Autotrader Group Plc

As usual, I'm joined by our COO, Catherine, and our CFO, Jamie. Before we get to results, I wanted to take a moment to thank our chair, Ed Williams, who will step down following this year's AGM as he approaches the end of his third three-year term as chair. Ed has been exceptional, not just for me personally or for past and present executive teams, but for the board, employees, shareholders, and wider stakeholders as well. He's not one to seek the limelight from it, but he has diligently worked for the good of AutoTrader year in and year out for over a decade now. So thank you, Ed. Following a comprehensive search and selection process led by our senior independent director, we have appointed Matt Davies as non-executive director, chair designate, who will become chair subject to shareholder approval immediately following our AGM in September. Matt is an experienced chair, board member and CEO of both private and public companies, including roles as the CEO of Tesco in the UK, Halfords and Pets at Home. Matt is also chair at Greggs PLC, where he was appointed in August 2022. Now for results. Well, a lot has happened this financial year, much of which feels a distant memory. We've had three prime ministers, four chancellors, an ill-fated growth plan, rising energy prices, broad-based inflation, industrial action, passing of a monarch. But despite all this disruption, the used car market has remained robust, albeit with supply constraints driven by years of limited new car supply. This, combined with strong demand, has meant that most of our customers have continued to experience very positive trading conditions. And these years of constrained new car supply will feed into the used car market for younger vehicles, so whilst demand remains strong, these positive trading conditions are likely to continue for some time. From AutoTrader's perspective, I'm proud of the progress that we've made this year, which is credit to the hard work of the teams right across the business and the partnerships that we're building with customers. With that, we'll start with some highlights from the year. In our core marketplace, we've grown revenue by 9%, operating profit by 10%, and maintained 70 operating profit margins. We have more buyers on AutoTrader, more retailers working with us, and our annual price and package event in both April 2022 and 2023 went well. This, combined with continued upsell of our higher-level packages, saw retailer revenue grow 10% year on year. We're seeing increased engagement with our platform solutions, which is helping to improve the quality and speed of our customers' advertising engines they need to make every day. We've launched and started to scale our deal builder journey for used cars and integrated new car leasing offers into AutoTrader. During this financial year, we had 200 completed deal builder transactions. But as we're scaling up, we've done over that number in just the first two months of this financial year. We have confidence that the software and experiences that we've built are both scalable to thousands of customers and will enable us to maintain our capital light model and operational cost profile. As we did at the half year results, following the acquisition of Autorama, we're now reporting segmented results for Autotrader and Autorama. As mentioned earlier, our core auto trader business grew profits double digit and maintained 70% operating profit margins despite continued investment in new products and wider inflationary pressures. Autorama losses were as expected given challenging new car supply, which we have mitigated to some extent through accelerating integration and a diligent approach to costs. The industry changes we are seeing continue to give us confidence that the online sales channel will be increasingly important to OEMs, and it's a capability we now have in Autorama, having transacted almost 7,000 new cars this financial year. Given the disposal of WebZone and deferration on the Autorama acquisition, we have provided adjusted measures to retain clarity on the underlying performance of our business, which does include the trading performance of Autorama. On this adjusted basis, Group EBITDA grew 7% and EPS 6%. Our teams have also delivered solid operating results. We continue to see more people using AutoTrader, particularly in the second half of the year, which is on top of the very strong growth we saw last year. Retailer numbers held at last year's high levels and ARPA grew 10% year-on-year, driven by price and product, with the stock lever remaining flat. Physical stock on site was up 2%. As mentioned earlier, Autorama delivered 6,895 new vehicles on lease and over 60% of those were cars. Then finally, EFT have grown 21% on an average basis, which is mostly due to the acquisition of Autorama. And finally, our cultural KPIs. We are pleased that 90% of employees are proud to work at AutoTrader, and our Glassdoor rating is 4.5 out of 5. This is a huge credit to the hard work that all our people put into building a culture that's unique, enabling, and fulfilling. We've got plenty of work to do when it comes to diversity. We are making good progress. This year, the percentage of female and ethnically diverse employees, both in total and in leadership positions, increased, and our board continues to be majority female. On carbon emissions, we're aiming to be net zero across our value chain by 2040, and have had our near and long-term targets and plans approved by the Science Based Targets Initiative. For a fair comparison for 2023, we have rebased financial year 2022 as if Autorama was in the group. This is largely the reason for our emissions being down year on year as Autorama had less vehicles pass through its balance sheet in 2023 compared to 2022. I'll now hand over to Jamie to talk through the financials in more detail.

