Auto Trader Regulatory News (AUTO)

AUTO TRADER GROUP PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

Auto Trader Group plc ('Auto Trader', 'the Group'), the UK's largest digital automotive marketplace, announces half year results for the six months ended 30 September 2021

Strategic overview

- We have achieved our highest ever six-monthly revenue and profits

- Consumer engagement and retailer numbers are at record levels, our competitive position has strengthened and product uptake by customers has been strong

- In April 2021, we launched our Retailer Stores product as part of our successful annual pricing event, these have seen strong traffic volumes throughout H1

- We implemented a new higher-level advertising package and a product that allows our retailers to reach car buyers outside their local area (Market Extension). Both have seen good levels of adoption, contributing to a record level of spending by our retailer customers (Average Revenue Per Retailer)

- Our strategic focus on supporting an increasingly online car buying journey continues to gather pace. Vehicles can be advertised nationally for local delivery (Market Extension and Motor Trade Delivery); car owners are able to get a guaranteed trade-in price (through Guaranteed Part-Exchange and Instant Offer); online reservations are being trialled with a small number of customers; and our online finance solution, offering finance collaboratively with car retailers (Retailer Finance), is scheduled for trial later this financial year

Financial results

- Revenue of £215.4 million up 82% (H1 2021: £118.2 million), and up 15% on H1 2020 (£186.7 million). Trade revenue of £192.3 million up 92% (H1 2021: £100.2 million) and up 19% on H1 2020 (£161.8 million). In H1 2021, we provided free advertising to retailer customers in April and May 2020, as well as at a discounted rate in June 2020

- Operating profit of £151.7 million up 121% (H1 2021: £68.5 million) and up 15% on H1 2020 (£131.4 million). Operating profit margin increased to 70%, up from 58% in H1 2021, and was consistent with H1 2020

- Basic EPS of 12.63p up 126% (H1 2021: 5.58p) and up 13% on H1 2020 (11.13p)

- Cash generated from operations up1 157% to £169.9 million (H1 2021: £66.1 million), and up 28% on H1 2020 (£132.7 million)

- £148.4 million returned to shareholders (H1 2021: Nil) through £100.4 million of share buy-backs and dividends paid of £48.0 million

- Interim dividend declared of 2.7p (H1 2021: no interim dividend declared)

Operational results

- Cross platform visits3,4 increased by 20% to 68.7 million per month on average (H1 2021: 57.3 million)

- Cross platform minutes3,4 increased by 14% to 633 million per month on average (H1 2021: 557 million). Our share of cross platform minutes3,5 remains strong at over 75% (H1 2021: over 75%) and we grew to be almost 9x larger than our nearest competitor (H1 2021: 7x)

- Continued growth in retailer forecourts3 from the end of FY21 due to both our strong position and favorable market conditions, up 6% to 13,892 (H1 2021: 13,056)

- Average Revenue Per Retailer3 (ARPR) per month of £2,199 up £993 (H1 2021: £1,206) and up 13% on H1 2020. Excluding COVID-19 discounts in the prior year, underlying ARPR increased by £353 per month, with good growth from all three ARPR levers

- Physical car stock3,6 on site down 9% to 436,000 (H1 2021 478,000) on average. Our listings product for new cars declined to 39,000 on average (H1 2021: 46,000). The remaining decline was due to stock offers in the prior year, where customers were able to advertise more cars than their contracted amounts without charge

- Number of employees (FTEs)3 increased to 941 on average during the period (H1 2021: 893) partly due to the acquisition of Auto Convert in July 2020

Cultural KPIs

- Employees that are proud to work at Auto Trader7 remained high at 92% (March 2021: 93%)

- Diverse teams and an inclusive culture are critical to attracting, identifying and maximising the potential of our people and therefore our business:

o Board: The proportion of women on the board continued to be 50% (March 2021: 50%). We announced the appointment of Jasvinder Gakhal as an Independent Non-Executive Director to the Board, with effect from 1 January 2022

o Leadership: The percentage of women leaders8 was 36% (March 2021: 34%), and those who are BAME9 were 5% (March 2021: 6%)

o Organisation: The percentage of employees who are women was at 39%10 (March 2021: 39%), and those who are BAME9,10 were 12% (March 2021: 11%)

- In June 2021, we signed up to the Science Based Target Initiative Business Ambition for 1.5°C. By doing so we have committed to achieving net zero before 2050 and to reduce emissions in line with the Paris Agreement goals. Our near term targets, which have been validated, are to halve carbon emissions before the end of 2030 and we continue to work on the initiatives to help us achieve our longer term targets

Nathan Coe, Chief Executive Officer of Auto Trader, said:

"Early in the pandemic we acted decisively to protect our people, customers, and business. As a result of these actions, we have emerged as a stronger business which can be seen in our results for the first half of this financial year.

"The number of people using Auto Trader to buy their next car is at record levels, more retailers are choosing to partner with us, and our competitive position has strengthened.

"This positions us well as we look to partner with retailers to bring more of the car buying journey online, which we believe will provide significant long term growth opportunities."

