Auto Trader still motoring despite ‘fly in the ointment’ Autorama losses
Auto Trader saw group operating profits dip 9 per cent this morning, down from £303.6m to £277.6m in its full year results, but saw a spike in sales of 16 per cent on the back of strong demand.
The car trader saw revenues up 9 per cent, and said it had resisted a tough economic backdrop and vehicle supply issues largely caused by the global semiconductor shortage.
The group also announced the appointment of a new chair Matt Davies, the former CEO of Tesco UK & Ireland and Pets at Home, who will replace Ed Williams.
Nathan Coe, Chief Executive Officer of Auto Trader, 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.”
Looking ahead, the car retailer maintained its growth expectations for the year ahead on the back of strong retailer revenue growth, although it warned that “other revenue areas within the main Auto Trader business are likely to perform within a range of flat to low single digit growth.”
The group said it anticipates growing its share in the car leasing markets this year, following the £200m acquisition of Autorama in March 2022, one of the UK’s largest digital leasing markets. That branch of the business is operating at a significant loss, the results indicated.
Coe said: “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.”
Auto Trader has performed strongly over the last year, bouncing back from the pandemic amid a backdrop of economic difficulty and supply chain shortages in the automotive sector.
Analysts gave the results a guarded welcome.
“Auto Trader’s core marketplace has once again enjoyed an excellent year, delivering double-digit profit growth even against the backdrop of supply chain challenges in both the used and new car market,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.
“The only fly in the ointment is the losses at Autorama, the recently acquired vehicle leasing business. This business is making annualised operating losses of £15m. Shareholders will want to see that loss significantly reduce in the year ahead,” he added.
Russ Mould, investment director at AJ Bell, said “despite car listings dropping amid a shortage of new cars, online vehicle marketplace Auto Trader’s profit is still accelerating as it squeezes more out of its client base.”
“As well as increasing prices, the company is also upselling customers to subscribe for new products and services.
He added: “Its ability to do so is impressive but you feel there will come a point at which it squeezes clients too much and subscriptions start to drop off. Auto Trader’s job is to work out where that breaking point lies.”
In November, Auto Trader saw revenues jump on the back of a “booming marketplace.”