Thanks, Nathan, and good morning, everyone. We'll start with the core auto trader financials. Total auto trader revenue increased by 9% to $473 million. Trade revenue increased by 10%, with the largest component of this being retailer revenue, which also grew by 10%. The year-on-year encouraging results of retailers continuing to see value in advertising on our marketplace and taking additional products. The average number of retailer forecourts advertising on our platform was broadly flat at 13,913, although when accounting for the disposal of WebZone, retailers were up 1% versus prior year. Average revenue per retailer increased by 10% year-on-year, to £2,437, with more details given on the following slide. Also within trade, we've seen an increase in home trade of pay-as-you-go listings, which increased 15%, alongside smaller growth in other trade revenue. Consumer services revenue increased by 4% in the year. Private revenue, which is largely from individual sellers who pay to advertise their vehicle on AutoTrader, increased by 11%, but was partially offset by motor income revenue, which decreased 8%. Instant offer contributed $0.8 million, which is included within private revenue. Finally, revenue from manufacturing agency customers was flat year on year, as new car advertising continued to be impacted by new car supply shortages. Now on to ARPA, live car stock, and retailers. ARPA increased by 10% year-on-year, with the average revenue per retailer generated at £2,437 per month. The chart on the left shows the components that contribute to the movement in ARPA compared to the prior year. As you can see, in 2023, ARPA was driven by both the product and price levers, with the stock lever being flat. We delivered our annual pricing event on 1st April 2022, which included additional products but also a like-for-like price increase. The price lever contributed £90 to total ARPA, equating to an effective increase of just over 4%. Products contributed £137 of ARPA growth. Of this growth, broadly half was due to retailers purchasing more of our prominent products, which included our high-yielding Enhanced Super and Ultra packages, where penetration increased to 33%, Our market extension product, allowing retailers to sell outside of their local area, with 7% of retailer stock on the product on March 2023. And finally, there was also some contribution from our pay-per-click product, where retailers can boost visibility of their stock in our search listings through pay-per-click campaigns. The other half of the product lever was made up from our AutoTrader Connect retail essentials product, included in our annual pricing events, and also some smaller contributions from auto convert finance and data products. Turning then to stock, it's important to note that the stock lever is not driven by livestock, but by the number of paid retailer stock units. You'll see on the right hand chart that the number of live cars advertised on AutoTrader increased by 2% year on year. As usual, we strip out the impact of new cars and provide underlying used car livestock the darker of the two lines, which increased by 3% on average across the year. Much of this increase came from a higher volume of private leverage, which has no impact on retailer revenue and therefore no impact on the stock lever, which was flat in the year. On to costs and operating profit for auto traders' core business. Total auto trade across increased by 8%, Within that, people costs increased by 6%. The increase in people costs was driven by an increase in average number of full-time equivalent employees to 900 NICs and an increase in underlying salary costs. Marketing spend increased by 9% in the year. Other costs increased by 15%. This increase was primarily due to higher costs 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 amortization decreased by 7%. As a reminder, levels of capex and depreciation are not a reflection of low levels of investment in our business. In addition to our investment in cloud-based services, We have over 350 people in products and technology who are continuously improving our platforms and developing new products for consumers and retailers, the costs for which are taken in full through our income statement in people costs. AutoTrader operating profit increased by 10% to $332.9 million, and operating profit margins remained flat at . Our share of profit generated by dealer auction, the group's joint venture, decreased 14% to 2.5 million in the year due to lower levels of auction activity as a result of supply constraints. Having covered the auto trader part of the business, we'll now move to the Autorama business. The acquisition completed on the 22nd of June 2022, and so the results represent just over nine months of trading. Autorama revenue was $27.2 million, with vehicle and accessory sales contributing $16 million, and commission and ancillary revenue contributing $11.2 million. The Autorama business delivered circa 700 vehicles, which were temporarily taken on balance sheet in the reported period, which represented just over 10% of total vehicles delivered. The cost of these vehicles is taken through cost of goods sold, with the corresponding revenue in vehicle and accessory sales. Total deliveries amounted to 6,895 units, which comprised of over 4,000 cars, over 2,000 vans, and less than 500 pickups. Average commission and ancillary revenue per unit delivered was £1,624. On the cost side, we saw people costs of 10.5 million from the 209 FTEs employed on average since acquisition. The contribution to the group's average number of FTEs in the year was 164. The remaining costs of marketing, other costs, and DNA totaled $12.2 million. The Autorama operating segment made a loss of $11.2 million, which is in line with the guidance given in November. Work on the integration of Autorama is progressing, and we're very focused on significantly reducing the current annualized operating losses