Auto Trader outshines tough car market

Online car seller and trading platform Auto Trader continued its impressive growth despite falling car sales throughout the sector, the company has revealed.

Revenues at the business jumped 8% in the year to March 31, with pretax profits in the period soaring 15% to £242.2 million. This also includes an £8.7 million profit from the sale of nearly half its stake in the business-to-business Smart Buying division.

Bosses did warn that growth is unlikely to be as fast next year and last, but added there were no concerns over Brexit to cause them any financial worries.

However, the company warned that challenges facing the manufacturing industry – on Monday new data showed the sector contracted in May – is expected to hit the business, with reduced advertising spends.

The firm said: “Despite a tougher new car market, manufacturers and agencies continue to see the value in our marketplace to advertise their new cars to consumers, with spend up by 18%.

“However the short-term challenges faced by both of these customer types did impact our growth in the second half of the year.”

The number of cars on the site during the year was up 2% to 461,000 although the company explained this was mainly due to a boost from professional sellers and sales of new cars.

Revenues from individuals advertising their own vehicles for sale dipped 7% to £20.1 million, with the company saying it was hit by “a lack of supply in older vehicles, a greater propensity to part-exchange (influenced by the transparency we have enabled for part-exchange values), and increased competition”.

Investors have been impressed with the business, with shares soaring from 354p a year ago to 587.4p on Wednesday night,

Ed Monk, associate director from Fidelity Personal Investing, explained: “Much of the optimism around Auto Trader isn’t simply that it’s doing its job very well, which it is, but that it appears to have plenty of room to move into still with few obvious rivals to get in its way – it is now five times larger than its nearest competitor.

“The development of hosting new car sales gives Auto Trader a new world to disrupt and there’s no reason to think it won’t do that, while retailers are buying enhanced services from the company in greater numbers.”