Auto Trader Group plc
Annual Report and Financial Statements 2023
Driving Change Together.
Responsibly.
Auto Trader’s purpose is Driving Change Together.
Responsibly. Auto Trader is committed to creating a
diverse and inclusive culture, it aims to build stronger
partnerships with its customers and use its voice
and influence to drive more environmentally friendly
vehicle choices.
With the largest number of car buyers and the largest
choice of trusted stock, Auto Trader’s marketplace
sits at the heart of the UK car buying process.
That marketplace is built on an industry-leading
technology and data platform, which is increasingly
used across the automotive industry. Auto Trader is
continuing to bring more of the car buying journey
online, creating an improved buying experience, whilst
enabling all its retailer partners to sell vehicles online.
2
Strategic report
2
Chair’s statement
3
CEO’s statement
6
Market overview
8
How we create value
10
Our purpose-driven strategy
14
Section 172(1) statement
18
Key performance indicators
21
Non-financial information statement
22
Operational review
24
Financial review
26
Being a responsible business
48
How we manage risk
50
Principal risks and uncertainties
58
Governance
58
Governance overview
60
Board of Directors
62
Corporate governance statement
66
Report of the Nomination Committee
70
Report of the Audit Committee
76
Report of the Corporate
Responsibility Committee
80
Directors’ remuneration report
94
Directors’ report
plc.autotrader.co.uk
Auto Trader Insight
@ATInsight
98
Financial statements
98
Independent auditor’s report to the
members of Auto Trader Group plc
109
Consolidated income statement
110
Consolidated statement of
comprehensive income
111
Consolidated balance sheet
112
Consolidated statement of changes in equity
113
Consolidated statement of cash flows
114
Notes to the consolidated
financial statements
156
Company balance sheet
157
Company statement of changes in equity
158
Notes to the Company financial statements
163
Unaudited five-year record
164
Shareholder information
Our purpose-driven strategy
Being a responsible business P26
Our purpose-driven strategy P10
CLASSIFIED
MARKETPLACE
PLATFORM
BEING A RESPONSIBLE
BUSINESS
DIGITAL RETAILING
13,913
average retailer forecourts
advertising with Auto Trader
(2022: 13,964)
69.6m
average monthly visits
to autotrader.co.uk
(2022: 68.9m)
c.50
retailers on Deal Builder
trial at end of March 2023
(2022: N/A)
91%
of employees are proud
to work for Auto Trader
(March 2022: 95%)
19
lenders integrated with
our finance platform
(2022: 9)
c.90
software partners integrated
with our Auto Trader Connect
platform
(2022: 40)
Net zero
our targets have been
validated by the Science
Based Targets initiative
c.7k
new vehicle leases
delivered in 2023
(2022: N/A)
We have a clear focus on our three strategic priorities, alongside
a commitment to always being a responsible business.
DIGITAL RETAILING
PLATFORM
CLASSIFIED
MARKETPLACE
B
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G
A
R
E
S
P
O
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S
I
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U
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Auto Trader Group plc
Annual Report and Financial Statements 2023
1
Chair’s statement
This is my ninth and final statement
as Chair of Auto Trader Group plc.
As such, rather than focus on the
year just gone, I would like to offer
a longer perspective regarding
Auto Trader’s history and future.
It has been my privilege to
serve as the Auto Trader Chair
throughout our eight years
as a public company.
A reflection on my tenure as Chair
I first got to know Auto Trader around 15
years ago when I was chief executive of
Rightmove Plc. I first attended an Auto Trader
Board meeting as a guest. That meeting
decided to sell Auto Trader’s last remaining
print plant, though Auto Trader would
continue to publish weekly magazines for
a few years after that. Auto Trader had a
successful website but it contributed a small
amount to our overall revenues. Our online
product offering was simple and focused
on tools to help car retailers get their adverts
online and monitor their success. We had
a number of small wholly owned or partly
owned businesses in other countries.
We operated out of a number of physical
offices spread around the UK.
Today, we operate a sophisticated online
automotive marketplace, with our car
retailers able to select from a range of
advertising options and data products
that not only help them sell vehicles but
manage the effectiveness of their operations
including the stock they hold. We operate
in a single country with the considerable
majority of our office-based staff in a single
office in Manchester.
During the previous year we took a number
of steps to complete the simplification of
our business, including the sale of Webzone
Limited (trading as ‘Carzone’), our Irish
business, reducing and simplifying our
property holdings and starting the process
to exit our legacy defined benefit pension
scheme. I would particularly like to thank
Warren Cray and his team at Carzone in
Ireland for their contribution to the Group
over many years.
2023 saw the completion of one of the
largest product development projects in
the Company’s history, enabling our car
retailer customers to provide a complete
transactional service to car buyers on the
Auto Trader platform. This includes the
ability to reserve a car online with a deposit,
arrange finance, obtain a trade-in valuation
on an existing car and delivery to a buyer’s
home or other convenient location.
2023 also saw the purchase of Autorama,
which offers new vehicles on leases to
the public. This gives us a substantial
potential position in the online transactional
market for new cars. A current priority is the
integration of the Autorama offering into
our existing new car proposition and further
developments to that combined offering.
So not only have we successfully transitioned
from a print to digital, advertising-only to
data business, but we have also embarked
on the journey from a used car advertising
service to a platform for advertising and
transacting in both used and new cars. It will
take time for all these businesses to realise
their potential and if the past is any guide,
we will be both pleasantly surprised in the
long term and sometimes disappointed at
the speed of adoption and the path to full
commercial value being realised.
It is unhelpful for outgoing Chairs to seek
to tie the hands of their successors. It is the
job of future Auto Trader Board members
to exercise their judgement in pursuing the
course that makes most sense to them at the
time in the knowledge of the marketplace as
they then see it. I hope, though, that they will
come to the view that the current Board has
left the business stronger, simpler and with
a wider range of opportunities open to them
than when they first became involved.
Board succession
As announced on 1 June 2023, the Board has
approved the appointment of Matt Davies
as Chair Designate with effect from 1 July 2023,
to succeed me as Chair at the conclusion of
the 2023 Annual General Meeting, prior to
me becoming non-independent and in line
with good corporate governance. Therefore,
I will not be standing for re-election at our
September 2023 AGM and expect a smooth
transition to the new Chair.
As a result of the Company becoming
public in 2015 we put in place a new Board;
as such over the next two years, three further
Non-Executive Directors will be deemed
to have become non-independent under
the nine-year rule. We have plans in place
to recruit new Non-Executives, staggering
renewal dates to mitigate against large
changes in the Board and to preserve and
build on diversity and experience which will
best serve the business moving forward.
This is covered in more detail in the
Nomination Committee report.
Dividend and capital return strategy
We are recommending to shareholders a
final dividend of 5.6p, bringing the total
dividend for the year to 8.4p. The value of
dividends paid in respect of the 2023 financial
year totals c.£77.7m, with a further £147.3m
returned through share buybacks at an
average share price of 582.1p.
Annual General Meeting
Our Annual General Meeting (‘AGM’) will be
held at our Manchester office on 14 September
2023 at 10am.
A big thank you
As this is my last statement as Chair, it remains
for me to say a big thank you to everyone
involved with Auto Trader over the last eight
years, including car buyers and sellers,
our business customers, past and present
employees, the current and previous
executive teams, our Board of Directors
and our shareholders, many of whom have
held our shares continuously since the
Company went public in 2015.
In particular, I would like to thank those
with whom I have worked closely, including
a large number of executives outside the
Board. From the start of my involvement
with Auto Trader one thing was obvious:
an enormous commitment and enthusiasm
to simply “get stuff done”. I am sure the new
Board members, who will replace those of
us reaching the end of our Board service,
will value this as much as we have. It has
allowed us to focus a huge proportion of our
time and attention on opportunities and not
problems, making it critical to our success
and such a pleasure to be part of.
Ed Williams
Chair
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
2
CEO’s statement
There are two strands to our commitment
around the environment: achieving net zero
carbon emissions by 2040, and supporting
consumers in making more environmentally
friendly vehicle choices.
Outlook
The new financial year has started well and
the Board is therefore confident of meeting
its growth expectations for the year.
We expect another good year of retailer
revenue growth, by far the largest part of
our Auto Trader business. This will come from
a similar ARPR growth rate to that achieved
in financial year 2023. We expect the product
lever to be consistent with the £137 achieved
last year and the price lever to be slightly
higher than last year’s £90. The stock lever
is likely to remain flat. We anticipate a slight
decline in retailer numbers, mostly due
to the full year impact of the disposal of
Webzone Limited.
Over time we aim to grow share in the
new car leasing market through our new
Autorama segment. Our short-term focus
is on significantly reducing the current
annualised operating losses of £15 million
through deeper integration with Auto Trader
and being disciplined on costs. Group
central costs, which are non-cash and
relate to the acquisition of Autorama,
will be c.£18 million for the year.
Auto Trader operating profit margins
should be consistent year on year at 70%,
despite continued investment in product
development and inflationary pressures.
Group margins are expected to increase
year on year.
Nathan Coe
CEO
1 June 2023
The UK car market
New car registrations at 1.7 million were 3%
above financial year 2022 (2022: 1.6 million)
but 19% lower than financial year 2020 with
supply chain challenges continuing to impact
the volume of new cars available for sale
in the UK. New light commercial vehicle
(‘LCV’) registrations were down 11% year on
year. Used car transactions at 6.9 million
were 8% below financial year 2022 levels
(2022: 7.5 million) due to the knock-on impact
of low volumes of new car supply, which has
reduced the availability of younger cars.
Despite the weakness seen in supply
throughout the period, demand has been
resilient and used car prices have remained
strong. Our used car Retail Price Index saw
a 12% like for like, year on year increase in
prices over the past 12 months, which has
contributed to favourable trading conditions
for our customers.
Being a responsible business
We hold ourselves to the highest standards
when it comes to acting responsibly. We
have a Corporate Responsibility Committee
with oversight of Auto Trader’s focus on the
environmental, social and governance (‘ESG’)
aspects of our business. We have identified
focus areas and created a range of initiatives
which are monitored regularly, and reported
on externally with our cultural KPIs. While
recognising that many of these changes
take time, we remain committed to making
meaningful progress across all measures.
We continue to focus on our people, ensuring
that those from all backgrounds can fully
realise their potential. We have carefully
constructed learning and development
programmes focusing on supporting early
careers, mid-management and a continuous
leadership programme for senior leaders.
All of these programmes are specifically
designed to recruit, support and develop
diverse talent in our business.
I’m pleased to report that our
business is in as strong a position
as it has ever been, and we are
embarking on a journey where
used and new car buyers can not
only complete their research on
Auto Trader, but complete more
of the transaction too.
Summary of Group financial performance
Revenue in the core Auto Trader business
increased by 9% to £473.0 million as
customers are increasingly using our
data, platform and advertising products
to support their businesses. At a Group
level revenue grew 16% to £500.2 million
(2022: £432.7 million), the difference being
the inclusion of the Autorama business,
acquired in June 2022, with revenue of
£27.2 million. Auto Trader growth was ahead
of expectations and has been achieved
despite both the new and used car markets
experiencing low transaction volumes,
although this headwind has been somewhat
offset by robust levels of retailer profitability.
The brilliant work of our people continues
to strengthen our position with car buyers,
build true partnerships with our customers
and support an industry-leading data and
technology platform.
Operating profit in the core Auto Trader
business was £332.9 million, up 10% on last
year, with a continued margin of 70% as
a result of careful management of costs
despite inflationary pressures. Group
operating profit declined by 9% to £277.6 million
(2022: £303.6 million), due to an operating
loss of £11.2 million from Autorama, and
£44.1 million of Group central costs relating
to the acquisition of Autorama, which were
£38.8 million of deferred consideration and
amortisation of acquired intangibles of
£5.3 million. Group operating profit margin
was 55% (2022: 70%).
Strategy and purpose
Our purpose continues to be “Driving Change
Together. Responsibly” which guides strategy
and decisions across the organisation. At our
2022 Investor Day, we outlined our strategy
using three concentric circles to illustrate
that they are all elements of Auto Trader’s
central business strategy, rather than three
distinct opportunities. Our technology and
data platform and digital retailing build
on the strengths of our core marketplace
business. As an example, our platform
strategy embeds our technology and data
into retailers’ businesses enabling them to
make quicker decisions, which ultimately
improves the value they get from advertising
on Auto Trader. Digital retailing provides a
deeper buying experience on Auto Trader
that is more efficient for retailers and harder
for others to replicate.
Auto Trader Group plc
Annual Report and Financial Statements 2023
3
Strategic report
Governance
Financial statements
CEO’s statement
continued
2010
Appointed to the Board
of Trader Media Group
(co-owned by funds
advised by Apax Partners
and Guardian Media
Group) to support its
digital transformation
with huge credibility
coming from his time
as founder and CEO
of Rightmove from
2000 to 2013.
2015
The business had a successful
IPO on the London Stock Exchange,
supported by Ed’s credibility
and significant experience
with public market investors.
This included establishing
a new independent Board,
most of whom remain with
the business to this day.
2013
Ed was instrumental in supporting
the business’s transition from
print to digital, culminating in the
closure of the magazines in 2013.
This included the appointment of
Trevor Mather as CEO, who oversaw
the strategy to simplify the business
and transition to a purpose-led,
values driven culture.
2014
Ed was appointed Chair
of Auto Trader, leading the
business through to its
next phase of becoming
a public company.
2012
Ed was instrumental in
the business adopting
a strategy to simplify its
focus and operations on
Auto Trader.
As the tenure of our current Chair, Ed Williams, comes to an end,
we wanted to recognise the unique impact he has had on Auto Trader
during his involvement since 2010.
Reflecting on and recognising
the notable achievements of
our Chair, Ed Williams
Ed has worked diligently in the
background for years to create a great
business with outstanding governance,
while holding himself to the very
highest standards as a Chair.
Nathan Coe
CEO
Auto Trader Group plc
Annual Report and Financial Statements 2023
4
2015
2023
2020
Along with the rest of the
world, Auto Trader was hit
by the COVID-19 pandemic,
with retailers closing their
forecourts in late March 2020.
The business acted swiftly to
protect its people, support
its customers and reduce risk
given the significant unknowns
at the time. This included
pausing charging retailers
for over four months, pausing
dividends and share buybacks,
raising capital, reducing debt
and waiving Board fees, salaries
and bonuses. Ed’s leadership
of the Board at this time was
more important than at any
time in our history given the
magnitude of decisions made.
The impact of these actions
still benefit us today – with our
people, retailers, car buyers
and our shareholders.
2022
•
January:
Following the
appointment of Jasvinder Gakhal,
the Board met the Parker review
recommendation for ethnic
diversity on boards.
•
September:
The business
announces an evolved strategy at
its Investor Day, outlining future
growth in its core marketplace
and the opportunity to grow
further through digital retailing
– bringing more of the car buying
journey onto Auto Trader – and
our platform strategy to enable
the industry to benefit from the
data and technology we use
to run Auto Trader.
31 MARCH SHARE PRICE
OPERATING PROFIT
253p
£133.1m
613p
£277.6m
MONTHLY AVERAGE CROSS PLATFORM VISITS
REVENUE
69.6m
2023
47.2m
2015
£500.2m
2023
£255.9m
2015
2019
•
January: Auto Trader market
capitalisation reached £4.2bn as
we became a FTSE 100 business.
•
November: Following the
appointment of Sigga Sigurdardottir,
Auto Trader’s Board became 50:50
male to female, one of only seven
FTSE 100 businesses at the time,
exceeding the Hampton-Alexander
recommendations for gender
diversity on boards.
2020
As Chair, Ed oversaw the
planning and execution
of a comprehensive
succession plan from the
then CEO, Trevor Mather,
to current CEO, Nathan Coe.