in 2024. With auto trader operating profit increasing by 10% from $32.9 million, Autorama losses of $11.2 million, and group central costs which relate to the deferred consideration of Autorama and the amortization of acquired intangibles of $44.1 million, group operating profit declined by 9% to $277.6 million, and group operating profit margin was 55%. We continue to deliver strong cash flows consistently over time. and it's worth emphasizing the strong cash signature of our business leaves us well-placed to return surplus cash to shareholders. Cash generated from operations is $327.4 million for the year. The statutory income statement outlines areas beyond our revenue and operating costs. Net finance costs increased to $3.1 million due to the increased utilization of our revolving credit facility. We recently amended this facility, reducing our commitment to $200 million and extending it until February 2028. Our profit before tax was $293.6 million, 2% lower than 2022, with the decrease being better than operating profit, predominantly due to the $19.1 million profit on disposal from the sale of WebZone. The group tax charge of $59.7 million represents an effective tax rate of 20%. This was marginally higher than the average standard rate due to the Autorama deferred consideration charge being non-deductible. Basic EPS decreased by 2%, which was slightly better than the profit after tax, with less shares in issue following our share buyback program. And finally, the directors are recommending a final dividend of 5.6 pence per share, giving total dividends for the year of 8.4 pence per share. Moving now to net bank debt and capital allocation. Year end, the group had drawn 60 million of its syndicated revolving credit facility and held cash of 16.6 million, resulting in net bank debt of 43.4 million. During the year, a total of 25.3 million shares were purchased for a consideration of 147.3 million at an average price of 582 pence. A further 77.7 million was paid in dividends giving a total of $225 million of cash out to shareholders. 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 program and steadily reduce growth indebtedness. It's the Board's long-term intention that the group will return to a net cash position. To conclude the financials, I'll now hand over to Catherine to talk through the market dynamics and progress against our strategic priorities.

Thank you, Jamie, and good morning, everyone. Moving on to slide 16 and looking at new car and light commercial vehicle registrations in the UK back to financial year 2016. On the chart we have highlighted for the five years prior to the pandemic, we saw on average a new car and LCV market of 2.8 million registrations each year. However, since the pandemic, the new vehicle market has been impacted by well-documented supply chain challenges. These challenges continued into financial year 2023, where the new car and LCV market remained 29% behind the pre-pandemic five-year average. This means that in the past three years, we have missed out on around 2.5 million new car registrations that we would have expected to happen. This impacts our new car stock product and our Autorama business, but also the flow of cars into the used car market. While levels of supply remain constrained, the availability of stock is improving very gradually. New car registrations in Q4 of our financial year saw 18% growth year on year. There are two other dynamics worth calling the new car vehicle market. The first is that we see manufacturers bringing more electric cars to market ahead of the 2030 deadline. In the financial year, 16.5% of new car registrations were battery electric, up three percentage points year on year. This will start to flow into the used car market over the coming years. We have also seen two new manufacturers enter the UK market in the last year, BYD and Aura, focusing light on new electric vehicles. This provides consumers with even more choice. The second dynamic is manufacturers changing their distribution models and operating under an agency agreement for new cars. Rather, risks and rewards of retailing substantially remain with the manufacturer rather than being passed on to the retailer. The retailer continues to act as a distributor and self-support agent in the transaction, but does not control the price or advertising of the call. We are working closely with brands who are moving to an agency model. We are either already working with them today or will be live with them soon, retailing new cars on Autotrader. We continue to invest in our partnerships with manufacturers, and we believe these changes overall present more opportunities than risks to our business. Moving on then to think about used car transactions, the UK car park and the fleet of transactions. Starting first with used car transactions. Used car transactions were 8% below 2022 levels at £6.9 million for financial year 2023. As we have shown on the chart, this was around 1 million transactions below the pre-pandemic five-year average. This year, we saw differences in the two halves. as many of you will have seen in our monthly market intelligence reports. In the first half, demand on auto trades down compared with H1 2022, and the DVLA reported used car transactions back 15% year on year. This was lasting a very strong comparative period in the summer of 2021, when the UK exited lockdown and we saw record months for used car transactions in the UK. By contrast, in the second half of financial year 2023, we continue to see demand metrics improve year on year. And although supply tightened, used car transactions in the second half were actually up marginally year on year. On the right-hand side of the slide, we have shown two metrics, the car park and the transaction rates. We only have this data available for the calendar year 2022. By the car park, we are referring to the total number of cars on UK roads. You will see that this number grew