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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Auto Trader Group Plc | LSE:AUTO | London | Ordinary Share | GB00BVYVFW23 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 6.80 | 0.99% | 695.40 | 696.40 | 697.00 | 698.20 | 689.80 | 693.40 | 1,417,687 | 16:35:04 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Autos & Other Vehicles-whsl | 500.2M | 233.9M | 0.2563 | 27.19 | 6.36B |
From Apr 2023 to Apr 2024
TIDMAUTO
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 YEARED 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
Hot Features
Premium
-- 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 1st 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
GBPm (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 (44.1) -
Autorama acquisition -
----------------------------------------- ------- ------ -------
Group operating profit 277.6 303.6 (9%)
----------------------------------------- ------- ------ -------
Auto Trader operating profit margin 70% 70% 0% pts
----------------------------------------- ------- ------ -------
(15%)
Group operating profit margin 55% 70% 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%
----------------------------------------- ------- ------ -------
-- GBP225.0 million was returned to shareholders (2022: GBP237.1 million) through GBP147.3 million of share buybacks
and dividends paid of GBP77.7 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 visits7,8 were up 1 % to 69.6 million per month (2022: 68.9 million) and cross platform minutes7,8 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 forecourts7 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 Retailer7 (ARPR) per month was up GBP227 (or 10%) to GBP2,437 on average per month (2022:
GBP2,210) . This was driven by both price and product levers, with the stock lever being flat.
-- Physical car stock7,10 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 GBP1,624, whilst facing continued
new vehicle supply constraints.
-- The average number of employees (FTEs7) 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 Trader11 (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 CO2 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 equivalent15 (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 GBP137 achieved last year and the price lever to be slightly higher than last year's GBP90. 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 GBP15 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.GBP18 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
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
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/
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 GBPm 500.2 432.7 16%
------------------------------------ ------------ ------- ------- -------
Adjusted EBITDA (4) GBPm 328.0 307.9 7%
------------------------------------ ------------ ------- ------- -------
Operating profit GBPm 277.6 303.6 (9%)
------------------------------------ ------------ ------- ------- -------
(15%)
Operating profit margin % 55% 70% pts
------------------------------------ ------------ ------- ------- -------
Profit before tax GBPm 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) GBPm 327.4 328.1 0%
------------------------------------ ------------ ------- ------- -------
Net bank debt/(cash)(6) GBPm 43.4 (51.3) 94.7m
------------------------------------ ------------ ------- ------- -------
Auto Trader results
------------------------------------ ------------ ------- ------- -------
Trade GBPm 427.4 388.3 10%
Consumer Services GBPm 34.5 33.3 4%
Manufacturer & Agency GBPm 11.1 11.1 0%
------------------------------------ ------------ ------- ------- -------
Revenue GBPm 473.0 432.7 9%
------------------------------------ ------------ ------- ------- -------
People costs GBPm 74.0 69.8 6%
Marketing GBPm 22.3 20.5 9%
Other costs GBPm 39.6 34.5 15%
Depreciation & amortisation GBPm 6.7 7.2 (7%)
------------------------------------ ------------ ------- ------- -------
Operating costs GBPm 142.6 132.0 8%
------------------------------------ ------------ ------- ------- -------
Share of profit from joint
ventures GBPm 2.5 2.9 (14%)
------------------------------------ ------------ ------- ------- -------
Operating profit GBPm 332.9 303.6 10%
------------------------------------ ------------ ------- ------- -------
Operating profit margin % 70% 70% 0% pts
------------------------------------ ------------ ------- ------- -------
Autorama results
------------------------------------ ------------ ------- ------- -------
Vehicle & Accessory Sales GBPm 16.0 - -
Commission & Ancillary GBPm 11.2 - -
------------------------------------ ------------ ------- ------- -------
Revenue GBPm 27.2 - -
------------------------------------ ------------ ------- ------- -------