On behalf of myself, the Board and everyone at Auto Trader we want
to say thank you for years of dedicated service, over which time the
business has completely transformed to the benefit of our people,
customers, car buyers, shareholders and other stakeholders.
As we say at Auto Trader, you have every reason to feel
#proud
.
2023
2015
£995.1m
cash returned to
shareholders through
dividends and share
buybacks
Auto Trader Group plc
Annual Report and Financial Statements 2023
5
Strategic report
Governance
Financial statements
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
£0
£5,000
£10,000
£15,000
£20,000
Year-on-year price
growth for the month
Year-on-year mix
growth for the month
FY21
Average retail price
of a used car
FY22
FY23
Market overview
£17,544
average price of a used car advertised on
Auto Trader for the 12 months ending March 2023
+12% year on year, like for like (2022: £16,155)
Retail Price Index
The Auto Trader Retail Price Index tracks the average
retail price of used cars based on c.900,000 daily pricing
observations across the automotive retail market.
Used car prices have remained strong, increasing 12%
during financial year 2023 on a year-on-year, like-for-like
basis, with average prices reaching £17,712 in March 2023,
the 36
th
month of consecutive year-on-year growth.
Prices have remained strong due to a constrained supply side,
twinned with robust levels of demand in the market. We expect
that these supply and demand dynamics will continue and that
average retail prices will remain stable for the foreseeable future.
Used car transactions
New car registrations
New car registration volumes remain impacted by
supply chain challenges. New car registrations for
financial year 2023 were 1.7 million, +3% on financial
year 2022 but still -19% behind pre-pandemic levels
(financial year 2020).
While levels of supply do remain heavily constrained,
the availability of stock has very gradually improved
over the second half of the financial year and new
car registrations in Q4 of our financial year saw 18%
growth year on year.
With manufacturers continuing to bring more electric
cars to market, much of the new car growth has been
driven by alternatively fuelled vehicles. Over the full
year, EVs accounted for 279k registrations, a 25%
year-on-year increase.
Used car transactions were 8% below
financial year 2022 levels at 6.9 million
for financial year 2023, as transactions
continued to feel the knock-on impact
of low volumes of new car supply.
This was a story of two halves. In H1,
we saw demand on Auto Trader
down compared with H1 2022 and
saw used car transactions -15%
year on year. This was lapping a very
strong comparative period in H1 2022.
By contrast, in H2 2023, we saw our
demand metrics improve year on
year and in the second half used
car transactions were actually up
marginally year on year.
6.9m
used car transactions in the 12 months to March 2023
-8% year on year (2022: 7.5m)
1.7m
new car registrations in the 12 months to March 2023
+3% year on year (2022: 1.6m)
Continually adapting our onsite experience to meet the changing
needs of both our consumers and customers is core to remaining
the UK’s largest automotive marketplace for new and used cars.
Despite potential headwinds,
we expect demand for used cars
to remain robust, not least because
cars are for most motorists a
fundamental need. What’s more,
there remains a huge backlog of
people waiting for a driving test,
and there has been a combined five
million lost new and used car sales
over the past three years.
A changing new
and used car market
Auto Trader Group plc
Annual Report and Financial Statements 2023
6
Key trend
There are significant structural
changes taking effect in new
vehicles, including electrification,
the growth of leasing, new
manufacturers entering the UK
market and a shift towards new
digital distribution models.
Future opportunities
There is a significant opportunity
for us to help consumers, retailers,
funders and manufacturers
navigate these changes.
For consumers, we can help them
choose their next new vehicle
and for retailers, funders and
manufacturers we can be a highly
efficient digital sales channel.
Structural changes in the new car market
1
3
2
The key drivers shaping the future of our industry
Key trend
Consumer appetite to do more of the
car buying journey online remains strong
following the pandemic. Today, almost
two thirds of consumers and more than
80% of younger car buyers are open to the
concept of digital retailing.
Whether it’s checking availability,
sourcing a valuation, booking a test
drive, paying a deposit, or organising
finance, 60% of car buyers would like
to do these key jobs online.
Future opportunities
While most people still want to do
some of the purchase journey in person,
many are comfortable doing more of
their car buying jobs online.
There is a significant opportunity for us
in digitising key parts of the transaction,
providing a better experience for
consumers and creating significant
efficiencies for our retailers.
Consumers’ desire to move online
Key trend
Levels of supply and demand for
different makes and models continue
to change at speed, and with the added
complexity of increasing fuel types,
it is more difficult than ever for retailers
to base stocking and pricing decisions
on experience alone.
Future opportunities
We’re surfacing our award-winning
valuations into retailers’ businesses
through Auto Trader Connect.
We’ve also launched Vehicle Insight,
a new performance tool that enables
retailers to access our market data in one
simplified view through our Retailer Portal.
We’re constantly evolving and investing
in our platforms to help our retailer
partners respond quickly to market
changes and improve performance
across their digital forecourts.
The increasing importance of data
Key trend
Across the whole year we have continued
to see the demand and supply for electric
vehicles (‘EVs’) increase across both new
and used cars.
However, the picture has varied significantly
throughout the year. By the end of the year
we were seeing supply rise faster than
demand in used EVs causing pressure on
used EV pricing.
Future opportunities
The EV market is immature and nuanced,
which means accurate and timely data is
critical for retailers to inform their sourcing
and pricing strategies.
Auto Trader has a unique opportunity to
guide and support consumers in making the
switch to electric and is providing more
detail on its platforms including total cost of
ownership information and battery ranges.
The EV market continues to evolve
4
Auto Trader Group plc
Annual Report and Financial Statements 2023
7
Strategic report
Governance
Financial statements
How we create value
BEING A RESPONSIBLE BUSINESS
Our ESG ethos runs through all
elements of value creation and
everything we do as a business.
The drivers that set us apart
The core activities we undertake to create value
Brand &
audience
Auto Trader has
been trusted for
over 45 years
by UK car buyers
and sellers,
giving it the
largest UK car
buying audience.
People &
culture
Our values-led
culture underpins
a fast-moving,
collaborative
and community-
minded
environment.
Technology
We have a
scaleable,
cloud-based
technology
platform which
enables many
iterative changes
to be made.
Data
Our proprietary
data is
increasingly
embedded
across the
automotive
value chain
as the industry
standard.
Investment
We have a high
return, capital
light business
model, which
enables us
to invest in
the business.
Long-term
focus
The strength
of our business
model enables
us to take
a long-term
approach to
product and
technology.
The most trusted brand
1st
choice destination for car
buyers in the UK
The most choice
437,000
live car stock on site on average
across the year (2022: 430,000)
The most
scalable tech
51,000
software releases
across the year (2022: 46,000)
A highly cash
generative model
£327.4m
cash generated from operations
(2022: £328.1m)
Read more P26
Leveraging our leading market position and technology
platform to create value for our stakeholders.
Our unique network effect
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CLASSIFIED
MARKETPLACE
Auto Trader Group plc
Annual Report and Financial Statements 2023
8
The value created for our stakeholders
69.6m
average monthly visits to
autotrader.co.uk (2022: 68.9m)
c.90
software partners integrated with
our Auto Trader Connect platform
(2022: 40)
13,913
average retailer forecourts
(2022: 13,964)
Net zero
committed to achieving
net zero by 2040
91%
of employees are proud to work
for Auto Trader (March 2022: 95%)
£225.0m
returned to shareholders
in 2023 (2022: 237.1m)
Classified marketplace
Our core marketplace
benefits from network
effects where the largest
audience of in-market
car buyers attracts the
widest array of stock,
which then appeals to
more car buyers. We create
the best experience for
consumers, and the most
efficient sales channel for
our retailer customers.
Platform
Through a combination of
our unique data set, scaleable
technology and wide-ranging
partnerships, we are uniquely
placed to be the data and
technology platform for UK
automotive. We create value
by combining data sets
and exposing them to our
customers, helping them make
better and faster decisions.
Digital retailing
We are building products and
services to enable consumers
to do more of the vehicle buying
journey online. For new vehicles
this can be an entirely online
sale, whereas for used cars
this is the completion of a
deal. This will ensure a better
experience for consumers,
and increased efficiency
for retailers.
FOR CONSUMERS
Our marketplace offers
consumers the widest choice of
vehicles in the UK, with tools to
increase trust and transparency
in the buying process.
FOR CUSTOMERS
We offer the most effective
sales channel for retailers,
and are the industry leading
technology and data platform
for our wider pool of partners.
FOR OUR PEOPLE
We continue to evolve our
unique culture to ensure everyone
can develop and achieve their
career aspirations.
FOR PARTNERS
& SUPPLIERS
We work collaboratively in
partnership, increasing revenue
from shared opportunities whilst
ensuring we have fair trading
and robust terms and conditions.
FOR THE COMMUNITY
& THE ENVIRONMENT
Every employee is provided up
to two volunteering days each
year, within local communities.
The environment is a key
consideration for our business.
We have a clear plan for net zero
and helping consumers shift
to electric vehicles.
FOR INVESTORS
Given our strong cash generation,
a high proportion of our profit
is returned to shareholders
in the form of dividends and
share buybacks.
Auto Trader Group plc
Annual Report and Financial Statements 2023
9
Strategic report
Governance
Financial statements
Our purpose-driven strategy
Our purpose continues to be Driving Change Together. Responsibly.
We deliver on this through our three strategic priorities detailed below,
alongside our commitment to always being a responsible business.
DIGITAL RETAILING
PLATFORM
CLASSIFIED
MARKETPLACE
Driving Change Together.
Responsibly.
B
E
I
N
G
A
R
E
S
P
O
N
S
I
B
L
E
B
U
S
I
N
E
S
S
Whereas we previously presented Digital Retailing
and Data (now called Platform) alongside our
Marketplace, we now recognise that all three of
these areas are interconnected and complementary.
Our strategy is only possible because of the
strength of our Marketplace and everything
we are doing serves to strengthen it.
Auto Trader Group plc
Annual Report and Financial Statements 2023
10
Being a responsible business
A key part of our purpose is
responsibly
,
wherein we commit to doing the right
thing. Our teams are passionate about
this and it infuses our culture.
It ensures we strive to make a positive difference to our
people, the automotive industry, our communities and the
wider environment.
Read more P26
Read more overleaf
Classified
marketplace
Be the best place
to buy a car
Platform
Be the industry’s
data & technology
platform
Digital retailing
Be the enabler for all
retailers to sell online
Auto Trader Group plc
Annual Report and Financial Statements 2023
11
Strategic report
Governance
Financial statements
Our purpose-driven strategy
continued
Classified
marketplace
Be the best place
to buy a car
Platform
Be the industry’s
data & technology
platform
Digital
retailing
Be the enabler
for all retailers
to sell online
In our core advertising marketplace,
we successfully executed our annual price
increase in April 2022, which included the launch
of Retail Essentials, the first module of our Auto
Trader Connect platform. This product was well
received by customers given the quality of the
data and the operational efficiencies it delivers.
Our customer numbers in the UK are at record
levels, with continued low levels of cancellation
in part due to the strength of our standing
with customers. We continue to make progress
deepening our partnerships with our customers,
particularly through providing our market-
leading insight. Our sales teams have data
driven, goal focused conversations with our
customers. Levels of new customer acquisition
were largely consistent with the prior year.
Penetration of our higher yielding packages
increased, with 33% of retailer stock now above
Standard as at March 2023 (March 2022: 31%).
We also saw an increase in the uptake of our
Market Extension product (allowing customers
to sell vehicles outside their local area) and our
Pay-Per-Click product which allows stock items
to appear at the top of the search listings.
With the sale of new and used electric vehicles
increasing, we continue to invest in our electric
vehicle content to ensure we are the number
one destination for car buyers interested
in purchasing an EV. We continue to inform
consumers about electric vehicles on our social
media channels and raise the awareness of
EVs through our EV giveaway which achieved
over 3.5 million entries this year. By rethinking
our make-model product pages, we have
significantly improved our EV SEO ranking,
bringing more consumers to the site. When on
Auto Trader, we have focused on improving
the level of information to help make consumers
more informed about owning an EV.
As part of our annual pricing event in April 2022,
we included our first Auto Trader Connect
module – ‘Retail Essentials’. Retail Essentials
gives customers access to our most fundamental
and powerful data, including our taxonomy,
which improves advert quality, and enables
stock to be updated on Auto Trader in real time.
At the end of March 2023, we had integrations
with over 90 third-party software providers with
Auto Trader Connect.
For our April 2023 pricing event we have
launched the second module of Auto Trader
Connect – ‘Valuations’. This gives our customers
access to our retail, part exchange and trade
valuations to help inform retailers’ sourcing and
pricing strategies with the most accurate view
of the market.
These modules are an important part of how
we are increasingly using our platform to power
our retailers’ businesses, which strengthens our
core and is a key enabler for digital retailing.
We have also made good progress in continuing
to build lender integrations, strengthening both
the breadth and depth of our finance platform.
This is a critical asset that underpins the finance
component of our Digital Retailing journey.
We now have 19 lenders integrated, which we
estimate represents 42% of retailers on our
Retailer Finance product (based on first string
lender). We also enabled the entire end to end
finance transaction journey with one lender
including e-sign. FCA Consumer Duty is central
to our digital journeys, both for consumers
and retailers.
We saw an increase in the number of software
releases on the Auto Trader platform to 51,000
(2022: 46,000).
Building on both our platform and marketplace,
we are bringing more of the car buying journey
online. Our approach to digital retailing is to be
‘car first’ and to enable any retailer (including
manufacturers and leasing companies) to sell
their cars online. With this goal in mind, we will
initially offer two digital retailing consumer
journeys: a used car Deal Builder journey on
Auto Trader and a fully online retailing journey
for new vehicles.
For our used car Deal Builder journey, we are
pleased with the initial trial and by the end of the
financial year had over 50 retailers live. We have
continued to develop the product with the ability
to complete the deal in multiple sessions across
devices, a revision to the reservations and part
exchange flow and the launch of the product for
multi-site customers using our Retailer Portal.
We have also launched a new product page for
cars with Deal Builder.
In new vehicles there are significant structural
changes taking effect, including the growth
of electric cars, the growth of leasing, new
manufacturers entering the UK market and
a shift towards new digital distribution models.
To enhance our new vehicle proposition,
and to ensure we are well placed as these
structural changes take effect, on 22 June 2022,
we completed the acquisition of Autorama UK
Limited (‘Autorama’).
By combining Autorama’s capabilities with
Auto Trader’s platform and scale, we believe
we have a compelling proposition for
manufacturers, retailers and leasing companies,
with a significant opportunity to reduce existing
customer acquisition costs and grow the
business’s profitability.
2023 progress
Auto Trader Group plc
Annual Report and Financial Statements 2023
12
Future opportunities
How we measure progress
Associated risks
We continue to consider ways in which
we can build consumer trust in our core
marketplace. We also see an opportunity
to improve our search experience,
particularly in the ways we use data to
create a more personalised search
experience for consumers.
Given the changing landscape in new cars,
we will continue to evolve our new car
product. For example, with an increasing
number of manufacturers selling direct to
consumers, or operating under an agency
model, we will look to enable manufacturers
to advertise new cars directly on Auto Trader
with national reach.
We plan to further embed our data and
usage of Auto Trader Connect (Retail
Essentials and Valuations) with retailers.
We have launched a new Vehicle Insight
tool in our Retailer Portal which has
already seen high levels of engagement.
We will also continue to deepen
relationships with third-party software
providers, OEMs and lenders to further
develop our proposition.
We will continue to scale the number of
retailers on Deal Builder, and iterate the
product in financial year 2024 – with an aim
to monetise the product with some retailers
by the end of financial year 2024.