slightly in 2022, with new car transactions marginally ahead of the scrappage rate. The second number on the chart on the right-hand side is the transaction rate. This shows how regularly each car changes hands in the UK and is calculated by taking the combined new and used car transactions volume in the year and dividing it into the car park. Prior to the pandemic, we saw the transaction rate sit consistently between three and three and a half years. However, since the pandemic, driven by the lack of supply, seen this number rise to between 3.8 and 4.2 years. As new car supply gradually returns, we expect the frequency of transactions will speed up again. On to slide 18, and used car pricing. We continue to publish a monthly price index of cars advertised by retailers on AutoTrader, the results of which are shown in this chart. The dark blue line on the chart shows the average of a used vehicle advertised since April 2014. The lighter blue bar charts show the like-for-like year-on-year price movements and are therefore not impacted by mix adjustments. You can see on the chart that average used car prices rose to around £17,500, a 12% like-for-like pricing growth over the full year. The lighter blue bar chart illustrates the monthly data. For the first nine months, we saw the growth rate rises slow, but it has picked up again in the last quarter as demand has outstripped supply, a trend we continue to see into financial year 2024. One of the key metrics we monitor for retailers is days to sell. The quicker a retailer can sell their used cars, the more profitable they will usually be. Over the whole year, we saw retailers turn their cars two days quicker than pre-pandemic norms. We exceed resilient used car pricing through financial year 2024 and good days to sell performance for retailers. Let's move on to consider progress against the strategic goals we talked to at the Investor Day last summer. As Nathan mentioned at the start, during 2023, we have made good progress against each of our three strategic priorities. Our core classified marketplace to grow as evidenced by site visits, retailer numbers, and adoption of products and services. We executed a successful product and pricing event with the launch of our first AutoTrader Connect module, Retail Essentials, in April 2022. This enabled retailers to use AutoTrader taxonomy, our market-leading underlying vehicle reference database, to create accurate adverts in their existing systems, with real-time stock updates between retailers and AutoTrader to drive better operational efficiency and an improved consumer experience. Retailers continue to take up more of our prominence products despite a buoyant market backdrop. This gives us some confidence that we can continue to grow uptake of prominence even in a robust market. On the Newcastle side, the number of retailers on our Newcastle stock products grew by over 100 retailers despite the loss of retailers that have moved to agency. This sets us up well into financial year 2024 as we expect to see new car stock gradually return. Our data and platform is increasingly important for our retailers and partners, and we have seen strong adoption of our data and technology services from industry technology providers, retailers, and manufacturers. As we did last financial year, we have embedded a new AutoTrader Connect module into this, which I will talk to shortly. We are also making progress in bringing more of the car buying journey online, both with the growth of DealBuilder and the work we are doing to integrate Autorama. We'll cover a few brief highlights on both shortly. Over the year, consumer engagement has remained strong. We have maintained our position as the UK's largest and most engaged automotive marketplace for new and used cars. with our share of total minutes among our main competitor set as measured by ComScore remaining strong at over 75%. We were seven times larger than our nearest competitor. Over the year, we saw cross-platform visits increase 1% year-on-year. However, it's important to appreciate the differences in performance in the two halves. You'll recall that at our half-year results, our audience was back 10%, and yet we have finished the full year up 1%. This is due to a very strong second half, with record-breaking consumer engagement in January and then again in March, with included in the appendix a slide which shows our year-on-year audience performance by month. Both visits and minutes were up significantly versus pre-pandemic levels, up 24% and 16% respectively versus 2020. The chart on the right-hand side shows shows the total minutes spent across an expanded set of retailers and manufacturers. It shows that we continue to have a significant lead in terms of both volume and engagement against both our closest competitors and all other marketplace participants. Our traditional competitors have not changed significantly over the past few years, and we have not seen new entrants or players exiting the market. We continue to be significantly larger than those retailers who are large enough to appear in all manufacturer websites combined. Moving on to consider electric vehicles, a growing and increasingly important part of our core marketplace. We are focused on extending our lead wherever we can as the industry migrates and car buyers switch to electric vehicles. On the supply side, you can see that the share of electric new car registrations is growing, albeit slowly. The share of used car transactions is accelerating, but from a very low base. We offer consumers the widest choice of electric cars, with over double that offered by our nearest competitors. We have continued to see growth in demand for electric vehicles. You can see on the third chart the growth in the share of engagement with zero to five-year-old used electric cars. In 2019, just one in 100 advert views were for electric cars. Now it is one in. This is a good signal of the level of