Cost of goods sold GBPm 15.7 - -
People costs GBPm 10.5 - -
Marketing GBPm 4.7 - -
Other costs GBPm 5.4 - -
Depreciation & amortisation GBPm 2.1 - -
------------------------------------ ------------ ------- ------- -------
Operating costs GBPm 38.4 - -
------------------------------------ ------------ ------- ------- -------
Operating loss GBPm (11.2) - -
------------------------------------ ------------ ------- ------- -------
Group central costs - relating to
Autorama acquisition
-------------------------------------------------- ------- ------- -------
Autorama deferred consideration GBPm 38.8 - -
Depreciation & amortisation GBPm 5.3 - -
----------------------------------- ------------- ------- ------- -------
Operating costs GBPm 44.1 - -
----------------------------------- ------------- ------- ------- -------
Operating loss GBPm (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 GBP38.8 million charge for the expense of Group shares expected to be issued to settle the Autorama deferred consideration and a GBP5.3 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 GBP473.0 million as customers are increasingly using our data, platform and advertising products to support their businesses. At a Group level revenue grew 16% to GBP500.2 million (2022: GBP432.7 million), the difference being the inclusion of the Autorama business, acquired in June 2022, with revenue of GBP27.2 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 GBP332.9 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 GBP277.6 million (2022: GBP303.6 million), due to an operating loss of GBP11.2 million from Autorama, and GBP44.1 million of Group central costs relating to the acquisition of Autorama, which were GBP38.8 million of deferred consideration and amortisation of acquired intangibles of GBP5.3 million. Group operating profit margin was 55% (2022: 70%).
Group profit before tax decreased by 2% to GBP293.6 million (2022: GBP301.0 million) which included a GBP19.1 million profit on disposal of Webzone Limited in October 2022. Cash generated from operations was GBP327.4 million (2022: GBP328.1 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 GBP1,624.
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 GBP1,624. 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. I nitial 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
GBPm GBPm %
------------------------------------- -------- -------- -------
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 GBP500.2m (2022: GBP432.7m) driven by Auto Trader revenue which increased by 9% to GBP473.0m (2022: GBP432.7m), and GBP27.2m from Autorama following its acquisition on 22 June 2022.
Group operating profit declined by 9% to GBP277.6m (2022: GBP303.6m). Auto Trader operating profit increased by 10% to GBP332.9m (2022: GBP303.6m), which included GBP2.5m share of profit from joint ventures (2022: GBP2.9m). Autorama had an operating loss of GBP11.2m.
Group central costs included a charge of GBP38.8m, which is part of the GBP50.0m 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 GBP5.3m 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
GBPm GBPm %
------------------------------------- ------ ------ -------
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 GBP328.0m (2022: GBP307.9m).
Group profit before tax decreased by 2% to GBP293.6m (2022: GBP301.0m), which included a GBP19.1m profit on disposal of Webzone Limited (trading as 'Carzone'), which was sold on 24 October 2022. Cash generated from operations was GBP327.4m (2022: GBP328.1m).
Auto Trader Results
Revenue increased to GBP473.0m (2022: GBP432.7m), 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 GBP427.4m (2022: GBP388.3m).
2023 2022 Change
GBPm GBPm %
----------------------- ------ ------ -------
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 GBP406.8m (2022: GBP370.4m). 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 GBP2,437 (2022: GBP2,210). This was driven by both the product and price levers, with the stock lever being flat.
-- Price: Our price lever contributed growth of GBP90 (2022: GBP74) 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 GBP52).
-- Product: Our product lever contributed growth of GBP137 (2022: GBP121) 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 GBP10.1m (2022: GBP8.8m). Other revenue increased by 15% to GBP10.5m (2022: GBP9.1m).
Consumer Services revenue increased by 4% in the year to GBP34.5m (2022: GBP33.3m). Private revenue, which is largely generated from individual sellers who pay to advertise their vehicle on the Auto Trader marketplace, increased by 11% to GBP22.4m (2022: GBP20.2m) which was partially offset by Motoring Services revenue, which decreased 8% to GBP12.1m (2022: GBP13.1m). Instant Offer contributed GBP0.8m to Consumer Services (2022: GBP0.9m), which is included in Private revenue.
