Autotrader Group Plc

Good morning everyone and welcome to Autotrader's four-year results for the year ending on the 31st of March 2024. As usual, I'm joined by our COO, Catherine, and our CFO, Jamie, who will be both presenting and joining me later for Q&A. It has been another year of strong financial, operational and strategic progress for Autotrader, building on the consistent performance displayed since our IPO in 2015. It is testament to the strength of our marketplace and the partnerships that we're building with our customers. We've seen record levels of demand and consumer engagement on our platform. We have increasing numbers of customers relying on our data and technology services to run their businesses, and we've made good progress on our strategic initiatives, which provide a meaningful opportunity to extend our role in car buying and retailing. I'd like to say thank you to our people, customers, shareholders, and wider stakeholders for their continued trust in our organization. Starting with some of the highlights during the year. At a group level, revenue grew 14% and operating profit grew 26%. Within the core auto trader business, revenue growth was 12%, driven by double digit growth across all revenue segments. Trade, consumer services, and manufacturer and agency, which is the first time this has been the case since our IPO. Core AutoTrader operating profit grew by 14% and margins increased to 71%. Trade revenue performance was largely driven by our retailer segment, where average revenue per retailer, or ARPA, grew 12%. This was underpinned by a strong pricing and product event in April 2023, where we launched our second module of AutoTrader Connect. We've also continued to see strong adoption of our additional products and services, including high-level packages and new car. Retailer forecourts increased 1% year on year when adjusting for the web zone disposal last financial year. Without this adjustment, retailer numbers were marginally down. We've achieved record levels of consumer visits and our lead over our nearest classified competitor has increased to 10 times. Despite concerns over the wider economy, the used car market continues to be robust. Supply vehicles gradually increase during the year but demand remained strong, which meant the speed of sale remained fast by historic standards. We did see trade prices soften in the latter months of the calendar year, which did feed through to retail prices. Those monthly pricing movements have since stabilised, although they do remain down year on year. The new car retail market continues to be more challenging than the used market, and we have seen offers and discounts steadily increase. We're seeing good engagement with both new car buyers and the retailers of those vehicles, and we continue to see this as a significant opportunity for the business given our new car audience and the structural changes that are taking place in that market. We're currently addressing this opportunity with products that enable franchise retailers, manufacturers, and leasing companies to sell new cars directly to consumers on AutoTrader. Finally, we've continued to scale up our DealBuilder product trial. We ended the year with around 1,100 retailers on the trial and just over 40,000 vehicles. We generated 16,000 deals in the period with at least a reservation and many including part exchange valuations and finance applications. The feedback we're getting from both buyers and sellers continues to be positive. In January, we began testing monetization with a small cohort of customers charging 0.25% of the vehicle price when a deal is placed. Our focus on Deal Builder in priority order is scaling up the number of customers and stock, increasing consumer engagement and conversion, and then finally, monetization, as if we get the first two priorities right, monetization is just a matter of when, not if. Now turning to the group financial results. Group revenue increased by 14%, with auto trader revenue increasing by 12%. Group operating profit increased by 26%, the core auto trader business increased operating profit by 14%, and Autorama made an operating loss of 8.8 million pounds. Central costs relating to the acquisition of Autorama were 21.1 million pounds, less than the prior year. Group operating profit margin was 61%, with auto traders operating margin expanding slightly to 71%. Basic EPS was up 13%, which was lower than operating profit growth due to the profit on disposal of WebZone last year and higher UK corporation tax. Cash generated from operations was up 16%. We returned £250.3 million of cash to shareholders through £80.4 million in dividends and £169.9 million in share buybacks. Today we're declaring a final dividend of 6.4 pence per share, making total dividends to the year 9.6 pence per share. Now on to our operational results. The average number of cross-platform visits were up 11% to 77.5 million per month, and engagement measured as cross-platform minutes was up 8% to 553 million minutes per month. We're the UK's largest and most engaged automotive marketplace for new and used vehicles and continue to account for over 75% of all time spent across our main competitor set. The average number of retailer forecourts advertising with us decreased 1% to 13,783, but as mentioned before, adjusting for the sale of WebZone last year, underlying retailers were actually up 1%. ARPA was up £284 to £2,721, with positive contributions from all three levers, price, stock and product. Live car stock was up 2% to £445,000, within which new car listings declined to £20,000, due in part to a change in our own commercial model from all-you-can-eat to a slot-based model which aligns more closely with what we do on news. This has had a positive impact on new car revenue and improved the quality of the stock listed. Finally, the average number of full-time equivalent employees increased to 1,233 during the period. And finally, our cultural KPIs. Culture is an integral part of who we are and how we operate, ensuring we're able to attract, retain, and enable talented people from all backgrounds to fulfill their potential as auto trader. 97% of our employees are proud to work at AutoTrader, and our Glassdoor rating is 4.5 out of 5, which is a huge credit to the hard work of all our people to build a culture that's not only unique but enabling and fulfilling as well. On to our diversity measures. Post our AGM, six out of nine board members will be women, of which one will be our Senior Independent Director, and two board members will be ethnically diverse. Over the past year, within the organisation, the percentage of female employees, female leaders, and ethnically diverse employees have all increased. We are disappointed that our percentage of ethnically diverse leaders has dropped two percentage points, but we are making the right structural changes and systemic changes across the organisation, just as we did from a gender perspective, and so we're confident in time these will come through in the KPIs. We aim to have net zero carbon emissions across our whole value chain by 2040 and half emissions by 2030. We've amended our base year to incorporate the acquisition of Autorama. Our carbon emissions for the year across Scopes 1, 2 and 3 were 98.9 thousand tonnes. The year-on-year increase is a result of slightly more vehicles acquired by Autorama which pass through our balance sheet. I'll now hand over to Jamie to talk us through the financials in more detail.

