Auto Trader in pole position

Brisk trading, coupled with stringent cost control, drove underlying operating profit up 17 per cent to £83m in the six months to 27 September. More than 13,500 UK car dealers advertised with Auto Trader in the period, and its website listed an average of 427,000 vehicles. It continues to gain traction: average monthly website visits rose 3 per cent to 43m, and advertising views climbed 9 per cent as new ad formats and better targeting tools attracted premium brands and more marketing campaigns. But, arguably, the biggest boon was a 9 per cent rise in average revenue per retailer to £1,347 a month. That reflected increased stock levels, higher prices and robust demand for digital tools that maximise sale prices and improve inventory management.

Sales in the home trader segment leapt 12 per cent as the group introduced new offerings. Display advertising revenue also rose sharply and consumer services revenue crept upward by 2 per cent. This broad-based growth, combined with careful spending, meant operating cash flow swelled 46 per cent to £86m. That allowed management to slash adjusted net debt by 13 per cent to £457m, or 2.7 times underlying cash profit. It plans to pay out a third of earnings as dividends once that multiple falls below two times, then use any leftover cash to buy back shares or pay down debt further.

Broker Numis Securities hiked its forecasts and now expects pre-tax profit of £150m for the year to March 2016, giving EPS of 12p (from £51.2m and 4.1p in FY2015).