- Outlook revised down
- New car market remains tough
- Fears over ruling on car financing commissions
The UK’s largest automotive platform Auto Trader (AUTO) revised down its dealership listing volumes outlook and now expects full year average revenue per retailer to fall, sending the shares down 7% to the bottom of the FTSE 100 index.
The shares have reversed nearly 12% since the beginning of October on concerns that Auto Trader’s motor finance arm could get embroiled in the FCA’s (Financial Conduct Authority) ruling on discretionary commission arrangements for car finance.
The company confirmed it does not expect the ruling to directly impact its products but has had to adjust its commission disclosures in its leasing business.
Panmure Liberum analyst Sean Kealy said the company’s historic exposure is only around £20 million, albeit he acknowledged the wide uncertainty in the degree of Auto Trader’s exposure.
HOW AUTO TRADER PERFORMED
Group revenue for the six months to 30 September increased 8% to £302.5 million and operating profit was up 14% to £188.4 million.
Retailer revenue grew in line with expectations at 8% with the number of retailer forecourts stronger than management anticipated, increasing 2% year-on-year.
However, growth was skewed towards smaller, lower yielding retailers which diluted average revenue per retailer. The company said the new car market remained ‘challenging’ as volumes shrank 10% despite an increase in discounts by car manufacturers.
Auto Trader added that used car prices have been broadly stable over the first half after declining for much of last year.
WHAT ARE THE EXPERTS SAYING?
Shore Capital’s Roddy Davidson said he would review his forecasts following the analyst meeting and noted the tough comparatives which the company faces in the second half.
‘We remain cautious on the group’s ability to drive the sustained and significant average revenue per retailer inflation that its valuation suggests,’ said Davidson.
Sean Kealy trimmed his full year 2025 revenue forecast by 1% to £605 million and his EPS (earnings per share) estimate by 2.7% to 33.4p. ‘While performance has been less than expected, the focus today is likely to be on motor finance commissions,’ said Kealy.
‘We believe investors should continue to respond with calm to these developments, as there remain significant hurdles to pass before any impact is felt by retailers.’