By bringing our scale to bear, combined
with continued product improvements in
financial year 2024, we are confident that
our new car leasing order take will grow year
on year and expect to see efficiencies in
customer acquisition cost.
• Revenue
• Average Revenue Per Retailer (‘ARPR’)
• Operating profit (and margin)
• Basic EPS
• Cash generated from operations
• Cross platform visits
• Cross platform minutes
• Number of retailer forecourts
• Live car stock
• Employee engagement
• Auto Trader Connect integrations
• Number of lender integrations
• Number of product releases
•
For our digital retailing Deal Builder journey:
–
Number of retailers using Deal Builder
–
Number of completed deals
• For our online retailing journey for
new vehicles:
–
Number of new vehicle leases
–
Yield per vehicle sold
• Automotive economy, market
and business environment
• Climate change
• Employees
• Reliance on third parties
and partners
• IT systems and cyber security
• Failure to innovate: disruptive
technologies and changing
consumer behaviours
• Legal and regulatory compliance
• Competition
• Brand and reputation
• Reliance on third parties
and partners
• IT systems and cyber security
• Failure to innovate: disruptive
technologies and changing
consumer behaviours
• Reliance on third parties
and partners
• IT systems and cyber security
• Failure to innovate: disruptive
technologies and changing
consumer behaviours
• Legal and regulatory compliance
Auto Trader Group plc
Annual Report and Financial Statements 2023
13
Strategic report
Governance
Financial statements
Section 172(1) statement
Our purpose is
Driving Change Together. Responsibly.
We are
driving change
in an industry
that needs to evolve to adapt to
changing consumer needs, and the
impact of electric vehicles.
In order to achieve our purpose,
we need to understand who our
stakeholders are and what is
important to them; we need to
understand the long-term impact
of our business on the industry
and the environment; and we need
to maintain our high standards
of business conduct.
All of these matters are taken into
consideration by the Board in its
discussions and decision-making.
In order to formalise this process,
a stakeholder framework has been
established which is applied to
all Board papers and discussions,
to enable the Board to consider
the balance of interests of
affected stakeholders.
The Board acknowledges that
not every decision it makes will
necessarily result in a positive
outcome for all of our stakeholders.
But by understanding our
stakeholders, and by considering
their diverse needs, the Board
factors into boardroom discussions
the potential impact of our
decisions on each stakeholder
group, and of the other matters
required by S172(1).
Section 172 matters
Considering the long-term
consequences of
our decisions
Considering the interests
of our employees
The need to foster good
relationships with our
stakeholders
Considering our impact
on the environment and
our community
Maintaining high
standards of conduct
Acting fairly between
stakeholders
How we
create value
How we
create value
How we
create value
Report of the
Corporate Responsibility
Committee
Governance
How we
create value
Material
decisions made
Our people
& communities
TCFD
disclosures
Our governance
& compliance
Our purpose-driven
strategy
Our stakeholders
Our stakeholders
ESG strategy
How we
manage risk
Our stakeholders
P8
P8
P8
P76
P58
P8
P15
P38
P30
P44
P10
P16
P16
P26
P48
P16
Our business model results in bringing
together
a diverse set of stakeholders
– consumers, customers (including
retailers, manufacturers and other
customers), suppliers and partners
– underpinned by our collaborative,
people-led culture.
We are committed to act
responsibly
through our focus on diversity and
inclusion, environmental sustainability
and maintaining high levels of ethical
conduct, trust and transparency.
Considering our stakeholders
The Directors of the Company have acted in the way that they consider,
in good faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole, having due regard in doing so
for the matters set out in section 172 (1) (a) to (f) of the Companies Act 2006.
Auto Trader Group plc
Annual Report and Financial Statements 2023
14
By understanding our stakeholders’ diverse needs, we factor
into Board discussions the potential impact our decisions could
have on them. Below are two material decisions made during the
financial year with an explanation of how we considered the
needs of our stakeholders in each.
CONTEXT
As inflation began to rise and the cost of living
crisis began to impact daily life, the Board
considered the impact on stakeholders in
response to growing financial concerns.
BOARD CONSIDERATIONS
Given the significant shift in the macro-economic
backdrop at the start of our financial year, with
rising inflation and weaker consumer confidence,
the Board devoted significant time to reviewing
the impact on the business and each stakeholder
group. This included our product and pricing
strategy; the management of our own cost
base; the impact on employees (particularly
lower paid employees); the implications for
customers, consumers and suppliers; as well
as considering any impacts on the wider
community and the environment.
OUTCOME
The Board noted that the increase in the cost
of living and inflation pressure would impact
all employees, in particular those on lower
salaries. Allowance was made for this
in the annual pay review, which weighted
increases towards employees on lower
incomes. In addition, a one-off payment
of £700 per employee was made (excluding
the OLT and the Board) in December 2022.
CONTEXT
Webzone Limited, which trades in the Republic
of Ireland under the Carzone brand, was sold
to Mediahuis Ireland for consideration of
€30 million.
BOARD CONSIDERATIONS
Webzone Limited is the second largest
automotive marketplace for retailers and
consumers in Ireland and is headquartered
in Dublin. For the year ended 31 March 2022,
Webzone Limited contributed total revenue
of £4.9m (which included £4.1 million of retailer
revenue) and operating profit of £1.3 million to
Auto Trader’s Group results. It represented 4%
of the Company’s average retailer forecourts
and 4% of its full-time equivalent employees.
The Board considered the impact of rising costs
on our customers, and decided to continue to
prioritise developing and launching products
that would help our customers to inform their
own pricing and improve their profitability,
such as the Auto Trader Connect: ‘Valuations’
module and AT Moves, which many customers
have made significant cost savings through.
Recognising an increase in our own cost base,
and the expectations of investors to grow revenue
in line with inflation, the Board considered a number
of options in relation to annual price rises, including
consideration of a one-off inflationary rise. However,
balancing the need to support our customers in a
sustainable way, this approach was ruled out, and we
maintained the existing policy of a single annual rise.
The Board reviewed consumer behaviour during
previous recessions or economic slowdowns,
and noted that consumer behaviour has generally
remained resilient to economic shocks. However,
it was also noted that there was a risk that cost
pressures could result in a slowing down in
the adoption of electric vehicles, which are on
average 37% more expensive than an internal
combustion engine (‘ICE’) vehicle. It was agreed
that we need to enhance the content around
affordability, including finance options, but to
balance this with a continued focus of being the
best buying destination for EVs.
THE COST OF LIVING CRISIS
The Board noted it was important to continue
to work in a partnership approach with suppliers,
particularly smaller suppliers. Material supplier
contracts were reviewed for inflation linked
cost increases and we enhanced our supplier
risk review processes over their financial stability.
Noting that the charity sector was likely to
be impacted adversely, the Board agreed that
it was important to maintain existing levels
of corporate charitable donations and to
continue to support employees with their
fundraising efforts.
Overall, the Board agreed that the actions
taken in response to the cost of living crisis
are in line with our purpose and the long-term
interests of the business.
RELEVANT STAKEHOLDERS
• Consumers
• Customers
• Our people
• Partners & suppliers
•
The community & the environment
• Investors
In making its decision about whether to proceed
with the disposal of Webzone Limited, the Board
considered various factors, including the
valuation of the business in comparison to current
profitability; the impact of the disposal on the
Auto Trader UK business; the impact on Webzone
Limited’s management team and employees;
and the impact on Webzone Limited’s customers
and suppliers, which were taken into account
when negotiating the final terms of the disposal.
OUTCOME
Webzone Limited had been part of the Auto Trader
Group for almost 20 years, and whilst this would
represent a significant change for employees and
customers, the Board agreed that the disposal
was likely to promote the success of the Company
for the benefit of its members, and would enable
Auto Trader to focus fully on the opportunities in
the UK automotive market.
Read more overleaf
DISPOSAL OF WEBZONE LIMITED
RELEVANT STAKEHOLDERS
• Consumers
• Customers
• Our people
• Partners & suppliers
• Investors
Relevant strategic priorities:
Relevant strategic priorities:
OUR STRATEGIC PRIORITIES
Classified marketplace
Platform
Being a responsible business
Digital retailing
Auto Trader Group plc
Annual Report and Financial Statements 2023
15
Strategic report
Governance
Financial statements
Consumers
WHY ARE THEY IMPORTANT TO US?
Maintaining a large and highly engaged
consumer audience of in-market car buyers,
who have high levels of trust and confidence
in Auto Trader, underpins the success of our
business model.
SIGNIFICANT AREAS OF INTEREST
•
Comprehensive choice of vehicles.
•
Ease of buying or selling a vehicle.
•
Clear and transparent information about
the vehicle, about the seller and about the
payment options.
•
Offering good levels of consumer support.
Our stakeholders
We highlight below some of our key stakeholders, and we discuss why they are
important to us, what their significant areas of interest are and, more importantly, the
ways in which we as an organisation, and the Board, effectively engage with them.
Customers
(retailers, manufacturers
and other customers)
WHY ARE THEY IMPORTANT TO US?
Our partnerships with almost 14,000 vehicle
retailers, with manufacturers and other
customers (such as leasing companies),
means that we continue to have the greatest
choice of vehicles for consumers. The majority
of our revenue is generated from our customers.
SIGNIFICANT AREAS OF INTEREST
•
Making the car selling process more efficient.
•
Access to data to make informed sourcing
and disposing decisions.
•
High-quality access to car buyers.
•
Receiving value for money from Auto Trader,
product quality and cost.
• Sourcing vehicles.
• Building strong partnerships.
Our people
WHY ARE THEY IMPORTANT TO US?
Our people are fundamental to our continued
success. This requires us to attract new talent
and to nurture, motivate and inspire a highly
skilled workforce. We commit to ensuring that
we continue to build a diverse and inclusive
culture where everyone feels valued and able
to achieve their full potential.
SIGNIFICANT AREAS OF INTEREST
• Diversity and inclusion.
•
Training, career development and progression.
•
Fair reward, recognition and benefits.
•
Working conditions, environment and wellbeing.
HOW DO WE ENGAGE WITH THEM?
•
Speaking to consumers for our Car Buyers Report,
and biannual consumer brand trackers to gauge
views on their car buying intentions. The outputs
are shared with the Board.
•
Hosting consumer surveys onsite, which provide
constant feedback on our user experience.
•
Regular consumer user testing of new products,
services and brand designs of our website.
•
Holding workshops with people who are neurodiverse
and potentially vulnerable consumers, which feeds
into our consumer facing products (for example,
their thoughts on how we display finance).
•
Consumer complaints and customer security
teams operating seven days a week.
HOW DO WE ENGAGE WITH THEM?
•
Hosting monthly retailer sentiment surveys,
evaluating product improvements and value.
•
Hosting regular forums with CEOs of big and mid-tier
retailers, OEMs, car supermarkets and automotive
finance companies to share latest data and insight.
•
Regular thought leadership and insight-driven
reports, such as the Road to 2030 Report.
•
Hosting industry insight events, retailer performance
masterclasses, webinars and conferences to share
latest views of the market and news.
•
Operational Leadership Team (‘OLT’) engages
in a business partnering programme and the Board
visited customers this year.
•
Sales teams, both telesales and field sales,
are in constant dialogue with all our customers.
•
Customers attend select Board meetings.
HOW DO WE ENGAGE WITH THEM?
•
Board Engagement Guild engages directly with the
Board (without management present) on matters
such as the cost of living crisis.
•
Hosting biannual all-employee conferences,
and regular CEO and OLT virtual business updates.
•
Annual employee benefits roadshows and
salary workshops.
•
Annual Save As You Earn share scheme for
all employees.
•
Regular employee check-in surveys.
•
Health and safety assessments.
• Wellbeing forums.
•
Inclusive Leadership Programme and Diverse
Talent Accelerator, which focuses on developing
diverse talent across the business.
• Independent whistleblowing service.
Material issues
2
Data privacy and security
4
Product innovation
5
Customer satisfaction
11
Driving transparency
Material issues
2
Data privacy and security
4
Product innovation
5
Customer satisfaction
6
Pricing fairness
8
Advocacy
Material issues
2
Data privacy and security
3
Employee wellbeing,
engagement and safety
7
Investment in talent
10
Diversity and inclusion
16
Ethics and integrity
17
Remuneration
Auto Trader Group plc
Annual Report and Financial Statements 2023
16
Section 172(1) statement
continued
The Board ensures it is kept informed of stakeholder views and concerns throughout the year and
where engagement doesn’t take place directly with the Board, the output of this engagement
is fed back to the Board and/or a Board Committee, which informs their decisions. A deeper
understanding of our stakeholders and their diverse areas of interest enables us to factor
into boardroom discussions the potential impact of our decisions on each stakeholder group.
Partners
& suppliers
WHY ARE THEY IMPORTANT TO US?
We rely on our suppliers and partners to provide
technology infrastructure, supply of data about
vehicles and their financing, and in the fulfilment
of some of our revenue generating products.
Building trusted partnerships helps us to work
better together and continue to provide the
highest quality products and services.
SIGNIFICANT AREAS OF INTEREST
•
Working collaboratively on innovations.
•
Increasing revenue from shared opportunities.
•
Fair trading and terms and conditions.
• Building long-term relationships.
The community
& the environment
WHY ARE THEY IMPORTANT TO US?
We aim to give back more to the planet than
we take out and protect our business from
the impact of climate change. We also strive
to create stronger communities and have
a positive social and environmental impact.
SIGNIFICANT AREAS OF INTEREST
•
Energy usage and carbon emissions.
•
The transition to electric vehicles.
•
Supporting and working with, and in,
the local communities in which we operate.
•
Environmental, Social and Governance
(‘ESG’) factors.
HOW DO WE ENGAGE WITH THEM?
•
Corporate Responsibility Committee holds
the business to account on its cultural KPIs.
Investors
WHY ARE THEY IMPORTANT TO US?
Maintaining a continuous transparent and
trusted dialogue with current and potential
investors promotes investor confidence and
as a result ensures continued access to capital,
allowing us to invest in the long term for the
success of the business.
SIGNIFICANT AREAS OF INTEREST
•
Financial performance including a balanced
and fair representation of financial results
and future prospects.
•
High governance standards and transparency.
• Reasonable remuneration practices.
•
Share price performance and return.
•
A continued focus on environmental and
social issues.
HOW DO WE ENGAGE WITH THEM?
•
Maintaining regular engagement with suppliers and
partners, including by a number of our OLT members.
•
Procurement processes in place to onboard new
suppliers into our business, as well arranging
regular check-ins for ongoing relationships.
•
Agreeing ways of working with new suppliers or partners
and providing feedback during ongoing projects.
•
Encouraging an open dialogue to ensure we work
collaboratively and share learnings.
•
Regular monitoring and review of financial and
operating resilience.
•
Analyse the time taken to pay suppliers via
regular reporting.
•
Applying our Ethical Procurement Policy which
helps us to take a holistic view based on cultural
alignment when deciding which suppliers and
partners we should work with.
•
Employee networks managing our charitable
support including our Auto Trader Community
Fund and our sustainability strategy.
•
Supporting organisations such as
Manchester Digital and the Automotive
30% Club, and local schools and colleges
through our STEM ambassadors.
•
Carbon Literacy training for all employees and
funding an automotive toolkit for industry use.
•
Net Zero Working Group, responsible for
leading our carbon reduction plans and
reporting in line with the TCFD framework.
•
Sharing data and insight with industry bodies
and government departments to support
policy required to enable the mass adoption
of electric vehicles.
•
Conduct regular consumer research and user
testing to understand what information is most
helpful when buying an electric vehicle.
HOW DO WE ENGAGE WITH THEM?
•
Open, honest and balanced communication
available to all shareholders.
•
Annual Report, AGM, corporate website,
regulatory news announcements and press releases.
