The big news from online car retailer Auto Trader (AUTO) comes in the form of a share buyback programme, a consequence of the group's newly lowered leverage ratio. At the end of the reported year the level of net debt versus underlying cash profit had fallen from 3.4 times to just 2.2 times, which gives the company more financial headroom to start gathering shares back from investors. It will use surplus funds after the payment of its usual dividend - it is to pay 1.5p a share in respect of the 2016 financial year and roughly a third of future net income. There's no estimated total given by the company, but analysts at Peel Hunt reckon it could return up to £100m.
There were plenty of other positives to be found in the group's annual results statement. Despite only a 0.5 per cent uplift in the number of retailer forecourts to just more than 13,500, revenue per retailer forecourt jumped by 11 per cent to £1,384 a month. The average number of advert views during the year - a company measure of how many times individual vehicle advertisements are seen on the UK marketplace - rose by 7.5 per cent, which also helps explain how Auto Trader managed to drive a 23 per cent improvement in display advertising revenue from £12.1m to £14.9m.
In short, the company's plan appears to have worked: better customer engagement equals higher retailer revenue, which equates to higher trade and advertising revenue for the company. Tight cost control led to a substantial 5 percentage point improvement in underlying operating margins to 61 per cent, which in turn contributed to a whopping 27 per cent rise in operating profit to £170m. There was little detail on how the ensuing financial year was going, suffice to say chief executive Trevor Mather is confident the business could again perform well.
Analysts at Peel Hunt still expect pre-tax profit in the region of £181m for the year ending March 2017, giving EPS of 14.3p (12.7p in FY2016).
| AUTO TRADER (AUTO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 414.3p | MARKET VALUE: | £4.15bn | |
| TOUCH: | 413.9-414.5p | 12-MONTH HIGH: | 455p | LOW: 286p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 33 | |
| NET ASSET VALUE: | * | NET DEBT: | £393m | |
| Year to 27 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012** | 209 | 23.4 | na | nil |
| 2013** | 219 | 22.8 | na | nil |
| 2014 | 238 | 3.7 | -0.3 | nil |
| 2015 | 256 | 10.9 | 0.9 | nil |
| 2016 | 282 | 155 | 12.7 | 1.5 |
| % change | +10 | +1322 | +1391 | - |
Ex-div: 1 Sep Payment: 30 Sep *Negative shareholders' funds **Pre IPO figures | ||||