Thanks Nathan and good morning everyone. I'll start by focusing on the core auto trader financials. Starting with revenue, total auto trader revenue increased 12% to $529.7 million. Trade revenue increased by 11%, with the largest component of this being retailer revenue, which also grew by 11%. This year-on-year increase within retailer revenue was largely a result of retailers continuing to see value in advertising on our marketplace and taking additional products. The average number of retailer forecourts on our platform decreased to 13,783. But as Nathan said, after accounting for the disposal of WebZone, retailers increased 1% year-on-year. Average revenue per retailer increased by 12% to £2,721 per month, with more detail given on the following slide. Also within trade, we've seen an increase in home trader pay-as-you-go listings and growth in other trade revenue. Consumer services revenue increased by 15%. Within this, private revenue, which is largely generated from individual sellers who pay to advertise their vehicle on the auto trader marketplace, increased by 19% due to higher volume of adverts being placed. And motoring services revenue increased 7%. Revenue from manufacturing agency customers increased 30%, which is mainly driven by manufacturers paying to advertise new car stock directly on AutoTrader. Now onto ARPA, live car stock, and retailers. The chart on the left shows the components that contribute to the movement in ARPA compared to the prior year. As you can see, the majority of ARPA growth is driven by the price and product levers, with a smaller positive contribution from stock. It's worth noting that the disposal of WebZone, where retailers were lower yielding, added about two percentage points to ARPA growth in the year. We delivered our annual pricing event for all customers on the 1st of April, 2023, which included additional products and a like-for-like price increase. This increase contributed much of the £114 of price lever growth. Product contributed £136, Just over half of this growth was from the second module of AutoTrader Connect valuations, which was included in retailer advertising packages in April 2023. The remaining product lever growth was largely due to continued uptake of our prominence packages, which increased to an average of 35% of retailer stock in the year, up from 32% in 2023. Also contributing to the product lever growth was Nucar, where we increased the number of paying customers during the year. Market extension stock was consistent with the prior year at an average of 6%. Turning now to stock, you'll see on the right-hand side of the chart that the number of live cars advertised on AutoTrader increased slightly year-on-year. Within this, used car stock increased by 3%, partially offset by a decline in new cars. Some of the 3% used car stock growth was driven by an increased number of home trader and private listings, which do not impact ARPA. There was a small amount of growth in the volume of slots retailers paid for in the period, which drove the £34 stock lever. Total auto trader costs increased 8% to £153.9 million. People costs increased by 10%, This increase was partly driven by an increase in the average number of full-time equivalent employees to 1,060, and also an increase in underlying salary costs. Within people costs, share-based payments increased by 21%, largely due to the introduction of our new all-employee share scheme in November 2023. Marketing spend was flat at $22.3 million, while other costs, which include data services, property-related costs, and other overheads, increased by 12%. Depreciation and amortization decreased by 12%. However, our low 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 around 400 people in products and technology who are continually improving our platforms and developing new products for consumers and retailers, the costs for which are taken in full through our income statement in PeopleCop. Operating profit increased by 14% to $378.6 million during the year, and core auto trader operating profit margins increased slightly to 71%. Our share of profit generated by dealer auction, the group's joint venture, increased 12% to $2.8 million. Having covered AutoTrader, the main part of the group, we'll now move on to the Autorama results. The acquisition completed on the 22nd of June 2022, and so the prior year comparator for revenue costs and operating losses represent just over nine months of trading. Autorama revenue for the year was 41.2 million, with vehicle and accessory sales contributing 28.4 million, and commission and ancillary revenue contributing 12.8 million. The Autorama business delivered about 1,200 vehicles, which were temporarily taken on balance sheet as a pass-through in the period. The cost of these vehicles was taken through cost of goods sold, with the corresponding revenue in vehicle and accessory sales. On the cost side, we saw people costs of $10.9 million, relating to the 173 FTEs employed on average through the period. Marketing was $4 million, and other costs were $4.5 million. There was $2.4 million of depreciation amortization, which was largely for developed software capitalized in prior years. Total deliveries amounted to 7,847 units. The leasing market for brokers has been impacted for the last 12 months by supply challenges. However, we expect with the growing volume of new car registrations that this will improve over time. The Autorama segment made an operating loss of $8.8 million, an improvement year-on-year, largely through cost savings brought about by the integration with the main auto trader business and platform. With total group revenue up 14%, group costs being broadly flat, and a 12% increase in our share of dealer auctions profit, we saw total group operating profit increase 26% to $348.7 million, and group operating profit margins increased to 61%. We continue to deliver strong cash flows consistently over time. As we grow, the strong cash generation of our business leaves us well-placed to return surplus cash to shareholders. Cash generated from operations was at $379 million for the year. The statutory income statement outlines areas beyond our revenue and operating costs. Net finance costs increased to $3.5 million due to higher borrowing costs. Our profit before tax was $345.2 million, 18% higher than last year but lower than operating profit, primarily due to a $19.1 million profit on disposal from the sale of WebZone in the prior year. The group tax charge of $88.3 million was significantly higher than last year due to the UK corporation tax rate increasing to 25%. We've previously stated that the group was potentially in scope for the UK digital services tax, with revenues exceeding $500 million. The UK government continues to work towards implementing a global two-pillar tax solution, although the implementation of Pillar 1, which would see DST repealed, is still not certain. There is no charge in financial year 2024 as in-scope revenues were below the $500 million threshold. However, we do expect to incur this tax from financial year 2025. Basic EPS increased by 13%, which was higher than net income growth due to fewer shares in issue following our share buyback program. The directors are recommending a final dividend of 6.4 pence per share, giving total dividends for the year of 9.6 pence per share. Now to briefly review net bank debt and capital policy. At the end of March 2024, the group had drawn $30 million of its syndicated revolving credit facility and held cash and cash equivalents of $18.7 million. During the period, cash generated from operations was largely used to pay tax or return to shareholders through a combination of dividends and share buybacks. 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 gross indebtedness. That concludes the financials. I'll now hand over to Catherine to talk through the market dynamics and our consistent strategy.

