers and emissions related to the small number of vehicles sold by
Autorama that pass through their balance sheet. Total Group emissions for the
period were 79.5k tonnes of carbon dioxide equivalent(15) (2022 restated:
129.4k tonnes). We are aiming to achieve net zero across our entire value
chain (Scopes 1, 2 and 3) before 2040 and to halve our carbon emissions before
the end of 2030.
Nathan Coe, Chief Executive Officer of Auto Trader, said:
"This year marks another strong financial and operational performance for Auto
Trader. Given the challenging economic backdrop and historically low levels of
vehicle supply, these results are a credit to our people and the close
partnerships we've developed with our customers.
"The prospects for our marketplace are as strong as they have ever been,
underpinned by the significant number of car buyers and retailers using Auto
Trader. We have also made good progress on improving the new and used car
buying experience by moving more of the journey online, on Auto Trader.
"As a result, despite continued economic uncertainty and automotive industry
changes we feel confident about the year ahead."
Outlook
The new financial year has started well and the Board is therefore confident
of meeting its growth expectations for the year.
We expect another good year of retailer revenue growth, by far the largest
part of our Auto Trader business. This will come from a similar ARPR growth
rate to that achieved in financial year 2023. We expect the product lever to
be consistent with the £137 achieved last year and the price lever to be
slightly higher than last year's £90. The stock lever is likely to remain
flat. We anticipate a slight decline in retailer numbers, mostly due to the
full year impact of the disposal of Webzone Limited. The other revenue areas
within the main Auto Trader business are likely to perform within a range of
flat to low single digit growth.
Over time we aim to grow share in the new car leasing market through our new
Autorama segment. Our short-term focus is on significantly reducing the
current annualised operating losses of £15 million through deeper integration
with Auto Trader and being disciplined on costs. Group central costs, which
are non-cash and relate to the acquisition of Autorama, will be c.£18 million
for the year.
Auto Trader operating profit margins should be consistent year-on-year at 70%,
despite continued investment in product development and inflationary
pressures. Group margins are expected to increase year-on-year.
Our capital policy remains unchanged, with the majority of surplus cash
generated by the business being returned to shareholders through dividends and
share buybacks.
Analyst presentation
A presentation for analysts will be held in person at Numis and also via audio
webcast at 9.30am, Thursday 1 June 2023. Details below:
Audio webcast: https://edge.media-server.com/mmc/p/jq62eeh7
(https://edge.media-server.com/mmc/p/jq62eeh7)
If you have any trouble registering or accessing either the conference call or
webcast, please contact Powerscourt on the details below.
For media enquiries
Please contact the team at Powerscourt on +44 (0)20 7250 1446 or email
autotrader@powerscourt-group.com (mailto:autotrader@powerscourt-group.com)
About Auto Trader
Auto Trader Group plc is the UK's largest automotive marketplace. It listed on
the London Stock Exchange in March 2015 and is a member of the FTSE 100 Index.
Auto Trader's purpose is Driving Change Together. Responsibly. Auto Trader is
committed to creating a diverse and inclusive culture, it aims to build
stronger partnerships with its customers and use its voice and influence to
drive more environmentally friendly vehicle choices.
With the largest number of car buyers and the largest choice of trusted stock,
Auto Trader's marketplace sits at the heart of the UK car buying process. That
marketplace is built on an industry-leading technology and data platform,
which is increasingly used across the automotive industry. Auto Trader is
continuing to bring more of the car buying journey online, creating an
improved buying experience, whilst enabling all its retailer partners to sell
vehicles online.
Auto Trader publishes a monthly used car Retail Price Index which is based on
pricing analysis of circa 800,000 vehicles. This data is used by the Bank of
England to feed the broader UK economic indicators.
For more information, please visit: https://plc.autotrader.co.uk/
(https://plc.autotrader.co.uk/)
Cautionary statement
Certain statements in this announcement constitute forward looking statements
(including beliefs or opinions). "Forward looking statements" are sometimes
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "aims", "anticipates", "expects", "intends", "plans",
"predicts", "may", "will", "could", "shall", "risk", "targets", forecasts",
"should", "guidance", "continues", "assumes" or "positioned" or, in each case,
their negative or other variations or comparable terminology. Any statement in
this announcement that is not a statement of historical fact including,
without limitation, those regarding the Company's future expectations,
operations, financial performance, financial condition and business is a
forward looking statement. Such forward looking statements are subject to
known and unknown risks and uncertainties, because they relate to events that
may or may not occur in the future, that may cause actual results to differ
materially from those expressed or implied by such forward looking statements.
These risks and uncertainties include, among other factors, changing economic,
financial, business or other market conditions. These and other factors could
adversely affect the outcome and financial effects of the plans and events
described in this results announcement. As a result, you are cautioned not to
place reliance on such forward looking statements, which are not guarantees of
future performance and the actual results of operations, financial condition
and liquidity, and the development of the industry in which the Group
operates, may differ materially from those made in or suggested by the forward
looking statements set out in this announcement. Except as is required by
applicable laws and regulatory obligations, no undertaking is given to update
the forward looking statements contained in this announcement, whether as a
result of new information, future events or otherwise. Nothing in this
announcement should be construed as a profit forecast. This announcement has
been prepared for the Company's group as a whole and, therefore, gives greater
emphasis to those matters which are significant to the Company and its
subsidiary undertakings when viewed as a whole.
To the extent available, the industry and market data contained in this
announcement has come from third party sources. Third party industry
publications, studies and surveys generally state that the data contained
therein have been obtained from sources believed to be reliable, but that
there is no guarantee of the accuracy or completeness of such data. In
addition, certain parts of the industry and market data contained in this
announcement come from the Company's own internal research and estimates based
on the knowledge and experience of the Company's management in the market in
which the Company operates. While the Company believes that such research and
estimates are reasonable and reliable, they, and their underlying methodology
and assumptions, have not been verified by any independent source for accuracy
or completeness and are subject to change without notice. Accordingly, undue
reliance should not be placed on any of the industry or market data contained
in this announcement.
Summary financial performance
Group results Units 2023 2022 Change
Revenue £m 500.2 432.7 16%
Adjusted EBITDA(4) £m 328.0 307.9 7%
Operating profit £m 277.6 303.6 (9%)
Operating profit margin % 55% 70% (15%) pts
Profit before tax £m 293.6 301.0 2%
Basic earnings per share Pence 25.01 25.61 (2%)
Adjusted earnings per share(5) Pence 27.12 25.61 6%
Dividend per share Pence 8.4 8.2 2%
Group cash flow
Cash generated from operations(3) £m 327.4 328.1 0%
Net bank debt/(cash)(6) £m 43.4 (51.3) 94.7m
Auto Trader results
Trade £m 427.4 388.3 10%
Consumer Services £m 34.5 33.3 4%
Manufacturer & Agency £m 11.1 11.1 0%
Revenue £m 473.0 432.7 9%
People costs £m 74.0 69.8 6%
Marketing £m 22.3 20.5 9%
Other costs £m 39.6 34.5 15%
Depreciation & amortisation £m 6.7 7.2 (7%)
Operating costs £m 142.6 132.0 8%
Share of profit from joint ventures £m 2.5 2.9 (14%)
Operating profit £m 332.9 303.6 10%
Operating profit margin % 70% 70% 0% pts
Autorama results
Vehicle & Accessory Sales £m 16.0 - -
Commission & Ancillary £m 11.2 - -
Revenue £m 27.2 - -
Cost of goods sold £m 15.7 - -
People costs £m 10.5 - -
Marketing £m 4.7 - -
Other costs £m 5.4 - -
Depreciation & amortisation £m 2.1 - -
Operating costs £m 38.4 - -
Operating loss £m (11.2) - -
Group central costs - relating to Autorama acquisition
Autorama deferred consideration £m 38.8 - -
Depreciation & amortisation £m 5.3 - -
Operating costs £m 44.1 - -
Operating loss £m (44.1) - -
1. Auto Trader includes the results of Auto Trader, AutoConvert and
Webzone (up to the date of disposal) in respect of online classified
advertising of motor vehicles and other related products and services in the
digital automotive marketplace, including the share of profit from the Dealer
Auction joint venture.
2. Group central costs which are not allocated within either of the two
segmental operating profit/(loss) comprise a £38.8 million charge for the
expense of Group shares expected to be issued to settle the Autorama deferred
consideration and a £5.3 million amortisation expense relating to the fair
value of intangible assets acquired in the Group's business combination of
Autorama.
3. Cash generated from operations is defined as net cash generated from
operating activities, before corporation tax paid.
4. Adjusted EBITDA is earnings before interest, taxation, depreciation and
amortisation, share of profit from joint ventures, Autorama deferred
consideration and profit on the sale of subsidiary.
5. Adjusted earnings per share is calculated before Autorama deferred
consideration, profit on the sale of subsidiary, and net of the tax effect in
respect of these items.
6. Net bank debt/(cash) represents gross bank debt before amortised debt
costs, less cash and does not include amounts relating to leases, non-bank
loans or vehicle stocking loans.
7. Average during the year.
8. Measured by Snowplow.
9. Share of minutes is a custom metric based on Comscore minutes and is
calculated by dividing Auto Trader's total minutes volume by the entire
custom-defined competitive set's total minutes volume. The custom-defined list
includes: Auto Trader, Gumtree motors, Pistonheads, Motors.co.uk, eBay Motors
& CarGurus.
10. Physical car stock advertised on autotrader.co.uk.
11. Based on a survey to all Auto Trader employees (excluding Autorama) in
February 2023 asking our people to rate the statement "I am proud to work for
Auto Trader?". Answers are given on a five-point scale from strongly disagree
to strongly agree. The employee engagement score excludes employees of
Autorama. Autorama currently conduct their own survey with a different
question set. In their March 2023 survey, Autorama employees were asked to
rate the question "How likely is it you would recommend Vanarama as a place to
work" and answers were given on a 10 point scale from 1-10, 10 representing
highly recommend. The survey had a 71% response rate and 62% responded 9 or
above.
12. We define leaders as those who are on our Operational Leadership Team
('OLT') and their direct reports.
13. Throughout the year we have asked our employees to voluntarily disclose
their ethnicity, at the year end we had 166 employees (14%) who had not yet
disclosed.
14. We calculate all our diversity percentages using total group headcount,
1,226 (March 2022: 1,002) as at 31st March. At the period end, we had 524
employees who are women, 696 employees who are men and 6 who are non-binary.
15. The total amount of CO(2) emissions includes Scope 1, 2 and 3. From the 15
different emission categories that fall within Scope 3, the following have
been identified as relevant to Auto Trader: Purchased goods and services (For
general procurement categories an Environmentally Extended Input Output
database methodology was used to calculate the GHG footprint across total
spend in the year. For vehicle purchases a bottom-up, life cycle
assessment-based approach has been used.); Capital goods; Fuel and energy
related activities (not included in Scope 1 and Scope 2); Upstream
transportation & distribution; Waste generated in operations; Business
travel; Employee commuting; Downstream transportation & distribution; Use
of sold products; End of life treatment of sold products; and Investments.
Summary of Group operating performance
Revenue in the core Auto Trader business increased by 9% to £473.0 million as
customers are increasingly using our data, platform and advertising products
to support their businesses. At a Group level revenue grew 16% to £500.2
million (2022: £432.7 million), the difference being the inclusion of the
Autorama business, acquired in June 2022, with revenue of £27.2 million. Auto
Trader growth was ahead of expectations and has been achieved despite both the
new and used car markets experiencing low transaction volumes, although this
headwind has been somewhat offset by robust levels of retailer profitability.
The brilliant work of our people continues to strengthen our position with car
buyers, build true partnerships with our customers and support an
industry-leading data and technology platform.