Outlook

The Board is confident for the second half of the year. The majority of revenues are recurring in nature and most of the significant growth events for the year have been successfully delivered in the first half. Notable events were our annual pricing event, the launch and initial uptake of new products, which have occurred alongside low levels of retailer churn.

For the full year, we now expect modest year on year growth in retailer forecourt numbers and low double-digit ARPR growth on FY20 levels. The stock lever, which shows the year on year movement, is likely to represent a small headwind for the full year, as we lap a strong second half last year.

Operating profit margins for the full year are expected to be in line with FY20 levels.

Analyst presentation

A presentation for analysts will be held at the offices of Numis at 9.30am, Thursday 11 November 2021. If you wish to attend, please contact Powerscourt on the details below. Alternatively, you can listen to the presentation via audio webcast at the following link:

Audio webcast: https://edge.media-server.com/mmc/p/uk4tziry

Conference call details:

Passcode: 4095590

Please note: Questions will only be taken from in the room at Numis. Participants on the conference call who plan on following the slides via the webcast should switch the webcast to Phone mode using the cogwheel icon located on the bottom right corner of the webcast screen to ensure the slides are synced to the phone audio rather than the webcast audio.

If you have any trouble registering or accessing either the conference call or webcast, please contact Powerscourt on the details below.

For media enquiries

Please contact the team at Powerscourt on +44 (0)20 7250 1446 or email autotrader@powerscourt-group.com 

About Auto Trader

Auto Trader Group plc is the UK and Ireland's largest digital automotive marketplace. Our marketplace sits at the heart of the vehicle buying process, with the largest number of car buyers and the largest choice of trusted stock. Auto Trader exists to grow both its car buying audience and core advertising business. It will change how the UK shops for cars by providing the best online car buying experience, enabling all retailers to sell online. We aim to build stronger partnerships with our customers, use our voice and influence to drive more environmentally friendly vehicle choices and create an inclusive and diverse culture. Auto Trader listed on the London Stock Exchange in March 2015 and is now a member of the FTSE 100 Index.

For more information, please visit https://plc.autotrader.co.uk/who-we-are/about-us/

Cautionary statement

Certain statements in this announcement constitute forward looking statements (including beliefs or opinions). "Forward looking statements" are sometimes identified by the use of forward-looking terminology, including the terms "believes", "estimates", "aims" "anticipates", "expects", "intends", "plans", "predicts", "may", "will", "could", "shall", "risk", "targets", forecasts", "should", "guidance", "continues", "assumes" or "positioned" or, in each case, their negative or other variations or comparable terminology. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company's future expectations, operations, financial performance, financial condition and business is a forward looking statement. Such forward looking statements are subject to known and unknown risks and uncertainties, because they relate to events that may or may not occur in the future, that may cause actual results to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this results announcement. As a result, you are cautioned not to place reliance on such forward looking statements, which are not guarantees of future performance and the actual results of operations, financial condition and liquidity, and the development of the industry in which the Group operates, may differ materially from those made in or suggested by the forward looking statements set out in this announcement. Except as is required by applicable laws and regulatory obligations, no undertaking is given to update the forward looking statements contained in this announcement, whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast. This announcement has been prepared for the Company's group as a whole and, therefore, gives greater emphasis to those matters which are significant to the Company and its subsidiary undertakings when viewed as a whole.

To the extent available, the industry and market data contained in this announcement has come from third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. In addition, certain industry and market data contained in this announcement come from the Company's own internal research and estimates based on the knowledge and experience of the Company's management in the market in which the Company operates. While the Company believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this announcement.

Summary financial performance

1. Cash generated from operations is defined as net cash generated from operating activities, before corporation tax paid.

2. Net bank debt/(cash) is Net debt before amortised debt fees and excluding accrued interest and amounts owed under lease arrangements.

3. Average during the period.

4. Measured by Google analytics.

5. Share of minutes is a custom metric based on Comscore minutes and is calculated by dividing Auto Trader's total minutes volume by the entire custom-defined competitive set's total minutes volume. The custom-defined list includes: Auto Trader, Gumtree motors, Pistonheads, Motors.co.uk & CarGurus.

6. Physical car stock advertised on autotrader.co.uk.

7. Based on a survey to all Auto Trader employees in October 2021 asking our people to rate the statement "I am proud to work for Auto Trader?". Answers are given on a five-point scale from strongly disagree to strongly agree.

8. We define leaders as those who are on our Operational Leadership Team ('OLT'), three divisional leaders and their direct reports.

9. Throughout 2021 we have asked our employees to voluntarily disclose their ethnicity, at the period end we had 141 employees (14%) who had not yet disclosed.

10. We calculate all our diversity percentages using total group headcount (September 2021: 980, March 2021: 953) as at 30th September. 

Summary of operating performance in H1 2022

Revenue grew by 82% to £215.4 million (H1 2021: £118.2 million). The abnormally high rate of growth principally reflects the COVID-related discounts we gave to our retailer customers during the first wave of the pandemic early in calendar year 2020. A better comparison is that of two years ago, against which revenue grew by 15% (H1 2020: £186.7 million), with a greater number of customers using Auto Trader and choosing to spend more on our platform. Operating profit grew 121% to £151.7 million (H1 2021: £68.5 million), again with a better comparison being H1 2020 where growth was 15% (H1 2020: £131.4 million). Operating profit margin grew to 70% (H1 2021: 58%) and was consistent with the level seen in H1 2020.