Revenue from Manufacturer & Agency customers was flat at GBP11.1m (2022: GBP11.1m). New car advertising in 2023 continued to be impacted by new car supply shortages.
Total costs increased 8% to GBP142.6m (2022: GBP132.0m).
2023 2022 Change
GBPm GBPm %
----------------------------- ------- ------- ---------
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 GBP74.0m (2022: GBP69.8m). 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 GBP22.3m (2022: GBP20.5m).
Other costs, which include data services, property related costs and other overheads, increased by 15% to GBP39.6m (2022: GBP34.5m). 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 GBP6.7m (2022: GBP7.2m).
2023 2022 Change
GBPm GBPm %
-------------------------------------------------------- -------- -------- ---------
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 GBP332.9m during the year (2022: GBP303.6m). 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 GBP2.5m (2022: GBP2.9m) in the year due to lower levels of auction activity as a result of supply constraints.
Autorama Results
2023
GBPm
--------------------------- -------
Vehicle & Accessory Sales 16.0
Commission & Ancillary 11.2
Autorama revenue 27.2
--------------------------- -------
Autorama revenue was GBP27.2m, with Vehicle and Accessory Sales contributing GBP16.0m, and Commission and Ancillary revenue contributing GBP11.2m.
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 GBP1,624.
2023
GBPm
----------------------------- -------
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 GBP10.5m 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 GBP4.7m. 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 GBP11.2m.
2023
GBPm
----------------- -------
Revenue 27.2
Operating costs (38.4)
Operating loss (11.2)
----------------- -------
Group net finance costs
Group net finance costs increased to GBP3.1m (2022: GBP2.6m). Interest costs on the Group's Syndicated Revolving Credit Facility ('Syndicated RCF') totalled GBP2.6m (2022: GBP1.4m) with the year-on-year increase due to higher utilisation of the facility across the year. At 31 March 2023 the Group had drawn GBP60.0m of its available facility (31 March 2022: GBPnil). Other finance costs comprised amortisation of debt issue costs of GBP0.5m (2022: GBP0.1m). Interest costs relating to leases totalled GBP0.2m (2022: GBP0.2m), which was offset by interest receivable on cash and cash equivalents of GBP0.2m (2022: GBP0.1m).
Amendment of Syndicated RCF commitments
On 1 February 2023, the Group amended and extended its Syndicated RCF, reducing the commitment from GBP250.0m to GBP200.0m. The facility was due to terminate in two tranches: GBP52.2m maturing in June 2023 and GBP197.8m 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 GBP293.6m (2022: GBP301.0m), with the decrease being lower than Operating profit predominantly due to a GBP19.1m profit on disposal from the sale of Webzone Limited. The Group tax charge of GBP59.7m (2022: GBP56.3m) 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 GBP500m 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
GBPm GBPm %
------------------------------------- ------- ------ -------
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 GBP327.4m (2022: GBP328.1m). Corporation tax payments increased to GBP60.5m (2022: GBP56.2m). Cash generated from operating activities was GBP266.9m (2022: GBP271.9m).
As at 31 March 2023 the Group had net bank debt of GBP43.4m (31 March 2022: net cash GBP51.3m), an increase of GBP94.7m due to the acquisition of Autorama. At the year end, the Group had drawn GBP60.0m of its Syndicated RCF (31 March 2022: GBPnil) and held cash and cash equivalents of GBP16.6m (31 March 2022: GBP51.3m).
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 GBP3.4m (2022: GBP1.5m).