Operating profit in the core Auto Trader business was £332.9 million, up 10%
on last year, with a continued margin of 70% as a result of careful management
of costs despite inflationary pressures. Group operating profit declined by 9%
to £277.6 million (2022: £303.6 million), due to an operating loss of £11.2
million from Autorama, and £44.1 million of Group central costs relating to
the acquisition of Autorama, which were £38.8 million of deferred
consideration and amortisation of acquired intangibles of £5.3 million. Group
operating profit margin was 55% (2022: 70%).
Group profit before tax decreased by 2% to £293.6 million (2022: £301.0
million) which included a £19.1 million profit on disposal of Webzone Limited
in October 2022. Cash generated from operations was £327.4 million (2022:
£328.1 million).
Consumer engagement remained strong; we have maintained our position as the
UK's largest and most engaged automotive marketplace for new and used cars.
Over 75% of all minutes spent on automotive classified sites were spent on
Auto Trader (2022: over 75%) and we were 7x larger than our nearest competitor
(2022: 8x). Our average monthly cross platform visits increased by 1% to 69.6
million per month (2022: 68.9 million) and were 24% above pre-pandemic levels
recorded in 2020 (56.3 million). Engagement, measured by total minutes spent
onsite, decreased by 8% to an average of 514 million minutes per month (2022:
556 million minutes), although was 16% ahead of pre-pandemic levels (2020: 443
million minutes). For both visits and minutes, we have changed the data source
from Google Analytics to Snowplow to give us a deeper understanding of our
user events.
The average number of retailer forecourts advertising on our platform was
broadly flat at 13,913 (2022: 13,964). However, excluding the Webzone Limited
disposal (a negative impact of 245 retailers over the period), like-for-like
retailer numbers grew by 1% year-on-year, representing the highest level of UK
retailers we have ever had using our platform. Though there continues to be
some merger and acquisition activity among car retailers, we see no evidence
of meaningful industry consolidation, nor any increase in barriers for those
wishing to enter the industry.
Total live stock on site increased by 2% to an average of 437,000 cars (2022:
430,000). New car stock declined to an average of 25,000 (2022: 29,000) due to
constrained new car supply. Used car live stock increased 3% on average across
the year although was 35,000 cars lower than pre-pandemic levels.
Autorama delivered 6,895 vehicles across the period, which comprised 4,295
cars, 2,253 vans and 347 pickups. Both vans and pickups were particularly
impacted by supply challenges in the year. Average commission and ancillary
revenue per vehicle delivered was £1,624.
The UK car market
New car registrations at 1.7 million were 3% above financial year 2022 (2022:
1.6 million) but 19% lower than financial year 2020 with supply chain
challenges continuing to impact the volume of new cars available for sale in
the UK. New light commercial vehicle ('LCV') registrations were down 11%
year-on-year. Used car transactions at 6.9 million were 8% below financial
year 2022 levels (2022: 7.5 million) due to the knock-on impact of low volumes
of new car supply, which has reduced the availability of younger cars.
Despite the weakness seen in supply throughout the period, demand has been
resilient and used car prices have remained strong. Our used car Retail Price
Index saw a 12% like-for-like year-on-year increase in prices over the past 12
months, which has contributed to favourable trading conditions for our
customers.
Strategic overview
Our purpose continues to be "Driving Change Together. Responsibly" which
guides strategy and decisions across the organisation. At our 2022 Investor
Day, we outlined our strategy using three concentric circles to illustrate
that they are all elements of Auto Trader's central business strategy, rather
than three distinct opportunities. Our technology and data platform and
digital retailing build on the strengths of our core marketplace business. As
an example, our platform strategy embeds our technology and data into
retailers' businesses enabling them to make quicker decisions, which
ultimately improves the value they get from advertising on Auto Trader.
Digital retailing provides a deeper buying experience on Auto Trader that is
more efficient for retailers and harder for others to replicate.
Our marketplace
Our core Auto Trader marketplace saw strong revenue and operating profit
growth despite ongoing supply challenges, which shows the resilience of our
business through economic cycles. We successfully executed our annual pricing
event in April 2022, which included the launch of Retail Essentials, the first
module of our Auto Trader Connect platform. This product uses our proprietary
taxonomy data to ensure that vehicles are well described and that their
specification is accurate, helping retailers to optimise margins. It also
enables real-time stock management to ensure that all stock records are up to
date on Auto Trader and all other digital channels, improving sales conversion
and the experience of car buyers.
Our UK customer numbers are at record levels due to good market conditions,
our strong position with car buyers and the partnerships formed with our
customers. We have further embedded our partnership approach by ensuring that
we capture our customers' own business goals, be that stock turn, sales
volumes or target margins, and then use this as a basis to recommend products
and performance improvements. Penetration of our higher yielding packages
increased during the year, with 33% of retailer stock now above our Standard
package as at the end of March 2023 (March 2022: 31%). We also saw an increase
in the uptake of our Pay-Per-Click product which allows stock items to appear
at the top of our search listings.
With the sale of new and used electric vehicles increasing, we continue to
invest in electric vehicle (EV) content to ensure we are the number one
destination for car buyers interested in purchasing an EV. We inform consumers
about electric vehicles through social media channels and raise awareness
through our monthly EV giveaway which achieved over 3.5 million entries this
year. We have also focused on improving the EV charging information to help
give consumers simpler, more consistent data to make informed decisions.
At the end of March 2023, we had over 1,900 retailers (March 2022: over 1,800)
paying to advertise new cars on our site which is a robust performance given
the challenges sourcing new car stock due to supply shortages.
Platform
We continue to invest in our technology, data and product platform which
supports our core marketplace. As mentioned above, we launched Retail
Essentials which enables real-time stock management and makes our vehicle
taxonomy available to retailers through our own Retailer Portal or our
platform via APIs. At the end of March 2023, we had integrations with over 90
third-party software providers with Auto Trader Connect.
As part of our April 2023 pricing event, we launched our second module of Auto
Trader Connect, Valuations. This makes specification adjusted valuations
available within Retailer Portal, where many of our retailers manage their
inventory. Our valuations benefit from machine learning technology which
continuously improves and optimises results based on c.500,000 obervations
that we see each day. This enables customers to drive pricing performance as
the market moves. This data can also be accessed through an API via our
platform, enabling third parties and retailers to directly integrate
valuations into the systems used to manage their businesses. These modules are
an important part of how we are using our platform to power retailers'
businesses, which strengthens our marketplace and is a key enabler for digital
retailing.
We continued to see an increase in the number of software releases to 51,000
over the year (2022: 46,000).
Digital retailing
Last year, we launched a new product, Market Extension, which allows customers
to sell vehicles outside their local area, beyond the physical constraints of
their forecourt. This product is a key part of our longer-term aspiration to
enable digital retailing for all customers. We had over 7% of retailer stock
on this product at the end of March 2023 (March 2022: 6%), with the product
being most relevant for those customers with either delivery capability or
multiple forecourt locations.
Building on both our strong classified marketplace and platform capability, we
continue to bring more of the car buying journey online. Our approach to
digital retailing is to be "car first" and to enable any retailer (including
manufacturers and leasing companies) to sell their cars online. With this goal
in mind, we will initially offer two digital retailing consumer journeys on
Auto Trader: a used car Deal Builder journey and an online retailing journey
for consumers to lease a new car.
The used car Deal Builder journey
During the year, we launched Deal Builder which uses Auto Trader technology to
enable car buyers to do more of their car buying journey online, including
valuing their part-exchange, applying for finance and reserving the car.
Importantly, all of these interactions can be easily carried out either
online, over the phone or on the forecourt. Currently these tools are
available in Retailer Portal, but over time they will be made available via
APIs as part of our platform strategy, enabling these transactions to be
picked up in retailers' existing sales systems and processes. Our focus is on
enabling the car buyer to complete as much of the journey as they are
comfortable with on Auto Trader, completing the rest of the transaction on the
forecourt, over the phone or a combination of these channels.
In summer 2022, we began running a Deal Builder trial with a handful of
retailers and have been encouraged by how the trial has performed to date.
Towards the end of the year we started to scale the number of customers on the
product and by the end of the financial year there were over 50 retailers
live. We saw over 200 deals submitted in the year. We are encouraged by the
percentage of deals that converted into a sale and the positive feedback from
both consumers and retailers. We are seeing strong buyer engagement out of
retail hours, seven days a week, which supports the case that this should
build sales capacity for our retailers.
We will continue to scale the number of retailers on Deal Builder, and iterate
the product during this financial year, with the goal to monetise some
retailers by the end of financial year 2024.
Online retailing journey for consumers to lease a new car
There are significant structural changes impacting the new vehicle market in
the UK. These include the growth of electric cars, new manufacturers entering
the UK market and a shift towards new digital distribution models. These
changes present an opportunity for Auto Trader to play a more significant role
in the new vehicle market, and were part of the strategic rationale behind the
acquisition of Autorama, which completed during the financial year. Autorama's
capabilities combined with Auto Trader's platform and scale will provide a
compelling proposition for manufacturers, retailers and funders, with an
opportunity to drive direct sales, reduce customer acquisition costs and grow
their businesses profitability.
Following the acquisition, Autorama has been heavily impacted by the supply
challenges particularly in the pickup and van markets. The business has
largely been run standalone throughout 2023, delivering 6,895 vehicles, which
comprised 4,295 cars, 2,253 vans and 347 pickups, with average commission and
ancillary revenue per vehicle of £1,624. During the latter part of 2023, we
successfully tested driving traffic into the Autorama journey and have
recently completed the work to enable the full check out of a leasing deal on
Auto Trader.
Being a responsible business
We hold ourselves to the highest standards when it comes to acting
responsibly. We have a Corporate Responsibility Committee with oversight of
Auto Trader's focus on the environmental, social and governance ('ESG')
aspects of our business. We have identified focus areas and created a range of
initiatives which are monitored regularly, and reported on externally with our
cultural KPIs. While recognising that many of these changes take time, we
remain committed to making meaningful progress across all measures.
We continue to focus on our people, ensuring that those from all backgrounds
can fully realise their potential. We have carefully constructed learning and
development programmes focusing on supporting early careers, mid-management
and a continuous leadership programme for senior leaders. All of these
programmes are specifically designed to recruit, support and develop diverse
talent in our business. We are pleased the proportion of employees that are
proud to work at Auto Trader remained high at 91% (March 2022: 95%) and our
gender and ethnicity make up has improved year-over-year. At year end, women
represented 43% of our organisation (March 2022: 40%) and 40% (March 2022:
38%) of leadership roles as defined by the FTSE Women Leaders Review. We are
committed to increasing the percentage of ethnically diverse employees, who
currently represent 15% of the organisation (March 2022: 14%), with 14% of
employees not disclosing their ethnicity. The percentage of ethnically diverse
employees in leadership increased to 8% (March 2022: 6%) again using the FTSE
Women Leaders definition, which highlights the work still to be done in this
area.
Our employee-driven networks (representing women, ethnicity, LGBT+, early
careers, disability & neurodiversity, social mobility, families and age)
have continued their impressive work with high engagement and are key to
creating an Auto Trader where people feel they belong and can achieve their
full potential. Each network sets its own commitments aligned to our broader
strategy which is reviewed by the leadership team bi-annually.
There are two strands to our commitment around the environment: achieving net
zero carbon emissions by 2040, and supporting consumers in making more
environmentally friendly vehicle choices.