Our audience performance has strengthened with average monthly cross platform visits increasing by 20% to 68.7 million per month (H1 2021: 57.3 million). Engagement, which we measure by total minutes spent on site, was also strong with an increase of 14% to an average of 633 million minutes per month (H1 2021: 557 million minutes). We have maintained our position as the UK's largest and most engaged automotive marketplace for new and used cars, with over 75% of all minutes spent on automotive classified sites spent on Auto Trader (H1 2021: over 75%) and grew to be almost 9x larger than our nearest competitor (H1 2021: 7x).

The average number of retailer forecourts advertising on our platform increased by 6% to 13,892 (H1 2021: 13,056). The increase in the number of forecourts was due to lower levels of cancellation, partly due to favourable market conditions and the current strength of our position and standing with customers. Levels of new customer acquisition were largely consistent with prior periods.

Total live stock on site decreased by 9% to an average of 436,000 cars (H1 2021: 478,000). Part of the decline was due to a fall in the volume of new car stock, which averaged 39,000 (H1 2021: 46,000) due to the well documented shortage of new car supply. Used car stock was also impacted by supply shortages, particularly amongst our larger, lower yielding customers. Despite this supply pressure, the year on year decline in used car live stock was due to a stock offer in the previous year, where customers could advertise more than their contracted amounts without charge, which wasn't repeated this year.

The UK car market

As the UK emerged from the most recent national lockdown in June 2021, demand for both new and used cars has been particularly strong. This demand has been fuelled by a catch up in transactions that didn't happen in 2020 due to COVID-related lockdowns, increased consumer interest in car ownership and good levels of consumer confidence. These factors, combined with limited supply, give us confidence that favourable market conditions are likely to remain for some time to come.

New car registrations, whilst seeing year on year growth of 17% versus H1 2021, were still 23% below H1 2020 levels as semi-conductor shortages impacted the supply of new cars. These constraints have also impacted used cars, particularly for our larger customers, as lower new car sales have meant fewer part-exchanges and a lower volume of cars sent to auction from wholesalers. High levels of demand combined with constrained supply have led to significant levels of price growth, with our used car price index seeing an 11% year on year increase in prices across the period.

Despite these unusual conditions most of our customers have been able to trade profitably, with some customers at record levels, making significantly more profit per vehicle and selling those vehicles significantly faster. In the medium to long term the financial health of our customers is clearly important, however short-term these conditions have been less favourable for Auto Trader given the direct impact on our business model of fewer cars being advertised for less time.

Our core marketplace

In April 2021, we successfully executed our annual pricing event including the launch of Retailer Stores, which offers retailers their own dedicated, customisable location on Auto Trader. We have seen over 28m visits to these pages in H1 2022. As we build our digital retailing journey, we envisage these becoming an area that customers can use as part of their own e-commerce journey.

In the first half, we have evolved our advertising package structure and changed the sort order for listings. Our packages previously promoted adverts depending on the device a consumer was searching on, we have now created a consistent cross platform experience with adverts appearing in search based on a relevancy algorithm, which takes package level into account. As part of this change, we have discontinued our Basic package, introduced a higher level and re-branded our top three levels Enhanced, Super and Ultra. We have increased the penetration of our higher yielding packages with 25% of retailer stock on a package above Standard in September 2021 (September 2020: 22%). We also launched a new product, Market Extension, that allows customers to sell vehicles outside their local area, which has seen some initial uptake from our larger Independent customers, exiting the period with over 4% of retailer stock on this product. Whilst the supply and demand dynamics during the past six months have not been the best catalyst for upselling, we have nonetheless seen customers continue to invest further in our prominence products.

Our new car proposition has been impacted by supply shortages created by the challenge sourcing semi-conductors. This has seen the number of new cars advertised decrease to 39,000 (H1 2021: 46,000). However due to our "all you can eat" charging model we have not seen this directly impact revenue and the number of paying dealers ended the half at c.2,100 (H1 2021: over 1,500). Despite lower stock levels, awareness that Auto Trader is a destination for new cars continues to grow with 1.5m unique visitors viewing a new car on average each month across the period.

Investing in the future

We remain committed to being the best place to find, buy and sell a car in the UK on a platform that enables data-driven digital retailing for our customers. This involves changing how the UK shops for cars by providing the best online car buying experience and enabling all retailers to sell online. With this goal in mind, we continue to make good progress in developing the most important components of the online car buying journey, all built on our trusted, industry leading marketplace.