Thank you, Jamie, and good morning, everyone. Over the past 12 months, our audience position has strengthened as both the volume and engagement of buyers has increased. The number of cross-platform visits increased 11% year-on-year to reach a record number of 77.5 million per month. Engagement, which we measure as cross-platform minutes, also increased to 553.2 million on average per month, an increase of 8% over the prior year. The chart on the right shows the total minutes spent across an expanded set of competitors, retailers, and manufacturers. On average, over the year, Comscore estimated that consumers spent over 10 times more minutes on AutoTrader than our nearest classified competitor, the combination of Gumtree Motors and eBay, and over 19 times that of CarGurus and Pistonheads combined. Outside of these competitors, we also compare our size of audience to that of retailers that are large enough to be tracked by Comscore. The number of minutes spent on AutoTrader was over 41 times these retailer sites combined. When doing the same exercise with all manufacturer sites, AutoTrader is over 32 times their combined size. Moving on to slide 16 and looking at both new car registration and used car transactions. It's worth looking at these separately as the demand and supply dynamics in each have been very different over the past year. From a new car perspective, as can be seen from the chart on the left, supply has continued to improve and registrations increased 16% year-on-year. It's worth noting, though, that we are still slightly below the levels seen pre-pandemic and significantly lower than the highs of 2017. Over the past 12 months, we've seen manufacturers attempt to stimulate private demand with increasing levels of discounts and finance offers. This has been particularly prevalent with electric vehicles, where the zero emissions vehicle mandate is now in place, which requires a minimum percentage of registrations to be electric. Despite these higher levels of discounts, private sales have been broadly flat year on year, with new car registrations growth coming through threes. The fleet channel has seen very little volume in the three previous years and these players are now replacing what has become a much older fleet. Fleet channels have taken up the greatest share of registration since the financial crisis, which is a trend we expect to continue this year. As can be seen from the chart, the used car market is much less cyclical. Over the past 12 months, we've gradually seen supply improving, which has led to an increase in transaction volumes with a growth rate of 6% year-on-year. At 7.3 million transactions for the year, we're still marginally below the levels seen from 2015 to 2020, but expect a gradual and continued recovery over the coming years. On to slide 17, looking at used car pricing and median days for sale. We continue to publish a monthly retail price index of cars advertised by retailers and auto traders. the results of which are shown in this chart. The dark blue line on the chart shows the average retail price of a used vehicle advertised over the last three financial years. As can be seen, pricing appreciated dramatically in the second half of 2021, our financial year 2022, but it's been relatively stable over the past two years. The average used car price over the financial year has been £17,833, a 1% like-for-like decrease in pricing over the prior year. Since September 2023, we have seen higher year-on-year declines in used car pricing, driven by significant movements in trade valuations. Although month-on-month pricing movements have recently stabilised, year-on-year pricing remains down. Greater discounting on new cars, which has been skewed towards electric vehicles, has weighed on the prices of younger used electric vehicles and driven some of this trend. Demand on AutoTrader has remained strong over the years. Cars have sold at a similar speed to the prior year and faster than pre-pandemic levels. This fast speed of sale has supported transaction volumes, but less so our livestock on-site measure, with retailers continuing to hold less stock than they were before 2020. It is expected that the growing supply of new car registrations will gradually feed into better volumes of used cars. There remains a significant structural gap in vehicles aged 3 to 5 years due to low registration volumes since 2020. This will ease in the coming years as registrations continue to recover. Let's move on to consider our strategy, where we've highlighted some of the factors that have contributed to our past performance. We believe these factors are also likely to be some of the key drivers of our future performance. Since our IPO in 2015, we have executed consistently and the business results have been similarly consistent. During the first few years of being a public company, we saw higher levels of profit growth as we removed parts of our cost base which related to our magazine heritage. Throughout this period, we focused on our core marketplace and product growth, coupled with investments in our platform and adjacent opportunities. This focus and investment have led to the higher revenue growth that we have seen since 2021 at relatively consistent margins. Our profits have been redistributed back to shareholders, which is something we expect to continue. Over the past 10 years, £1.1 billion of surplus cash has been returned to shareholders and we have delivered total shareholder returns of 225% versus 60% for the FTSE 350. We don't always expect our performance to be linear, with financial year 2021 being a good example in a set of exceptional circumstances. But we do expect the key drivers of historic and future value creation to remain consistent. These drivers, which I will touch on next, include a growing automotive market, our market-leading position, our heritage of innovation, a focused and consistent strategy, and our purpose and culture. Over the past 20 years, the total size of the UK car park has gradually increased, growing on average by just over a quarter of a million cars per year. This trend has been driven by UK population growth, and with that, an increase in the number of people with a full driving licence. These drivers see their car as a necessity, with our consumer research consistently telling us that car buyers want exclusive access to their car. Finally, with continued improvements in manufacturing, vehicles are lasting longer than those produced 15 to 20 years ago, and therefore more new cars are registered than are scrapped. In addition to the growth of the UK car park, the value of the park has also increased over time. This has been due to inflation, improved functionality, longer useful lives and the move towards more expensive electric vehicles. We expect both of these trends to continue with Autotrader at the center of a market growing in both volume and value. Autotrader is a technology business and technology is key to our future success. We have a well-invested technology platform on which the many products we've talked to investors and analysts about over the years are built. All of our services have moved to Google Cloud. We invested to take full advantage of the significant benefits that cloud computing brings. Scalability, resilience, security, and cost transparency. Our data platform relates to a complex set of technologies that enable us to activate the enormous value in the signals and activities that we observe on our marketplace. We have a busy marketplace with tens of thousands of retailers advertising hundreds of thousands of vehicles to millions of consumers. This all generates a fantastic amount of clickstream and transactional data that our data scientists and analysts can explore to unlock actionable insights for our retailers and consumers. This insight, in turn, is then surfaced in many of our products. And finally, our product delivery platform is optimized for speed and agility, where we can rapidly test ideas with consumers. We deliver thousands of individual software releases every week, and this trend has been increasing year on year. It has grown tenfold since our IPO. With strong technology foundations and a rich set of opportunities across our marketplace, data, and digital retailing, we expect to continue delivering products adding real value to car buyers and customers alike for many years to come. As the wider automotive market increasingly embraces digital sales channels, technology, and data, we are uniquely placed to help. Over the past 10 years, the number of visits to AutoTrader has increased by 60%. We see many more times the number of searches on AutoTrader for vehicles than Google see, across made model terms and beyond. We have a highly engaged audience, where car buyers are completing millions of searches on our platforms. Many of these buyers come to us directly via our app, where over the years we have seen over 21 million downloads. This means we're in the hands or pockets of one in two of all UK driving license holders. Our prompted brand awareness is 89% amongst the UK population. Eight in 10 car buyers use AutoTrader during their shopping journey and two-thirds of buyers only use AutoTrader. These are incredibly strong foundations to build upon. We continue to invest in improving our site experience, maintaining high levels of trust, evolving our brand, creating new content, and in building our marketing capabilities. Alongside this, and just as importantly, we continue to launch new tools and functionality for retailers and work to deepen our partnerships with them. We have made good progress against each of our three focus areas. These areas are closely interconnected. Our platform and our digital retailing capabilities build on the strengths of our marketplace and deepen our relationships with retailers and car buyers. Our marketplace continues to grow and we have seen a record number of car buyers and UK resellers using AutoTrader. We have consistently executed pricing and product events each year and With a robust pipeline of future products, we're excited to bring to market over the coming years. These will be generated from our continued investment in data products, our Autotrader Connect platform, AI-enabled products, and continued improvements in our consumer experience. As part of our platform strategy, we continue to make the technology and data that we have built and scaled to support Autotrader available to our partners. This is a key differentiator. and connects our data and services into key business processes for our customers. The level of engagement with these products and services continues to increase over time. We embedded a new AutoTrader Connect module into this year's event, Trended Valuations. We are also enabling more of the car buying journey online on AutoTrader, both through the scaling of DealBuilder and the work we are doing to integrate Autorama. We'll cover the highlights on both trended valuations and deal building shortly. As Nathan mentioned earlier, we are well-placed to support ongoing structural changes in the new car market. We have products to enable franchise retailers, manufacturers, and leasing companies to sell new cars directly to consumers on AutoTrader. Franchise customers have been able to advertise physical new cars for a number of years, During the financial year, we successfully moved from an all-you-can-eat charging model to a slot-based model. We also introduced pipeline stock, allowing retailers to advertise stock that will arrive on their forecourt soon, but is not yet there. Finally, we have grown the number of franchise retailers paying to advertise their new car stock to 2,100. Alongside this, we have launched a product allowing manufacturers operating an agency model to advertise new cars directly to consumers nationally. We've also continued to integrate leasing into the core auto trader search experience. The personal leasing market, along with private new vehicle registrations, remains impacted by supply constraints, which we expect to improve over time. This slide references many of the data points we have made available to retailer customers over the past three years through our AutoTrader Connect strategy. AutoTrader Scale gives us a unique view of vehicle pricing, with almost a million vehicle observations every day. Our valuations are data-driven, and so our customers can be confident and trust in the data we provide to help them source, price, dispose, and retail their vehicles in the most effective way. Over the past three years, the market has seen higher levels of average price movements and big differences in pricing trends between different segments of stock. With this in mind, we've launched a Trended Valuations product. This product uses machine learning models of current and historical data to look forward and provide a view on where we expect the value to trend in future periods. This supports customers to set prices for vehicles with more confidence, hopefully maximizing their margin, and with the data to fine-tune their pricing strategy over time. Moving on now to talk more to the outer ring of our strategy and our DealBuilder product. Our approach to digital retailing is to enable any retailer to sell their vehicles online. We've made good progress with our DealBuilder product, ending the year with 1,100 retailers and over 40,000 cars on the trial. A small proportion of these retailers are now monetized. We have started to charge a handful of customers a quarter of a percent of the vehicle price when a deal is submitted. We also saw around 16,000 deals throughout the year. DealBuilder uses autotrader technology to enable car buyers to do more of their car buying 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 the dealership. Currently, these tools are available in our AutoTrader retailer portal, which can be seen on the right-hand side of the slide. 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. It is encouraging that deals convert into sale at a higher rate than any other inquiry type. We are seeing strong buyer engagement out of retail hours with over 50% of deals taking place outside of 9 a.m. to 6 p.m., Monday to Saturday. We support the case that this should build sales capacity for our retailer partners. Our focus for DealBuilder in order of priority is to continue to scale the number of retailers on the DealBuilder trial increase consumer engagement and conversion with the product, and to continue to test monetization. Everything I've spoken about up to this point has been possible because of the culture and ways of working at Autotrader. Autotrader people have always embraced change and been adaptable in the face of technology innovation and the evolution of the automotive landscape. I've already spoken to some of the examples where we embrace change and invested early. Firstly in mobile and app, we then embraced server virtualization, then private cloud, then public cloud. We invested in building out a new data platform and data science capability 10 years ago, making artificial intelligence available to the automotive industry. We believe in working as one organization where people feel empowered to have an impact. More recently, we've introduced share ownership with the launch of an all-employee share scheme this year, which reflects these principles. We always seek to work in partnership with our customers, a principle we've moved forward significantly over the past 10 years. The first step was the removal of sales commissions, then democratizing and sharing our data and insights widely, and increasingly our conversations are focused on driving retailer performance and optimizing for their business goals. Finally, we believe in thinking and working responsibly in everything we do. This includes creating an environment that attracts diverse groups of people and enables them to fulfill their potential for both the business and themselves. Our environmental strategy is an important part of working responsibly. It has three pillars. To reduce our carbon emissions, to support the automotive industry towards the mass adoption of electric vehicles, and to support consumers to make environmentally friendly vehicle choices. Many of our initiatives in this space are underpinned by the amazing work of our employee-led guilds and networks. There is still much work to do, but we believe with our market position in a growing market and our consistent and focused strategy, we have a significant opportunity still to deliver. We will deliver this because the foundations of WaterTrader are strong. Our well-invested technology platform means we can launch products quickly at scale, and our people, culture, and ways of working means we will embrace change and adapt to whatever comes next. I'll now hand back to Nathan to summarize our outlook for 2015. Thank you, Catherine.