On the first strand, we have committed to reducing absolute Scope 1 and 2
emissions by 50% and absolute Scope 3 emissions by 46% before the end of
financial year 2031 and continue to include these reduction plans as part of
our remuneration targets. Alongside the reduction in emissions, we are working
on a carbon removal plan to help us achieve our long-term net zero goal by
2040. These targets were validated by the Science Based Targets initiative in
January 2023. Absolute emission levels have increased from last year as we
have updated our calculations to include the impact of Autorama. Initial
calculations of our GHG emissions during the year total 79.5k tonnes of CO(2)
across Scopes 1, 2 and 3 (2022 restated: 129.4k). The majority of our
emissions are Scope 3, predominantly attributable to our suppliers and
emissions relating to the small number of vehicles sold by Autorama that pass
through their balance sheet. The year-on-year reduction is predominantly due
to lower volumes of these vehicles passing through the balance sheet, which we
expect to reduce further over time.
On the second strand, initiatives include using our data and voice within the
industry and government to help inform public policy and better decision
making. We have improved our SEO ranking for electric vehicles, continued our
EV giveaway (with over 3.5 million entries this year) and have significantly
improved the EV charging and battery range information on our product pages.
The Board
Auto Trader is pleased to announce that, following a comprehensive search and
selection process, Matt Davies will be appointed to the Board as Non-Executive
Director, Chair Designate and as a member of the Nomination Committee. The
appointment is part of the Board's long-term succession planning given Ed
Williams will come to the end of his third three-year term in 2024. Matt will
join the Board with effect from 1 July 2023 and will succeed Ed Williams as
Chair of the Board and Nomination Committee at the conclusion of the Company's
Annual General Meeting on 14 September 2023, subject to shareholder approval.
Ed will not stand for election at the 2023 AGM, stepping down as a Director
from that date. As such, we want to take a moment to thank him for the
pivotal role he has played before, during and since Auto Trader's IPO. Ed has
created a board that has enabled the business, its leaders and the people at
Auto Trader to thrive while also maintaining high standards of governance and
an outstanding performance for shareholders and stakeholders.
Investor calendar
The Group's results for the half year ending 30 September 2023 will be
announced on 9 November 2023.
2023 financial performance
Group Results
2023 2022 Change
£m
£m
%
Revenue 500.2 432.7 16%
Operating costs (225.1) (132.0) 71%
Share of profit from joint ventures 2.5 2.9 (14%)
Operating profit 277.6 303.6 (9%)
Group revenue increased by 16% to £500.2m (2022: £432.7m) driven by Auto
Trader revenue which increased by 9% to £473.0m (2022: £432.7m), and £27.2m
from Autorama following its acquisition on 22 June 2022.
Group operating profit declined by 9% to £277.6m (2022: £303.6m). Auto
Trader operating profit increased by 10% to £332.9m (2022: £303.6m), which
included £2.5m share of profit from joint ventures (2022: £2.9m). Autorama
had an operating loss of £11.2m.
Group central costs included a charge of £38.8m, which is part of the £50.0m
share-based payment expense relating to the deferred consideration for
Autorama (which will be settled in shares 12 months after the completion
date), and an amortisation charge of £5.3m relating to the Autorama
intangible assets recognised under IFRS 3 business combinations. This resulted
in Group operating profit margin of 55% (2022: 70%).
2023 2022 Change
£m
£m
%
Operating profit 277.6 303.6 (9%)
Depreciation & amortisation 14.1 7.2 96%
Share of profit from joint ventures (2.5) (2.9) (14%)
Autorama deferred consideration 38.8 - -
Adjusted EBITDA 328.0 307.9 7%
Adjusted earnings before interest, taxation, depreciation and amortisation,
share of profit from joint ventures and Autorama deferred consideration
increased by 7% to £328.0m (2022: £307.9m).
Group profit before tax decreased by 2% to £293.6m (2022: £301.0m), which
included a £19.1m profit on disposal of Webzone Limited (trading as
'Carzone'), which was sold on 24 October 2022. Cash generated from operations
was £327.4m (2022: £328.1m).
Auto Trader Results
Revenue increased to £473.0m (2022: £432.7m), up 9% when compared to the
prior year. Trade revenue, which comprises revenue from Retailers, Home
Traders and other smaller revenue streams, increased by 10% to £427.4m (2022:
£388.3m).
2023 2022 Change
£m
£m
%
Retailer 406.8 370.4 10%
Home Trader 10.1 8.8 15%
Other 10.5 9.1 15%
Trade 427.4 388.3 10%
Consumer Services 34.5 33.3 4%
Manufacturer & Agency 11.1 11.1 0%
Auto Trader revenue 473.0 432.7 9%
Retailer revenue increased by 10% to £406.8m (2022: £370.4m). The average
number of retailer forecourts advertising on our platform was broadly flat at
13,913 (2022: 13,964). However, after accounting for the disposal of Webzone
Limited (an impact of 245 fewer retailers over the period), like-for-like
retailer numbers increased by 1% on average across the year.
Average Revenue Per Retailer ('ARPR') per month increased by 10% to £2,437
(2022: £2,210). This was driven by both the product and price levers, with
the stock lever being flat.
· Price: Our price lever contributed growth of £90 (2022: £74) to
total ARPR as we delivered our annual pricing event for all customers on 1
April 2022, which included additional products but also a like-for-like price
increase.
· Stock: The number of live cars advertised on Auto Trader increased
by 2% to 437,000 (2022: 430,000). New car stock declined to an average of
25,000 (2022: 29,000) due to the well documented shortage of new car supply.
Underlying used car live stock increased by 3% on average across the year,
although much of this increase came from a higher volume of private listings.
The stock lever is not impacted by private listings, but by the number of
retailer paid stock units which were broadly flat for the year (2022: increase
£52).
· Product: Our product lever contributed growth of £137 (2022: £121)
to total ARPR. Broadly half of this product growth was due to more retailers
purchasing prominence products, including our higher yielding Enhanced, Super
and Ultra packages where penetration increased to 33% (March 2022: 31%); Our
Market Extension product, allowing retailers to sell outside of their local
area, also contributed to the product lever with 7% (March 2022: 6%) of
retailer stock on the product by the end of the year. Finally, there was also
some contribution from our Pay-Per-Click product, where retailers can boost
visibility of their stock in search through pay-per-click campaigns. The other
half of the product lever was made up from our Auto Trader Connect: Retail
Essentials product included in our annual pricing event in April 2022 and also
smaller contributions from Auto Convert finance and data products.
Home Trader revenue increased by 15% to £10.1m (2022: £8.8m). Other revenue
increased by 15% to £10.5m (2022: £9.1m).
Consumer Services revenue increased by 4% in the year to £34.5m (2022:
£33.3m). Private revenue, which is largely generated from individual sellers
who pay to advertise their vehicle on the Auto Trader marketplace, increased
by 11% to £22.4m (2022: £20.2m) which was partially offset by Motoring
Services revenue, which decreased 8% to £12.1m (2022: £13.1m). Instant Offer
contributed £0.8m to Consumer Services (2022: £0.9m), which is included in
Private revenue.
Revenue from Manufacturer & Agency customers was flat at £11.1m (2022:
£11.1m). New car advertising in 2023 continued to be impacted by new car
supply shortages.
Total costs increased 8% to £142.6m (2022: £132.0m).
2023 2022 Change
£m
£m
%
People costs 74.0 69.8 6%
Marketing 22.3 20.5 9%
Other costs 39.6 34.5 15%
Depreciation & amortisation 6.7 7.2 (7%)
Auto Trader costs 142.6 132.0 8%
People costs, which comprise all staff and contractor costs, increased by 6%
to £74.0m (2022: £69.8m). The increase in people costs was partly driven by
an increase in the average number of full-time equivalent employees ('FTEs')
to 996 (2022: 960), and an increase in underlying salary costs.
Marketing spend increased by 9% in the year to £22.3m (2022: £20.5m).
Other costs, which include data services, property related costs and other
overheads, increased by 15% to £39.6m (2022: £34.5m). The increase was
primarily due to increased overhead costs; including the cost associated with
completing the buy-in of our legacy defined benefit pension scheme, return of
travel and higher office and people related costs. Depreciation and
amortisation decreased by 7% to £6.7m (2022: £7.2m).
2023 2022 Change
£m
£m
%
Revenue 473.0 432.7 9%
Operating costs (142.6) (132.0) 8%
Share of profit from joint ventures 2.5 2.9 (14%)
Auto Trader operating profit 332.9 303.6 10%
Group central costs - relating to Autorama acquisition (44.1) - -
Autorama operating loss (11.2) - -
Group operating profit 277.6 303.6 (9%)
Operating profit increased by 10% to £332.9m during the year (2022:
£303.6m). Operating profit margin remained flat at 70% (2022: 70%).
Our share of profit generated by Dealer Auction, the Group's joint venture,
decreased 14% to £2.5m (2022: £2.9m) in the year due to lower levels of
auction activity as a result of supply constraints.
Autorama Results
2023
£m
Vehicle & Accessory Sales 16.0
Commission & Ancillary 11.2
Autorama revenue 27.2
Autorama revenue was £27.2m, with Vehicle and Accessory Sales contributing
£16.0m, and Commission and Ancillary revenue contributing £11.2m.
Total deliveries amounted to 6,895 units, which comprised 4,295 cars, 2,253
vans and 347 pickups. Average commission and ancillary revenue per unit
delivered was £1,624.
2023
£m
Cost of goods sold 15.7
People costs 10.5
Marketing 4.7
Other costs 5.4
Depreciation & amortisation 2.1
Autorama costs 38.4
The Autorama business delivered c.700 vehicles which were temporarily taken on
balance sheet in the period from 22 June 2022 to 31 March 2023. This
represented just over 10% of total vehicles delivered in the period. The cost
of these vehicles was taken through cost of goods sold, with the corresponding
revenue in Vehicle and Accessory Sales. People costs of £10.5m related to the
209 FTEs employed on average through the year. As a result of the acquisition
being on 22 June 2022, the contribution to the Group's average number of FTEs
in the year was 164. Marketing in the year was £4.7m. Other costs include IT
services, property, other overheads and some depreciation and amortisation of
developed software.
The Autorama operating segment made an operating loss of £11.2m.
2023
£m
Revenue 27.2
Operating costs (38.4)
Operating loss (11.2)
Group net finance costs
Group net finance costs increased to £3.1m (2022: £2.6m). Interest costs on
the Group's Syndicated Revolving Credit Facility ('Syndicated RCF') totalled
£2.6m (2022: £1.4m) with the year-on-year increase due to higher utilisation
of the facility across the year. At 31 March 2023 the Group had drawn £60.0m
of its available facility (31 March 2022: £nil). Other finance costs
comprised amortisation of debt issue costs of £0.5m (2022: £0.1m). Interest
costs relating to leases totalled £0.2m (2022: £0.2m), which was offset by
interest receivable on cash and cash equivalents of £0.2m (2022: £0.1m).
Amendment of Syndicated RCF commitments
On 1 February 2023, the Group amended and extended its Syndicated RCF,
reducing the commitment from £250.0m to £200.0m. The facility was due to
terminate in two tranches: £52.2m maturing in June 2023 and £197.8m maturing
in June 2025. The facility has now been extended to February 2028 plus
additional extension options with no tranche terminations. There is no
requirement to settle all or part of the debt earlier than the termination
dates stated.
Taxation
Profit before taxation decreased by 2% to £293.6m (2022: £301.0m), with the
decrease being lower than Operating profit predominantly due to a £19.1m
profit on disposal from the sale of Webzone Limited. The Group tax charge of
£59.7m (2022: £56.3m) represents an effective tax rate of 20% (2022: 19%).
This is higher than the average standard UK rate principally due to the
Autorama deferred consideration charge being non-deductible. With revenue
exceeding £500m for the first time, the Group is potentially within scope of
the UK's digital services tax ('DST'), however certain revenue streams, such
as Vehicle and Accessory Sales, would be exempt, meaning we do not meet the
threshold in financial year 2023. It is HMRC's intention that the current UK
DST will be repealed during financial year 2024 and replaced with an OECD
model for which the Group would not be in scope.