consumer interest in making the switch. We continue to invest in content to ensure we are the number one destination for car buyers interested in purchasing an electric vehicle. There are still a number of barriers for buyers looking to make the switch, and we have an important role to play in breaking these down. We are focused on informing consumers about electric vehicles through our social media channels and are working to raise through our monthly electric vehicle giveaway, which has achieved over 3.6 million entries this year. We have also improved electric vehicle charging information to help give consumers simpler, more consistent information to make informed decisions. We are working closely with a wide range of stakeholders to share our data on electric vehicles. This includes retailers, manufacturers, funders, the energy and charging sector and government to ensure they have the data they need to make informed decisions on what is still a relatively nascent industry. Many of you will have seen our Road to 2030 report, which we issue three times a year, and if you haven't, we've included a link to it and other market reports in the appendix. This is becoming the go-to source of information on progress, barriers and a call to action for the industry and the government on what still needs to be done to support the transition. We will continue to play an active role in driving change for the industry and shaping an electric future for car buyers. We continue to invest in the technology, data, and product platform which supports our core marketplace. As part of the April 2022 event, we launched AutoTrader Connect Retail Essentials, which enables real-time stock management and makes our vehicle taxonomy available to retailers through our own portal or our platform via APIs. We've also used Retail Essentials to ensure that imagery and video content is always up to date. At the end of March 2023, we had integrations with over 90 partners. As part of our April 2023 pricing event, we launched the second module of AutoTrader Connect, Valuations. This makes our live retail specification-adjusted valuations available for retailers. This data is unique to AutoTrader, based on the over half a million observations we see each day across our platforms daily. and our algorithms, which capture and learn from these observations and share the latest live market data back to retailers and buyers through our price flags on AutoTrader. For retailers, there are multiple benefits to pricing to live retail market data. Surfacing this data enables retailers to optimize, improve speed of sales, and drive performance in their businesses. For car buyers, it also provides a consistent, central, and importantly, a transparent view of pricing, which is an important step to support buyers to complete more of the buying journey online. This data can be accessed either through Portal or our API platform, enabling third parties and retailers to directly integrate valuations into the systems they use to manage their businesses. These modules are an important part of how we are enabling retailers to use our platform to power their businesses, which strengthens our marketplace and is a key enabler for digital retailing. Moving then to talk to the outer ring of our strategy, digital retailing. Our approach to digital retailing is to be car first. and to enable tailors, including manufacturers and leasing companies, to sell their vehicles online. With this goal in mind, we will initially offer two digital retailing consumer journeys on AutoTrader, a used car deal-builder journey and an online retailing journey for consumers to lease a new car. Let's take them in turn. Firstly, our deal-builder product shown on the slide. DealBuilder uses AutoTrader technology to enable car buyers to do their car buying journey online, including valuing their past exchange, applying for finance and reserving the car. Importantly, all of these interactions can easily be carried out either online, over the phone or in person at the dealership. Currently, these tools are available in our AutoTrader 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 through the existing sales systems and processes. In summer 2022, we started a deal-builder trial with a handful of retailers, and we've been encouraged by how the trial has performed to date. Towards the end of the year, we started to gradually scale the number of customers on the product and so by the end of the financial year, there were over 50 retailers live. We saw over 200 deals submitted in the year and have delivered over that number in the first two of this financial year. We are encouraged by the percentage of deals that have converted into a sale and the positive feedback from both buyers and retailers. We're seeing strong buyer engagement out of retail hours seven days a week, which supports the case that this should build sales capacity for our retailer partners. We will continue to scale the number of retailers on DealBuilder and iterate the product during this financial year, with the goal to monitor some retailers by the end of financial year 2024. Secondly, let's briefly consider our new vehicle leasing journey. As we've talked about before, there are significant structural changes impacting the new vehicle market in the UK. These changes present us with an opportunity 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. During the latter part of 2023, we began to work to integrate Autorama and successfully tested driving traffic into the Autorama journey. In the past few weeks, we have completed the work to enable the full checkout of a leasing deal on Autotrader. By bringing our brand, the scale of our platform, and continued product improvements throughout financial year 2024, we are confident that new car leasing sales will grow, whilst also delivering efficiencies in consumer acquisition costs. I'll hand back now to Nathan to summarise the outlook for 2024.