Auto Trader Group plc Annual Report and Financial Statements 2018 Auto Trader Group plc Annual Report and Financial Statements 2018 Statements Financial and Report Annual Unique journeys Auto Trader Group plc is the UK’s largest digital automotive marketplace. Auto Trader sits at the heart of the UK’s vehicle buying and selling processes, bringing together the largest and most engaged consumer audience with the largest pool of vehicle sellers. Follow us: twitter.com/ATInsight Strategic report Financial statements 02 Business at a glance 84 Independent auditors’ report to the 04 Unique journeys members of Auto Trader Group plc only 10 Chairman’s statement 88 Consolidated income statement 11 Chief Executive Officer’s statement 89 Consolidated statement of 12 Value generation story comprehensive income 14 – Market overview 90 Consolidated balance sheet 18 – Our business model 91 Consolidated statement of 20 – Our strategy changes in equity 22 – Key performance indicators 92 Consolidated statement of cash flows 26 Operating and financial review 93 Notes to the consolidated financial statements 32 Risk management 124 Company balance sheet 34 Principal risks and uncertainties 125 Company statement of changes in equity 39 Corporate social responsibility 126 Notes to the Company financial statements Governance 131 Shareholder information 50 Governance overview 52 Board of Directors 54 Corporate governance statement 60 Report of the Nomination Committee 62 Report of the Audit Committee 66 Directors’ remuneration report 81 Directors’ report To view and download this report online: plc.autotrader.co.uk Strategic report / Governance / Financial statements We all have journeys in life... With over 10 million transactions each year, the journey of buying or selling a car is often complex and inefficient. Auto Trader, the UK’s largest digital automotive marketplace, addresses this by driving efficiencies through its innovative products and solutions that enable smoother buying and selling experiences. Making these journeys easier will lead to people changing their cars more often – a win for consumers, retailers and manufacturers alike. Start the journey on page 4 Auto Trader Group plc 01 Annual Report and Financial Statements 2018 Business at a glance Another year Change from 52-week to annual accounting period As the 2017 financial year was four days longer than the 2018 financial year, of growth year-on-year percentages for revenue, costs, profit, EPS and dividend per share have been adjusted throughout this report to reflect like-for-like growth. Operating and financial review page 28 Financial highlights 1 Revenue Average Revenue Operating profit Basic EPS Per Retailer (‘ARPR’) 2 +7% +£149 +10% +15% to £330.1m to £1,695 pcm to £220.6m to 17.76p per share 65% 67% Margin Margin 2017 2018 2017 2018 2017 2018 2017 2018 £311.4m £330.1m £1,546 £1,695 £203.1m £220.6m 15.64p 17.76p Cash generated from operations 3 Net external debt 4,5 Total dividend per share Cash returns to shareholders 6 +£13.2m -£16.3m 5.9p +£19.7m to £226.1m to £338.7m interim 1.9p plus final 4.0p to £148.4m 1.65x 1.46x Leverage Leverage 2017 2018 2017 2018 2017 2018 2017 2018 £212.9m £226.1m £355.0m £338.7m 5.2p 5.9p £128.7m £148.4m Operational highlights Average monthly cross Advert views per month 2,8 Live car stock 2,9 Number of retailer forecourts platform minutes 7,8 advertising on Auto Trader 2 +6% -0% +1% -1% to 618m to 246m to 453,000 to 13,213 (2017: 582m) (2017: 247m) (2017: 450,000) (2017: 13,296) 1 ‘2018’ references the year ended 31 March 2018 and 4 Net external debt is gross external indebtedness, 7 Cross platform minutes as measured by comScore the comparative ‘2017’ references the 369-day period less cash and cash equivalents. MMX Multi-Platform. ended 31 March 2017 unless otherwise stated. 5 Leverage is Net external debt as a multiple of Adjusted 8 Company measure of the number of inspections 2 Average number during the year. underlying EBITDA (earnings before interest, taxation, of individual vehicle advertisements on the UK 3 Cash generated from operations is defined as net depreciation and amortisation, share-based payments marketplace for both physical and virtual stock. cash generated from operating activities, before and associated NI). 9 Physical cars advertised on autotrader.co.uk. corporation tax paid. 6 Cash returns to shareholders comprise dividends paid and the cost of share buybacks (excluding transaction costs). 