Earnings per share
Basic earnings per share decreased by 2% to 25.01 pence (2022: 25.61 pence)
based on a weighted average number of ordinary shares in issue of 935,138,578
(2022: 955,532,888). Diluted earnings per share of 24.77 pence (2022: 25.56
pence) also decreased by 3%, based on 944,144,242 shares (2022: 957,534,145)
which takes into account the dilutive impact of outstanding share awards.
2023 2022 Change
£m
£m
%
Net income 233.9 244.7 (4%)
Autorama deferred consideration 38.8 - -
Profit on the sale of subsidiary (19.1) - -
Adjusted Net income 253.6 244.7 4%
Adjusted earnings per share (pence) 27.12 25.61 6%
Adjusted earnings per share, before Autorama deferred consideration, profit on
the sale of subsidiary, and net of the tax effect in respect of these items,
increased by 6% to 27.12 pence (2022: 25.61 pence).
Cash flow and net bank debt
Cash generated from operations decreased to £327.4m (2022: £328.1m).
Corporation tax payments increased to £60.5m (2022: £56.2m). Cash generated
from operating activities was £266.9m (2022: £271.9m).
As at 31 March 2023 the Group had net bank debt of £43.4m (31 March 2022: net
cash £51.3m), an increase of £94.7m due to the acquisition of Autorama. At
the year end, the Group had drawn £60.0m of its Syndicated RCF (31 March
2022: £nil) and held cash and cash equivalents of £16.6m (31 March 2022:
£51.3m).
Leverage, defined as the ratio of Net bank debt to EBITDA (adjusted for the
Autorama deferred consideration), was 0.1 times (2022: zero) and interest paid
was £3.4m (2022: £1.5m).
Capital structure and dividends
During the year, a total of 25.3m shares (2022: 24.9m) were purchased for a
consideration of £147.3m (2022: £163.5m) before transaction costs of £0.7m
(2022: £0.8m). A further £77.7m (2022: £73.6m) was paid in dividends,
giving a total of £225.0m (2022: £237.1m) in cash returned to shareholders.
The Directors are recommending a final dividend of 5.6 pence per share.
Subject to shareholders' approval at the Annual General Meeting ('AGM') on 14
September 2023, the final dividend will be paid on 22 September 2023 to
shareholders on the register of members at the close of business on 25 August
2023. The total dividend for the year is therefore 8.4 pence per share (2022:
8.2 pence per share).
The Group's long-term capital allocation policy remains unchanged: continuing
to invest in the business enabling it to grow while returning around one third
of net income to shareholders in the form of dividends. Following these
activities any surplus cash will be used to continue our share buyback
programme and steadily reduce gross indebtedness. It is the Board's long-term
intention that the Group will return to a net cash position.
Going concern
The Group generated significant cash from operations during the year. At 31
March 2023 the Group had drawn £60.0m of its £200.0m unsecured Syndicated
RCF and had cash balances of £16.6m. The Group has a strong balance sheet and
flexibility in terms of uses of cash to manage increased economic uncertainty
and higher interest rates. The £200.0m Syndicated RCF is committed until
February 2028. Based on the facilities available and current financial
projections for the next 12 months the Directors have concluded that it is
appropriate to prepare the financial statements on a going concern basis.
Consolidated income statement
For the year ended 31 March 2023
Note 2023 2022
£m £m
Revenue 3 500.2 432.7
Operating costs (225.1) (132.0)
Share of profit from joint ventures, net of tax 12 2.5 2.9
Operating profit 4 277.6 303.6
Net finance costs 5 (3.1) (2.6)
Profit on disposal of subsidiary 6 19.1 -
Profit before taxation 293.6 301.0
Taxation 7 (59.7) (56.3)
Profit for the year attributable to equity holders of the parent 233.9 244.7
Basic earnings per share (pence) 8 25.01 25.61
Diluted earnings per share (pence) 8 24.77 25.56
Consolidated statement of comprehensive income
For the year ended 31 March 2023
2023 2022
£m £m
Profit for the year 233.9 244.7
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations (0.3) 0.2
Realisation of cumulative currency translation differences 0.4 -
0.1 0.2
Items that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations, net of tax (0.4) 0.2
Other comprehensive income for the year, net of tax (0.3) 0.4
Total comprehensive income for the year attributable to equity holders of the 233.6 245.1
parent
Consolidated balance sheet
At 31 March 2023
Note 2023 2022
£m £m
Assets
Non-current assets
Intangible assets 9 501.0 355.6
Property, plant and equipment 10 15.9 14.7
Deferred taxation assets - 1.4
Retirement benefit surplus 0.5 3.7
Net investments in joint ventures 12 49.3 49.7
Other investments 2.3 -
569.0 425.1
Current assets
Inventory 3.6 -
Trade and other receivables 72.9 65.9
Current income tax assets 0.6 0.6
Cash and cash equivalents 16.6 51.3
93.7 117.8
Total assets 662.7 542.9
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital 14 9.3 9.5
Share premium 182.6 182.6
Retained earnings 1,390.3 1,332.4
Own shares held 15 (26.0) (22.4)
Capital reorganisation reserve (1,060.8) (1,060.8)
Capital redemption reserve 1.2 1.0
Other reserves 30.7 30.2
Total equity 527.3 472.5
Liabilities
Non-current liabilities
Borrowings 13 57.5 -
Provisions 1.3 1.3
Lease liabilities 11 4.6 6.5
Deferred income 8.3 8.9
Deferred taxation liabilities 5.8 -
77.5 16.7
Current liabilities
Trade and other payables 53.6 42.0
Provisions 0.7 0.7
Lease liabilities 11 2.5 3.0
Borrowings 13 1.1 -
Deferred consideration - 8.0
57.9 53.7
Total liabilities 135.4 70.4
Total equity and liabilities 662.7 542.9
The financial statements were approved by the Board of Directors on 1 June
2023 and authorised for issue:
Jamie Warner
Chief Financial Officer
Auto Trader Group plc
Registered number: 09439967
Consolidated statement of changes in equity
For the year ended 31 March 2023
Note Share Share Retained Own shares Capital Capital Other Total
capital premium earnings held reorganisation redemption reserves equity
£m £m £m £m reserve reserve £m £m
£m £m
Balance at 31 March 2021 9.7 182.4 1,307.3 (10.7) (1,060.8) 0.8 30.0 458.7
Profit for the year - - 244.7 - - - - 244.7
Other comprehensive income:
Currency translation differences - - - - - - 0.2 0.2
Remeasurements of post-employment benefit obligations, net of tax - - 0.2 - - - - 0.2
Total comprehensive income, net of tax - - 244.9 - - - 0.2 245.1
Transactions with owners
Employee share schemes - value of employee services - - 5.1 - - - - 5.1
Exercise of employee share schemes - - (4.8) 6.0 - - - 1.2
Transfer of shares from ESOT - - (0.1) 0.1 - - - -
Tax impact of employee share schemes - - 0.1 - - - - 0.1
Purchase of own shares for treasury - - - (17.8) - - - (17.8)
Purchase of own shares for cancellation (0.2) - (146.5) - - 0.2 - (146.5)
Issue of ordinary shares 14 - 0.2 - - - - - 0.2
Dividends paid - - (73.6) - - - - (73.6)
Total transactions with owners, recognised directly in equity (0.2) 0.2 (219.8) (11.7) - 0.2 - (231.3)
Balance at 31 March 2022 9.5 182.6 1,332.4 (22.4) (1,060.8) 1.0 30.2 472.5
Profit for the year - - 233.9 - - - - 233.9
Other comprehensive income:
Currency translation differences - - - - - - (0.3) (0.3)
Realisation of cumulative currency translation differences - - - - - - 0.4 0.4
Remeasurements of post-employment benefit obligations, net of tax - - (0.4) - - - - (0.4)
Total comprehensive income, net of tax - - 233.5 - - - 0.1 233.6
Transactions with owners
Employee share schemes - value of employee services - - 44.6 - - - - 44.6
Exercise of employee share schemes - - (3.6) 5.1 - - 0.4 1.9
Tax impact of employee share schemes - - 0.4 - - - - 0.4
Purchase of own shares for treasury - - - (8.7) - - - (8.7)
Purchase of own shares for cancellation (0.2) - (139.3) - - 0.2 - (139.3)
Dividends paid - - (77.7) - - - - (77.7)
Total transactions with owners, recognised directly in equity (0.2) - (175.6) (3.6) - 0.2 0.4 (178.8)
Balance at 31 March 2023 9.3 182.6 1,390.3 (26.0) (1,060.8) 1.2 30.7 527.3
Consolidated statement of cash flows
For the year ended 31 March 2023
Note 2023 2022
£m £m
Cash flows from operating activities
Cash generated from operations 17 327.4 328.1
Income taxes paid (60.5) (56.2)
Net cash generated from operating activities 266.9 271.9
Cash flows from investing activities
Purchases of intangible assets (1.0) -
Purchases of property, plant and equipment (2.4) (2.8)
Dividends received from joint ventures 2.9 7.8
Proceeds from sale of property, plant and equipment 1.8 -
Payment for acquisition of subsidiary, net of cash acquired 18 (144.2) -
Payment of deferred consideration for acquisition of subsidiary 18 (8.1) -
Payment for acquisition of shares in investment entities (1.3) -
Proceeds on disposal of subsidiary, net of cash disposed 6 25.6 -
Net cash used in investing activities (126.7) 5.0
Cash flows from financing activities
Dividends paid to Company's shareholders 16 (77.7) (73.6)
Drawdown of Syndicated revolving credit facility 13 110.0 -
Repayment of Syndicated revolving credit facility 13 (50.0) (30.0)
Repayment of other debt (4.0) -
Proceeds from loan 13 1.1 -
Payment of refinancing fees 13 (1.4) -
Payment of interest on borrowings 13 (3.0) (1.5)
Payment of lease liabilities 11 (2.9) (3.2)
Purchase of own shares for cancellation 14 (138.6) (145.8)
Purchase of own shares for treasury 15 (8.7) (17.7)
Payment of fees on purchase of own shares (0.7) (0.8)
Contributions to defined benefit pension scheme (1.0) (0.1)
Proceeds from exercise of share-based incentives 2.0 1.4
Net cash used in financing activities (174.9) (271.3)
Net increase in cash and cash equivalents (34.7) 5.6
Cash and cash equivalents at beginning of year 51.3 45.7
Cash and cash equivalents at end of year 16.6 51.3
Notes to the consolidated financial statements
1. General information
Basis of preparation
The Consolidated financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and in accordance with UK-adopted
international accounting standards. The Consolidated financial statements have
been prepared on the going concern basis and under the historical cost
convention except for equity investments which are carried at fair value. The
Group's principal business is the operation of the Auto Trader platforms which
form the UK's largest automotive marketplace.
The following amendments to standards have been adopted by the Group for the
first time for the financial year beginning on 1 April 2022:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37)
· Annual Improvements to IFRS Standards 2018-2020
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
· Reference to the Conceptual Framework (Amendments to IFRS 3)
The adoption of these amendments has had no material effect on the Group's
Consolidated financial statements.
There are a number of amendments to IFRS that have been issued by the IASB
that, when endorsed in the UK, will become effective in a subsequent
accounting period including:
· IFRS 17 Insurance Contracts
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2)
· Definition of Accounting Estimates (Amendments to IAS 8)
· Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction (Amendments to IAS 12 Income Taxes)
· Classification of liabilities as current or non-current
(Amendments to IAS 1)
· Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
The Group has evaluated these changes and none are expected to have a material
impact on the Consolidated financial statements.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 March 2023 or 31 March 2022 but is
derived from those accounts. Statutory accounts for 31 March 2022 have been
delivered to the registrar of companies, and those for 31 March 2023 will be
delivered in due course. The auditor has reported on those accounts; their
reports were (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 Companies Act 2006.