We have a healthy core business with a good runway for growth. This remains our focus and first priority. In parallel, we have the opportunity to grow engagement with our products and our platform solutions for retailers to increase the number of customers benefiting from our digital retailing capabilities in DealBuilder. Trading so far this year has started well and we're anticipating another good year of growth in trade revenues driven by retailer revenue with ARPA growth across all three levers. In FY24, there was some positive ARPA benefit from the web zone disposal, which won't be replicated in FY25. We expect ARPA growth of £90 to £100 in price, £120 to £130 in product, and £20 to £40 in stock. We expect average retail forecourts to be marginally down year-on-year as market conditions return towards more normal levels. Consumer Services and Manufacturing Agency are expected to grow at a rate of mid to high single digits. Despite tight supply conditions in the leasing channel for new vehicles remaining, we expect Autorama operating losses to reduce year on year. Group central costs which relate to the amortisation of the Autorama acquired intangibles will be 13 million pounds for the year. As mentioned in our last results, in FY25 we'll exceed the threshold for the UK's Digital Services Tax, or DST, which is taken as an operating expense in the core auto trader segment. Therefore, we expect FY25 operating profit margins to be 69% or 71% if you excluded DST. However, at a group level, we do expect to see a modest expansion in margins. Our capital policy remains unchanged, with most surplus cash generated by the business being returned to shareholders through dividends and share buybacks. That concludes presentation. We'll now move to Q&A with analysts in the room, which Jamie will coordinate.