In the last six months, we have improved our offering for consumers who want to conveniently sell their car for cash through our Instant Offer product and connected it with our Guaranteed Part-Exchange ('GPX') product. Customers who subscribe to GPX have access to our B2B auction platform, Dealer Auction, where the vehicles acquired through Instant Offer are sold to dealers. The ability to source more stock from consumers is a key differentiator for online car retailers and this innovation enables our customers the same benefit by leveraging Auto Trader's brand and technology. These products enable consumers to get an accurate and guaranteed price for their existing vehicle whilst shopping on Auto Trader, eliminating either the need to haggle over a part-exchange or look for other disposal routes for their current vehicle. Over the past six months, we have provided c.520,000 guaranteed valuations and purchased c.5,000 vehicles on Instant Offer. At the reporting date we had c.500 customers using GPX, with 20% of them paying for the product.

Having last year acquired AutoConvert, a finance, insurance and compliance software platform, we continue to work towards having both a point-of-sale finance system and a finance application journey live on Auto Trader. We expect to have both products live and in trial during the second half of this financial year. This is by some distance the most complex product we have ever built and we expect it to continuously evolve and form a key component of facilitating an online transaction. Currently, the existing finance process is somewhat opaque and can be a time-consuming experience when completed on the forecourt. These products aim to improve that process by driving greater transparency and self-service for consumers, as well as realising improved efficiencies for our retailers.

As mentioned at our full year results, we have launched a trial for vehicle reservations during the first half, completing over 100 successful transactions and will continue to make progress building on that functionality to make the product scalable. We believe the willingness of consumers to complete more of the car buying process online has meaningfully changed. Having the three critical components of GPX, reservations and finance, either live or close to being live, our focus is now on optimising these products, adapting them for larger customers and bringing them together into an end to end journey on Auto Trader that compliments the forecourt experience.

Making a difference

Within our overall strategy we aim to 'make a difference' to our people, our communities, our industry, and to the wider environment, whilst holding ourselves to the highest standards when it comes to acting responsibly. We have a Corporate Responsibility Committee with oversight for Auto Trader's focus on the environmental, social and governance aspects of our business. Over the past 12 months we have identified focus areas around which we have created initiatives. These are monitored regularly and reported on using our cultural KPIs. While many of these changes take time, we are committed to making meaningful progress across all measures.

We want to continue to improve the diversity and inclusion within our organisation as we believe this improves individual and team performance and will allow us to identify and attract talent that we may not otherwise access. We are making progress, but there remains significant room for improvement. We are pleased to have a 50:50 gender parity on the Board and have announced the appointment of Jasvinder Gakhal as an Independent Non-Executive Director, with effect from 1 January 2022. Women represented 39% of our organisation (March 2021: 39%) and in leadership roles, as defined by Hampton-Alexander, there was some improvement to 36% (March 2021: 34%). We are committed to increasing the percentage of BAME employees, who currently represent 12% of the organisation (March 2021: 11%), with 14% of employees not disclosing their ethnicity. The percentage of BAME employees in leadership, again using the Hampton-Alexander definition, was 5% (March 2021: 6%). Much of our work around creating an inclusive culture and environment has been supported and informed by our many employee networks and guilds representing women, BAME, LGBT+, disability & neurodiversity and age.

The UK government has a target to become net zero by 2050 and Auto Trader has a role to play in reaching this goal. There are two strands to our commitments around the environment which include working towards achieving net zero carbon emissions and supporting consumers in making more sustainable vehicle choices.

In June 2021, we signed up to the Science Based Target initiative (SBTi) Business Ambition for 1.5°C. By doing so, we have committed to achieving net zero before 2050 and to reduce emissions in line with the Paris Agreement goals. We have built on the work we completed in the last financial year to understand our full Scope 3 emissions, in addition to our Scope 1 and 2 emissions, such that we can form science-based emission reduction targets. These near term targets, which have been validated, form a core component of our net zero strategy. We have committed to reduce absolute scope 1 and 2 emissions by 50% and absolute Scope 3 emissions by 46% before the end of financial year 2031, using financial year 2020 as the base year. Alongside the reduction in emissions, we are working on a carbon removal plan to help us achieve our long term net zero goal. In terms of helping consumers make more sustainable vehicle choices we have engaged 1.2 million consumers in our monthly EV giveaway campaign, launched an electric car hub on Auto Trader and have been educating both employees and customers with our carbon literacy training.

As lockdown restrictions began to ease in the UK at the beginning of the financial year, we decided to adapt our working policies to reflect the way in which we will work in future. Our people have been able to better balance their work and home life and we aim to see our employees retain some of these benefits as we transition back to a hybrid working environment. Employee engagement remains high, with 92% of employees who say they are proud to work at Auto Trader (March 2021: 93%).

The Board

In September, we announced the appointment of Jasvinder Gakhal to the Board as an Independent Non-Executive Director, with effect from 1 January 2022. Following Jasvinder's appointment, the Board will comprise five Independent Non-Executive Directors, three Executive Directors and a Non-Executive Chairman.

Investor calendar

The Group's full year results for the year ending 31 March 2022 will be announced on 26 May 2022.

Financial review

Revenue increased to £215.4m (H1 2021: £118.2m), up 82% when compared to the prior year. Trade revenue, which comprises revenue from Retailers, Home Traders and other smaller revenue streams, increased by 92% to £192.3m (H1 2021: £100.2m).

