ii view: Auto Trader shares motor to record high

Full-year results to 31 March

• Revenue up 14% to £570.9 million
• Operating profit up 26% to £348.7 million
• Final dividend of 6.40p per share
• Total dividend for the year up 14% to 9.6p per share
• Net debt down to £11.3 million from £43.4 million

Chief executive Nathan Coe said:

"This has been another year of strong financial, operational and strategic progress for Auto Trader. More than 8 in 10 car buyers now use Auto Trader during their car buying journey and two thirds of buyers only use Auto Trader.

"We are confident in our prospects for the year ahead and, in the longer term, we see significant opportunities to continue growing our marketplace and to move more of the car buying process online, on Auto Trader.”

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

ii round-up:

Online vehicle platform Auto Trader Group (LSE:AUTO) today detailed annual results which topped City forecasts and said the new financial year has started well.

Sales for the year to 30 March rose 14% £570.9 million, driving operating profit up 26% to £348.7 million, ahead of analyst forecasts of around £337 million. Average revenue per retailer (ARPR) rose 12% to £2,721 as customer forecourt dealerships took up additional products and services.

Shares in the FTSE 100 company rose more than 13% at one stage in UK trading to a record high at 831p, having come into these latest results up around 18% over the last year. That’s ahead of a near 9% rise for the FTSE 100 index itself over that time and comfortably ahead of a 1% rise for property advertising platform Rightmove (LSE:RMV).

Auto Trader provides an online digital automotive marketplace to both forecourt dealerships and individual consumers, bringing together buyers and sellers of vehicles and charging fees to sellers to advertise their product.

Accompanying management outlook comments pointed to expected ARPR price growth of £90 to £100 over the year ahead, product growth of £120 to £130 and stock growth of £20 to £40, with the average number of retailer forecourt dealerships likely to be marginally lower year-over-year.

Losses made by its Autorama leasing business are expected to further reduce year-over-year from £8.8 million in 2023, despite tight supply conditions in the leasing channel for new vehicles continuing.

A final dividend of 6.4p per share takes the annual payment up 14% to 9.6p, with net bank debt down to £11.3 million from £43.4 million a year ago.  

Auto Trader’s Annual General Meeting is scheduled for 19 September. 

ii view:

Coming to the stock market in 2015, Auto Trader is today the UK’s number one marketplace in terms of website traffic, revenues, and vehicle listings. Most of its revenues come from the advertising of vehicles via more than 13,700 forecourt trade customers. Both second-hand and new vehicles are bought and sold on its platform. Around 7% of revenues are generated by its leasing Autorama business under its Vanarama brand. A similar business model is operated by housing website marketplace operator Rightmove.

For investors, elevated interest rates mean it can still be expensive for people to finance the purchase of a vehicle. Tech giant Google (Alphabet Inc Class A (NASDAQ:GOOGL)) is taking an interest in the UK motoring market, with Amazon.com Inc (NASDAQ:AMZN) entering the US marketplace. Costs generally for businesses also remain elevated, while potential for forecourt consolidation persists as operators such as Cargiant and Motorpoint Group (LSE:MOTR) look to grow.

• Sector Screener: financially sound stocks with growth potential
• Another chance to buy into this dominant global brand
• Insider: heavy buying and selling of these FTSE 100 shares

On the upside, Auto Trader is still the dominant market player and continues to spend on innovation. More and more dealers are trialling its ‘Deal Builder’ product, which allows car buyers to value their part exchange vehicle, apply for finance, and reserve a vehicle online, while group net bank debt has reduced significantly.    

Auto Trader shares are not cheap after outperforming the FTSE 100 index the past year, and the consensus analyst fair value estimate is just 748p. However, while they may appear to be ‘up with events’, the shares will likely remain popular with investors looking for a company that dominates its market like Auto Trader does.

Positives: 

• Strong market position
• Investing in product innovation

Negatives:

• Uncertain economic outlook
• Tech giants entering market

The average rating of stock market analysts:

Strong hold