Thanks, it's Will Packer with BNP Paribas. Three questions from me, please. Firstly, there is some nervousness in the investor community around the cyclical health of the car dealers in the context of the normalization in pricing and potential impact on gross profits. Your guidance would suggest that the recent pricing round went well, but could you just update us on the cyclical health of the dealers from your recent engagement with them? I realize it varies by subsegment, so any color there would be helpful. Secondly, another recent area of focus is the ongoing FCA investigation into used car finance. Could you just update us where we stand today, where the next catalysts are, what the risks are to your car dealer customers, and the potential longer-term implications for auto traders? Is there an increased role for you in the finance side of things? And then finally, on DealBuilder, you're now another few months into the learnings. You've started monetization, albeit cautiously. What are your key takeaways so far, and what would you flag in terms of progress there? Thank you. Sure.

So I think we're definitely seeing a period of normalization for car retailers off the back of a few years of what have been exceptional market conditions. Most of the pressure is coming from either the supply side or the cost base. Used car and actually new car demand where the price point is right is still very robust. You can see it in all of our audience data. More generally, UK car buyers continue to prioritise automotive spend over other categories. The key pressures for retailers are mostly in the cost base, whether that's the cost of stocking loans, which has gone up significantly for some with rising interest rates, whether that's energy bills, people costs, the structural cost pressures in their businesses have been rising for the last few years. And I think this year, those cost pressures combined with a supply environment that's quite constrained, depending on, again, the retailer cohort and segment of stock you're focused on, and a pricing environment, retail pricing environment, that has softened, has meant that we've seen a normalization back to margin profile, I think, closer to where we were in 2019, early part of 2020, rather than the situation we've been in for the last few years. Overall, we haven't seen... We haven't seen any real growth in churn, and we haven't seen retailer insolvencies particularly spike or increase. So we're not at a point where there's any real, I think, bigger structural risk to retailer numbers overall. But definitely some normalization, I think, backs a more consistent margin profile with historical levels.

In terms of the FCA investigation that's going on, It obviously, just quickly for those that aren't aware, relates to a commission structure and sales approach that was in place but has been banned for some time. So I think in terms of scope, there is some talk around this being like PPI. I think there's not really any strong argument to suggest it's going to be anywhere near the size of that, not least because the lending is lower, but it does relate to that historical period. The key timeframe is September when they come back with their findings and what potential remedies that they might put in place. At the moment, I wouldn't say that we see it as a big risk to AutoTrader. It's something that we're paying a lot of attention to, obviously, because of the work that Catherine spoke about that we're doing on DealBuilder. But we don't sell finance. It's lenders that have mostly been in focus, lenders that have made provisions. Retailers like to do quite a bit of work because they were the broker of a lot of that finance. The average retailer isn't seeing this as a direct risk to their business. I think the obvious comment back to that is, well, the knock-on impact might be that lenders need to change the way that they work with retailers, and that could impact retailer profitability. And finance is a meaningful part for anyone selling cars that are under five, six, seven years old. that is important income. The reality is, as our customers will very gladly remind you, that these are not high-margin businesses and they're not making exorbitant or abnormal profits. So to the extent that profit is impacted in one area, the industry has a long history of finding that somewhere else, and this would be a broad-based impact on the industry. So I think it might turn up more in the metal margins. That's what it means for auto trader. Well, I think, you know, if you get behind the principle of what the FCA are getting at is they want better choice for consumers. They want more transparency. And actually we think we've got a brand, we've got some technology and we've probably got some data that could help them do, help the industry actually do that in a way that can be probably achieved much faster than any one of those players trying to do it themselves. So we do think what we're doing is consistent with where they want to go. And actually, if anything, you know, there'll be more pressure to go down a route that does make finance transparent and easy to access.

Yeah, and then on DealBuilder, I think the way that we started monetising through the trial is a transaction charge linked to the price of the vehicle. That charge is generated when a deal is placed, which is when there's a minimum of a reservation. And I think that was a bit of a test of concept for us. And I think the fact that we launched that in January, there's still less than 100 customers that are monetized. But the fact that we've been able to put that into place with that number of customers, it's a quarter of a percent is what we've initially charged based on the price of the vehicle. It's about £40 a deal. It's positive because that feels like progress. These deals are converting into sale about a rate of one in two, so it's about an £80 cost to sale. It's probably not where we said we wanted to get exactly to in the long term, but from an initial trial basis, we feel pretty positive about it. We sort of referenced in the presentation the priorities for this year, which is still very much scaling up the number of customers, increasing the level of consumer engagement with the product, and then monetization. And so, you know, I think through the year we will increase the number of paying customers. You know, we're going to look to continue to iterate the charging, although I think that the basis of charging that kind of transaction fee model is likely to be retained. And the ARPA guidance, the product lever of 120 to 130, less than 10% of that is made up with deal builders. So I don't think we're suggesting it. it's a huge contributor for this year. But, you know, hopefully we're sat here in 12 months' time and we've continued to make progress across those three focus areas.

Thanks very much. Catherine, just to come back on one element of your response. Is it right, therefore, to think that the kind of worst of the normalisation back to historic profit levels is behind us? Or would that be too extreme an interpretation of your comments?