Retailer revenue increased by 94% to £183.3m (H1 2021: £94.5m). Revenue in H1 2021 was impacted by a 100% discount for retailers in April 2020 and May 2020 as we supported customers who were required to close their forecourts due to COVID-19. This was followed by a 25% discount for customers in June 2020 as initial restrictions were lifted. There have been no discounts in relation to COVID-19 in H1 2022.

The average number of retailer forecourts advertising on our platform increased 6% to 13,892 (H1 2021: 13,056), with lower cancellations in the period. Average Revenue Per Retailer ('ARPR') increased by 82% to £2,199 (H1 2021: £1,206). Much of the increase came from COVID related discounts which were offered to customers in the prior year and due to their absence in 2022 contributed £640 of growth. Taking account of those discounts there was an underlying increase in ARPR of £353 which was spread across our price, stock and product levers:

· Price: Our price lever contributed an increase of £74 (H1 2021: £49) to total ARPR as we delivered our annual pricing event for all customers on 1 April 2021, which included additional products but also a like-for-like price increase.

· Stock: The number of live cars advertised on Auto Trader decreased by 9% to 436,000 (H1 2021 478,000). It is important to note though that the stock lever is not driven by live stock but by the number of paid stock units. Last year live stock was impacted by a stock offer which allowed customers to double their stock for free from late March to mid-July 2020, which did not impact paid for stock. We saw the full conversion of that stock offer in September 2020, which was followed by strong growth in paid for stock units throughout H2 2021, meaning we entered this financial year with a very strong run rate. Whilst we have seen some downgrades in paid stock during the first half, as a result of faster stock turn and limited supply, much has come from our larger Franchise customers who generally have a lower cost per car and overall paid for stock units have averaged above prior year levels. These dynamics resulted in a £160 increase in the stock lever (H1 2021: decline of £156). There have been no stock offers in H1 2022.

· Product: Our product lever contributed an increase of £119 (H1 2021: £57) to total ARPR. Part of this product growth was as a result of seeing an increase in retailers purchasing prominence products including our higher yielding Enhanced, Super and Ultra packages with penetration increasing to 25% (September 2020 (Advanced and Premium): 22%). We also introduced a new Market Extension product, allowing retailers to sell outside of their local area, which also contributed to the product lever with 4% of retailer stock on the product by the end of the period. There was also some contribution from our Retailer Stores product, which was launched in April 2021 as part of our pricing event. Finally, there was a positive contribution from our New Car product, with c.2,100 Franchise retailers paying for the product (September 2020: over 1,500 retailers).

Home Trader revenue increased by 67% to £4.5m (H1 2021: £2.7m). Other revenue increased by 50% to £4.5m (H1 2021: £3.0m).

Consumer Services revenue increased by 40% in the period to £18.0m (H1 2021: £12.9m) and we now expect 10-20% growth versus FY21 for the full year. Private revenue, which is generated from individual sellers who pay to advertise their vehicle on the Auto Trader marketplace, increased by 33% to £11.0m (H1 2021: £8.3m) with a further increase in Motoring Services revenue, up 52% to £7.0m (H1 2021: £4.6m) as a result of strong growth in both our insurance and finance offerings.

Revenue from Manufacturer & Agency customers was flat at £5.1m (H1 2021: £5.1m). The pandemic had a significant impact on this revenue line in H1 2021, as did the removal of standard format display advertising to improve our onsite experience. New car advertising in H1 2022 has been impacted by semi-conductor supply issues, with Manufacturers lowering their marketing spend until there is more clarity on the supply of new cars into the market. We expect full year revenue to be in line with FY21.

Costs

In H1 2021, the Group made the decision to reduce costs, mainly through discretionary marketing spend, whilst our retailer customers were closed in the first quarter of 2021. With a return to more normal levels in 2022, total costs increased by 29% to £65.4m (H1 2021: £50.8m), which was a 15% increase versus H1 2020.

People costs, which comprise all staff costs and third-party contractor costs, increased by 16% to £35.0m (H1 2021: £30.2m). The increase in people costs was primarily driven by an increase in the average number of full-time equivalent employees (including contractors) to 941 (H1 2021: 893). This increase was partly driven by the acquisition of AutoConvert in July 2020 accounting for an increase of 18. The average cost per employee increased by 10% due to an increase in performance related pay and as a result of the Executive Directors and the Board foregoing 50% or more of their salary and fees for the period of April to June 2020, as well as annual pay reviews resuming in July 2021 having not occurred last financial year. Underlying salary costs continue to increase as we invest in the best digital talent.

Marketing spend increased by 203% in H1 2022 to £10.6m (H1 2021: £3.5m) as discretionary spend was reduced in response to the pandemic in H1 2021 but has since resumed. However, as a percentage of revenue at 4.9%, it remains below the 5.4% seen in H1 2020.

Other costs, which include data services, property related costs and other overheads, increased by 16% to £16.2m (H1 2021: £14.0m). The increase was primarily due to increased overhead costs; including the return of travel, office & people related costs, as well as higher IT spend as we continue to move more of our services and applications to the cloud. Depreciation and amortisation increased to £3.6m (H1 2021: £3.1m) mainly driven by office improvements and an additional office lease.