•
Comprehensive investor relations programme
including results presentations, roadshows, investor
day, attendance at conferences, meetings with
institutional investors, fund managers and analysts.
•
Feedback regularly provided to the Board.
•
Meetings which relate to governance are attended
by the Chair or another Non-Executive Director.
•
Private shareholders encouraged to communicate
with the Board through ir@autotrader.co.uk.
•
Share relevant industry-related data and internally
produced market reports with analysts.
•
Engagement with proxy advisors and other agencies.
Material issues
4
Product innovation
13
Responsible supply chain
16
Ethics and integrity
Material issues
1
Climate
9
Making a difference to our local
communities and industries
10
Diversity and inclusion
Material issues
4
Product innovation
12
Digital infrastructure
14
Responsible tax strategy
and total tax contribution
15
Corporate governance
16
Ethics and integrity
17
Remuneration
Being a responsible business P26
MATERIAL ISSUES
Our environment
Our people & communities
Our governance & compliance
Our materiality assessment P27
Auto Trader Group plc
Annual Report and Financial Statements 2023
17
Strategic report
Governance
Financial statements
2023
2022
2021
262.8
432.7
500.2
2023
2022
2021
13.24
25.61
25.01
2023
2022
2021
152.9
328.1
327.4
2023
2022
2021
1,324
2,210
2,437
2023
Margin 55%
Margin 70%
Margin 61%
2022
2021
161.2
303.6
277.6
Key performance indicators
We measure our performance through a defined
set of financial, operational and cultural KPIs.
FINANCIAL
Definition
The Group generates revenue from Auto Trader
and Autorama. There are three streams within
Auto Trader: Trade, Consumer Services and
Manufacturer and Agency. Trade revenue is
broken down into three categories: Retailer,
Home Trader and Other, with Consumer
Services similarly split into Private, Motoring
Services and Instant Offer. Autorama revenue
is split into Vehicle and Accessory Sales, and
Commission and Ancillary.
Linked to remuneration?
Yes
Definition
Average Revenue Per Retailer (‘ARPR’) is
calculated by taking the average monthly
revenue generated from retailer customers
and dividing by the average monthly number
of retailer forecourts who subscribe to an
Auto Trader advertising package.
Linked to remuneration?
No
Definition
Operating profit is as reported in the
Consolidated income statement on
page 109. This is defined as revenue
less operating costs, plus share of profit
from joint ventures. Operating profit
margin is operating profit as a percentage
of revenue.
Linked to remuneration?
Yes
Definition
Basic earnings per share is defined as profit
for the year attributable to equity holders of
the parent divided by the weighted average
number of shares in issue during the year.
Linked to remuneration?
No
Definition
Cash generated from operations is as
reported in the Consolidated statement
of cash flows on page 113. It comprises net
cash generated from operating activities,
before income taxes paid.
Linked to remuneration?
No
Progress
Revenue increased 16% year on year, with the main
driver of growth being Retailer revenue, supported
by all other revenue lines. There was also a £27.2m
incremental contribution to Group revenue from
Autorama following the acquisition on 22 June 2022.
Link to risks: All principal risks could impact this KPI
Progress
ARPR grew £227 in the year. Growth was driven by
our product lever as retailers continued to purchase
prominence largely through higher level packages.
Market Extension and our Auto Trader Connect:
Retailer Essentials products also contributed to growth
of the product lever. Growth was further supported
by a price increase, with the stock lever being flat.
Link to risks: All principal risks could impact this KPI
Progress
Group operating profit declined by 9% to £277.6m
(2022: £303.6m), impacted by an operating loss of
£11.2m from Autorama, and £44.1m of Group central
costs. These Group central costs related to the
acquisition of Autorama, which included £38.8m of
deferred consideration and amortisation of £5.3m.
Operating profit in the core Auto Trader business was
£332.9m, up 10% on last year. Group operating profit
margin was 55% (2022: 70%).
Link to risks: All principal risks could impact this KPI
Progress
Basic EPS decreased by 2%, which was marginally
better than net income which decreased 4%, because
of fewer shares in issue following our share buyback
programme. The weighted average number of
shares in issue decreased by 2% as we purchased
and cancelled 25.3 million shares.
Link to risks: All principal risks could impact this KPI
Progress
Cash generated from operations decreased
marginally to £327.4m in the year due to Autorama
operating loss. Corporation tax payments increased to
£60.5m (2022: £56.2m). The majority of cash was utilised
for the acquisition of Autorama (£144.2m). We also
returned cash to shareholders through our share buyback
programme of £148.0m and dividends of £77.7m.
Link to risks: All principal risks could impact this KPI
Revenue
£m
Basic EPS
Pence per share
Cash generated from operations
£m
Link to strategic priorities:
Average Revenue Per Retailer (‘ARPR’)
£ per month
Operating profit
£m
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Auto Trader Group plc
Annual Report and Financial Statements 2023
18
2023
2022
2021
2020
64.6m
56.3m
68.9m
69.6m
2023
2022
2021
2020
498.4m
442.8m
556.3m
513.6m
2023
2022
2021
13,336
13,964
13,913
2023
2022
2021
909
960
1,160
2023
2022
2021
485,000
430,000
437,000
OPERATIONAL
Definition
Monthly average visits across all our
platforms, as measured by Snowplow.
Prior periods have been restated as
they were previously measured by
Google Analytics.
Linked to remuneration?
No
Definition
Monthly average minutes spent
across all our platforms, as measured
by Snowplow. Prior periods have been
restated as they were previously measured
by Google Analytics.
Linked to remuneration?
No
Definition
The average number of retailer forecourts
per month that subscribe to an Auto Trader
advertising package during the financial year.
Linked to remuneration?
No
Definition
Full-time equivalent employees are measured
on the basis of the number of hours worked
by full-time employees, with part-time
employees included on a pro-rata basis.
Number of FTEs (which includes contractors)
is reported internally each calendar month,
with the full-year number being generated
from an average of those 12 time periods.
Linked to remuneration?
No
Definition
The average number of physical cars
(either new or used) that are advertised on
autotrader.co.uk per month. Live stock is an
important component of our network effect
business model. For used cars, we charge our
retailer customers on a cost per advertised
slot basis for their advertising package,
meaning the stock on our website has some
correlation to our Retailer revenue.
Linked to remuneration?
No
Progress
Our average monthly cross platform visits increased
by 1% to 69.6 million per month (2022: 68.9 million) and
were 24% above pre-pandemic levels recorded in 2020
(56.3 million). Continued strong demand from car buyers,
despite economic uncertainty and higher cost of living,
underpinned good visit numbers across the year.
Link to risks:
1
6
8
9
Progress
Engagement, measured by total minutes spent onsite,
decreased by 8% to an average of 513.6 million minutes
per month (2022: 556.3 million minutes) although was
16% ahead of pre-pandemic levels (2020: 442.8 million
minutes). The high levels seen last year were a result
of pent-up demand following periods of COVID-19
lockdown. We continue to use Comscore for a
comparison to competitors and our share of minutes
remained at over 75% across our competitor set.
Link to risks:
1
6
8
9
Progress
The average number of retailer forecourts advertising
on our platform was broadly flat at 13,913 (2022: 13,964).
However, excluding the Webzone Limited disposal
(negative impact of 245 retailers over the period),
like-for-like retailer numbers grew by 1% year on year,
reaching the highest level of UK retailers we have ever
had using our platform.
Link to risks:
1
6
8
9
Progress
FTEs have increased by 21% year on year.
The acquisition of Autorama in June 2022
has been the primary driver of the increase,
contributing an additional 164 FTEs to this year’s
average. The disposal of Webzone Limited in
October 2022 partially offset this growth,
with a decrease of 16 FTEs on average.
Link to risk:
3
Progress
Total live stock on site increased by 2% to an average
of 437,000 cars (2022: 430,000). New car stock
declined to an average of 25,000 (2022: 29,000)
due to constrained new car supply. Used car live stock
increased 3% on average across the year, however we
still saw some supply shortages, particularly with our
franchise customers.
Link to risks:
1
6
8
9
Cross platform visits
Monthly average visits spent across all platforms
Number of full-time equivalent
employees (‘FTEs’)
Average number (including contractors)
Live car stock
Average number per month
Cross platform minutes
Monthly average minutes spent across all platforms
Number of retailer forecourts
Average number per month
1.
Automotive economy, market and business environment
2.
Climate change
3.
Employees
4.
Reliance on third parties and partners
5.
IT systems and cyber security
6.
Failure to innovate: disruptive technologies
and changing consumer behaviours
7.
Legal and regulatory compliance
8.
Competition
9.
Brand and reputation
10.
External catastrophic and geo-political events
OUR PRINCIPAL RISKS AND UNCERTAINTIES
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Being a responsible business
Classified marketplace
Platform
Digital retailing
OUR STRATEGIC PRIORITIES
Auto Trader Group plc
Annual Report and Financial Statements 2023
19
Strategic report
Governance
Financial statements
2023
2022
2021
93
95
91
2023
2022
2021
39
40
43
2023
2022
2021
34
38
40
2023
2022
2021
11
14
15
2023
2022
2021
6
6
8
2023
2022
2020 (Base year)
356,502
129,419
79,540
Key performance indicators
continued
Being a responsible business
Classified marketplace
Platform
Digital retailing
OUR STRATEGIC PRIORITIES
1.
The employee engagement score excludes employees of Autorama. Autorama currently conduct their own survey with a different question set. In their March 2023 survey,
Autorama employees were asked to rate the question “How likely is it you would recommend Vanarama as a place to work?” Answers were given on a 10-point scale,
10 representing highly recommend. The survey had a 71% response rate and 62% responded 9 or above.
Definition
We calculate our diversity percentages using
total Group headcount, and in 2023 this included
Autorama (2023: 1,226, 2022: 1,002, 2021: 953).
Based on the percentage of employees who are
women (both cis and trans) at the end of March.
In calculating this percentage we take into
account all gender identities, including non-binary.
Linked to remuneration?
Yes
Definition
We calculate our diversity percentages using
total Group headcount, and in 2023 this included
Autorama (2023: 1,226, 2022: 1,002, 2021: 953).
Based on the percentage of our headcount
that define themselves as ethnically diverse
as at the end of March. In calculating this
percentage we take into account those who
have chosen not to specify their ethnicity.
Linked to remuneration?
Yes
Progress
We are committed to having a representative
workforce across all levels of our business and
recognise the importance of gender diversity.
Over the past 12 months, the percentage of our
employees who are women increased to 43%
(2022:40%). We remain committed to improving
gender diversity across our organisation.
Link to risks:
3
9
Progress
Over the past 12 months we have increased
the percentage of our employees who define
themselves as ethnically diverse to 15%. Of the 1,060
people who disclose their ethnicity when asked,
184 are ethnically diverse. There were 166 employees
(14%) who have not yet disclosed their ethnicity or
opted not to do so.
Link to risks:
3
9
Employee engagement
1
% of employees who are proud
to work at Auto Trader
Ethnically diverse representation
as a % of total staff
% as at March each year
Ethnically diverse representation
as a % of leadership
% as at March each year
Total CO
2
emissions
2
Tonnes of carbon dioxide equivalent
Women as a % of total staff
% as at March each year
Women as a % of leadership
% as at March each year
CULTURAL
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Link to strategic priorities:
Definition
We define employee engagement by
measuring the percentage of people who
say they are proud to work for Auto Trader.
Based on a survey to all employees in February
2023 asking our people to rate the statement
“I am proud to work for Auto Trader”. Answers
were given on a five-point scale from strongly
disagree to strongly agree.
Linked to remuneration?
No
Progress
We are pleased that we have been able to maintain
high levels of engagement from employees, with 91%
of employees saying they are proud to work for
Auto Trader. We continue to survey employees regularly
and seek to improve the employee experience as we
continue to operate a hybrid working environment.
Link to risks:
3
9
Definition
We calculate our diversity percentages
using total Group headcount, and in 2023 this
included Autorama (2023: 1,226, 2022: 1,002,
2021: 953). Based on the percentage of those
in leadership positions who are women (both
cis and trans) at the end of March. We define
leaders as those who are on our Operational
Leadership Team (‘OLT’) and their direct reports.
Linked to remuneration?
Yes
Progress
The percentage of employees who are women in
leadership roles increased to 40% (2022: 38%). Of the
85 people in leadership positions who define their
gender when asked, 34 are women. Our Diverse
Talent Accelerator and Continuous Leadership
Development programmes are aimed at supporting
and developing employees into leadership roles.
Link to risks:
3
9
Definition
We calculate our diversity percentages using
total Group headcount, and in 2023 this included
Autorama (2023: 1,226, 2022: 1,002, 2021: 953).
Based on the percentage of those in leadership
positions that define themselves as ethnically
diverse at the end of March. We define leaders
as those who are on our Operational Leadership
Team (‘OLT’) and their direct reports.
Linked to remuneration?
Yes
Progress
The percentage of ethnically diverse employees in
leadership roles increased in the year to 8%. Of the
85 people in leadership positions who define their
ethnicity when asked, seven are ethnically diverse.
We recognise there is a lot to do in this area. Our
Diverse Talent Accelerator and Continuous Leadership
Development programmes are aimed at supporting
and developing employees into leadership roles.
Link to risks:
3
9
Definition
The methodology is based on the financial
consolidation approach, as defined in the
GHG Protocol, a Corporate Accounting and
Reporting Standard (Revised Edition). Emission
factors used are from the UK Government’s
Department for Business, Energy and Industrial
Strategy (‘BEIS’) conversion factor guidance
for the year reported. The total amount of CO
2
emissions includes Scope 1, 2 and 3 across all
relevant categories.
Linked to remuneration?
Yes
Progress
Calculations of our GHG emissions have been restated
to include Autorama, including prior year (2022) and our
base year (2020) calculations. GHG emissions during
the year total 79.5k tonnes of CO
2
across Scopes 1, 2
and 3 (March 2022 restated: 129.4k tonnes). The majority
of our emissions are predominantly due to the emissions
associated with the vehicles sold by Autorama which
temporarily pass through their balance sheet. This was
the main driver for the year-on-year decline with fewer
vehicles sold having passed through their balance sheet.
Link to risks:
2
4
7
2.
Our emissions have been restated to include
Autorama, including prior year (2022) and our
base year (2020).
1.
Automotive economy, market and business environment
2.
Climate change
3.
Employees
4.
Reliance on third parties and partners
5.
IT systems and cyber security
6.
Failure to innovate: disruptive technologies
and changing consumer behaviours
7.
Legal and regulatory compliance
8.
Competition
9.
Brand and reputation
10.
External catastrophic and geo-political events
OUR PRINCIPAL RISKS AND UNCERTAINTIES
Auto Trader Group plc
Annual Report and Financial Statements 2023
20
Non-financial information statement
NON-FINANCIAL
RISK
POLICIES, PROCEDURES
AND EMPLOYEE GUILDS
SECTION WITHIN THIS
ANNUAL REPORT
CULTURAL
KPIS
ENVIRONMENTAL
• Net Zero Working Group
• Sustainability Network
• Environmental sustainability:
pages 30 to 37
• Total Scope 1, 2 & 3
CO
2
emissions
OUR PEOPLE
• Stakeholder engagement
• Board Engagement Guild
• Whistleblowing Policy
• Ethnicity Network
• Women’s Network
• Diversity and inclusion:
pages 40 to 43
• Section 172(1) statement:
pages 14 to 17
• People who are proud
to work at Auto Trader
• Gender diversity
• Ethnic diversity
• Women in leadership roles
• Ethnic diversity in
leadership roles
SOCIAL AND
COMMUNITY
• Ethical Procurement Policy
• Customer Charter
• Volunteering days
• Make a Difference Guild
• Wellbeing Guild
• Ethnicity Network
• Women’s Network
• Disability & Neurodiversity
Network
• Age Network
• Family Network
• Social Mobility Network
• Career Kickstart Network
• LGBT+ Network
• Diversity and inclusion:
pages 40 to 43
• Environmental sustainability:
pages 30 to 37
• People who are proud
to work at Auto Trader
• Gender diversity
• Ethnic diversity
• Women in leadership roles
• Ethnic diversity in
leadership roles
HUMAN RIGHTS
• Modern Slavery Policy
• Privacy Policy
• Governance & compliance:
pages 44 to 47
ANTI-BRIBERY AND
ANTI-CORRUPTION
• Anti-bribery, Gifts
and Hospitality Policy
• Governance & compliance:
pages 44 to 47
BUSINESS MODEL
• How we create value:
pages 8 and 9
PRINCIPAL RISKS
• Principal risks
and uncertainties:
pages 50 to 55
NON-FINANCIAL
KEY PERFORMANCE
INDICATORS
• Operational and cultural KPIs:
pages 19 and 20
We aim to comply with all areas of the UK’s Non-Financial Reporting Directive.