Going concern
During the year ended 31 March 2023 the Group has continued to generate
significant cash from operations. The Group has an overall positive net asset
position and had cash balances of £16.6m at 31 March 2023 (2022: £51.3m).
During the year £225.0m was returned to shareholders through share buybacks
and dividends (2022: £237.1m).
The Group has access to a Syndicated revolving credit facility (the
'Syndicated RCF'). At 31 March 2023 the Group had £60.0m (2022: nil) drawn of
its £200.0m Syndicated RCF. The £200.0m Syndicated RCF is committed through
to maturity in February 2028.
Cash flow projections for a period of not less than 12 months from the date of
this report have been prepared. Stress case scenarios have been modelled to
make the assessment of going concern, taking into account severe but plausible
potential impacts of a severe economic downturn and a data breach within the
next 12 months. The results of the stress testing demonstrated that due to the
Group's significant free cash flow, access to the Syndicated RCF and the
Board's ability to adjust the discretionary share buyback programme, the Group
would be able to withstand the impact and remain cash generative. Subsequent
to the year end, the Group has generated cash flows in line with its forecast
and there are no events that have adversely impacted the Group's liquidity.
The Directors, after making enquiries and on the basis of current financial
projections and facilities available, believe that the Group has adequate
financial resources to continue in operation for a period not less than 12
months from the date of this report. For this reason, they continue to adopt
the going concern basis in preparing the financial statements.
Accounting estimates and judgements
The preparation of financial statements in conformity with UK-adopted
international accounting standards requires the use of certain accounting
estimates and assumptions. It also requires management to exercise its
judgement in the process of applying the Group's accounting policies.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Management believe that the estimates and assumptions listed below were
significant in the preparation of the Consolidated balance sheet at the
financial year end.
Acquisition accounting (judgement and estimate)
The Group acquired Autorama UK Limited ('Autorama') in the year. Business
combination accounting has been adopted in line with IFRS 3. Judgement was
required to determine the acquired intangible assets to be separately
identified. In particular, it was concluded that supplier relationships with
funders and car manufacturers did not meet the criteria for recognition as
separate intangible assets and their value would form part of the goodwill
arising on acquisition. For those acquired intangible assets which are
separately identified, principally the Vanarama brand, estimation was then
required to determine the appropriate methodology, assumptions and data to
measure their fair value at the acquisition date.
The purchase of Autorama gave rise to a deferred payment in shares of £50.0m,
with payment contingent on post-acquisition employment and service conditions.
This element of consideration payable has been determined to be a
post-acquisition income statement expense over the period of service, in
accordance with IFRS 3. There is no significant estimate relating to the
contingency, which expires in June 2023.
There are no accounting estimates or judgements at the financial year end
which have a significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next financial year.
Other accounting estimates and judgements include:
Carrying values of goodwill (judgement and estimate)
The Group tests annually whether goodwill, held by the Group or its joint
venture, has suffered any impairment. Judgement is required in the
identification and allocation of goodwill to cash-generating units and the
recoverable amounts of cash-generating units require the use of estimates.
2. Segmental information
IFRS 8 'Operating segments' requires the Group to determine its operating
segments based on information which is provided internally. Based on the
internal reporting information and management structures within the Group, it
has been determined that there are two operating segments (2022: one operating
segment). The acquisition of Autorama in June 2022 has led to Autorama being
reported as a separate segment during the period. The Group's reportable
operating segments have therefore been identified as follows:
· Auto Trader - includes the results of Auto Trader, AutoConvert
and Webzone in respect of online classified advertising of motor vehicles and
other related products and services in the digital automotive marketplace
including profit from the Dealer Auction joint venture.
· Autorama - the results of Autorama in respect of a marketplace
for leasing new vehicles and other related products and services.
Management has determined that there are two operating segments in line with
the nature in which the Group is managed. The reports reviewed by the
Operational Leadership Team ('OLT'), which is the chief operating
decision-maker ('CODM') for both segments, splits out operating performance by
segment. The OLT is made up of the Executive Directors and Key Management and
is responsible for the strategic decision-making of the Group. Revenue and
cost streams for each operating segment are largely independent in the
reporting period.
The OLT primarily uses the measures of Revenue and Operating profit to assess
the performance of each operating segment. The revenue from external parties
reported to the OLT is measured in a manner consistent with that in the income
statement. There are no inter-segment revenues in the current or comparative
periods.
Analysis of the Groups' revenue and results for both reportable segments, with
a reconciliation to Group profit before tax is shown below:
Year to March 2023 Auto Trader segment Autorama segment Group Group
central costs
£m £m
£m
£m
Total segment revenue 473.0 27.2 - 500.2
People costs (74.0) (10.5) (38.8) (123.3)
Marketing (22.3) (4.7) - (27.0)
Costs of goods sold - (15.7) - (15.7)
Other costs (39.6) (5.4) - (45.0)
Depreciation & amortisation (6.7) (2.1) (5.3) (14.1)
Total segment costs (142.6) (38.4) (44.1) (225.1)
Share of profit from joint ventures 2.5 - - 2.5
Total segment operating profit/(loss) 332.9 (11.2) (44.1) 277.6
Finance costs - net (3.1)
Profit on disposal of subsidiary 19.1
Profit before tax 293.6
Group central costs which are not allocated within either of the segment
operating profit/(loss) reported to the CODM comprise:
(i) People costs: A £38.8m charge for the expense of Group shares expected
to be issued to settle the Autorama deferred consideration.
(ii) Depreciation & amortisation: £5.3m of amortisation expense relating
to the fair value of intangible brand and technology assets acquired in the
Group's business combination of Autorama.
Year to March 2022 Auto Trader segment Autorama segment Group Group
central costs
£m £m
£m
£m
Total segment revenue 432.7 - - 432.7
People costs (69.8) - - (69.8)
Marketing (20.5) - - (20.5)
Other costs (34.5) - - (34.5)
Depreciation & amortisation (7.2) - - (7.2)
Total segment costs (132.0) - - (132.0)
Share of profit from joint ventures 2.9 - - 2.9
Total segment operating profit 303.6 - - 303.6
Finance costs - net (2.6)
Profit before tax 301.0
3. Revenue
The Group's revenue is derived from contracts with customers. Other than
disclosed in note 6, all revenues were earned from activities and customers in
the United Kingdom.
In the following table, the Group's revenue is detailed by customer type. This
level of detail is consistent with that used by management to assist in the
analysis of the Group's revenue-generating trends.
Revenue 2023 2022
£m £m
Retailer 406.8 370.4
Home Trader 10.1 8.8
Other 10.5 9.1
Trade 427.4 388.3
Consumer Services 34.5 33.3
Manufacturer and Agency 11.1 11.1
Autorama 27.2 -
Total revenue 500.2 432.7
4. Operating profit
Operating profit is after (charging)/crediting the following:
Note 2023 2022
£m £m
Staff costs (84.1) (69.8)
Contractor costs (0.4) -
Depreciation of property, plant and equipment 10 (4.9) (4.6)
Amortisation of intangible assets 9 (9.2) (2.6)
Profit on sale of property, plant and equipment 0.7 -
5. Net finance costs
2023 2022
£m £m
On bank loans and overdrafts 2.5 1.4
Amortisation of debt issue costs 0.5 1.0
Interest unwind on lease liabilities 0.2 0.2
Interest on vehicle stocking loan 0.1 -
Interest charged on deferred consideration - 0.1
Interest receivable on cash and cash equivalents (0.2) (0.1)
Total 3.1 2.6
6. Disposal of a subsidiary
Sale of Webzone Limited
On 24 October 2022, the Group announced the sale of one of its subsidiaries,
Webzone Limited, which trades in the Republic of Ireland under the Carzone
brand. The business was sold to Mediahuis Ireland for consideration of
€30.0m.
Revenue generated from Webzone Limited in the period to 24 October 2022 was
£2.9m (year ended 31 March 2022: £4.9m). The disposal of Webzone Limited
does not represent a discontinued operation under IFRS 5 as the entity was
neither a separate major line of business nor a material geographical area of
operation.
A profit on disposal has been recognised in the Group's Consolidated income
statement:
24 October 2022
£m
Goodwill 5.7
Property, plant and equipment 0.6
Deferred taxation assets 0.1
Trade and other receivables 0.9
Cash and cash equivalents 0.8
Lease liabilities (0.7)
Trade and other payables (0.5)
Net identifiable assets/(liabilities) disposed of 6.9
Cash consideration received 26.4
Net identifiable assets disposed of (6.9)
Realisation of cumulative currency translation difference (0.4)
Gain on disposal of subsidiary 19.1
7. Taxation
2023 2022
£m £m
Current taxation
UK corporation taxation 61.2 56.5
Foreign taxation 0.1 0.2
Adjustments in respect of prior years (0.2) (0.4)
Total current taxation 61.1 56.3
Deferred taxation
Origination and reversal of temporary differences (1.3) 0.3
Effect of rate changes on opening balance - 0.2
Adjustments in respect of prior years (0.1) (0.5)
Total deferred taxation (1.4) -
Total taxation charge 59.7 56.3
The taxation charge for the year is higher than (2022: lower than) the
effective rate of corporation tax in the UK of 19% (2022: 19%). The
differences are explained below:
2023 2022
£m £m
Profit before taxation 293.6 301.0
Tax on profit at the standard UK corporation tax rate of 19% (2022: 19%) 55.8 57.2
Expenses not deductible for taxation purposes 8.5 0.8
Income not taxable - gain on disposal of subsidiary (3.6) -
Share of joint venture taxation (0.5) (0.6)
Adjustments in respect of foreign taxation rates (0.1) (0.1)
Effect of rate change on deferred taxation - 0.1
Adjustments in respect of OCI group relief (0.1) (0.2)
Adjustments in respect of prior years (0.3) (0.9)
Total taxation charge 59.7 56.3
Expenses non-deductible for taxation purposes in the current year principally
includes the share-based payment expense relating to the deferred
consideration and amortisation of intangible assets arising on acquisition of
Autorama.
Taxation on items taken directly to equity was a credit of £0.4m (2022:
£0.1m) relating to tax on share-based payments.
Taxation recorded in equity within the Consolidated statement of comprehensive
income was a release of £0.4m (2022: charge of £0.2m) relating to
post-employment benefit obligations.
The taxation charge for the year is based on the standard rate of UK
corporation tax for the period of 19% (2022: 19%). Deferred income taxes have
been measured at the tax rate expected to be applicable at the date the
deferred income tax assets and liabilities are realised.
On 10 June 2021, Royal Assent to the Finance Act was given to increase the UK
corporation tax from 19% to 25% from 1 April 2023. Management has performed an
assessment, for all material deferred income tax assets and liabilities, to
determine the period over which the deferred income tax assets and liabilities
are forecast to be realised, which has resulted in an average deferred income
tax rate of 25% being used to measure all deferred tax balances as at 31 March
2023 (2022: 20%).
8. Earnings per share
Basic earnings per share is calculated using the weighted average number of
ordinary shares in issue during the year, excluding those held in treasury and
by the Employee Share Option Trust ('ESOT'), based on the profit for the year
attributable to shareholders.