Capital structure and dividends
During the year, a total of 25.3m shares (2022: 24.9m) were purchased for a consideration of GBP147.3m (2022: GBP163.5m) before transaction costs of GBP0.7m (2022: GBP0.8m). A further GBP77.7m (2022: GBP73.6m) was paid in dividends, giving a total of GBP225.0m (2022: GBP237.1m) 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 GBP60.0m of its GBP200.0m unsecured Syndicated RCF and had cash balances of GBP16.6m. 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 GBP200.0m 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
2023 2022
Note GBPm GBPm
-------------------------------------------- ---- ------- -------
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
GBPm GBPm
------------------------------------------------------- ----- -----
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 parent 233.6 245.1
-------------------------------------------------------- ----- -----
Consolidated balance sheet
At 31 March 2023
2023 2022
Note GBPm GBPm
--------------------------------------------- ---- --------- ---------
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
Own Capital Capital
Share Share Retained shares reorganisation redemption Other Total
capital premium earnings held reserve reserve reserves equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- ---- -------- -------- --------- ------- --------------- ----------- --------- -------
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
2023 2022
Note GBPm GBPm
---------------------------------------------------- ---- ------- -------
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 GBP16.6m at 31 March 2023 (2022: GBP51.3m). During the year GBP225.0m was returned to shareholders through share buybacks and dividends (2022: GBP237.1m).
The Group has access to a Syndicated revolving credit facility (the 'Syndicated RCF'). At 31 March 2023 the Group had GBP60.0m (2022: nil) drawn of its GBP200.0m Syndicated RCF. The GBP200.0m 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 GBP50.0m, 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:
Group
Auto Trader segment Autorama segment central costs Group
Year to March 2023 GBPm GBPm GBPm GBPm
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 GBP38.8m charge for the expense of Group shares expected to be issued to settle the Autorama deferred consideration.
(ii) Depreciation & amortisation: GBP5.3m of amortisation expense relating to the fair value of intangible brand and technology assets acquired in the Group's business combination of Autorama.
Group
Auto Trader segment Autorama segment central costs Group
Year to March 2022 GBPm GBPm GBPm GBPm
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.
2023 2022
Revenue GBPm GBPm
------------------------ ----- -----
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:
2023 2022
Note GBPm GBPm
------------------------------------------------ ---- ------ ------
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
GBPm GBPm
------------------------------------------------- ----- -----
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 EUR30.0m.
Revenue generated from Webzone Limited in the period to 24 October 2022 was GBP2.9m (year ended 31 March 2022: GBP4.9m). 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
GBPm
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
GBPm GBPm
-------------------------------------------------- ----- -----
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
GBPm GBPm
------------------------------------------------------ ----- -----
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 GBP0.4m (2022: GBP0.1m) relating to tax on share-based payments.
Taxation recorded in equity within the Consolidated statement of comprehensive income was a release of GBP0.4m (2022: charge of GBP0.2m) 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
number of ordinary earnings Pence
shares GBPm per share
------------------------- ------------------- --------- ----------
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
Software
and website
development Financial
Goodwill costs systems Brand Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------------ --------- ----- ----- -----
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 char ge of GBP9.2m (2022: GBP2.6m) 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: GBPnil).
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 Office Motor
improvements equipment vehicles Total
GBPm GBPm GBPm GBPm
--------------------------------------- -------------- ---------- --------- ------
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 GBP6.5m (2022: GBP8.3m) of assets recognised as leases under IFRS 16. The depreciation expense of GBP4.9m for the year to 31 March 2023 (2022: GBP4.6m) has been recorded
in operating costs. During the year, GBP2.6m (2022: GBP0.4m) worth of property, plant and equipment with GBPnil 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
GBPm GBPm
--------------------------------------------------- ----- -----
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
--------------------------------------------------- ----- -----
Land,
buildings
and leasehold Office Motor
improvements equipment vehicles Total
Net book value of right of use assets GBPm GBPm GBPm GBPm
-------------------------------------- -------------- ---------- --------- -----
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
-------------------------------------- -------------- ---------- --------- -----
2023 2022
Lease liabilities in the balance sheet at 31 March GBPm GBPm
--------------------------------------------------- ----- -----
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 (GBP0.1m) was recognised in the Consolidated income statement as a gain on disposal.
2023 2022
Amounts charged in the income statement GBPm GBPm
---------------------------------------------- ----- -----
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
---------------------------------------------- ----- -----
2023 2022
Cash outflow GBPm GBPm
------------------------------ ----- -----
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:
Share
of post Net investments
Equity investments acquisition in joint
in joint ventures net assets ventures
GBPm GBPm GBPm
------------------------------------------ ------------------ ------------ ---------------
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
GBPm GBPm
---------------------------- ----- -----
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
GBPm GBPm
-------------------------------------- ----- -----
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
2023 2022
Non-current GBPm GBPm
----------------------------------------------------- ------------------ ---------------
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 GBPm GBPm
--------------------------- ----- -----
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 GBP2.5m in the year (2022: GBP1.4m) following the amendment and extension of the Group's Syndicated RCF facility.