The table below sets out where stakeholders can find further information for
each area within this Annual Report.
Auto Trader Group plc
Annual Report and Financial Statements 2023
21
Strategic report
Governance
Financial statements
Operational review
I am pleased with the progress we’ve
made this year, in particular the
development of our digital retailing
proposition. The early feedback
from our Deal Builder offering is
encouraging and we are excited
to scale this in the coming year.
Summary of Group operating performance
Consumer engagement remained strong;
we have maintained our position as the
UK’s largest and most engaged automotive
marketplace for new and used cars. Over 75%
of all minutes spent on automotive classified
sites were spent on Auto Trader (2022: over
75%) and we were 7x larger than our nearest
competitor (2022: 8x). Our average monthly
cross platform visits increased by 1% to
69.6 million per month (2022: 68.9 million) and
were 24% above pre-pandemic levels recorded
in 2020 (56.3 million). Engagement, measured
by total minutes spent onsite, decreased by
8% to an average of 514 million minutes per
month (2022: 556 million minutes), although
was 16% ahead of pre-pandemic levels
(2020: 443 million minutes). For both visits and
minutes, we have changed the data source
from Google Analytics to Snowplow to give
us a deeper understanding of our user events.
The average number of retailer forecourts
advertising on our platform was broadly flat
at 13,913 (2022: 13,964). However, excluding the
Webzone Limited disposal (a negative impact
of 245 retailers over the period), like-for-like
retailer numbers grew by 1% year on year,
representing the highest level of UK retailers
we have ever had using our platform.
Though there continues to be some merger
and acquisition activity among car retailers,
we see no evidence of meaningful industry
consolidation, nor any increase in barriers
for those wishing to enter the industry.
Total live stock on site increased by 2% to
an average of 437,000 cars (2022: 430,000).
New car stock declined to an average of
25,000 (2022: 29,000) due to constrained
new car supply. Used car live stock increased
3% on average across the year although was
35,000 cars lower than pre-pandemic levels.
Autorama delivered 6,895 vehicles across
the period, which comprised 4,295 cars, 2,253
vans and 347 pickups. Both vans and pickups
were particularly impacted by supply challenges
in the year. Average commission and ancillary
revenue per vehicle delivered was £1,624.
Our marketplace
Our core Auto Trader marketplace saw strong
revenue and operating profit growth despite
ongoing supply challenges, which shows the
resilience of our business through economic
cycles. We successfully executed our annual
pricing event in April 2022, which included the
launch of Retail Essentials, the first module of
our Auto Trader Connect platform. This product
uses our proprietary taxonomy data to ensure
that vehicles are well described and that their
specification is accurate, helping retailers
to optimise margins. It also enables real-time
stock management to ensure that all stock
records are up to date on Auto Trader and
all other digital channels, improving sales
conversion and the experience of car buyers.
Our UK customer numbers are at record levels
due to good market conditions, our strong
position with car buyers and the partnerships
formed with our customers. We have further
embedded our partnership approach by
ensuring that we capture our customers’
own business goals, be that stock turn, sales
volumes or target margins, and then use
this as a basis to recommend products and
performance improvements. Penetration
of our higher yielding packages increased
during the year, with 33% of retailer stock now
above our Standard package as at the end
of March 2023 (March 2022: 31%). We also saw
an increase in the uptake of our Pay-Per-Click
product which allows stock items to appear
at the top of our search listings.
With the sale of new and used electric
vehicles increasing, we continue to invest
in electric vehicle (‘EV’) content to ensure
we are the number one destination for car
buyers interested in purchasing an EV.
We inform consumers about electric vehicles
through social media channels and raise
awareness through our monthly EV giveaway
which achieved over 3.5 million entries this
year. We have also focused on improving
the EV charging information to help give
consumers simpler, more consistent data
to make informed decisions.
At the end of March 2023, we had over 1,900
retailers (March 2022: over 1,800) paying to
advertise new cars on our site which is a robust
performance given the challenges of sourcing
new car stock due to supply shortages.
Platform
We continue to invest in our technology,
data and product platform which supports
our core marketplace. As mentioned above,
we launched Retail Essentials which enables
real-time stock management and makes
our vehicle taxonomy available to retailers
through our own Retailer Portal or our platform
via APIs. At the end of March 2023, we had
integrations with over 90 third-party software
providers with Auto Trader Connect.
As part of our April 2023 pricing event,
we launched our second module of Auto
Trader Connect, Valuations. This makes
specification adjusted valuations available
within Retailer Portal, where many of
our retailers manage their inventory.
Our valuations benefit from machine
learning technology which continuously
improves and optimises results based
on c.500,000 observations that we see
each day. This enables customers to drive
pricing performance as the market moves.
This data can also be accessed through
an API via our platform, enabling third
parties and retailers to directly integrate
valuations into the systems used to manage
their businesses. These modules are an
important part of how we are using our
platform to power retailers’ businesses,
which strengthens our marketplace and
is a key enabler for digital retailing.
We continued to see an increase in the number
of software releases to 51,000 over the year
(2022: 46,000).
Digital retailing
Last year, we launched a new product,
Market Extension, which allows customers
to sell vehicles outside their local area,
beyond the physical constraints of their
forecourt. This product is a key part of our
longer-term aspiration to enable digital
retailing for all customers. We had over 7%
of retailer stock on this product at the end
of March 2023 (March 2022: 6%), with the
product being most relevant for those
customers with either delivery capability
or multiple forecourt locations.
Building on both our strong classified
marketplace and platform capability,
we continue to bring more of the car buying
journey online. Our approach to digital
retailing is to be “car first” and to enable any
retailer (including manufacturers and leasing
companies) to sell their cars online. With this goal
in mind, we will initially offer two digital retailing
consumer journeys on Auto Trader: a used car
Deal Builder journey and an online retailing
journey for consumers to lease a new car.
The used car Deal Builder journey
During the year, we launched Deal Builder
which uses Auto Trader technology to
enable car buyers to do more of their
car buying online, including valuing their
Auto Trader Group plc
Annual Report and Financial Statements 2023
22
Our market-leading platform
part exchange, applying for finance and
reserving the car. Importantly, all of these
interactions can be easily carried out either
online, over the phone or on the forecourt.
Currently these tools are available in Retailer
Portal, but over time they will be made
available via APIs as part of our platform
strategy, enabling these transactions to be
picked up in retailers’ existing sales systems
and processes. Our focus is on enabling
the car buyer to complete as much of the
journey as they are comfortable with on
Auto Trader, completing the rest of the
transaction on the forecourt, over the
phone or a combination of these channels.
In summer 2022, we began running a Deal
Builder trial with a handful of retailers and
have been encouraged by how the trial has
performed to date. Towards the end of
the year we started to scale the number
of customers on the product and by the
end of the financial year there were over
50 retailers live. We saw over 200 deals
submitted in the year. We are encouraged by
the percentage of deals that converted into
a sale and the positive feedback from both
consumers and retailers. We are seeing
strong buyer engagement out of retail hours,
seven days a week, which supports the case
that this should build sales capacity for
our retailers.
We will continue to scale the number of
retailers on Deal Builder, and iterate the
product during this financial year, with the
goal to monetise some retailers by the end
of financial year 2024.
Online retailing journey for consumers
to lease a new car
There are significant structural changes
impacting the new vehicle market in the UK.
These include the growth of electric cars,
new manufacturers entering the UK market
and a shift towards new digital distribution
models. These changes present an
opportunity for Auto Trader to play a more
significant role in the new vehicle market,
and were part of the strategic rationale
behind the acquisition of Autorama,
which completed during the financial year.
Autorama’s capabilities combined with
Auto Trader’s platform and scale will provide
a compelling proposition for manufacturers,
retailers and funders, with an opportunity to
drive direct sales, reduce customer acquisition
costs and grow their businesses’ profitability.
Following the acquisition, Autorama has
been heavily impacted by the supply
challenges particularly in the pickup and
van markets. The business has largely been
run standalone throughout 2023, delivering
6,895 vehicles, which comprised 4,295 cars,
2,253 vans and 347 pickups, with average
commission and ancillary revenue per
vehicle of £1,624. During the latter part of
2023, we successfully tested driving traffic
into the Autorama journey and have recently
completed the work to enable the full check
out of a leasing deal on Auto Trader.
Being a responsible business
We are pleased the proportion of employees
that are proud to work at Auto Trader
remained high at 91% (March 2022: 95%)
and our gender and ethnicity make up has
improved year-over-year. At year end,
women represented 43% of our organisation
(March 2022: 40%) and 40% (March 2022: 38%)
of leadership roles as defined by the FTSE
Women Leaders Review. We are committed
to increasing the percentage of ethnically
diverse employees, who currently represent
15% of the organisation (March 2022: 14%),
with 14% of employees not disclosing their
ethnicity. The percentage of ethnically
diverse employees in leadership increased
to 8% (March 2022: 6%) again using the FTSE
Women Leaders definition, which highlights
the work still to be done in this area.
Our employee-driven networks (representing
women, ethnicity, LGBT+, early careers,
disability & neurodiversity, social mobility,
families and age) have continued their
impressive work with high engagement and
are key to creating an Auto Trader where
people feel they belong and can achieve
their full potential. Each network sets its
own commitments aligned to our broader
strategy which is reviewed by the leadership
team bi-annually.
We have committed to reducing absolute
Scope 1 and 2 emissions by 50% and absolute
Scope 3 emissions by 46% before the end
of financial year 2031 and continue to
include these reduction plans as part of
our remuneration targets. Alongside the
reduction in emissions, we are working on
a carbon removal plan to help us achieve
our long-term net zero goal by 2040.
These targets were validated by the Science
Based Targets initiative in January 2023.
Absolute emission levels have increased
from last year as we have updated our
calculations to include the impact of
Autorama. Initial calculations of our
GHG emissions during the year total
79.5k tonnes of CO
2
across Scopes 1, 2 and 3
(2022 restated: 129.4k). The majority of our
emissions are Scope 3, predominantly
attributable to our suppliers and emissions
relating to the small number of vehicles
sold by Autorama that pass through their
balance sheet. The year-on-year reduction
is predominantly due to lower volumes of
these vehicles passing through the balance
sheet, which we expect to reduce further
over time. Initiatives include using our
data and voice within the industry and
government to help inform public policy
and better decision-making. We have
improved our SEO ranking for electric
vehicles, continued our EV giveaway
(with over 3.5 million entries this year) and
have significantly improved the EV charging
and battery range information on our
product pages.
Catherine Faiers
Chief Operating Officer
1 June 2023
A seamless omni-channel experience for consumers
The car market is changing. While there is still a significant role for physical locations to play, it’s clear that consumers are keen
to complete more of the buying journey online, where possible. With our leading platform and data, we are perfectly positioned
to drive and help deliver this change in the best possible way for consumers and retailers, alike.
Search
Leveraging our
unrivalled data set to
deliver best-in-class
search experiences
Part exchange
Get an accurate price
for an existing vehicle
Finance
Point of sale and
applications on
Auto Trader
Reserve
Secure the vehicle
for the buyer and
give improved sales
attribution for retailers
Delivery
B2B and B2C
delivery available
on our Auto Trader
Moves platform
Deal Builder
Auto Trader Group plc
Annual Report and Financial Statements 2023
23
Strategic report
Governance
Financial statements
Financial review
Group adjusted EBITDA
(£m)
2023
2022
Change
Operating profit
277.6
303.6
(9%)
Depreciation &
amortisation
14.1
7.2
96%
Share of profit from
joint ventures
(2.5)
(2.9)
(14%)
Autorama deferred
consideration
38.8
–
–
Adjusted EBITDA
328.0
307.9
7%
Adjusted earnings before interest, taxation,
depreciation and amortisation, share of
profit from joint ventures and Autorama
deferred consideration increased by 7%
to £328.0m (2022: £307.9m).
Group profit before tax decreased by 2% to
£293.6m (2022: £301.0m), which included a
£19.1m profit on disposal of Webzone Limited
(trading as ‘Carzone’), which was sold
on 24 October 2022. Cash generated from
operations was £327.4m (2022: £328.1m).
Auto Trader results
Revenue increased to £473.0m (2022: £432.7m),
up 9% when compared to the prior year.
Trade revenue, which comprises revenue
from Retailers, Home Traders and other
smaller revenue streams, increased
by 10% to £427.4m (2022: £388.3m).
an average of 25,000 (2022: 29,000) due
to the well documented shortage of new
car supply. Underlying used car live stock
increased by 3% on average across the year,
although much of this increase came from
a higher volume of private listings. The stock
lever is not impacted by private listings,
but by the number of retailer paid stock
units which were broadly flat for the year
(2022: increase £52).
• Product: Our product lever contributed
growth of £137 (2022: £121) to total ARPR.
Broadly half of this product growth
was due to more retailers purchasing
prominence products, including our
higher yielding Enhanced, Super and Ultra
packages where penetration increased to
33% (March 2022: 31%). Our Market Extension
product, allowing retailers to sell outside
of their local area, also contributed to
the product lever with 7% (March 2022: 6%)
of retailer stock on the product by the
end of the year. Finally, there was also
some contribution from our Pay-Per-Click
product, where retailers can boost visibility
of their stock in search through pay-per-click
campaigns. The other half of the product
lever was made up from our Auto Trader
Connect: Retail Essentials product included
in our annual pricing event in April 2022
and also smaller contributions from
AutoConvert finance and data products.
Home Trader revenue increased by 15% to
£10.1m (2022: £8.8m). Other revenue increased
by 15% to £10.5m (2022: £9.1m).
Consumer Services revenue increased
by 4% in the year to £34.5m (2022: £33.3m).
Private revenue, which is largely generated
from individual sellers who pay to advertise
their vehicle on the Auto Trader marketplace,
increased by 11% to £22.4m (2022: £20.2m)
which was partially offset by Motoring
Services revenue, which decreased 8% to
£12.1m (2022: £13.1m). Instant Offer contributed
£0.8m to Consumer Services (2022: £0.9m),
which is included in Private revenue.
Revenue from Manufacturer and Agency
customers was flat at £11.1m (2022: £11.1m).
New car advertising in 2023 continued to
be impacted by new car supply shortages.
Total costs increased 8% to £142.6m
(2022: £132.0m).
Auto Trader costs (£m)
2023
2022
Change
People costs
74.0
69.8
6%
Marketing
22.3
20.5
9%
Other costs
39.6
34.5
15%
Depreciation &
amortisation
6.7
7.2
(7%)
Auto Trader costs
142.6
132.0
8%
People costs, which comprise all staff and
contractor costs, increased by 6% to £74.0m
(2022: £69.8m). The increase in people
costs was partly driven by an increase in
the average number of full-time equivalent
employees (‘FTEs’) to 996 (2022: 960),
and an increase in underlying salary costs.