02 Auto Trader Group plc Annual Report and Financial Statements 2018 Strategic report / Governance / Financial statements We have maintained our market leading position, Chairman’s statement page 10 with consistent full page advert views and Chief Executive Officer’s statement page 11 increasing minutes spent on our marketplace. Our business model page 18 Profit growth has largely been converted into cash, which has been returned to shareholders in line Operating and financial review page 26 with our capital returns policy. Our revenue streams 6% 9% 85% Trade Consumer services Manufacturer Revenue from retailers, home Revenue from private sellers and Agency traders and logistics companies, who pay to place adverts on our Revenue from manufacturers utilising Auto Trader’s products marketplace and from our partners and their advertising agencies and marketplaces. who provide services to consumers. who advertise their brand or services on the marketplace. Revenue performance Revenue performance Revenue performance +8% -5% +10% to £281.2m to £29.8m to £19.1m (2017: £262.1m) (2017: £31.8m) (2017: £17.5m) Auto Trader Group plc 03 Annual Report and Financial Statements 2018 Unique journeys: consumers From desire, to research, to decision. Auto Trader makes the consumer journey easier The role we play for consumers: New and used car Vehicle Check Motoring services search listings We offer a free standard We offer consumers a variety Consumers can search from five point vehicle check of services to help them make an 453,000 1 used cars and 6,000 so consumers can quickly informed decision about the car virtual cars on the marketplace assess the provenance they are looking to buy. These each month. of a vehicle. include finance and insurance. Searching by Valuations Motoring advice monthly budget We provide free vehicle We feature over 48,000 expert valuations, offering both a and owner reviews, as well as With 52% of car buyers wanting private sale price as well as regularly updated editorial to search for their next car by a part-exchange price. and advice articles to help monthly price 2, we launched a consumers in their car buying new finance search tool which Price Indicator journey. We recently launched allows them to do just that. Over Powered by our valuations, a new series of expert reviews 8,000 retailers feature monthly these good, great or low price called ‘The REV Test’ which are price payments on their adverts. indicators give consumers full presented by expert female Dealer reviews price transparency so they can automotive journalists and are understand the price they aimed at helping both women and ratings are paying compared to the and men choose their next car Over 8,000 retailers feature in market value. based on a monthly budget or circa 470,000 reviews, helping lifestyle change. consumers make an informed Private sales and trusted decision about Consumers can list their who they want to buy from. vehicles for sale directly to other consumers. 1 Average physical cars advertised on autotrader.co.uk. 2 Auto Trader Market Report, March 2018. 04 Auto Trader Group plc Annual Report and Financial Statements 2018 Strategic report / Governance / Financial statements Greater choice Over 453,000 1 8,000 used cars and 6,000 retailers feature monthly price virtual new make/model payments on their adverts derivatives listed each month Auto Trader Group plc 05 Annual Report and Financial Statements 2018 Unique journeys: retailers Average retailer Average Revenue forecourts Per Retailer (pcm) 13,213 £1,695 06 Auto Trader Group plc Annual Report and Financial Statements 2018 Strategic report / Governance / Financial statements From marketing, to finance, to deal. Auto Trader makes the retailer journey easier The role we play for retailers: Classified advertising Finance solutions Valuations Retailer education Our core classified platform After gaining FCA authorisation, An improvement in the and insight reaches the UK’s largest we can now enable retailers underlying data that powers As well as providing every automotive audience. Our to display their own finance our valuations has allowed us retailer customer with monthly product packages enable calculator as standard on their to launch specification-adjusted performance dashboard retailers to compete effectively full page adverts on Auto Trader. valuations which power price analytics to help them assess on the marketplace. Our ‘starter’ This allows retailers to show indicators consumers see their performance on retailer package now includes their finance offerings much on the marketplace. Our Auto Trader, we also offer free products such as 100 images, earlier on in the car buying valuations also power our best practice events. In the Live Chat, Dealer Reviews and journey, therefore increasing the part-exchange tool. last year over 4,000 retailers the Part-Exchange Guide. We opportunity for them to sell their have attended a free webinar, offer progressively higher levels, own finance over a consumer Creating a trusted masterclass or conference giving retailers the opportunity sourcing finance from elsewhere. marketplace where our insight team have to pay for greater prominence We invest in technology and a shared the latest consumer and stand out in a search. Forecourt security team that is focused insights and best practice advice. management tools on creating a safe and secure Powered by both our own and marketplace. We remove third-party data, we offer data misleading adverts and also intelligence solutions (i-Control operate two-factor verification and Retail Check) enabling on our platforms to protect retailers to buy the right stock, our customers.