Borrowings are repayable as follows:
2023 2022
GBPm GBPm
------------------- ----- -----
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 GBP5.9m, with GBP3.3m being incurred at initiation and GBP2.6m 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 GBP200.0m. 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 GBP1.6m, of which GBP1.4m 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, GBP1.1m was recognised on the Consolidated balance sheet (2022: GBPnil).
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
GBPm GBPm
------------------ ----- -----
One month or less 60.0 -
------------------ ----- -----
Total 60.0 -
------------------ ----- -----
14. Share capital
2023 2022
-------------------------------------------- ---------------- -----------------
Number Amount Number Amount
Share capital '000 GBPm '000 GBPm
-------------------------------------------- -------- ------ --------- ------
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 GBP0.01 were purchased. The average price paid was 582.1p with a total consideration paid (including fees of GBP0.7m) of GBP148.0m. 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
ESOT shares Treasury
reserve shares Total
Own shares held - GBPm GBPm GBPm GBPm
-------------------------------------- ----------- -------- ------
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)
-------------------------------------- ----------- -------- ------
ESOT shares Treasury
reserve shares Total
Number Number Number
Own shares held - number of shares of shares 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 Pence
per share GBPm per share GBPm
--------------------------- ---------- ---- ---------- ----
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 GBP51.4m, 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
GBPm GBPm
----------------------------------------------------------- ------ -----
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 GBP150.0m, with an additional GBP50.0m deferred until 22 June 2023 and settled in shares to the value of GBP50.0m, 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 GBP150.0m excludes acquisition costs of GBP2.1m 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
GBPm
------------------------------------------------------------- ------
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 GBP50.0m 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 GBP38.8m 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 GBP27.2m and a loss of GBP11.2m 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
GBPm
----------------------------------------------------- -------------
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 GBP14m or GBP16m 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 GBP8.1m 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 GBP18.2m, of which GBP8.1m was deferred until 31 July 2022.
Principal risks and uncertainties
Risk POTENTIAL IMPACT CHANGES IN THE YEAR
-------------------------------------- --------------------------------------
1. An adverse change in supply and -- The low level of supply of new
Automotive economy, market and demand in the new/used car market vehicles since 2020 has continued for
business environment could lead to reduced retailer much of the last year.
profitability and reduced retailer However, new car registrations in Q1
wallets, resulting in reduced (Jan - Mar) 2023 increased by 18%
advertising spend. Adverse compared to Q1 2022.
movements in supply and demand of Looking to the future, more reliable
vehicles could also lead to a supply of new vehicles will be
contraction in the number importantto the future
of retailers. In addition, we success of Autorama's integration into
continue to see the movement towards the Auto Trader Group.
an agency model whereby -- The low level of new car supply
retailers facilitate OEM sales since 2020 will likely affect the
directly to consumers. This could availability of used
lead to a loss of revenue car stock in the coming years. In
from our retailer customers. 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 -- Updates to our website in the last
intrinsically linked to climate year position us as front-runnersin
change and there is increasing the switch to EVs
pressure from consumers and and enable us to respond to potential
government for the industry to reduce changes in OEM and retailer business
its impact on the climate. models.
However, failure to deliver on our -- There is still a relatively small
environmental commitments will amount of data informing the residual
negatively impact our brand values of used
as a responsible business and may EVs. We have positioned ourselves well
result in legal exposure or by leveraging Autorama's capabilities,
regulatory sanctions. providing those
Failure to overcome the uncertainty consumers switching to EVs for the
created by the shift from internal first time a viable alternative to
combustion engines outright purchase.