So I think on probably a different answer for NUCAR compared to you. So I think on used car, we're now seeing month-on-month pricing movements have stabilized and the cost pressures that have hit retailers with interest rates, more stable environment, inflation coming under control, I would imagine we'd see more stability and consistency there. On new car, slightly different situation because with a combination of the ZEV mandate and a return to a more supply push market in that segment, there's no doubt we're going to keep seeing more manufacturer discounting and expectation probably that retailers will need to pre-register a bit more volume. And that return of short cycle business does typically have or can have an impact on retail and new car margins. So I think probably a bit more weakness to come on new car, but I think we're hopeful certainly that we're seeing a much more stable used car backdrop.

Thanks very much.

Thank you. It's Charles Thorne from Jefferies. My first question, actually all questions are on DealBuilder. The first one is noting that you've got a bit more of an outbound stance towards highlighting the value of DealBuilder to dealers, but it feels to me that a major challenge is going to get a dealer to look at it through the lens of, lowering the all-in cost to serve and improving competitiveness rather than just another cost or marketing cost per unit sold. So how do you approach that challenge? The second one is on the 0.25%, I guess one for Jamie. Does that include, well, does that fluctuate if the journey includes a part exchange and includes the sale of a loan? And then lastly, the 1,100 dealers, 40,000-plus cars at the end of March. It's ticked up quite a bit since then. I'm assuming that's because in mid-April you made it available to all FSA-authorized dealers. So just as we look forward to the number of cars that could be available for reservation, I don't know, by the end of this calendar year, you know, how many FSA-authorized dealers are there, how many extra dealers are going to be taking it, and, yeah, what will that impact be on the cars available for reservation? Do you want to do the first one?

Yeah, thanks. the next team. So I think on DealBuilder and the value proposition to retailers, I think our belief is ultimately this is just going to be the way that you need to sell cars, not necessarily because we're doing deal building, but because consumers just want this and they want to be given it. And at some point, actually, retailers will end up missing sales or not being as competitive if they're not using some form of digital channel. Ideally, auto trade is very easy and consumers are already I think where we are now it is the most difficult point in honesty to answer what the value proposition is because I think if you said to a retailer would you rather you know how much of your cost is driven by the fact that your people only convert one in four inquiries they would say that's mostly what everyone in the business is doing so it's a big part of my cost base and we say well what if you could only convert one in two. Now, so I think that will stack up, but if we're only accounting to say 10, 15% of all their sales they're doing on auto-trader, it's a little bit premature for us to suggest that they're actually going to be able to take cost out of their business. But I think when they see the thing that resonated a lot more strongly than we expected, or certainly than I expected, maybe Jamie and Catherine did expect it, was that one in two thing is very, very saleable proposition for them. And the fact that most of the deals, or at least half of the deals, are being done when they're not in the in the office. And those two things are carrying us for now. And I think that's why, to Jamie's point, now we're focused on it not just being, say, 40,000 out of 400,000 cars in oil trade. We want to push that up so actually consumers start to become to learn behaviour in oil trade. That will improve conversion. So that's kind of the stage we're at. And at that point, then, the value proposition, we think there's enough there that we're pretty confident, actually, that it will it will stand up and it should be definitely stronger than what we've done today and we've tested monetization. So there's a few experiments that we've kind of been doing.

Yeah, so the second one, the quarter percent doesn't flex based on part exchange or finance attachments. And I think particularly with the lens of finance, that's potentially a later iteration that there is some incremental charge, but I'd say it's still a little way off, but that's where we are today. In terms of the opening up to all FTA registered dealers, so that's about 70% of our customer base, 70% of franchise and independent dealers, but I would just caution I think the cadence at which we're bringing customers on isn't going to be radically different and that really comes down to the fact that this is a very different type of product for customers to take and the onboarding process and the sales process on the forecourt and the way that we want customers to work with consumers that people are turning up with a deal at the forecourt and everyone knows exactly how to manage that and sort of the answer to the first question, that those efficiencies are getting realized for consumers. So it's great to have opened up a larger number of customers, but there's still a product that's quite different to an advertising product. As we've described in the past, you just switch it on and people are away. So we're definitely optimistic we'll still make progress, but I would just caution suddenly thinking that it's many multiples of where we are today when we're sat here in 12 months' time.

The only other thing I'd add is obviously it's a portal product today. And for some of that 70% of retailers addressable, we need to do the API work to get deals in as part of the API so that they can consume the deal in their core retailing systems rather than needing to come to portal.

What's the timing for that, Catherine?

I say we've started work. We've proven with a couple of partners that we can make the deals API connectivity work. we're integrated with over a hundred partners or so for retail essentials and the other 80 connects modules and we will over the coming months and years work our way through that partner base to get the deals API work integrated as well morning everybody a couple from me so first of all with

some of the slowdowns in progress toward meeting these ZEV targets. Are we seeing any differences in how OEMs are rolling out the agency model? If not, are there any sort of impacts you'd expect a multi-trader from some of those changes in the EB market? And then secondly, just to touch on DealBuilder again, so I appreciate that the product's working really well for retailers. For consumers, what are you seeing in terms of their propensity to take up that product when they view a particular vehicle? Is it something that's resonating really well, or is it something that maybe isn't taken up so much, but because you have so many people visiting it, you still manage to complete quite a lot of deals? I think that's it for me. Do you want to take the first one, Kev?