Marketing spend increased by 9% in the year
to £22.3m (2022: £20.5m).
Other costs, which include data services,
property related costs and other overheads,
increased by 15% to £39.6m (2022: £34.5m).
The increase was primarily due to increased
Auto Trader revenue (£m)
2023
2022
Change
Retailer
406.8
370.4
10%
Home Trader
10.1
8.8
15%
Other
10.5
9.1
15%
Trade
427.4
388.3
10%
Consumer Services
34.5
33.3
4%
Manufacturer
& Agency
11.1
11.1
0%
Auto Trader revenue
473.0
432.7
9%
Retailer revenue increased by 10% to £406.8m
(2022: £370.4m). The average number of retailer
forecourts advertising on our platform was
broadly flat at 13,913 (2022: 13,964). However,
after accounting for the disposal of Webzone
Limited (an impact of 245 fewer retailers over
the period), like-for-like retailer numbers
increased by 1% on average across the year.
Average Revenue Per Retailer (‘ARPR’) per
month increased by 10% to £2,437 (2022: £2,210).
This was driven by both the product and price
levers, with the stock lever being flat.
• Price: Our price lever contributed growth
of £90 (2022: £74) to total ARPR as we
delivered our annual pricing event for all
customers on 1 April 2022, which included
additional products but also a like-for-like
price increase.
•
Stock: The number of live cars advertised
on Auto Trader increased by 2% to 437,000
(2022: 430,000). New car stock declined to
Group results
Group operating
profit (£m)
2023
2022
Change
Revenue
500.2
432.7
16%
Operating costs
(225.1)
(132.0)
71%
Share of profit
from joint
ventures
2.5
2.9
(14%)
Operating profit
277.6
303.6
(9%)
Group revenue increased by 16% to
£500.2m (2022: £432.7m) driven by
Auto Trader revenue which increased
by 9% to £473.0m (2022: £432.7m),
and £27.2m from Autorama following
its acquisition on 22 June 2022.
Group operating profit declined by 9%
to £277.6m (2022: £303.6m). Auto Trader
operating profit increased by 10% to
£332.9m (2022: £303.6m), which included
£2.5m share of profit from joint ventures
(2022: £2.9m). Autorama had an
operating loss of £11.2m.
Group central costs included a charge
of £38.8m, which is part of the £50.0m
share-based payment expense relating
to the deferred consideration for
Autorama (which will be settled in shares
12 months after the completion date),
and an amortisation charge of £5.3m
relating to the Autorama intangible
assets recognised under IFRS 3 business
combinations. This resulted in Group
operating profit margin of 55% (2022: 70%).
Auto Trader Group plc
Annual Report and Financial Statements 2023
24
overhead costs, including the cost associated
with completing the buy-in of our legacy
defined benefit pension scheme, return of
travel and higher office and people related
costs. Depreciation and amortisation
decreased by 7% to £6.7m (2022: £7.2m).
Operating profit bridge (£m)
2023
2022
Change
Revenue
473.0
432.7
9%
Operating costs
(142.6)
(132.0)
8%
Share of profit from
joint ventures
2.5
2.9
(14%)
Auto Trader
operating profit
332.9
303.6
10%
Group central costs
— relating to
Autorama acquisition
(44.1)
–
–
Autorama
operating loss
(11.2)
–
–
Group operating profit
277.6
303.6
(9%)
Operating profit increased by 10% to £332.9m
during the year (2022: £303.6m). Operating
profit margin remained flat at 70% (2022: 70%).
Our share of profit generated by Dealer
Auction, the Group’s joint venture, decreased
14% to £2.5m (2022: £2.9m) in the year due to
lower levels of auction activity as a result of
supply constraints.
Autorama results
Autorama revenue (£m)
2023
Vehicle & Accessory Sales
16.0
Commission & Ancillary
11.2
Autorama revenue
27.2
Autorama revenue was £27.2m, with Vehicle
and Accessory Sales contributing £16.0m,
and Commission and Ancillary revenue
contributing £11.2m.
Total deliveries amounted to 6,895 units,
which comprised 4,295 cars, 2,253 vans
and 347 pickups. Average commission
and ancillary revenue per unit delivered
was £1,624.
Autorama costs (£m)
2023
Cost of goods sold
15.7
People costs
10.5
Marketing
4.7
Other costs
5.4
Depreciation & amortisation
2.1
Autorama costs
38.4
The Autorama business delivered c.700
vehicles which were temporarily taken on
balance sheet in the period from 22 June 2022
to 31 March 2023. This represented just over
10% of total vehicles delivered in the period.
The cost of these vehicles was taken through
cost of goods sold, with the corresponding
revenue in Vehicle and Accessory Sales.
People costs of £10.5m related to the 209
FTEs employed on average through the year.
As a result of the acquisition being on
22 June 2022, the contribution to the Group’s
average number of FTEs in the year was 164.
Marketing in the year was £4.7m. Other costs
include IT services, property, other overheads
and some depreciation and amortisation
of developed software. The Autorama
operating segment made an operating loss
of £11.2m.
Autorama operating loss (£m)
2023
Revenue
27.2
Administrative expenses
(38.4)
Operating loss
(11.2)
Group net finance costs
Group net finance costs increased to £3.1m
(2022: £2.6m). Interest costs on the Group’s
Syndicated Revolving Credit Facility
(‘Syndicated RCF’) totalled £2.6m (2022: £1.4m)
with the year-on-year increase due to higher
utilisation of the facility across the year.
At 31 March 2023 the Group had drawn £60.0m
of its available facility (31 March 2022: £nil).
Other finance costs comprised amortisation
of debt issue costs of £0.5m (2022: £0.1m).
Interest costs relating to leases totalled
£0.2m (2022: £0.2m), which was offset by
interest receivable on cash and cash
equivalents of £0.2m (2022: £0.1m).
Amendment of Syndicated RCF
commitments
On 1 February 2023, the Group amended and
extended its Syndicated RCF, reducing the
commitment from £250.0m to £200.0m. The
facility was due to terminate in two tranches:
£52.2m maturing in June 2023 and £197.8m
maturing in June 2025. The facility has now
been extended to February 2028 plus
additional extension options with no tranche
terminations. There is no requirement to
settle all or part of the debt earlier than the
termination dates stated.
Taxation
Profit before taxation decreased by 2% to
£293.6m (2022: £301.0m), with the decrease
being lower than operating profit predominantly
due to a £19.1m profit on disposal from the
sale of Webzone Limited. The Group tax
charge of £59.7m (2022: £56.3m) represents
an effective tax rate of 20% (2022: 19%). This is
higher than the average standard UK rate
principally due to the Autorama deferred
consideration charge being non-deductible.
With revenue exceeding £500.0m for the first
time, the Group is potentially within scope of
the UK’s digital services tax (‘DST’), however
certain revenue streams, such as vehicle and
accessory sales, would be exempt, meaning
we do not meet the threshold in financial year
2023. It is HMRC’s intention that the current
UK DST will be repealed during financial year
2024 and replaced with an OECD model for
which the Group would not be in scope.
Earnings per share
Basic earnings per share decreased by 2%
to 25.01 pence (2022: 25.61 pence) based on
a weighted average number of ordinary shares
in issue of 935,138,578 (2022: 955,532,888).
Diluted earnings per share of 24.77 pence
(2022: 25.56 pence) also decreased by 3%,
based on 944,144,242 shares (2022: 957,534,145)
which takes into account the dilutive impact
of outstanding share awards.
Adjusted EPS (£m)
2023
2022
Change
Net income
233.9
244.7
(4%)
Autorama deferred
consideration
38.8
–
–
Profit on the sale of
subsidiary
(19.1)
–
–
Adjusted net income
253.6
244.7
4%
Adjusted earnings per
share (pence)
27.12
25.61
6%
Adjusted earnings per share, before Autorama
deferred consideration, profit on the sale of
subsidiary, and net of the tax effect in respect
of these items, increased by 6% to 27.12 pence
(2022: 25.61 pence).
Cash flow and net debt
Cash generated from operations decreased
to £327.4m (2022: £328.1m). Corporation tax
payments increased to £60.5m (2022: £56.2m).
Cash generated from operating activities
was £266.9m (2022: £271.9m).
As at 31 March 2023 the Group had net bank
debt of £43.4m (31 March 2022: net cash
£51.3m), an increase of £94.7m due to the
acquisition of Autorama. At the year end, the
Group had drawn £60.0m of its Syndicated
RCF (31 March 2022: £nil) and held cash and
cash equivalents of £16.6m (31 March 2022:
£51.3m).
Leverage, defined as the ratio of Net bank
debt to EBITDA (adjusted for the Autorama
deferred consideration), was 0.1 times (2022:
zero) and interest paid was £3.4m (2022: £1.5m).
Capital structure and dividends
During the year, a total of 25.3m shares (2022:
24.9m) were purchased for a consideration
of £147.3m (2022: £163.5m) before transaction
costs of £0.7m (2022: £0.8m). A further £77.7m
(2022: £73.6m) was paid in dividends, giving a
total of £225.0m (2022: £237.1m) in cash
returned to shareholders. The Directors are
recommending a final dividend of 5.6 pence
per share. Subject to shareholders’ approval
at the Annual General Meeting (‘AGM’) on
14 September 2023, the final dividend will be
paid on 22 September 2023 to shareholders
on the register of members at the close of
business on 25 August 2023. The total dividend
for the year is therefore 8.4 pence per share
(2022: 8.2 pence per share).
The Group’s long-term capital allocation
policy remains 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.
Following these activities any surplus cash
will be used to continue our share buyback
programme and steadily reduce gross
indebtedness. It is the Board’s long-term
intention that the Group will return to a net
cash position.
Going concern
The Group generated significant cash from
operations during the year. At 31 March 2023
the Group had drawn £60.0m of its £200.0m
unsecured Syndicated RCF and had cash
balances of £16.6m. The Group has a strong
balance sheet and flexibility in terms of
uses of cash to manage increased economic
uncertainty and higher interest rates.
The £200.0m Syndicated RCF is committed
until February 2028. Based on the facilities
available and current financial projections
for the next 12 months the Directors have
concluded that it is appropriate to prepare
the financial statements on a going
concern basis.
Jamie Warner
Chief Financial Officer
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
25
Strategic report
Governance
Financial statements
As the UK’s largest automotive marketplace, we believe we have an
obligation to do business responsibly and to create a more accessible,
equitable and sustainable future.
In a rapidly changing world, we recognise the importance of making
sustainability a business priority. We know that we will only succeed
as a business if we use our technology, expertise and data to help
solve the challenges our customers, our consumers and our industry
face. Our trusted brand has been built over more than 40 years and
we remain committed to being the best place to find, buy and sell
vehicles in the UK on a platform that enables data-driven digital
retailing for our customers.
This involves changing how the UK shops for vehicles by providing
the best online buying experience and supporting all our retailers
to sell online.
Our ESG strategy focuses on the material issues that have the
greatest impact on our business whilst considering the expectations
of our stakeholders. In 2021 we introduced our cultural KPIs (see page 20)
to help us measure progress against our strategy. In 2022, we undertook
our first materiality assessment to consider what ESG issues matter
most to our stakeholders and the impact of these on our business.
The findings continue to inform our ESG strategy and focus areas.
We are committed to being a responsible business and our
purpose is driven by our resolve to do the right thing, measure and
report transparently, and always act ethically and with integrity.
Making a positive impact
Our environment
Minimise our impact on the
environment, thereby protecting
our business from the impact
of climate change.
Drive change across our own
operations and supply chain,
but also use our capabilities and
voice to influence the automotive
industry to support urgent action
to tackle climate change.
Our people & communities
Build diverse teams and an
inclusive culture.
Maintain high levels of employee
engagement, supporting positive
health and wellbeing.
Partner with charities, community
groups and industry bodies to make
a difference to the communities
where we work and live.
Our governance & compliance
Uphold the values of good
corporate governance and risk
management and consider the
needs of all our stakeholders in
our strategic decision-making.
Comply with our legal and regulatory
obligations and behave ethically
and with integrity at all times.
Maintain a trusted marketplace
for our customers and consumers
to find, buy and sell vehicles.
Our ESG strategy is underpinned by our purpose,
Driving Change Together. Responsibly.
We can play a positive role in making a difference to our people,
our communities, our industries and the wider environment to create
a more accessible, equitable and sustainable future.
Auto Trader Group plc
Annual Report and Financial Statements 2023
26
Being a responsible business
Auto Trader Group plc
Annual Report and Financial Statements 2023
26
2
7
9
10
11
14
15
16
17
12
13
8
3
6
5
4
Moderate
Very high
Importance to our stakeholders
Impact on the business
Moderate
Very high
1
Our materiality assessment
plc.autotrader.co.uk/esg
The size of the bubbles on our materiality assessment highlight where our activities for this
financial year have been focused and will continue to be focused over the coming 12 months.
In order to remain successful in the long
term, an understanding of what ESG
topics matter most to our key stakeholders
is essential. In 2022, we conducted a
materiality assessment to help inform our
ESG strategy. This included an analysis of
the issues impacting our business and a
survey of opinion amongst our stakeholders
as to the relative importance to them of
those issues. The stakeholders included
our employees, consumers, retailers,
suppliers, commercial partners and
investors. The materiality assessment
helped us to capture our impacts in a
non-financial manner and the findings
continue to guide the focus areas of our
ESG strategy.
Alongside our aim to have high standards
of governance, we have focused most of
our activities and initiatives on: diversity
and inclusion; employee wellbeing;
engagement and safety; product
innovation; and customer satisfaction,
all of which our stakeholders placed in
the higher priority category. We have
also chosen to actively focus on climate.
Although climate did not place in the
highest category, we believe we should
be doing what we can to positively impact
the world in which we live.
Product innovation and customer
satisfaction are key to our business
strategy. Our focus on digital retailing
is to bring more of the buying journey
online, realising both an improved
consumer experience and efficiencies
for our customers (read more on pages
12 and 13). We actively seek retailer
feedback on all aspects of product
and service development to ensure that
we continue to provide market-leading
solutions and also actively monitor
consumer sentiment across our various
products and channels.
1
Climate
11
Driving transparency
12
Digital infrastructure
13
Responsible supply chain
14
Responsible tax strategy
and total tax contribution
15
Corporate governance
16
Ethics and integrity
17
Remuneration
2
Data privacy and security
3
Employee wellbeing,
engagement and safety
4
Product innovation
5
Customer satisfaction
6
Pricing fairness
7
Investment in talent
8
Advocacy
9
Making a difference to our local
communities and industries
10
Diversity and inclusion
Our environment
Our governance & compliance
Our people & communities
Want to know how we define each material issue? Head online:
Auto Trader Group plc
Annual Report and Financial Statements 2023
27
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
27
Our environment
Our people & communities
Our governance & compliance
Being a responsible business
continued
OUR AMBITIONS
• Achieve net zero in our own business
as well as help our customers and
suppliers as they transition to net zero.
• Ensure the majority of our employees
have completed Carbon Literacy training.
• Our customers can confidently sell more
electric vehicles.
• Support our customers in making their
workforce environmentally aware with
the Automotive Carbon Literacy Toolkit.
• Help car buyers make more
environmentally friendly vehicle choices.
• Use our data and insight to support
and influence the government’s policies
related to supporting the adoption
of electric vehicles.
• Have a representative workforce
across all levels of our business.
• Foster an environment where everyone
feels included.
• Continue to make progress on our
gender & ethnicity pay gaps.
• Maintain high levels of employee
engagement.
• Support the physical, mental and
financial wellbeing of all our employees.
• Positively contribute to the communities
we operate in through local and
national charities.
• Fully adopt the NIST framework for
cyber-security.