('ICE') to electric vehicles ('EVs') -- Despite ongoing uncertainty
could inhibit their take-up, surrounding EVs, the electric share of
potentially leading to changes ad-views has a gradual
in buying behaviours. Factors include upwards trend. Supply in the used EV
the high purchase price of most EVs, market increased this year as those
potential for improvement EVs purchased on
in public transport, new and expanded three- and four-year agreements enter
emissions zones, increasing EV the used EV market.
running costs, and consumer -- Looking ahead, widespread take-up
uncertainty over the residual value of EVs could be affected by:
of EVs. -the availability of public charging
for those drivers unable to access
Changing and more stringent private charging
regulatory requirements could - EV purchase costs, which are still
increase our cost base and increased around 37% more expensive than ICE
frequency and severity of extreme equivalents on a like-for-like
weather events could lead to basis.
heightened costs, including - Increases in EV running costs owing
heating/air-conditioning, insurance, to increased taxation and charging
and cloud infrastructure. Extreme costs (especially
weather events could those EV drivers without private
also lead to short-term closure of charging).
retailer forecourts (for example, due -- Further regulation and legislation
to flooding). ] 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 -- Our Glassdoor rating based on
Employees objectives it is important that we anonymous reviews is 4.4 out of 5 and
attract, retain and in our latest Culture
motivate a highly skilled workforce, Amp survey, 91% of respondents said
including those with specialist that they are proud to work at Auto
skillsets in data and Trader. This year
technology. our employee turnover has remained
low.
Delivery of our strategy is also We now operate a Connected Working
dependent on us building a diverse model where employees are in the
and inclusive workforce, office for two 'fixed'
and a supportive, collaborative days per week plus an additional
culture, conducted in a safe 'flex' day per week on a day which
environment, all of which will suits them best. The aim
enable optimum performance from all of this working model is to increase
our employees. efficiency, collaboration and
innovation whilst also
allowing flexibility and maximising
inclusion.
-- 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 have implemented a refreshed
Reliance on third parties and we are reliant on partners engaging onboarding and monitoring process for
partners with the changes critical suppliers.
we are introducing to the industry. Despite the threats posed to our
Getting lenders on-board with our suppliers in the external environment,
digital retailing aspirations, we have not experienced
for example, is a key dependency. We any material disruptions in the last
also rely on third parties to support year.
our technology -- As we progress further into digital
infrastructure, supply of data about retailing, we are likely to see an
vehicles and their financing, and in increased reliance
the fulfilment of on third parties. Some of the products
some of our revenue generating we intend to launch will rely on
products. Consequently, it is partners and lenders,
important that we manage and these could be barriers to growth
relationships should these partners not engage with
with, and performance of, key us. Ensuring that
suppliers and key strategic partners. 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 -- We have completed a multi-year
IT systems and IT infrastructure to provide our migration of our applications to the
cyber security services. A disruptive cloud. This increases
cyber security and/or business the resilience of our systems and the
continuity event could lead to security of our data.
downtime of our systems and -- Development of new products carries
infrastructure. the threat of cyber-attack and with
digital retailing
Execution of our strategy also relies the impact of a potential data breach
on us making appropriate investments is likely to increase. We are
in secure systems therefore developing systems
and technologies. Failure to invest which provide not just the best
in appropriate technology and customer and consumer experience, but
safeguards could lead to all necessary security
us failing to achieve our objectives. to ensure we remain resilient.
-- Integration of Autorama's leasing
Delivery of our strategic objectives deals onto the Auto Trader platform is
also relies on us using data to complex, and we
provide valuable insights are mindful of IT and cyber security
to customers. A significant data threats during the integration. We are
breach, whether because of our own also committed
failures or a malicious to continuously reviewing, testing and
cyber-attack, would lead to a loss in updating Autorama's IT disaster
confidence by the public, retailers recovery and business
and advertisers. continuity arrangement.