Weighted average Total Pence
number of ordinary shares earnings per share
£m
Year ended 31 March 2023
Basic EPS 935,138,578 233.9 25.01
Diluted EPS 944,144,242 233.9 24.77
Year ended 31 March 2022
Basic EPS 955,532,888 244.7 25.61
Diluted EPS 957,534,145 244.7 25.56
The number of shares in issue at the start of the year is reconciled to the
basic and diluted weighted average number of shares below:
2023 2022
Issued ordinary shares at 1 April 946,892,976 969,024,186
Weighted effect of ordinary shares purchased for cancellation (7,112,698) (9,573,664)
Weighted effect of ordinary shares held in treasury (4,304,401) (3,572,833)
Weighted effect of shares held in the ESOT (348,989) (371,316)
Weighted effect of ordinary shares issued for share-based payments 11,690 26,515
Weighted average number of shares for basic EPS 935,138,578 955,532,888
Dilutive impact of share options outstanding 9,005,664 2,001,257
Weighted average number of shares for diluted EPS 944,144,242 957,534,145
For diluted earnings per share, the weighted average number of shares for
basic EPS is adjusted to assume conversion of all potentially dilutive
ordinary shares. The Group has potentially dilutive ordinary shares arising
from share options granted to employees and shares issued as deferred
consideration. Options are dilutive under the Sharesave scheme where the
exercise price together with the future IFRS 2 charge is less than the average
market price of the ordinary shares during the year. Options under the
Performance Share Plan, the Single Incentive Plan Award, the Deferred Annual
Bonus Plan and the Share Incentive Plan are contingently issuable shares and
are therefore only included within the calculation of diluted EPS if the
performance conditions are satisfied.
The average market value of the Group's shares for the purposes of calculating
the dilutive effect of share-based incentives was based on quoted market
prices for the period during which the share-based incentives were
outstanding.
9. Intangible assets
Goodwill Software Financial Brand Other Total
and website development costs
systems
£m
£m £m £m
£m £m
Cost
At 31 March 2021 457.9 14.4 13.1 1.2 25.3 511.9
At 31 March 2022 457.9 14.4 13.1 1.2 25.3 511.9
Acquired through business combinations 92.5 13.7 - 47.6 5.6 159.4
Additions - 1.0 - - - 1.0
Disposals (5.7) (1.8) - (0.6) (1.2) (9.3)
Exchange differences (0.1) - - - - (0.1)
At 31 March 2023 544.6 27.3 13.1 48.2 29.7 662.9
Accumulated amortisation and impairments
At 31 March 2021 117.0 8.3 12.8 0.6 15.0 153.7
Amortisation charge - 0.9 0.3 0.1 1.3 2.6
At 31 March 2022 117.0 9.2 13.1 0.7 16.3 156.3
Amortisation charge - 2.5 - 4.2 2.5 9.2
Disposals - (1.8) - (0.6) (1.2) (3.6)
At 31 March 2023 117.0 9.9 13.1 4.3 17.6 161.9
Net book value at 31 March 2023 427.6 17.4 - 43.9 12.1 501.0
Net book value at 31 March 2022 340.9 5.2 - 0.5 9.0 355.6
Net book value at 31 March 2021 340.9 6.1 0.3 0.6 10.3 358.2
Other intangibles include customer relationships, technology, trade names,
trademarks and non-compete agreements. Intangible assets which have a finite
useful life are carried at cost less accumulated amortisation. Amortisation of
these intangible assets is calculated using the straight-line method to
allocate the cost of the assets over their estimated useful lives (principally
between 3 to 15 years). The longest estimated useful life remaining at 31
March 2023 is 12 years (31 March 2022: 13 years).
For the year to 31 March 2023, the amortisation charge of £9.2m (2022:
£2.6m) has been charged to operating costs in the Consolidated income
statement. At 31 March 2023, there were no software and website development
costs representing assets under construction (2022: £nil).
In accordance with UK-adopted international accounting standards, goodwill is
not amortised, but instead is tested annually for impairment, or more
frequently if there are indicators of impairment. Goodwill is carried at cost
less accumulated impairment losses.
10. Property, plant and equipment
Land, buildings and leasehold improvements Office Motor Total
vehicles
£m equipment
£m
£m
£m
Cost
At 31 March 2021 16.5 13.0 1.9 31.4
Additions 6.6 1.3 0.2 8.1
Disposals and modifications - (0.4) (0.5) (0.9)
At 31 March 2022 23.1 13.9 1.6 38.6
Acquired through business combinations 4.0 0.3 1.0 5.3
Additions 2.2 2.0 0.3 4.5
Disposals (7.6) (3.0) (0.9) (11.5)
At 31 March 2023 21.7 13.2 2.0 36.9
Accumulated depreciation
At 31 March 2021 8.2 10.6 1.4 20.2
Charge for the year 3.3 0.9 0.4 4.6
Disposals - (0.4) (0.5) (0.9)
At 31 March 2022 11.5 11.1 1.3 23.9
Charge for the year 3.3 1.1 0.5 4.9
Disposals (4.4) (2.8) (0.6) (7.8)
At 31 March 2023 10.4 9.4 1.2 21.0
Net book value at 31 March 2023 11.3 3.8 0.8 15.9
Net book value at 31 March 2022 11.6 2.8 0.3 14.7
Net book value at 31 March 2021 8.3 2.4 0.5 11.2
Included within property, plant and equipment are £6.5m (2022: £8.3m) of
assets recognised as leases under IFRS 16. The depreciation expense of £4.9m
for the year to 31 March 2023 (2022: £4.6m) has been recorded
in operating costs. During the year, £2.6m (2022: £0.4m) worth of property,
plant and equipment with £nil net book value was disposed of.
11. Leases
The Group's lease assets including land and buildings and motor vehicles are
held within property, plant and equipment. Information about leases for which
the Group is a lessee is presented below.
2023 2022
£m £m
Net book value property, plant and equipment owned 9.4 6.4
Net book value right of use assets 6.5 8.3
15.9 14.7
Net book value of right of use assets Land, buildings and leasehold improvements Office Motor Total
vehicles
£m equipment
£m
£m
£m
Balance at 31 March 2021 4.9 0.1 0.6 5.6
Additions 5.1 - 0.2 5.3
Depreciation charge (2.2) - (0.4) (2.6)
At 31 March 2022 7.8 0.1 0.4 8.3
Acquired through business combination 0.1 - 0.3 0.4
Additions 1.5 0.1 0.3 1.9
Disposals (1.4) - (0.1) (1.5)
Depreciation charge (2.2) - (0.4) (2.6)
At 31 March 2023 5.8 0.2 0.5 6.5
Lease liabilities in the balance sheet at 31 March 2023 2022
£m £m
Current 2.5 3.0
Non-current 4.6 6.5
Total 7.1 9.5
The term recognised for certain leases has assumed lease break options are
exercised. Certain lease rentals are subject to periodic market rental
reviews.
During the year, the Group relocated its London office to a new premises and
exited its existing lease. In accordance with IFRS 16, the difference between
the carrying value of the right of use asset and the lease liability at the
date of the lease termination (£0.1m) was recognised in the Consolidated
income statement as a gain on disposal.
2023 2022
Amounts charged in the income statement £m £m
Depreciation charge of right of use assets 2.6 2.6
Interest on lease liabilities 0.2 0.2
Gain on disposal of right of use assets (0.1) -
Total amounts charged in the income statement 2.7 2.8
Cash outflow 2023 2022
£m £m
Total cash outflow for leases 2.9 3.2
12. Net investments in joint ventures
Joint ventures are contractual arrangements over which the Group exercises
joint control with partners and where the parties have rights to the net
assets of the arrangement, irrespective of the Group's shareholding in the
entity.
The Group owns 49% of the ordinary share capital of Dealer Auction Limited
(previously Dealer Auction (Holdings) Limited). The basis of the Group's joint
control is through a shareholder agreement and an assessment of the
substantive rights of each shareholder, including operational barriers or
incentives that would prevent or deter rights being exercised.
Net investments in joint ventures at the reporting date include the Group's
equity investment in joint ventures and the Group's share of the joint
ventures' post acquisition net assets. The table below reconciles the movement
in the Group's net investment in joint ventures in the year:
Equity investments in joint ventures Share of post acquisition net assets Net investments
in joint ventures
£m £m
£m
Carrying value
As at 31 March 2021 48.1 6.5 54.6
Share of result for the year taken to the income statement - 2.9 2.9
Dividends received in the year (7.8) - (7.8)
As at 31 March 2022 40.3 9.4 49.7
Share of result for the year taken to the income statement - 2.5 2.5
Dividends received in the year (2.9) - (2.9)
As at 31 March 2023 37.4 11.9 49.3
Set out below is the summarised financial information for the joint venture,
adjusted for differences in accounting policies between the Group and the
joint venture. The table also reconciles the summarised financial information
to the carrying amount of the Group's interest in the joint venture.
2023 2022
£m £m
Non-current assets 95.6 96.8
Current assets
Cash and cash equivalents 6.4 1.1
Other current assets 1.3 8.2
Total assets 103.3 106.1
Liabilities
Current liabilities 2.0 4.0
Total liabilities 2.0 4.0
Net assets 101.3 102.1
Group's share of net assets 49.3 49.7
2023 2022
£m £m
Revenues 10.5 12.0
Profit for the year 5.2 6.0
Total comprehensive income 5.2 6.0
Group's share of comprehensive income 2.5 2.9
Dividends received by the Group 2.9 7.8
13. Borrowings
Non-current 2023 2022
£m £m
Syndicated RCF gross of unamortised debt issue costs 60.0 -
Unamortised debt issue costs on Syndicated RCF (2.5) (1.4)
Total 57.5 (1.4)
2023 2022
Current £m £m
Loan from other investment 1.1 -
Total 1.1 -
Total borrowings 58.6 (1.4)
Unamortised debt issue costs on the Syndicated RCF increased to £2.5m in the
year (2022: £1.4m) following the amendment and extension of the Group's
Syndicated RCF facility.
Borrowings are repayable as follows:
2023 2022
£m £m
Less than one year 1.1 -
Two to five years 60.0 -
Total 61.1 -
The carrying amounts of borrowings approximate their fair values.
Syndicated revolving credit facility ('Syndicated RCF')
The Group has access to an unsecured Syndicated RCF. Associated debt
transaction costs total £5.9m, with £3.3m being incurred at initiation and
£2.6m of additional costs associated with extension requests.
With effect from 1 February 2023 the Group entered into an Amendment and
Restatement Agreement to extend the term of the facility for five years from
the date of signing and to further reduce the capacity of the facility to
£200.0m. There is no requirement to settle all or part of the facility before
the termination date of February 2028. The associated debt transaction costs
were £1.6m, of which £1.4m was paid in the period to 31 March 2023.
Individual tranches are drawn down, in sterling, for periods of up to six
months at the compounded reference rate (being the aggregate of SONIA for that
interest period) plus a margin of between 1.2% and 2.1% depending on the
consolidated leverage ratio of the Group. A commitment fee of 35% of the
margin applicable to the Syndicated RCF is payable quarterly in arrears on
unutilised amounts of the total facility.
The Syndicated RCF has financial covenants linked to interest cover and the
consolidated debt cover of the Group:
· Net bank debt to EBITDA must not exceed 3.5:1.
· EBITDA to Net Interest Payable must not be less than 3.0:1.
EBITDA is defined as earnings before interest, taxation, depreciation and
amortisation, share-based payments and associated NI, share of profit from
joint ventures and exceptional items.
All financial covenants of the facility have been complied with through the
period.
Loan from other investment
During the year, the Group's wholly owned subsidiary, Autorama Holding (Malta)
Limited, elected to transfer the insurance portfolio held in a protected
insurance cell with Advent Insurance PCC Limited to Atlas Insurance PCC
Limited. As part of this process, Advent Insurance PCC Limited issued a loan
to Autorama Holding (Malta) Limited to fund the investment in the new
protected insurance cell until the portfolio transfer was complete. This
process is likely to be completed within the next twelve months. As at 31
March 2023, £1.1m was recognised on the Consolidated balance sheet (2022:
£nil).