• Continue to evolve with the requirements
of both GDPR and FCA compliance.
• Integrate sustainability into all aspects
and decision-making processes of
our business.
• Embed our ethical procurement policy
within the business and adopt a socially
responsible sourcing model.
• Report comprehensively in line with SASB
and TCFD reporting frameworks.
2023 HIGHLIGHTS
• Our long-term target to be net zero by
2040 has been validated by the Science
Based Targets initiative (‘SBTi’).
• Included Autorama in our carbon
footprint calculations.
• 80% of Auto Trader employees have
completed the Carbon Literacy training,
putting us at Platinum award level.
• 114 organisations have engaged with
the Automotive Carbon Literacy Toolkit,
with over 1,000 people completing
their accreditation.
• Hosted two industry-focused
sustainability events, bringing together
sustainability-focused organisations
to collaborate and share ideas.
• Earned a Guinness World Record for
the ‘largest online quiz’, amplifying our
monthly electric vehicle giveaway.
• Launched new sustainability awards
for manufacturers and retailers at our
flagship Retailer and New Car Awards.
• Three more cohorts (32 employees)
completed our Diverse Talent Accelerator
programme during the year, developing
our next level of leadership talent.
• Fully launched our Continuous Leadership
Development programme to support
senior leaders within the business.
• Launched our social mobility network
and we were 33
rd
on the Top 75 Employers
in the Social Mobility Index produced
by the Social Mobility Foundation.
• Four colleagues recognised at the
Automotive 30% Club Most Inspiring
Automotive Women Awards for 2022.
• Launch of our new ‘Your Community
Fund’ to support local community
based charities.
• We have again been named as one of
the Inclusive Top 50 companies in the UK.
• Ethical procurement questionnaires
completed covering 75% of our
supplier spend.
• Further evolved our TCFD reporting
to include scenario analysis.
• Fully migrated our technology
infrastructure to the cloud and will
exit from our two main data centres
by June 2023.
• Red team testing undertaken to ensure
our processes for responding to a cyber
incident are robust and fit for purpose.
• Comprehensive implementation plan
in place to ensure compliance with
the forthcoming FCA Consumer Duty.
• Began the process of integrating
Autorama into the Group governance
framework following acquisition.
ALIGNMENT WITH THE UN SDGS
There are 17 UN SDGs that form a shared global agenda to achieve a better and more sustainable future for all. Whilst all of
the goals are important, we believe our ambitions and priorities best align with the above SDGs, which are most relevant to
our strategy and where we believe we can have the greatest impact.
Our progress during financial year 2023
ESG at a glance
Auto Trader Group plc
Annual Report and Financial Statements 2023
28
Driving Change Together.
Responsibly.
AUTO TRADER GROUP PLC BOARD
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
DISCLOSURE
COMMITTEE
EXTERNAL
AUDITORS
INTERNAL
AUDITORS
OTHER
EXTERNAL
ASSURANCE
SUBSIDIARY BOARDS
OPERATIONAL LEADERSHIP TEAM & SENIOR LEADERS
THIRD LINE
NOMINATION
COMMITTEE
CORPORATE
RESPONSIBILITY
COMMITTEE
RISK MANAGEMENT
INTERNAL CONTROL
FCA COMPLIANCE
GDPR COMPLIANCE
LEGAL TEAM
PROCUREMENT
CYBER SECURITY TEAM
SECOND LINE
FUNCTIONS
ENVIRONMENTAL STRATEGY
SUSTAINABILITY
NETWORK
ENVIRONMENTAL
STRATEGY
WORKING GROUP
NET ZERO
WORKING
GROUP
EMPLOYEE GUILDS & NETWORKS
CAREER
KICKSTART
NETWORK
FAMILY
NETWORK
ETHNICITY
NETWORK
LGBT+
NETWORK
DISABILITY &
NEURODIVERSITY
NETWORK
MAKE A
DIFFERENCE
GUILD
WOMEN’S
NETWORK
WELLBEING
GUILD
AGE
NETWORK
SOCIAL
MOBILITY
NETWORK
BOARD
ENGAGEMENT
GUILD
SECOND LINE FORUMS
AND COMMITTEES
RISK FORUM:
SCOPE OF RISK FORUM
INCLUDES CLIMATE
FCA GOVERNANCE
COMMITTEE
HEALTH & SAFETY
COMMITTEE
GDPR STEERING
DISASTER RECOVERY
STEERING
CYBER SECURITY
WORKING GROUP
TRUST FORUM
How we manage risk P48
Governance overview P58
Report of the Corporate Responsibility Committee P76
We recognise that our activities, and the
way in which we carry them out, impact
well beyond our financial performance.
There is increasing evidence that
sustainable businesses drive greater
long-term profit and value for stakeholders.
With this in mind, in 2021 we established
our Corporate Responsibility Committee
to sit alongside our Audit, Remuneration
and Nomination Committees. Whilst ESG
related topics are covered in all Committees,
this is a formal Committee of the Board
with the overarching goal of monitoring
our corporate responsibility initiatives
and sustainability targets. The Committee,
chaired by Jeni Mundy, plays a crucial role
in overseeing the progress towards fulfilling
our ESG strategy and ensuring that our
targets and goals are ambitious and
realistic. Responsibility for putting our
ESG strategy into action spans across the
business through specific functions within
the business and through our individual
guilds and networks, which are empowered
to drive change within the organisation.
Governance of our ESG strategy
Auto Trader Group plc
Annual Report and Financial Statements 2023
29
Strategic report
Governance
Financial statements
Being a responsible business
continued
Task Force on Climate-related
Financial Disclosures (‘TCFD’)
compliance statement
The Group has prepared its TCFD
disclosures in line with guidance from
the 2021 updates to the TCFD Final Report
and Annex, including the supplementary
guidance for all sectors. At the time of
publication, the Group has made climate
related financial disclosures consistent
with the TCFD recommendations set out
on pages 30 to 34. We have built on our
progress from previous years to develop
a net zero strategy and we continue to
identify the risks and opportunities to
our business as a result of climate change
and their potential financial impact.
TCFD: Governance
We have integrated climate governance
into our existing governance processes
and sought to embed responsibility for
the risks associated with climate change
throughout our business, adopting a
climate change focused mindset. There is a
clear commitment from the Board to deliver
on our environmental commitments and
ensure relevant accountability across the
business. Our environmental strategy was
initiated to ensure a joined up approach
across the business considering the risks
and opportunities climate issues pose and
how we are responding to them.
TCFD: Strategy
As the world transitions to a low carbon
economy, regulatory change and changes
in consumer behaviour will have an impact
on the automotive market, meaning we
need to develop and adapt our business
strategy accordingly. Reducing the impact
our business has on the environment is
embedded into our wider business strategy
of acting responsibly and we are committed
to being a net zero business by 2040. As well
as reducing our own emissions, we are also
raising environmental awareness with both
our customers and consumers, encouraging
them to reduce their own environmental impact.
We use our breadth of expertise, data and
market insight to accelerate the transition
to low carbon transport, working with the
automotive industry.
Our environment
Minimise our impact on the environment,
thereby protecting our business from the
impact of climate change.
Drive change across our own operations
and supply chain, but also use our
capabilities and voice to influence the
automotive industry to support urgent
action to tackle climate change.
Auto Trader Group plc
Annual Report and Financial Statements 2023
30
RISK
FORUM
EXECUTIVE
RESPONSIBILITY
BOARD
RESPONSIBILITY
REMUNERATION
COMMITTEE
THIRD-PARTY
ASSURANCE
ENVIRONMENTAL
WORKING GROUPS
7
EMPLOYEE
GUILDS &
NETWORKS
1
2
6
3
4
5
1. BOARD RESPONSIBILITY
The Corporate Responsibility Committee is responsible for holding the
Executive Directors to account with respect to climate risks and their
impacts on the business. Our environmental strategy is a standing agenda
item for all Committee meetings.
2. EXECUTIVE RESPONSIBILITY
The responsibility for assessing and managing climate related risks sits at
both executive and Board level. Executive responsibility for climate change
impact is held by all our Executive Directors, who have responsibility for
overseeing our climate change agenda and are responsible for ensuring that
climate related risks are integrated into our existing business strategy.
Responsibility for the consideration of climate related risks on the financial
performance of the Group and compliance with environmental reporting
rests with our CFO, Jamie Warner.
3. RISK FORUM
Our Risk Forum undertakes a review of climate related risks with our
Operational Leadership Team (‘OLT’).
4. REMUNERATION COMMITTEE
The Committee introduced ESG related targets into the Performance Share
Plan (‘PSP’) for the first time in 2021. In 2022, the PSP included a performance
target linked to a reduction of our GHG emissions and it will also be included
in the 2023 PSP.
5. THIRD-PARTY ASSURANCE
Our GHG emissions have been independently assured by EcoAct using ISO
14064-3 for all scopes of our carbon footprint.
6. ENVIRONMENTAL WORKING GROUPS
Our environmental strategy not only focuses on our own environmental
impact, but also aims to support our customers, consumers and the industry
in which we operate and, as a result, various parts of the business play a part
in delivering our ambitions. Different parts of the business are brought
together through our various working groups, which are supported by members
of our OLT. Key activities and milestones are set for each financial year and
these are shared with the Corporate Responsibility Committee. The working
groups meet individually as required but meet collectively on a quarterly basis:
•
Net Zero working group (sponsored by Jamie Warner, CFO):
responsible for our commitment to net zero in line with our SBTi targets.
•
Environmental strategy working group (sponsored by Ian Plummer,
Commercial Director): responsible for helping consumers make more
environmentally friendly vehicle choices.
7. EMPLOYEE GUILDS & NETWORKS
Our employees play a fundamental role in the success of our environmental
strategy. Our Sustainability Network comprises passionate individuals
from across the business who are focused on making life at Auto Trader
more sustainable through increasing employee awareness and driving
impactful changes for both individuals and our business, supporting our
overall goal of reducing our carbon emissions.
Climate related risks and opportunities
To build climate resilience into our
business strategy we identify climate
related risks and opportunities. As an
online marketplace, we have a relatively
small carbon footprint and our business
model is sustainable in a low carbon
environment. However, with the acquisition
of Autorama, our emissions have increased
due to the vehicles sold by Autorama that
temporarily pass through their balance sheet.
The nature of the risks and opportunities that
we face depends not just on the physical
aspects of climate change, but also on
transition risks. These are driven by the
trajectory of our customers and consumers
in responding to climate change and the
regulations applied to the market we
operate in.
During the year we refined our assessment
of the risks and opportunities posed by
climate change and how they might impact
our business. We considered the transitional
and physical climate risks and opportunities
presented by rising temperatures, climate
related policy and emerging technologies.
We agreed the methodology for assessing
and quantifying financial impacts. For the
purposes of our assessment, the time
horizons we used were as follows:
• Short term: 0–5 years
• Medium to long term: 5 years +
In each case, the likely impact on costs or
revenues was assessed. We have assessed
how the risks can be better managed,
reduced or mitigated in line with the Group’s
risk management framework and business
strategy. The risks identified during our
analysis are more likely to present
themselves in the medium or long term.
Having assessed and modelled the risks, we
believe that there is no immediate material
financial risk or threat to our business model.
Even though there is uncertainty around the
time horizon over which climate risks will
materialise, stakeholder expectations and
regulatory attention could develop at pace,
impacting the rate at which the business
may need to cut carbon emissions.
We recognise that we will need to keep
abreast of future climate change legislation
as well as consumer preferences and
retailers’ ability to adapt. However, we have
a strong track record of quickly evolving.
The results of our scenario analysis inform
our long-term strategic business planning
and are overseen by the Corporate
Responsibility Committee.
How we govern this area
Auto Trader Group plc
Annual Report and Financial Statements 2023
31
Strategic report
Governance
Financial statements
Being a responsible business
continued
Climate related scenario analysis
To further understand and explore how potential climate risks and opportunities could evolve and impact our business over the medium
to longer term, the TCFD recommends undertaking climate scenario analysis, which includes a ‘2°C or lower scenario’ in line with the
2015 Paris Agreement.
We examined three climate scenarios against two timeframes for the purposes of our analysis. The three scenarios we considered were
as follows:
Scenario
Description
Disorderly transition
Rapid change in policy and legislation to encourage businesses to rapidly achieve reductions and avoid
climate change – UK takes immediate and substantial action – governments make dramatic policy
interventions to make up for a late start.
Orderly transition
Additional policy and legislation introduced to limit climate change – UK does not take immediate and
substantial action – gradual and deliberate shift towards a low carbon economy.
Hot house world
Business as usual – no change in climate policy and legislation – UK takes limited or no action – continuation
of current projection of carbon emissions without any significant abatement or mitigation.
Impact
Mitigation/response
Financial impact
Inherent likelihood
Physical risk: Increased frequency/severity of extreme weather and climate related natural disasters
• Offices closed.
• Data centre disruption.
• Customers cannot open their showrooms.
All technology infrastructure is cloud based.
Disaster recovery/business continuity planning
in place, including tools and guidance to support our
people in emergency situations. COVID-19 proved the
sales process can be completed without physical
showrooms, plus development of digital retailing will
enable all retailers to compete on our digital marketplace.
Low
• Weather has the potential to disrupt the
supply chain and limit vehicles entering
the UK car parc.
We have experienced the impact of disrupted supply
chains as a result of recent external catastrophic
and geo-political events. These significant supply
side challenges have constrained new and used car
transactions for much of the past three years. However,
our business has remained healthy as market dynamics
have adjusted and OEMs and retailers learnt to adapt
their business models. We would anticipate weather
related disruption to be more intermittent and
comparatively less severe than the disruption caused
by recent events.
Low
• Costs – increased operational costs such
as heating/aircon, insurance, cloud costs.
In order to have a significant impact on our business,
costs would need to increase significantly. We are
continually reviewing our cost base such that any
increases can be managed and profit margins retained.
Medium
Transition risk: Increased regulation relating to climate change
•
Regulation banning the sale of new internal
combustion engine (‘ICE’) vehicles from 2030
is existing UK regulation that the industry is
already working towards.
We already closely monitor the implementation of policies
relating to our core business. We will continue to monitor
policies with a view to identifying potential risks and
opportunities and related financial impacts. We are already
evolving our product offering and provision of information
to support the effectiveness of EVs on our marketplace and
will continue to meet changing preferences of car buyers.
High
• Increased regulatory scrutiny and
introduction of new legislation could
result in increased reputational risk
but also increased compliance costs.
Failure to deliver against our
environmental commitments would
undermine our reputation as a responsible
business and may result in loss of revenue,
legal exposure or regulatory sanctions.
We have formed a Corporate Responsibility Committee
to oversee our environmental commitments. We will
report in line with the TCFD recommendations and report
progress towards our net zero ambitions against our
science based targets.
Low
Auto Trader Group plc
Annual Report and Financial Statements 2023
32
Impact
Mitigation/response
Financial impact
Inherent likelihood
Transition risk: Regulation ramping up of internal combustion engine (‘ICE’) vehicle taxation
• Cost of ownership increases, making ICE
vehicles less appealing.
• Consumers stop buying petrol or diesel
vehicles, demand switches over to electric.
• If EVs remain expensive some consumers
could be priced out of the market
presenting a risk to demand.
We will continue with our strategy to adapt our
marketplace to meet changing preferences of all car
buyers. It is likely that used car prices will continue to
move in line with supply and demand dynamics such that
lower demand will make vehicles more affordable.
Low/Medium
Transition risk: Demand for sustainable products & services
• Risk: Consumers’ preferences shift
away from ICE vehicles; steep decline
in purchase of petrol or diesel vehicles
in favour of EVs.
• Opportunity: Help our audience to find the
sustainable options they are seeking.
