8:02 am, November 11, 2022
Auto Trader is confident it can turn loss-making leasing division Autorama around – but has admitted losses clocked up in the first half of the year were worse than forecast.
Autorama made a £4m loss in the first six months of this year, dragging down Auto Trader’s profitability, figures released to the Stock Market revealed yesterday.
It is predicted to make a loss of £11m this year – far worse than the £5-7m prediction when Auto Trader snapped it up for £200m in March.
However, chief operating officer Catherine Faiers has told Car Dealer she is confident the business will become profitable.
In an exclusive interview with Car Dealer, Faiers said: ‘We knew when we bought the business that it was loss making.
‘And we have a plan, and still have a plan, that over time, we will work with the business to help it scale and grow.
‘It hasn’t clearly been helped – as any business exposed to the new car market – by the very challenging six months, in terms of [supply of] commercial vehicles which is still a big part of its business.
‘I think that backdrop has been tougher than we thought when we first made the acquisition.
‘But over the long term, we still think there are more consumers who will want to buy electric vehicles, some of them are going to choose to lease those electric vehicles, and it’s important for us to have that proposition as part of Auto Trader.’
Auto Trader plans for Autorama to break even by 2025.
The used car marketplace told investors it clocked up an overall operating profit of £149.1m for the first half of 2022 in an update to the Stock Market yesterday.
The online used car marketplace generated revenues of £249.8m – up 16 per cent – in the six-month period as it revealed for the first time the impact of its acquisition of Autorama.
As well as the £4m loss, a charge of £13.8m associated with the Autorama deal saw Auto Trader’s profit figure fall 2 per cent compared to the same period last year.
Its margin fell 10 percentage points from 70 to 60 per cent.
Shares in Auto Trader initially dropped in morning trading from Wednesday’s closing price of 549p to a low of 526p, but finished the day up 3.1 per cent at 571p.
Shares are down from a high after launch of closer to 750p, leading The Times to speculate today that Auto Trader could be ‘the next tech name to be taken out by a private buyer’.
Faiers said: ‘The share price in the last few months has been more driven by what’s happening to UK bond yields, what’s happening with prime ministers and budgets and bigger macro factors than it has been by anything that we’ve delivered.’
Visits to the firm’s marketplace across its platform were down 10 per cent in the reporting period – which covers the six months to the end of September – at 67.7m. The amount of time users spent on the site dropped too, by 14 per cent.
However, the number of car dealers using the platform rose two per cent – some 14,161 car dealers now advertise their stock on Auto Trader.
Auto Trader said it made nine per cent more from each of those car dealers too.
Faiers said: ‘Our core business is stronger than it’s ever been. We’ve got more retailers advertising with us and are seeing a strong level of consumers engaging with the platform.
‘Autorama was a strategic acquisition for us and one that we’re still going to do work on to make sure the market backdrop is more positive and helpful to it, and that we’re helping them with the investment they need to scale and drive growth.’
Faiers said she and the Auto Trader team are confident they can make Autorama profitable and that the firm ‘believes in the long-term opportunity’ it represents, but admitted it might not be as quick as initially hoped.
‘I think it will probably take longer than we’d hoped when we first bought it, but we’re still feeling positive about that long-term opportunity,’ she added.
The Auto Trader director also explained that the audience figures were being compared to a period in 2021 when dealers were just coming out of lockdown. She said it’s better to compare them to 2019.
Faiers added: ‘We’re still up 18 per cent on before the pandemic and consumer demand engagement on our platform is still with us. And in that context, actually, we were pleased with where audience figures landed.
‘The biggest driver of revenue growth is product growth – more retailers are choosing to buy more products from us, which again, I think is a positive sign of undermining health.’
With economic pressures from the cost of living crisis and inflation likely to impact car buying intentions, Auto Trader said it plans to continue supporting the industry – by advertising more and investing in new tech.
‘We’re committed to continuing to invest strongly in marketing as potentially the market does soften a bit,’ added Faiers.
‘We think one of the very helpful things we can do is to just keep being out there talking about the car buying journey and talking about the fact that we’re there and trying to trigger consumers in the market.’