Profit from the share in joint ventures

Our share of profit generated by Dealer Auction, the Group's joint venture, increased 55% to £1.7m (H1 2021: £1.1m) in the period as a result of higher auction activity following a reduction through H1 2021 due to lockdown restrictions.

Operating profit

During the period, Operating profit increased by 121% to £151.7m (H1 2021: £68.5m). Operating profit margin increased by twelve percentage points to 70% (H1 2021: 58%) and is back in line with H1 2020 levels.

Net finance costs

Net finance costs decreased to £1.7m (H1 2021: £2.3m). Interest costs on the Group's RCF totalled £0.9m (H1 2021: £2.0m), with a reduction in interest payable being offset by higher amortised debt issue costs. At 30 September 2021 the Group had drawn £nil of its available facility (30 September 2020: £89.5m). Amortisation of debt issue costs amounted to £0.8m (H1 2021: £0.3m) with the increase driven by an acceleration of amortisation following the reduction of the Syndicated Revolving Credit Facility ('RCF') commitments as referenced below. Interest costs relating to leases totalled £0.1m (H1 2021: £0.1m). This was offset by interest receivable on cash and cash equivalents of £0.1m (H1 2021: £0.1m).

Reduction of RCF commitments

With effect from 24 September 2021, the Company reduced the total commitments of the Syndicated Revolving Credit Facility ('RCF') by £150m from £400m to £250m. The facility will terminate in two tranches: £52.2m will mature in June 2023 and £197.8m will mature in June 2025. Additionally, there was an amendment to the Senior Facilities Agreement to reflect the discontinuation of LIBOR and the transition to SONIA (in respect of sterling loans); Loan Market Association updates; and to include the effect of IFRS 16 for the purposes of calculating financial covenants. There is no requirement to settle all, or part, of the debt earlier than the termination dates stated.

Taxation

Profit before taxation increased by 127% to £150.0m (H1 2021: £66.2m). The Group tax charge of £28.3m (H1 2021: £12.4m) represents an effective tax rate of 18.9% (H1 2021: 18.7%) in line with the average standard UK rate.

Earnings per share

Basic earnings per share increased by 126% to 12.63 pence (H1 2021 5.58 pence) based on a weighted average number of ordinary shares in issue of 963,162,476 (H1 2021: 964,532,317). Diluted earnings per share of 12.61 pence (H1 2021: 5.55 pence) increased by 127%, based on 965,070,560 shares (H1 2021: 969,927,775) which takes into account the dilutive impact of outstanding share awards.

Cash flow

Cash generated from operations increased to £169.9m (H1 2021: £66.1m) as a result of the growth in Operating profit. Corporation tax payments increased to £27.8m (H1 2021: £18.0m). Cash generated from operating activities was £142.1m (H1 2021: £48.1m).

Capital structure and dividends

The final dividend for the year ended 31 March 2021 of 5.0 pence per share (H1 2021: £nil) was paid on 24 September 2021, totaling £48.0m (H1 2021: £nil). The Board resumed its share-buyback programme in July 2021 following the suspension of share-buybacks in response to the COVID-19 outbreak. During the period, a total of 15.8m shares were repurchased in the period (H1 2021: nil). The average price per share was 636.1p (H1 2021: £nil) for a total consideration of £100.4m (H1 2021: £nil) before transaction costs of £0.5m (H1 2021: £nil). 

The Group's long-term capital allocation policy remains broadly unchanged: continuing to invest in the business enabling it to grow while returning around one third of net income to shareholders in the form of dividends. Any surplus cash following these activities will be used to continue our share buyback programme.

For H1 2022, the Board has declared an interim dividend of 2.7 pence per share. The interim dividend will be paid on 28 January 2022 to members on the register on 7 January 2022.

Going concern

The Group generated significant cash from operations during the period. At 30 September 2021 the Group had drawn £nil of its £250m (previously £400m) unsecured revolving credit facility ('RCF') and had cash balances of £9m. The £250m RCF is committed until June 2023, when it reduces to £197.8m through to maturity in June 2025. On the basis of facilities available and current financial projections for the next twelve months, the Directors have concluded that it is appropriate to prepare the condensed interim financial statements on a going concern basis.  

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as issued by the IASB and adopted for use in the UK;

· the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Consolidated interim income statement

For the six months ended 30 September 2021

Consolidated interim statement of comprehensive income

For the six months ended 30 September 2021

Consolidated interim balance sheet

As at 30 September 2021

Consolidated interim statement of changes in shareholders' equity

For the six months ended 30 September 2021

Consolidated interim statement of cash flows

For the six months ended 30 September 2021

Notes to the Condensed Consolidated interim financial statements

1 General information

Auto Trader Group plc ('the Company') is a company incorporated in the United Kingdom and its registered office is 4th Floor, 1 Tony Wilson Place, Manchester, M15 4FN.

These condensed consolidated interim financial statements have been prepared as at, and for the six months ended, 30 September 2021. The comparative financial information presented has been prepared as at, and for the six months ended, 30 September 2020.