Exposure to interest rate changes
The exposure of the Group's borrowings (excluding debt issue costs) to SONIA
rate changes and the contractual repricing dates at the balance sheet date are
as follows:
2023 2022
£m £m
One month or less 60.0 -
Total 60.0 -
14. Share capital
Share capital 2023 2022
Number Amount Number Amount
'000 £m '000 £m
Allotted, called-up and fully paid ordinary shares of 1p each
At 1 April 946,893 9.5 969,024 9.7
Purchase and cancellation of own shares (23,831) (0.2) (22,198) (0.2)
Issue of shares 13 0.0 67 0.0
Total 923,075 9.3 946,893 9.5
In the year ended 31 March 2017, the Company commenced a share buyback
programme. By resolutions passed at the 2022 AGM, the Company's shareholders
generally authorised the Company to make market purchases of up to 96,678,535
of its ordinary shares, subject to minimum and maximum price restrictions. In
the year ended 31 March 2023, a total of 25,261,584 ordinary shares of £0.01
were purchased. The average price paid was 582.1p with a total consideration
paid (including fees of £0.7m) of £148.0m. Of all shares purchased,
1,430,372 were held in treasury with 23,831,212 being cancelled. In the year
ended 31 March 2023, 12,893 ordinary shares were issued for the settlement of
share-based payments.
Included within shares in issue at 31 March 2023 are 340,196 (2022: 358,158)
shares held by the ESOT and 4,371,505 (2022: 3,826,928) shares held in
treasury, as detailed in note 15.
15. Own shares held
Own shares held - £m ESOT shares reserve Treasury Total
shares
£m
£m
£m
Own shares held as at 31 March 2021 (0.5) (10.2) (10.7)
Transfer of shares from ESOT 0.1 - 0.1
Repurchase of own shares for treasury - (17.8) (17.8)
Share-based incentives exercised - 6.0 6.0
Own shares held as at 31 March 2022 (0.4) (22.0) (22.4)
Repurchase of own shares for treasury - (8.7) (8.7)
Share-based incentives exercised - 5.1 5.1
Own shares held as at 31 March 2023 (0.4) (25.6) (26.0)
Own shares held - number ESOT shares reserve Treasury Total
Number of shares shares Number of shares
Number of shares
Own shares held as at 31 March 2021 404,653 2,422,659 2,827,312
Transfer of shares from ESOT (46,495) - (46,495)
Repurchase of own shares for treasury - 2,718,193 2,718,193
Share-based incentives exercised - (1,313,924) (1,313,924)
Own shares held as at 31 March 2022 358,158 3,826,928 4,185,086
Transfer of shares from ESOT (17,962) - (17,962)
Purchase of own shares for treasury - 1.430,372 1,430,372
Share-based incentives exercised - (885,795) (885,795)
Own shares held as at 31 March 2023 340,196 4,371,505 4,711,701
16. Dividends
Dividends declared and paid by the Company were as follows:
2023 2022
Pence £m Pence £m
per share per share
2022 final dividend paid 5.5 51.7 5.0 48.0
2023 interim dividend paid 2.8 26.0 2.7 25.6
8.3 77.7 7.7 73.6
The proposed final dividend for the year ended 31 March 2023 of 5.6p per
share, totalling £51.4m, is subject to approval by shareholders at the Annual
General Meeting ('AGM') and hence has not been included as a liability in the
financial statements.
17. Cash generated from operations
2023 2022
£m £m
Profit after tax 233.9 244.7
Adjustments for:
Tax charge 59.7 56.3
Depreciation 4.9 4.6
Amortisation 9.2 2.6
Share-based payments charge (excluding associated NI) 5.8 5.1
Deferred contingent consideration 38.8 -
Share of profit from joint ventures (2.5) (2.9)
Profit on sale of property, plant and equipment (0.7) -
Net lease disposals and modifications (0.1) -
Post employment expenses relating to the defined benefit scheme 2.7 -
Finance costs 3.1 2.6
RDEC (0.1) (0.1)
Profit on disposal of a subsidiary (19.1) -
Changes in working capital (excluding the effects of exchange differences on
consolidation):
Trade and other receivables (3.6) (5.3)
Trade and other payables (1.9) 20.5
Inventory (2.7) -
Cash generated from operations 327.4 328.1
18 Business combinations
Purchase of Autorama UK Limited
On 22 June 2022, the Group acquired the entire share capital of Autorama UK
Limited ('Autorama') for initial consideration of £150.0m, with an additional
£50.0m deferred until 22 June 2023 and settled in shares to the value of
£50.0m, subject to employment and customary performance conditions.
Autorama, one of the UK's largest marketplaces for leasing new vehicles, is a
leading end-to-end digital platform, which aggregates leasing deals from
multiple funders and OEMs (under its 'Vanarama' brand), enabling buyers to
transact online across a wide range of vehicles.
The total consideration of £150.0m excludes acquisition costs of £2.1m which
were recognised within costs in the Consolidated income statement. The
following table provides a reconciliation of the amounts included in the
Consolidated statement of cash flows for the period:
2023
£m
Cash paid for subsidiary 150.0
Less: cash acquired (5.8)
Payment for acquisition of subsidiary, net of cash acquired 144.2
As the settlement of the deferred £50.0m consideration is subject to a
condition for continuing employment to 22 June 2023, the amount is not
included in the business combination but is recorded as a post-acquisition
income statement expense over the period of service, which extends to the
first anniversary of the acquisition. A charge of £38.8m has been recorded in
the period from acquisition to 31 March 2023.
From the period of acquisition to 31 March 2023, Autorama contributed revenue
of £27.2m and a loss of £11.2m to the Group's results.
The purchase has been accounted for as a business combination under the
acquisition method in accordance with IFRS 3. The fair value of net assets
acquired was assessed and, other than in respect of the intangible assets and
related deferred tax, described below, no material adjustments from book
value were made to existing assets and liabilities. The period in which
measurement adjustments could be made is still open on this acquisition and
the provisional goodwill calculation is summarised below:
Fair value
£m
Intangible asset recognised on acquisition
Brand 47.6
Technology 13.7
Customer relationships 2.9
Order book 2.3
Deferred tax liability arising on intangible assets (16.3)
50.2
Other non-current assets
Investments 1.0
Property, plant and equipment 5.3
Intangible assets 0.4
Deferred tax asset 6.8
13.5
Current assets
Cash and cash equivalents 5.8
Trade and other receivables 4.5
Inventory 0.9
Other debtors 0.9
12.1
Current liabilities
Trade and other payables 11.6
Deferred income 2.3
13.9
Non-current liabilities
Borrowings 4.0
Lease liabilities 0.4
4.4
Total net assets acquired 57.5
Goodwill on acquisition 92.5
Total assets acquired 150.0
Fair value of cash consideration 150.0
The brand, technology, customer relationships and order book obtained through
the acquisition met the requirements to be separately identifiable under IFRS
3.
The business operates under the Vanarama brand name and is one of the UK's
longest running leasing e-commerce brands. This asset was valued using
Multi-period Excess Earnings Method and crosschecked using relief from
royalty. A useful economic life and obsolescence decline period of 10 years
was assumed. Revenue forecasts were discounted using a post-tax discount rate
of 14%. This discount rate is lower than that for Autorama as a whole at the
date of acquisition and reflects factors including the finite brand forecast
period, compared to cash flows into perpetuity used to support the goodwill.
The technology is Autorama's propriety technology which helps manage a complex
vehicle lease purchasing process into a streamlined online transaction via a
customer friendly user interface, which has been developed in-house. The asset
was valued using the cost approach specifically replacement costs and
crosschecked using relief from royalty. The order book is customer orders not
yet delivered, which is expected to unwind.
The goodwill recognised on acquisition principally relates to value arising
from intangible assets that are not separately identifiable under IFRS
3. Such assets include the value of the acquired workforce (including
technical experience), returning customers and future market growth
opportunities. Customer lists have not been valued separately on the basis
they are inseparable in their own right from the brand. Supplier relationships
are not separately valued on the basis that their terms are in line with
industry standards of what would be typically agreed with a market
participant.
The valuation of the Vanarama brand name is sensitive to a change in the
obsolescence rate assumption. An obsolescence profile has been assumed which
is considered to be a representative curve for a consumer asset in the absence
of continued marketing spend, showing a slow decline in the early years due to
the benefit of historic spend, then decline accelerating in the middle years
as consumer brand consciousness falls, before slowing in the final years to
reflect a slower drop off of residual awareness. Slowing or accelerating the
assumed rate of obsolescence by one year, with all other factors being
unchanged, would increase or decrease the valuation of the brand by £14m or
£16m respectively. Residual goodwill would be adjusted by an equal and
opposite amount, net of taxation. The discount rate used in the brand
valuation is less sensitive to change, reflecting the finite useful economic
life of ten years and the lower positive cash flows in the latter years due to
the obsolescence decline.
None of the acquired intangible assets or goodwill is expected to be
deductible for tax purposes. A deferred tax liability has been recorded on the
fair value of the intangible assets recognised, other than goodwill, measured
at the substantively enacted UK rate of corporation tax from April 2023 of
25%. This deferred tax liability has been debited against and increased the
value of goodwill recognised.
Settlement of deferred consideration in relation to BlueOwl Network Limited
In addition, in July 2022, the deferred consideration of £8.1m was settled in
respect of the acquisition of BlueOwl Network Limited ('BlueOwl'). On 31 July
2020, the Group acquired the entire share capital of BlueOwl for consideration
of £18.2m, of which £8.1m was deferred until 31 July 2022.
Principal risks and uncertainties
Risk POTENTIAL IMPACT CHANGES IN THE YEAR
1. An adverse change in supply and demand in the new/used car market could lead • The low level of supply of new vehicles since 2020 has continued for much
Automotive economy, market and business environment to reduced retailer profitability and reduced retailer wallets, resulting in of the last year. However, new car registrations in Q1 (Jan - Mar) 2023
reduced advertising spend. Adverse movements in supply and demand of vehicles increased by 18% compared to Q1 2022. Looking to the future, more reliable
could also lead to a contraction in the number of retailers. In addition, we supply of new vehicles will be importantto the future success of Autorama's
continue to see the movement towards an agency model whereby retailers integration into the Auto Trader Group.
facilitate OEM sales directly to consumers. This could lead to a loss of
revenue from our retailer customers. • The low level of new car supply since 2020 will likely affect the
availability of used car stock in the coming years. In contrast, consumer
demand remains high and retailer profitability, in the main, remains high. In
March 2023, used car retail prices increased by 2% year-on-year, being the
36th consecutive month of price growth.
• In 2023 some OEMs began operating under an agency model. We are aware that
each OEM encounters unique challenges if they switch to an agency model and we
have been working with OEMs to develop bespoke solutions.
•Overall, the risks posed by changes to the automotive economy, market, and
business environment continue to evolve, however metrics and performance
indicators suggest that we are managing these risks to an acceptable level
through our strategic actions.
2. Climate change The automotive industry is intrinsically linked to climate change and there is • Updates to our website in the last year position us as front-runnersin the
increasing pressure from consumers and government for the industry to reduce switch to EVs and enable us to respond to potential changes in OEM and
its impact on the climate. However, failure to deliver on our environmental retailer business models.
commitments will negatively impact our brand as a responsible business and may
result in legal exposure or regulatory sanctions. • There is still a relatively small amount of data informing the residual
values of used EVs. We have positioned ourselves well by leveraging
Failure to overcome the uncertainty created by the shift from internal Autorama's capabilities, providing those consumers switching to EVs for the
combustion engines ('ICE') to electric vehicles ('EVs') could inhibit their first time a viable alternative to outright purchase.
take-up, potentially leading to changes in buying behaviours. Factors
include the high purchase price of most EVs, potential for improvement in • Despite ongoing uncertainty surrounding EVs, the electric share of
public transport, new and expanded emissions zones, increasing EV running ad-views has a gradual upwards trend. Supply in the used EV market increased
costs, and consumer uncertainty over the residual value of EVs. this year as those EVs purchased on three- and four-year agreements enter the
used EV market.