Yeah, sure. So on the ZEV mandate target, the 20% for this year for every OEM, and we're currently tracking about 15% of new registrations, but A lot of that, if you speak to retailers and manufacturers, a lot of that is actually coming through pre-registration or other short cycle business. So there is a structural worry that the underlying level of actually private demand and private registration is some way behind that 15% of registrations that we're seeing. So you're right to point out there is this big gap that manufacturers are either going to need to meet or pay the £15,000 fine per vehicle. The approach... that different manufacturers are taking does vary hugely. So some have now very openly talked about potentially constraining registrations of ICE vehicles later in the year to force the 20% target. Others have talked about putting up prices potentially on ICE vehicles to make electric vehicles look more competitive. And other OEMs are pushing full steam ahead with trying to drive as much EV volume as possible. probably more variation in manufacturer strategies than we've seen for a long time in terms of how they're approaching the market. In terms of what that means for us and what we're seeing on Autotrader, I think for the retailer stock, Newcastle stock product, we're expecting to see more stock on that product as the year progresses, particularly through hopefully some of the the volume OEMs when they're pushing later this year. We moved from an all-you-can-eat to a per-slot model for that product during this year, so if supply comes back, we're hopeful we'll see some benefit there. The second product we have is then manufacturers advertising directly, those that are selling direct even through agency model or have a direct-to-consumer proposition. We've got a version of our market extension product that they're on on the platform retailing those cars. we're working it's relatively early days still for that product we've got work to do to get images descriptions all the kind of core advertising proposition as good as it can be but we've got the cards there and to the extent people are looking to push through that channel we should be relatively well-paced to pick up that volume and then we've obviously got the leasing proposition as well where we structurally haven't seen the market come back there but if it did i think it's probably unlikely later this year but if it did into next year then we've got a route to market there for funders and other leasing companies looking to sell through that market. So I think we feel pretty good that actually we've got the propositions, like whoever's selling the car, whichever channel structurally benefits, that we've got a good proposition there for retailers, manufacturers, and funders.

And on consumer propensity around dual builder, I think... our view certainly my view is that it's good the feedback when people go through the process most importantly is is very very positive um even though it's quite an involved process especially if you go through part exchange and finance actually it all makes sense it's protecting vulnerable customers doing all the things that we wanted to do so we're really happy from that perspective um From an engagement perspective, we spoke earlier at our last results at accounting for maybe 5% or so of transactions. That number is starting to creep up, so I guess if you want some evidence, more and more consumers are engaging with it. I think the truth is, from our perspective, there's been no marketing It's not been pushed on the website because we did a very subtle push and our retailers got upset with us because some of their finance providers weren't yet available. That's why we've kind of opened it up more recently so we can start pushing it on site without some retailers feeling like they've not really got a chance to go at it. We've not really done a lot of the optimisation work other than optimising for reservations. So the propensity of a consumer to do a finance application and part exchange looks lower than what we would expect. and we'll get on to working on that and it's not at scale on auto traders so when you run these big websites that have been used by um you consumers for years and years and years they are surprisingly blinkered they just see red buttons and they press them and getting them to kind of read something different or behave slightly different is much easier said than done but i think that's that's really the stage that we're at now. By opening it up to all retailers, we can start to push on all four of those elements, actually, which we'd like to think will increase propensity from where it is today. But I think where it is today is actually pretty good, actually, considering.

Perfect. Thank you, Nathan. If I could just ask a quick follow-up, Catherine. I just want to dig into retailer numbers. So I'm sort of following on from Will's earlier one. A lot of the pressures in the used car market have sort of possibly peaked and maybe start to decline a little bit. If we're guiding for retailer numbers down, is that more of a case of retailer numbers right now are a little bit below where they were at the year end, but we should maybe see an improving trend and while the overall average might be slightly lower than last year, the exit rate might be quite good? Or is it a case of sort of a little bit of a decline still throughout the year that you're expecting?

I think it's more of a question just sort of stepping back and thinking what's happened over the last three to four years that we've seen almost an extra thousand customers coming into the market. And there's no doubt that some of them will have been drawn in by those higher gross margins that were realized sort of through 22 and 23. I think it's more at that higher level as those margins, to the first question, start to get back to more normalised levels. So I think we expect through the year that some of those people will leave the market. So that's what's behind that guidance.

We're not seeing it yet, though. It's an expectation of what might happen as we progress through the year.

Perfect, thank you.

Dr Kieran?

Thanks, yes, it's Kieran Dolly from Barenburg. Just on DealBuilder again, I guess just in terms of the priorities you laid out, on the first one in terms of uptake, could you just help us kind of understand how you define success? Is it, I don't know, a doubling of the number of retailers with DealBuilder available, or how should we think about that in terms of success? And then I guess just in terms of monetization, Could you just give an insight in how you landed on 25 basis points as kind of the starting level? And when you get to, let's say, full monetization, do you think it'll be 25 basis points and then try to increase over time? Or it will go up to closer to getting to your kind of £100 revenue per vehicle that you kind of alluded to previously?

Okay. I thought my guidance was done by the CFO, but I'll give you my... No. Look, I think the clip that we've been running at is like 500 retailers every six months. That was with some constraints around the number of retailers that we had their finance provider available to do the integration. We've got some other ways to work around that and provide a different finance journey if they're what the desired provider's not plugged in. So I think we'd like to go quicker than that. But it's not crazy amounts, not double that at all, I think, because of the constraints that Jamie said. So I think we'd like to be going faster than the 500 every six months that we've been doing. That would seem, if I was you, that would seem like a reasonable expectation to have on us, because now, you know, we don't have any of those constraints. But the onboarding is still quite, you know, it is a pretty involved product. And because we're choosing a monetization model that's based on not only kind of a more involved product to onboard people, we're monetizing at the moment on a transaction basis. So we have nothing to gain by putting loads of work into a retail that's not really going to engage and do any transactions. So we're a bit more discerning about who we bring on. So there's some natural constraints in there. But, you know, we have got our foot down on, you know, it's a very big priority within the organization is to get people plugged in.

guess the historic runway as well has also been well it's been entirely free and now we are monetizing that will put some kind of constraint around um how fast we can go as well yeah and then on the i mean on the quarter percent um you know did it how many of the prices internally at the rise that we you know we we work through internally we look at

some external benchmarks. We talked very closely to the sales team. We talked to the customers that have been using the product. I think, you know, Nathan talked about the kind of consumer engagement, you know, where we're at sort of 5% to 10% of customer sales have deals attached. And I think to drive the kind of real efficiencies, you know, kind of alluded to Charles' question where, you know, customers can suddenly think, well, actually I'm able to operate in a slightly different way. You do want to be continually increasing that number. And so I think that That's what's been part of the discussion as we've arrived at that amount. We definitely have, you know, expectations over time that we can, you know, certainly add finance in time into the kind of charging model because that feels like a high part of value if you're able to get someone to complete that process online. So there's a lot to learn through the next 12 months, but, you know, I certainly hope that it can increase over time and we'll learn a lot more as we're rolling out monetizations and more customers.