The condensed consolidated interim financial information presented as at, and for the six months ended, 30 September 2021 comprise the Company and its subsidiaries (together referred to as the Group). The consolidated financial statements of the Group as at, and for the year ended, 31 March 2021 are available on request from the Company's registered office and via the Company's website.

These condensed consolidated interim financial statements are unaudited but have been reviewed by the Auditor whose report is set out on page 35. They have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" issued by the IASB and adopted for use in the UK. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2021 which were prepared in accordance with international Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

The comparative financial information for the year ended 31 March 2021 included in this interim statement of results does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 (the 'Act'). The statutory accounts for the year ended 31 March 2021 have been reported on by the Company's Auditor and were delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditor's report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Act.

Judgements and estimates

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2021.

Going concern 

The Group generated significant cash from operations during the period. At 30 September 2021 the Group had nil drawn of its £250m unsecured revolving credit facility ('RCF') and had cash balances of £9m. The £250m Revolving Credit Facility ('RCF') is committed until June 2023, when it reduces to £197.8m through to maturity in June 2025.

In making their assessment of going concern, the Directors reviewed financial projections for a period of 12 months from the date of this report. Stress cases were modelled to take into account severe but plausible scenarios including impacts of COVID-19. The results of stress testing demonstrated that the combination of significant free cash flow, existing cash resources and the discretionary nature of dividend payments and share buybacks were sufficient for the Group to withstand such impacts and continue to comply with the RCF's financial covenants with significant headroom. For these reasons, the Directors continue to adopt the going concern basis in preparing these financial statements. 

Changes in accounting policies

The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 March 2021. Taxes on income in the interim periods are accrued using the effective tax rate that would be applicable to expected total annual profit or loss.

2 Segmental information

IFRS 8 'Operating segments' requires the Group to determine its operating segments based on information which is provided internally. Based on the internal reporting information and management structures within the Group in the period, it has been determined that there is only one operating segment being the Group, as the information reported includes operating results at a consolidated Group level only. This reflects the nature of the business, where the major cost is to support the IT platforms upon which all of the Group's customers are serviced. These costs are borne centrally and are not attributable to any specific customer type or revenue stream. There is also considered to be only one reportable segment, which is the Group, the results of which are shown in the Consolidated income statement. This assessment was determined at 31 March 2021 and is a change from the H1 2021 where Auto Trader, Webzone, KeeResources and AutoConvert were reported as separate Operating segments. The Group has restated the corresponding items for the prior six-month period.

Management has determined that there is one operating and reporting segment based on the reports reviewed by the Operational Leadership Team ('OLT') which is the chief operating decision-maker ('CODM'). The OLT is made up of the Executive Directors and Key Management and is responsible for the strategic decision-making of the Group.

The OLT primarily uses the statutory measures of Revenue and Operating profit to assess the performance of the one operating segment. To assist in the analysis of the Group's revenue-generating trends, the OLT reviews revenue at a disaggregated level as detailed within note 3. The revenue from external parties reported to the OLT is measured in a manner consistent with that in the income statement.

A reconciliation of the one segment's Operating profit to Profit before tax is shown below.

Group adjustments which are borne centrally and are not attributable to any specific operating segment include finance costs on the Group's RCF, share of profit from joint ventures, the elimination of transactions and consolidation adjustments. Consolidation adjustments include the amortisation of intangible assets recognised under IFRS 3 business combinations.

3 Revenue

In the following table the Group's revenue is disaggregated by customer type. This level of disaggregation is consistent with that used by the OLT to assist in the analysis of the Group's revenue-generating trends.

4 Net finance costs

5 Income taxes

The taxation charge for the period is based on the standard rate of UK corporation tax for the period of 19% (March 2021: 19%). The taxation charge recognised is based on management's best estimate of the effective tax rate for the full year of 18.9% (September 2020: 18.7%) applied to the profit before taxation of the interim period.

6 Earnings per share

The difference between the basic and diluted weighted average number of shares represents the dilutive impact of the Share Incentive Plan, Performance Share Plan, Deferred Annual Bonus, Single Incentive Plan Award and the Sharesave scheme. Shares issued to satisfy the Share Incentive Plan were purchased by the Employee Share Option Trust ('ESOT').

6 Earnings per share

The number of shares in issue at the start of the year is reconciled to the basic and diluted weighted average number of shares below:

The average market value for the Group's shares for the purposes of calculating the dilutive effect of share-based incentives was based on quoted market prices for the period during which the share-based incentives were outstanding.

7 Intangible assets

8 Leases and property, plant and equipment

The Group has right-of-use assets which comprise of property and motor vehicles which are held within property, plant and equipment. Information about leases for which the Group is a lessee is presented below.

9 Trade and other receivables

10 Trade and other payables

11 Retirement benefit obligations

Across the UK and Ireland the Group operates several pension schemes. All except one are defined contribution schemes.

Defined contribution scheme

In the period the pension contributions to the Group's defined contribution scheme amounted to £1.6m (September 2020: £1.1m; March 2021: £2.3m). At 30 September 2021, there were £0.5m (September 2020: £0.3m; March 2021: £0.4m) of pension contributions outstanding relating to the Group's defined contribution scheme.

