Shares in Manchester-headquartered Auto Trader have dropped heavily following the release of its latest financial results despite reporting a positive outlook for the UK automotive market.
The online automotive marketplace, widely considered one of the North’s tech success stories, said the UK’s new car market grew by 3% over the past year mainly driven by growth in fleet vehicle sales. Retail sales, however, slipped 4% year-on-year, prompting Auto Trader’s share price to fall by as much as 14% in early Thursday trading.
Despite the initial market reaction, the company reported strong underlying performance in the used car segment, with 4% more used cars sold compared to the previous year. Used car prices have remained “stable” over the last 12 months, following a period of volatility.
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Revenue for the year to 31 March was up 5% to £601.1 million, while operating profits rose 8% to £376.8 million. Consumers made a record 81.6 million visits to Auto Trader’s platforms, and vehicle listings averaged 449,000 per month.
Chief Executive Nathan Coe said: “Despite broader macroeconomic uncertainties, the UK car market is in good health and we continue to deliver against our strategy to improve car buying and retailing.”
On tariff concerns he said that while increased trade friction could raise prices across the board, higher import levies could see more cars coming into the UK.
He said: “Depending on where they all (tariffs) settle, you might all find new car prices are slightly higher on a like-for-like basis. If you look at last year, the number of new cars sold to consumers (in the UK) actually fell and was very low by historical standards.
“So I think the UK becomes potentially a more attractive market, given all the trade wars. It has got a good market, it does buy a lot of cars.
“If it’s more expensive to export those cars to other countries, it could well be the UK is a place where we find a few more new cars coming this way.”
Auto Trader also unveiled progress on its AI-powered product suite, Co-Driver, which aims to speed up search and listing processes. “The first wave of Co-Driver products has already successfully enhanced the quality of adverts, while reducing the amount of time it takes for retailers to advertise their vehicles,” Coe added. “We see significant potential for the use of AI to improve the buying and selling of cars in the years ahead.”
Commenting on Auto Trader’s Full Year Results, Julie Palmer, Partner at Begbies Traynor, said: “Auto Trader is motoring forward, having reported a solid uptick in revenues and profits over last year, despite the challenging economic backdrop. Its core business is performing well and it has not been impacted too heavily by the introduction of the UK Digital Services Tax charge.
“However, while Auto Trader continues to dominate the online automotive marketplace, it has to be careful not to stall when it comes to trader relations. Smaller, independent garages have voiced concerns online and the platform will be keen to keep these key stakeholders on-side, performing a customer services task, if it is to continue driving forward.
“There is little chance of Auto Trader veering off course though in the near-term, with it racking up again a record number of minutes spent on its website. Demand in the used cars market remains as strong as ever and, if it continues to invest in AI-enabled technologies, it looks set to stay in pole position for a while yet.”
Analysts offered mixed views. Mark Crouch of eToro described Auto Trader as “a hidden gem” with “margins north of 60 per cent” and a dominant market position, adding that “today’s dip may prove more of a pit stop than a sign of breakdown.”
Richard Hunter, Head of Markets at Interactive Investor, noted the group’s long-term momentum but warned: “These numbers are middle of the road by the standards Auto Trader has set itself.”
He added: “Even after this latest drop, the shares are not obviously cheap on a historic basis… The market consensus is likely to stay at a hold for the time being, albeit a strong one.”
