ii view: Auto Trader revved up after annual MOT

This FTSE 100 company fell 30% in 2022 but is up almost a fifth so far in 2023. We assess prospects.

Full-year results to 31 March 2023

• Revenue up 16% to £500.2 million
• Pre-tax profit down 2.5% to £293.6 million
• Final dividend of 5.6p per share
• Total dividend for the year up 2% to 8.4p per share
• Net debt of £43.4 million, down from net cash of £51.3 million a year ago

Chief executive Nathan Coe said:

"This year marks another strong financial and operational performance for Auto Trader. Given the challenging economic backdrop and historically low levels of vehicle supply, these results are a credit to our people and the close partnerships we've developed with our customers.

"The prospects for our marketplace are as strong as they have ever been, underpinned by the significant number of car buyers and retailers using Auto Trader. We have also made good progress on improving the new and used car buying experience by moving more of the journey online, on Auto Trader. 

"As a result, despite continued economic uncertainty and automotive industry changes we feel confident about the year ahead."

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ii round-up:

Auto Trader Group (LSE:AUTO) provides an online digital marketplace for both car dealerships and individual consumers. 

It brings together buyers and sellers of both new and second-hand vehicles, charging fees to sellers to advertise their product.  

Employing over 1,100 people, its website attracts more than 60 million visits each month.

For a round-up of these latest results announced on 1 June, please click here.

ii view:

Started in 1977, Auto Trader is now the UK’s number one marketplace in terms of website traffic, revenues, and vehicle listings. Around 90% of its revenues comes from classified advertising made by its more than 13,900 forecourt trade customers, with the balance largely generated by individual consumer advertising fees. A similar business model is operated by housing website marketplace operator Rightmove (LSE:RMV). 

For investors, the tough economic backdrop, including higher borrowing costs to finance the purchase of vehicles, cannot be forgotten. A wealth of competitors such as Cazoo, and Cinch are not standing still, costs generally for businesses remain elevated and supply chain challenges continue to hinder the delivery of new cars. Potential for forecourt consolidation also persists as operators such as Car Giant and Motorpoint Group (LSE:MOTR) look to grow.

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On the upside, it still occupies a dominant position in the marketing of vehicle and investment in product innovation and bolt-on acquisitions continues. Despite a modest forecast dividend yield of around 1.4%, the payment has been increased again and followed a share buyback programme, while group net debt is relatively small.  

For now, and while some caution looks sensible given the tough economic backdrop, an analyst consensus estimate of fair value at over 675p per share likely puts existing shareholders in the driving seat.

Positives: 

• Strong market position
• Investing in product innovation

Negatives:

• Uncertain economic outlook
• Competition not standing still

The average rating of stock market analysts:

Strong hold