Defined benefit scheme

The defined benefit pension scheme provides benefits based on final pensionable pay and this scheme was closed to new joiners with effect from May 2002. New employees after that date have been offered membership of the Group's defined contribution scheme.

The most recent actuarial valuation of the defined benefit obligations was performed as at 30 September 2021 by a qualified independent actuary. The amounts recognised in the balance sheet are determined as follows:

During the year ending 31 March 2020, the Trustees of the Scheme sought legal advice which concluded that the Company has an unconditional right to a refund of surplus from the Scheme, if the Scheme were to be run-off until the final beneficiary died. As a result, the Group has concluded that IFRIC14 does not apply, and therefore has recognised the accounting surplus of £4.4m and an associated deferred tax liability of £1.5m in the Consolidated balance sheet.

 The amounts charged to the Consolidated income statement are set out below:

The amounts recognised in the statement of other comprehensive income are as follows:

Movements during the period in the post-employment defined benefit obligations are set out as below:

12 Dividends

Dividends declared and paid in the period were as follows:

An interim dividend of 2.7p per share for the six months to September 2021 (September 2020: nil) has been declared by the Directors', totaling £25.7m (September 2020: £nil) based on the number of shares eligible for the distribution as at 30 September 2021. The interim dividend is payable on 28 January 2022 to shareholders on the register at the close of business on 7 January 2022. No provision has been made for the interim dividend and there are no income tax consequences.

 13 Cash generated from operations

14 Borrowings

The Syndicated revolving credit facility is repayable as follows:

The carrying amounts of borrowings approximate their fair values.

Syndicated revolving credit facility

With effect from 24 September 2021 the Group entered into an Amendment and Restatement Agreement to amend and restate the original Senior Facilities Agreement. The primary purpose of the Amended and Restated Senior Facilities Agreement is to incorporate LIBOR transition language to reflect the discontinuation of LIBOR and the transition to SONIA (in respect of sterling loans); Loan Market Association updates; and to include the effect of IFRS 16 for the purposes of calculating financial covenants.

The Group continues to be highly cash generative and remains in a net cash position, such that the size of the original £400m facility is not required. Therefore, the Group served notice to cancel £150m of the £400m total commitments under the Senior Facilities Agreement, such cancellation being pro-rated between the lenders. The Amended and Restated Senior Facilities Agreement incorporates the reduced total commitments of £250m.

The Group has access to an unsecured Syndicated revolving credit facility (the 'Syndicated RCF'). Associated debt transaction costs total £4.3m, with £3.3m being incurred at initiation and £1.0m of additional costs associated with extension requests. The Group has extended the termination date of the Syndicated RCF by two years and it will terminate in two tranches as follows:

• £52.2m will mature at the original termination date of June 2023; and

• £197.8m will mature in June 2025.

Individual tranches are drawn down, in sterling, for periods of up to six months at the compounded reference rate (being the aggregate of SONIA and the applicable baseline credit adjustment spread for that interest period) plus a margin of between 1.2% and 2.1% depending on the consolidated leverage ratio of the Group. A commitment fee of 35% of the margin applicable to the Syndicated RCF is payable quarterly in arrears on unutilised amounts of the total facility.

The Syndicated RCF has financial covenants linked to interest cover and the consolidated debt cover of the Group:

• Net bank Debt to Consolidated EBITDA must not exceed 3.5:1.

• EBITDA to Net Interest Payable must not be less than 3.0:1.

EBITDA is defined as earnings before interest, taxation, depreciation and amortisation, share-based payments and associated NI, share of profit from joint ventures and exceptional items.

All financial covenants of the facility have been complied with through the period.

15 Share capital

During the period, 13.1m shares were purchased for cancellation (September 2020: nil; March 2021: nil) and 2.7m shares were purchased for treasury (September 2020: nil; March 2021: nil). The average price per share was 636.1p (H1 2021: £nil) for a total consideration of £100.4m (H1 2021: £nil) before transaction costs of £0.5m (H1 2021: £nil).

Included within shares in issue at 30 September 2021 are 365,068 (September 2020: 445,319; March 2021: 404,653) shares held by the ESOT and 4,125,530 (September 2020: 2,930,542; March 2021: 2,422,659) shares held in treasury, as detailed in note 16.

16 Own shares held

17 Share-based payments

The Group currently operates five share plans: the Share Incentive Plan, Performance Share Plan, Deferred Annual Bonus, Single Incentive Plan Award and the Sharesave scheme.

All share-based incentives are subject to a service condition. Such conditions are not taken into account in the fair value of the service received. The fair value of services received in return for share-based incentives is measured by reference to the fair value of share-based incentives granted. Black-Scholes and Monte Carlo models have been used where appropriate to calculate the fair value of share-based incentives with market conditions.

The total charge in the period relating to the five schemes was £3.9m (September 2020: £2.6m; March 2021: £4.3m). This included associated national insurance ('NI') at the rate at which management expects to be effective when the awards are exercised (13.8% up until April 2022 and 15.05% thereafter), and apprenticeship levy at 0.5%, based on the share price at the reporting date.