Auto Trader puts pedal to metal

Auto Trader makes its money through subscriptions paid by vehicle retailers to advertise on the site and access related services, supplemented by fees from home traders and private sellers posting their motors, and other companies looking to advertise their wares. Last year revenue from retailers and home traders rose 8 per cent to £215m, of which a 9 per cent hike in retailer revenues to £202m accounted for much of the improvement. Add to that a 19 per cent jump in display advertising sales to £12.1m, and this led to overall sales growth of 8 per cent, with consumer sales stagnant. Operating profits grew 35 per cent to £133m, while growing profit margins, an increasing rate of cash conversion and a £15.8m impairment charge in the last financial year meant adjusted underlying cash profits were 15 per cent higher at £157m.

Having terminated the print magazine in 2013, Auto Trader is now a fully digital business. Traditionally, most of its revenue comes from the used car market, however management is confident a growing new car market will drive future top-line growth. Auto Trader already has 13,450 automotive retailers advertising on its website – up 2.5 per cent year on year. Its online marketplace also has a record number of cars advertised, averaging 423,000 vehicles over the course of the last financial year.

Now that Auto Trader is enjoying life as a UK plc, brokerage Numis expects growth to step up. It has pencilled in adjusted pre-tax profits of £145m, giving EPS of 11.5p for the current financial year, compared with £51.2m and 4.1p in the year to March 2015.