• Looking ahead, widespread take-up of EVs could be affected by:
Changing and more stringent regulatory requirements could increase our cost
base and increased frequency and severity of extreme weather events could lead -the availability of public charging for those drivers unable to access
to heightened costs, including heating/air-conditioning, insurance, and cloud private charging
infrastructure. Extreme weather events could also lead to short-term closure
of retailer forecourts (for example, due to flooding). - EV purchase costs, which are still around 37% more expensive than ICE
equivalents on a like-for-like basis.
- Increases in EV running costs owing to increased taxation and charging costs
(especially those EV drivers without private charging).
• Further regulation and legislation ] are likely, such as the introduction
of new clean air zones and congestion charges.
• At Autorama, some vehicles are pre-registered and held temporarily on
their balance sheet. Consequently, we capture the lifetime emissions of
these vehicles when calculating the Group's carbon emissions. This has led
to a material increase in our reported carbon emissions.
• Overall, the risks associated with climate change have decreased in the
last year owing to the actions we continue to take. Nevertheless, looking to
the future, the impact of climate change means that managing these risks
effectively remains a key strategic priority.
3. To enable us to achieve our strategic objectives it is important that we • Our Glassdoor rating based on anonymous reviews is 4.4 out of 5 and in our
Employees attract, retain and motivate a highly skilled workforce, including those with latest Culture Amp survey, 91% of respondents said that they are proud to work
specialist skillsets in data and technology. at Auto Trader. This year our employee turnover has remained low.
We now operate a Connected Working model where employees are in the office for
two 'fixed' days per week plus an additional 'flex' day per week on a day
Delivery of our strategy is also dependent on us building a diverse and which suits them best. The aim of this working model is to increase
inclusive workforce, and a supportive, collaborative culture, conducted in a efficiency, collaboration and innovation whilst also allowing flexibility and
safe environment, all of which will enable optimum performance from all our maximising inclusion.
employees.
• Connected Working also includes a 'remote first' policy. For periods in
July, August and December, employees can work fully remotely to increase
flexibility at times when there are increased levels of annual leave.
• The cost of living crisis and skills shortages in the marketcontinue to
affect workforce costs. We monitor the market proactively to ensure that our
salaries are fair, proportionate and aligned to market rates. In 2022 we made
a cost-of-living payment to all employees (except for the OLT and the Board)
and increased the size of our annual salary review.
• In the marketplace, employees have increasing expectations of their
employers to act in a fair, responsible and sustainable manner and we remain
committed to ensuring that we conduct our business in a morally responsible
way.
• Overall, the employee-related risks remain a principal risk and we
acknowledge that managing this risk effectively is crucial to achieving our
strategic objectives.
4. To achieve our strategic objectives, we are reliant on partners engaging with • We have implemented a refreshed onboarding and monitoring process for
the changes we are introducing to the industry. Getting lenders on-board with critical suppliers. Despite the threats posed to our suppliers in the external
Reliance on third parties and partners our digital retailing aspirations, for example, is a key dependency. We also environment, we have not experienced any material disruptions in the last
rely on third parties to support our technology infrastructure, supply of data year.
about vehicles and their financing, and in the fulfilment of some of our
revenue generating products. Consequently, it is important that we manage • As we progress further into digital retailing, we are likely to see an
relationships with, and performance of, key suppliers and key strategic increased reliance on third parties. Some of the products we intend to launch
partners. will rely on partners and lenders, and these could be barriers to growth
should these partners not engage with us. Ensuring that we manage our
relationships with these third parties will be crucial.
• Overall, our significant strategic initiatives in relation to platform and
commercial data represent good progress in reducing the level of reliance we
have on third parties. However, we remain aware of the importance of our
partners in achieving our aspirations in digital retailing.
5. As a digital business, we rely on our IT infrastructure to provide our • We have completed a multi-year migration of our applications to the
services. A disruptive cyber security and/or business continuity event could cloud. This increases the resilience of our systems and the security of our
IT systems and lead to downtime of our systems and infrastructure. data.
cyber security
• Development of new products carries the threat of cyber-attack and with
digital retailing the impact of a potential data breach is likely to increase.
Execution of our strategy also relies on us making appropriate investments in We are therefore developing systems which provide not just the best customer
secure systems and technologies. Failure to invest in appropriate technology and consumer experience, but all necessary security to ensure we remain
and safeguards could lead to us failing to achieve our objectives. resilient.
• Integration of Autorama's leasing deals onto the Auto Trader platform is
complex, and we are mindful of IT and cyber security threats during the
Delivery of our strategic objectives also relies on us using data to provide integration. We are also committed to continuously reviewing, testing and
valuable insights to customers. A significant data breach, whether because of updating Autorama's IT disaster recovery and business continuity arrangement.
our own failures or a malicious cyber-attack, would lead to a loss in
confidence by the public, retailers and advertisers. • Whilst we have used artificial intelligence ('AI') for many years, the
recent emergence generative AI poses a great opportunity for us to enhance our
products, customer and consumer experience, and to improve efficiency.
However, it is important we use AI in a manner which does not expose us to
excessive security, compliance and or reputational risks.
• AI being used by criminals maliciously in future. Deepfake technology, for
example, increases the risks of social engineering against stakeholders.
• The cyber security landscape is constantly evolving. We continue to make
significant investments in safeguarding our systems and data, as well as
implementing best-in-class systems to support the achievement of our strategic
objectives.
6. The automotive industry is changing at unprecedented pace. Should we fail to • We continue to develop new products in our marketplace platform and
innovate our business and product offerings, we could lose relevance with our digital retailing. In the last year we have launched a trial of Deal Builder
Failure to innovate: disruptive technologies and changing consumer behaviours key stakeholders, including consumers and customers. with a small number of retailers. This provides consumers with an
omni-channel buying journey where they can find, reserve, finance and
part-exchange online.
It is crucial that we develop and implement new products, services and • Leveraging Autorama's systems, we launched a leasing check-out journey on
technologies, and adapt to changing consumer behaviour towards car buying and the Auto Trader site. Providingconsumers with a leasing option positions us to
ownership. meet their needs as buying behaviours change, particularly those consumers
wary about buying an EV for the first time.
• We have continued to develop our AT Connect solution. This online tool
Failure to provide both customers and consumers with the best possible leverages our platform and data to provide retailers with real-time
products and online journey, including an online buying experience, could lead connections to Auto Trader systems which can be used to inform vehicle
to reduced website traffic and loss of revenue. valuations, maintain stock on our website in real-time and access our vehicle
taxonomy.
• Our data has been recognised nationally through the provision of our
market pricing data to the ONS. We also work with government to provide
information about EV demand to inform potential locations for EV chargers.
• Overall, we have continued to manage the risks well over the last year and
continue to provide new and updated solutions to both customers and consumers.
7. The Group operates in a complex regulatory environment. As we progress in • Providing consumers with an online car buying journey will increase our
executing our strategy, we are likely to be exposed to increased legal and exposure to regulatory risks, in particular the amount of personal information
Legal and regulatory compliance regulatory risks, particularly those relating to FCA and GDPR. we collect and in the provision of the online finance application journey.
• Autorama exposes us to increased FCA and GDPR risks. This relates to both
the leasing journey itself, as well as the ancillary products offered as part
There is a risk that the Group, or its subsidiaries, fail to comply with legal of leasing, such as gap insurance. Our compliance teams have been working to
and regulatory requirements. This could lead to reputational damage, financial ensure that Autorama's policies and procedures are compliant.
or criminal penalties and impact on our ability to do business.
• We are regularly 'horizon scanning' to prepare us for upcoming changes to
regulations and legislation. Upcoming legislative and regulatory changes which
may affect us, albeit to varying degrees, include the UK Online Safety Bill
Digital Markets, Competition and Consumers Bill, Data Protection and Digital
Information Bill, the UK Audit Reform Bill, FCA Consumer Duty regulations, and
changes to the UK Corporate Governance Code.
• In the last year, in both response to, and in anticipation of, changes in
regulatory risk, we have increased our resource in relation to risk and
compliance monitoring, and increased headcount in our Governance, Risk and
Compliance function. Overall, we consider the level of risk has increased.
8. Our data continues to show that there is a low competitive threat in our • Large technology companies such as Facebook, eBay and Amazon continue to
classified marketplace. Nevertheless, we remain wary of the risk that operate in the automotive marketplace. In the last year, however, we
Competition competitors could develop a superior consumer experience or superior retailer maintained our position as the UK's largest and most engaged automotive
products. This could lead to loss of market share. marketplace for new and used cars, with over 75% of all minutes spent on
automotive classified sites spent on Auto Trader.
• On Boxing Day 2022 we launched a new marketing campaign which focusses on
Further, as the automotive industry evolves, an agency model could change the helping consumers to find the right car for them. This was supported by social
way that vehicles are bought and sold. Under an agency model cars are sold by media and digital audio content. We estimated that our advertising reached 99%
OEMs directly to consumers via retailers. As we progress with our own of the UK population between Boxing Day and 31 March 2023.
objectives surrounding digital retailing, an agency model could mean that OEMs
themselves emerge as a direct competitor in the vehicle retail industry. • In 2023 we have worked with certain OEMs to provide them with advertising
Failure to manage this emerging threat could inhibit our ability to achieve solutions following their switch to an agency model.
our objectives.
• Overall, we continue to see retailers and manufacturers evolving their
online offerings, and as we diversify our own product offering, we broaden our
competitive landscape, potentially leading to exposure to increased
competition. It therefore remains imperative that we are innovative across the
our classified marketplace, our platform and digital retailing.
9. Brand and reputation Our brand is one of our biggest assets. Our research shows that we are the • Our research shows that Auto Trader has c.90% prompted brand awareness
largest and most trusted automotive classified brand in the UK. with consumers. We are also voted regularly as the most influential automotive
website by consumers in the car buying process.
• We are supporting digital retailing product development with marketing to
Failure to maintain and protect our brand, and/or negative publicity affecting ensure that consumers see us as the most suitable place to transact online.
our reputation could diminish the confidence that retailers, consumers and
advertisers have in our products and services. This could result in a • Owing to measures and monitoring tehchniques used by our security team, we
reduction in audience and revenue. continue to see very low levels of fraudulent and misleading adverts on our
website. We use a customer watch list which aims to manage our platforms
proactively in line with our values and relevant regulations, to identify and
stop customer behaviour that could harm consumers, retailers or the Auto
Trader brand.
• To date, the trial of our Deal Builder product has been provided to only a
select number of retailers. All retailers trialing this new product undergo
enhanced checks before being granted access, including reviews on consumer
feedback.
• Overall, we consider there to be a decreasing risk to our brand and
reputation.
10. External catastrophic and geo-political events affecting customer and In a connected, global industry, we are increasingly prone to the impacts of • In the last year, adverse market reaction to UK Government policy, the
consumer behaviours external events around the globe, as are our customers and consumers. We enduring impacts of Covid-19 and the conflict in Ukraine have all led to high
consider there to be a threat to the short-to-mid-term performance of our inflation. Should the resultant rise in the cost of living be sustained for a
business posed by external, unpreventable, catastrophic and geo-political lengthy period, it could have an impact on the ownership model of vehicles,
events. Such events could result in our customers being unable to trade, potentially with a lower volume of vehicles per household. However, our
leading to loss of revenue, stock, audience and market share. exposure to high interest rates is minimal owing to our low levels of debt.
• It is of paramount importance to the resilience of our business that we
can anticipate, and respond quickly to, the impacts of external events,
particularly those which impact on our customers. We are therefore
continuously reviewing our business continuity and crisis management
arrangements to ensure that they consider the impacts of external events.
• Overall, we have performed well despite the uncertain economy.
Nevertheless, we remain wary of the threats posed by external events, and we
continue to review our crisis and business continuity arrangements regularly.
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