-- 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 -- We continue to develop new products
Failure to innovate: disruptive at unprecedented pace. Should we fail in our marketplace platform and
technologies and changing consumer to innovate our digital retailing.
behaviours business and product offerings, we In the last year we have launched a
could lose relevance with our key trial of Deal Builder with a small
stakeholders, including number of retailers.
consumers and customers. This provides consumers with an
omni-channel buying journey where they
It is crucial that we develop and can find, reserve,
implement new products, services and finance and part-exchange online.
technologies, and adapt -- Leveraging Autorama's systems, we
to changing consumer behaviour launched a leasing check-out journey
towards car buying and ownership. on the Auto Trader
site. Providingconsumers with a
Failure to provide both customers and leasing option positions us to meet
consumers with the best possible their needs as buying
products and online behaviours change, particularly those
journey, including an online buying consumers wary about buying an EV for
experience, could lead to reduced the first time.
website traffic and -- We have continued to develop our AT
loss of revenue. Connect solution. This online tool
leverages our platform
and data to provide retailers with
real-time connections to Auto Trader
systems which can
be used to inform vehicle 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 -- Providing consumers with an online
Legal and regulatory compliance regulatory environment. As we car buying journey will increase our
progress in executing our strategy, exposure to regulatory
we are likely to be exposed to risks, in particular the amount of
increased legal and regulatory risks, personal information we collect and in
particularly those relating the provision of
to FCA and GDPR. the online finance application
journey.
There is a risk that the Group, or -- Autorama exposes us to increased
its subsidiaries, fail to comply with FCA and GDPR risks. This relates to
legal and regulatory both the leasing journey
requirements. This could lead to itself, as well as the ancillary
reputational damage, financial or products offered as part of leasing,
criminal penalties and such as gap insurance.
impact on our ability to do business. Our compliance teams have been working
to ensure that Autorama's policies and
procedures are
compliant.
-- 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 -- Large technology companies such as
Competition is a low competitive threat in our Facebook, eBay and Amazon continue to
classified marketplace. operate in the
Nevertheless, we remain wary of the automotive marketplace. In the last
risk that competitors could develop a year, however, we maintained our
superior consumer position as the UK's
experience or superior retailer largest and most engaged automotive
products. This could lead to loss of marketplace for new and used cars,
market share. with over 75% of all
minutes spent on automotive classified
Further, as the automotive industry sites spent on Auto Trader.
evolves, an agency model could change -- On Boxing Day 2022 we launched a
the way that vehicles new marketing campaign which focusses
are bought and sold. Under an agency on helping consumers
model cars are sold by OEMs directly to find the right car for them. This
to consumers via was supported by social media and
retailers. As we progress with our digital audio content.
own objectives surrounding digital We estimated that our advertising
retailing, an agency reached 99% of the UK population
model could mean that OEMs themselves between Boxing Day and
emerge as a direct competitor in the 31 March 2023.
vehicle retail -- In 2023 we have worked with certain
industry. Failure to manage this OEMs to provide them with advertising
emerging threat could inhibit our solutions following
ability to achieve our their switch to an agency model.
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 -- Our research shows that Auto Trader
assets. Our research shows that we has c.90% prompted brand awareness
are the largest and most with consumers.
trusted automotive classified brand We are also voted regularly as the
in the UK. most influential automotive website by
consumers in the
Failure to maintain and protect our car buying process.
brand, and/or negative publicity -- We are supporting digital retailing
affecting our reputation product development with marketing to
could diminish the confidence that ensure that consumers
retailers, consumers and advertisers see us as the most suitable place to
have in our products transact online.
and services. This could result in a -- Owing to measures and monitoring
reduction in audience and revenue. tehchniques used by our security team,
we 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 In a connected, global industry, we -- In the last year, adverse market
geo-political events affecting are increasingly prone to the impacts reaction to UK Government policy, the
customer and consumer behaviours of external events enduring impacts
around the globe, as are our of Covid-19 and the conflict in
customers and consumers. We consider Ukraine have all led to high
there to be a threat to inflation. Should the resultant
the short-to-mid-term performance of rise in the cost of living be
our business posed by external, sustained for a lengthy period, it
unpreventable, catastrophic could have an impact on the
and geo-political events. Such events ownership model of vehicles,
could result in our customers being potentially with a lower volume of
unable to trade, vehicles per household. However,
leading to loss of revenue, stock, our exposure to high interest rates is
audience and market share. 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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