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.