I think one of the reference points just to add in there is remember, unlike many other transactional platforms, this is on top of the 0.6% or 6% of gross margin we talk about, which is about 0.6%. So it does sit kind of on top of that, and that 0.6% is a reference point for where we were kind of pitching and thinking about the transaction phase.

So just to confirm, at this point next year, every retailer using it will be paying for it?

Not necessarily, but there will be more than, say, less than 100 that we have today, I'm sure. Cool.

Yeah, Andrew?

Thanks. It's Anderson Barclays. I've got two more on DealBuilder, amazingly, which is to ask about the incrementality of the monetization. So appreciate the under 100 customers who are paying for it is a pretty small number and they're not paying that much. But as you've gone through the April pricing event, did you find with those customers that it was a simple conversation of you take a normal price increase, normal product increase, and then you pay for DealBuilder on top, such that you've seen kind of a higher yield from those customers as part of monetizing them. And I guess as an extension to that, going back to the September 22 CMD, you spoke about an ambition to take the ARPA growth into double digits driven by DealBuilder. I guess FY25 is not the year to judge you on that, but Is that still the ambition? And when is the year that we should judge you on that as DealBuild starts to scale?

Thank you.

Yeah, I think with DealBuild and monetization, most of the conversations either, a number of the conversations have happened prior to the April event. So for those retailers, yes, we would have, it has been a yield increase for the individual retailers that have been As you say, it's relatively, I don't think the individual per deal yield is that low, but the volume of deals that they're getting as a percentage of sales means as an incremental auto trader cost, it's not been a huge shift yet. But the structure is there and set up now such that their own deal builder is delivering value for them. So as we've all talked about, we hope that continues to scale over time. We're committed to keep monetizing those retailers in waves over the coming months, mostly linked to how long they've been on the trial, and we'll keep doing that. So any monetization in-year will sit on top of the April rate product and price conversations that we've already had.

Yeah, and on the – so, yeah, we said at the invest today that – the business had historically run at mid to high single digit, R per grade, and hopefully with DealBuilder we'd move to double digits. Obviously we've managed to do double digits in 23, 24, and the top of the range is double digits that we've just put out. So we're definitely aspiring that in 26, DealBuilder is a more meaningful contributor than what's in the guidance today. But the next 12 months will tell us more That's achievable. Thank you.

We've got time for one more. It's Pete.

Hey, guys. It's Pete from Morgan Stanley. We'll stay on topics of deal builder, but I'm going to ask it through the stock lever. So your stock lever guidance, I'm wondering, does that reflect your view of increasing supply or longer sales or, like, days to sales? Or have you seen any kind of change in dealer willingness to subscribe to more slots if they are on the deal builder product? Because I think you mentioned that 50% of something are coming outside of the normal business hours. So that's potentially pretty attractive for a dealer. So is that impacting your stock labor at all? Then the second question is just on attachment rates for financing.

deal builder deals that have gone through so far what kind of attachment rates have you had there and is it materially different from what retailers usually have um so the stock lever so i think the guidance is i mean if you kind of split the half second half was um a bit stronger than the first half and i think that is that is the kind of supply tightness that we've seen through a lot of the last three years has eased slightly. Just as you've had more new car registrations, you're starting to see a little bit more increased level of defleet or cars being defleeted into franchise and independent dealers. But speed of sales still running very, very quick. And I don't, you know, the level of demand that we see, you know, I don't think we expect that to slow down significantly. So I think it's more just there was a lot less supply over the last two or three years, and it feels like it should improve gradually. I would just say, you know, if you look at the second half, it's almost a £100 stock lever, and we're guiding to 20 to 40, and that's because right now, actually, it's suddenly, you know, you go through these strange periods where actually it feels a little bit tight, and that's actually a period that we're going through at the moment. So I think generally looking across the whole year, we hope that, you know, it's at relatively small levels, so there is just that little bit more supply. I don't think we've seen deal builder customers necessarily increasing slots. You're absolutely right that over 50% of deals are placed outside of traditional hours. But I think it's still relatively small sample size to be saying that that's going to drive an increase in slots taken in the next 12 months. Then just on the attachment rate, so the attachment rates for both, I'd say, are lower than a dealer would see on average. So there's only a bit over 10% that has a part exchange or a finance application, but the lead call to action is reserved. So I don't think it's, again, wholly surprising, as Nathan sort of mentioned. you know, we want to drive deal volume, but, you know, on the list of priorities is also to increase the attachment rate alongside it, which if we're able to do that, then the kind of next phase of monetization where you're potentially charging for finance will hopefully follow as well.

Great. I thought we got one last one.

All right, thank you. It's Carl Smith from Zeus. Just one question on something different, on Autorama. So on the deliveries, it says that the car deliveries have fallen about 50% versus the annualized FY23 figures, and this is due to supply factors. But you've also said today that there's a supply push environment on new vehicles so can you just explain how the supply dynamics differ in the leasing market versus the overall uk new car market and whether there might actually be some demand factors in play as well for leasing or you know what's what's driving that 50 decrease

Yes, so if you think about new cars registered in the UK, half goes into retail and half goes into fleet. And I think the comment around more push factors is push into retail. So pricing that you see, the PPP, the finance dealers are offering, franchise dealers are offering, and the finance offers that are attached to those cars is where the push is. There is more volume going into fleet, but that's being taken by corporate and rental and those fleet customers turning over what is quite an aged fleet that they've sat on for two to three years. If you get saturation in that fleet channel, those cars then get offered through the leasing broker. So the vehicles that are supplied into Autorama today come from fleet wholesalers. They're the ones offering the finance. So they're still taking vehicles for their own needs and their own customers And it's that saturation that then ends up fueling that leasing broker market. So retail is seeing more push. Fleet is taking volume, but we're not yet seeing it feed into the broker channel. I mean, I think the fact that retail is seeing more of a push suggests there's not as much demand from private individuals buying those new cars. I'm not discounting your question that demand may also be a factor, but the competitive nature between what's available through PCH to what you get in PCP, you're not seeing the same balance currently.

Excellent. Well, thank you, everyone, for joining us. That brings us to an end.