We will continue with our strategy to adapt our marketplace
to meet changing preferences of all car buyers and
continue to be the largest marketplace for EVs.
Low/Medium
Transition risk: Increased reputational risk associated with the automotive industry and misrepresenting environmental claims
•
As consumer consciousness around climate
change rises, there is increased scrutiny
on our industry’s role on the environment.
• Failure to appropriately demonstrate
that as a business we are committed and
moving towards net zero carbon emissions
could negatively impact our brand and also
impact our ability to operate and/or remain
relevant to our customers and consumers.
As part of our goal to be net zero by 2040 we will focus
not only on our own operational footprint but also on
how we can positively support our industry. We have
set clear reduction targets for our own operations and
report progress to stakeholders. We work with customers,
suppliers and the industry on education and policy.
Low
Transition risk: Achieving resource efficiency through cutting our carbon footprint and improving energy efficiency
• Reduced costs associated with energy
use and avoid increased costs associated
with carbon taxation.
Reduction initiatives to reduce our absolute carbon
usage, including moving our technology infrastructure
to the cloud.
Medium
Transition risk: Increase in towns and cities introducing pedestrian zones/Ultra Low Emission Zones (‘ULEZs’) supported
by government scrappage schemes and/or improvements in public transport
• Risk: Consumers stop buying ICE vehicles
as they no longer require a vehicle.
• Opportunity: Consumers’ desire/need
to switch to EV.
Likely the risk and opportunity would be taken together,
and stock/demand would be maintained as the desire
for personal transportation/vehicle ownership remains
strong. We will continue with our strategy to adapt our
marketplace to meet changing preferences for all car
buyers and continue to be the largest marketplace for EVs.
Low/Medium
Minor
Moderate
Major
We intend to periodically review the scenarios and timeframes we choose to apply in our analysis and refine them as needed.
The risk management recommendations arising from our climate change scenario analysis were:
•
Policy/regulation: it is likely that increased policy and regulation will have the most significant financial impact on Auto Trader over
the longer term. The most significant action we can take is to reduce our exposure to this risk and continue with our strategy to adapt
our marketplace to meet the changing preferences of all car buyers. We also need to make sure we continue to remain abreast of
regulatory requirements to ensure we are compliant with all relevant reporting obligations.
•
Market: climate change is expected to impact the supply and demand for ICE vehicles and EVs. Auto Trader can mitigate this risk by
continuing to develop its strategy to be the destination of choice for consumers searching for a more environmentally friendly vehicle.
Auto Trader Group plc
Annual Report and Financial Statements 2023
33
Strategic report
Governance
Financial statements
Being a responsible business
continued
TCFD: Metrics and targets
Methodology
The Group is required to measure and
report its direct and indirect greenhouse
gas (‘GHG’) emissions by the Companies
(Directors’ Report) and Limited Liability
Partnerships (Energy and Carbon Report)
Regulations 2018. The GHG reporting period
is aligned to the financial reporting year.
The methodology used to calculate emissions
is based on the financial consolidation
approach, as defined in the Greenhouse
Gas Protocol, A Corporate Accounting
and Reporting Standard (Revised Edition).
Emission factors used are from the UK
Government’s Department for Business,
Energy and Industrial Strategy (‘BEIS’)
conversion guidance for the year reported.
We have calculated our footprint using the
official UK Government conversion factors.
For general procurement categories,
an Environmentally Extended Input Output
database methodology was used to
calculate the GHG footprint across total
spend in the year. For vehicle purchases,
a bottom-up, life cycle assessment-based
approach has been used.
We have approximated and rounded up
where necessary, reflecting this is a ‘scoping
exercise’ to indicate the broad quantum of
emissions rather than a precise calculation.
The accuracy of our footprint will get better
each year as we revisit and refine the
methodology and underlying dataset.
We have reported our Scope 2 emissions
using both a location based and market
based approach, with the latter taking into
account renewable energy consumed.
Rebasing of our calculations
During the year we acquired Autorama
and we have therefore undertaken work to
calculate their emissions and include them
within our base year (2019/20) and every year
thereafter. We have also undertaken work
to identify more accurate data in relation
to our suppliers and include this in our
calculations. The data resulted in a change
of more than 5% in our emissions and so we
have recalculated our base year and every
year thereafter using the updated data.
We have disclosed our rebased base
year, prior year and current year to take
into account these changes and will be
updating our climate targets accordingly.
Independent verification
of our GHG emissions
EcoAct has independently assessed
and verified Auto Trader’s GHG emissions
following verification standard ISO 14064-
3:2019. Based on the data and information
provided by Auto Trader and the processes
and procedures followed, nothing has come to
EcoAct’s attention to indicate that the GHG
emissions totals for all years reported are not
fairly stated and free from material error.
TCFD: Risk management
The Board is collectively responsible for
determining the nature and extent of the
principal risks which may impact the business
as it seeks to achieve its strategic objectives.
We recognise climate change as a principal
risk (see page 51) as it poses a threat to our
business and supply chain, mainly through
regulatory changes. We have updated our
risk management process to enhance our
assessment of the potential implications
of climate change on our business and its
operations. Our risk management framework,
including the processes for identifying,
assessing and managing risk, is described
on pages 48 and 49.
Our total CO
2
emissions
1
2023
2022
2020 (base year restated)
UK
Global
UK
Global
UK
Global
Scope 1
342
363
276
294
441
487
Scope 2 (location based)
297
310
368
385
510
542
Total (Scopes 1 and 2)
639
674
644
679
951
1,029
KwH (‘000s)
2,714
2,775
2,618
2,767
3,462
3,766
Purchased goods & services
19,537
23,562
50,149
Capital goods
498
794
477
Fuel and energy-related activities
133
196
244
Upstream transportation & distribution
72
115
210
Waste generated in operations
5
16
16
Business travel
365
63
1,141
Employee commuting (inc. working from home)
1,746
1,004
716
Upstream leased assets
129
106
33
Use of sold products
56,323
102,807
302,267
End of life treatment of sold products
31
50
191
Investments
26
27
29
Scope 3 (total)
78,865
128,740
355,473
Total (Scopes 1, 2 and 3)
79,540
129,419
356,502
Revenue
3
£510.4m
£491.1m
£458.9m
Tonnes of CO
2
equivalent per FTE
2
68.5
107.9
334.1
Tonnes of CO
2
equivalent per £million turnover
3
155.8
263.5
1,091.9
Scope 2 (market based)
3
91
N/A
% renewable
99%
4
76%
4
N/A
1.
Scopes 1, 2 & 3 are reported in tonnes of CO
2
equivalent.
2.
Based on average number of employees in the Group throughout the year (2023: 1,160, 2022: 1,199, 2020: 1,067). The average number of employees included Autorama
FTEs for the period 1 April to 31 March for each period reported.
3.
This includes Autorama revenue for the period 1 April to 31 March for each period reported.
4.
Emissions from our data centres are included within our Scope 2 emissions. It has been confirmed by our provider that our data centres continue to be powered by
100% renewable – we have received a certificate covering the period to 31 December 2022 and the period 1 Jan to 31 Mar 2023 is currently being verified by a third party.
Auto Trader Group plc
Annual Report and Financial Statements 2023
34
Overview
We want to minimise our impact on the environment, thereby protecting
our business from the impact of climate change. Our strategy is to put
the brakes on carbon, not only across our own operations and supply
chain, but also using our capabilities and voice to influence the
automotive industry to support others in the transition to a low
carbon economy and take urgent action to tackle climate change.
Our pathway to net zero
1. Our net zero commitment
In June 2021, we signed up to the Science Based
Targets initiative (‘SBTi’) Business Ambition for
1.5°C. By doing so, we are committed to achieving
net zero before 2050 and to reducing emissions
in line with the Paris Agreement goals. Net zero
refers to the balance between the amount of
greenhouse gas produced and the amount
removed from the atmosphere. We reach net zero
when the amount we add is no more than the
amount taken away. Our near and long-term net
zero targets have both been approved by the SBTi.
We have committed to reach net zero greenhouse
gas emissions across our value chain by 2040,
committing to:
•
Reduce absolute Scope 1 and 2 GHG emissions
by 50% before 2030 from a 2020 base year.
•
Reduce absolute Scope 3 GHG emissions
by 46.2% over the same timeframe.
•
Reduce absolute Scope 1, 2 and 3 GHG emissions
90% by 2040 from a 2020 base year.
How we’re taking action
To meet the SBTi’s definition of net zero, we need
to reduce our emissions by at least 90% and then
use carbon removal initiatives to neutralise any
limited emissions that cannot yet be eliminated.
It is therefore essential that we fully understand
the source of our emissions and undertake
targeted actions. The make up of our carbon
emissions is heavily weighted towards Scope 3,
and within that, purchased goods and services and
use of sold goods are the biggest contributors.
During the year, our GHG emissions totalled
79.5ktCO
2
. Whilst this represents a significant
reduction from our restated 2020 baseline year
(2020: 356.5k CO
2
e), it was principally due to a
reduction and mix of vehicles passing through
Autorama’s balance sheet. Further work is
required to understand the emissions associated
with these vehicles. In respect of our other
emissions, we have a committed climate action
plan and our targets and progress are set
out below:
Metric
Emission type
Target year
Our progress
Current status
Switch 100% of
our fleet vehicles
(Auto Trader fleet) to
be EV or low emission.
SCOPE
1
2030
Base year
240 tCO
2
e
Current year
91 tCO
2
e
•
Any newly ordered vehicles must be fully electric or hybrid with
emissions 75g/km or less.
•
16% of the Auto Trader fleet is now an EV or ULEV.
ON TRACK
Auto Trader data
centres to be fully
migrated to the cloud.
SCOPE
2
2024
Base year
168 tCO
2
e
Current year
74 tCO
2
e
•
Our data centres are powered entirely by renewable energy.
100% of our data centres will be migrated to the cloud by June 2023.
ON TRACK
Energy: reduce overall
electricity use by 50%
(against a 2020 baseline)
and procure 100%
renewable energy for
our remaining needs.
SCOPE
2
2030
Base year
542 tCO
2
e
Current year
310 tCO
2
e
•
Moved to a smaller London office but contracts are not renewable.
•
Disposed of High Wycombe and Dublin offices.
•
Energy saving initiatives implemented including removal of printers,
switching off electrical items while the office is closed.
ON TRACK
Business travel
emissions: achieve a 50%
reduction (against a 2020
baseline).
SCOPE
3
2030
Base year
1,141 tCO
2
e
Current year
365 tCO
2
e
•
Air travel has reduced with more people opting to travel by rail.
•
Enhanced video conferencing equipment to facilitate enhanced
virtual meetings and collaborative online working.
ON TRACK
Commuting emissions
(including emissions
generated from working
from home): achieve
a 50% reduction (against
a 2020 baseline).
SCOPE
3
2030
Base year
716 tCO
2
e
Current year
1,746 tCO
2
e
•
Employee commuting survey launched in January 2023 giving us more
accurate commuting data.
•
Introduction of Connected Working which offers all employees greater
flexibility in where and when they work, resulting in less commuting.
•
Launched employee salary sacrifice scheme to lease electric vehicles
with 6% of eligible employees participating to date.
MORE WORK
NEEDED
Suppliers: require 50%
of suppliers, by spend,
to have meaningful
carbon reduction targets.
SCOPE
3
2030
•
Overall significant reduction in Scope 3 but more work is needed
on supplier engagement.
•
Ethical procurement questionnaires completed covering 75% of our supplier spend.
•
20% of Auto Trader suppliers by spend have CDP responses.
MORE WORK
NEEDED
Autorama
Scope 3 emissions
SCOPE
3
2030
•
The first phase of recalculating our emissions to include the impact
of Autorama is complete.
•
As can be seen from our restated emissions, the acquisition of Autorama has
resulted in a significant increase in our Scope 3 emissions as we are required
to account for the projected life time carbon emissions of vehicles held temporarily
on the balance sheet. Further work will be undertaken in 2024 to form relevant
metrics to monitor reduction of their emissions.
ON TRACK
Auto Trader Group plc
Annual Report and Financial Statements 2023
35
Strategic report
Governance
Financial statements
Being a responsible business
continued
2. Supporting the automotive industry
Our aim is to support the industry in the transition
to the mass adoption of electric vehicles (‘EVs’).
The automotive industry is under enormous
pressure to reduce its carbon emissions and whilst
many manufacturers and retailers have bold
commitments to reduce emissions, many are still
very early on in their sustainability journeys and are
actively seeking support to help them develop a
carbon reduction plan. Therefore, our partnership
with the Carbon Literacy Trust, and the resulting
Automotive Carbon Literacy Toolkit we created,
has been well received. 114 organisations have now
completed the training (as at 31 March 2023) which
many see as an important step in their sustainability
strategy, as well as a key initiative to engage their
workforces. Once an individual in a business has
been accredited as ‘carbon literate’, the business
is then provided with training content and trainer
manuals that enable them to run their own one-day
Carbon Literacy training. Over 1,000 people in these
businesses have now completed the training.
In addition to the training, we launched a new
sustainability themed series of events where
we invite businesses to share their sustainability
journeys, ask questions and share ideas with the
aim of inspiring action and motivating businesses
to be more sustainable. We’ve hosted two in the
year and are planning our third in the autumn.
The production and distribution of electric vehicles
is also a key part of many businesses’ sustainability
strategies, so in order for retailers to feel equipped
to sell these vehicles, we launched a ‘Retailer
Performance Module’ focusing on EVs.
We also support the National Franchise Dealership
Association’s ‘Electric Vehicle Accreditation’
scheme; once retailers become accredited, we
add their badge to their Auto Trader profile and
adverts on our marketplace, enabling them to
promote their knowledge to consumers.
As manufacturers and retailers become more
focused on their own environmental impacts,
we felt it was important to start recognising those
who are leading the way as another way to inspire
others to do more. We therefore introduced
sustainability-focused awards at both our Retailer
Awards and New Car Awards. The categories are
self-nominated and attracted a high level of entries.
The government’s mandate to ban the sale of new
petrol and diesel cars by 2030 has created huge
levels of change in the industry, and a lot needs
to happen in the coming years to ensure the mass
adoption of electric vehicles. We regularly meet with
various government departments to share our data
and insights to help guide policy required to support
the mass adoption of EVs.
CELEBRATING SUSTAINABILITY
IN THE AUTOMOTIVE INDUSTRY
To celebrate and support the industry’s efforts
to do business more sustainably, we have
introduced new sustainability awards at both
our New Car Awards and Retailer Awards.
Our wealth of data and insight gives us a unique
view of consumer car buying intentions, and
particularly consumer EV buying intentions.
This data forms the basis of our ‘Road to 2030’
Reports, which are extremely valuable to not
only the government, but also to media and
the industries involved in the transition to EVs.
The Report is widely reported in national press
and is regularly presented at key industry events.
Developing the first ever
industry-specific Carbon
Literacy Toolkit
Developed in partnership with the Carbon
Literacy Trust, the toolkit is the first of its
kind, being carefully designed in close
collaboration with leading retailers and
manufacturers, including: Nissan, Marshall
Motor Group, Lookers, Motorpoint,
AvailableCar and SYNETIQ.
Available for any organisation, of any size,
working within the automotive industry,
it has been developed with the purpose
of supporting individuals and businesses
in their journey towards reducing their
carbon footprint.
114
organisations have engaged with the
Carbon Literacy Automotive Toolkit training
during the year
Auto Trader Group plc
Annual Report and Financial Statements 2023
36
3.Supporting consumers
Our aim is to support consumers in making the switch
to more environmentally friendly vehicles and be the
number one electric car destination in the UK.
We have increased the coverage and exposure we
give EVs across all our platforms. On our marketplace,
we have taken steps to make it easier for car buyers
to search for EVs, so the filters now reflect the key
attributes of an EV. Our EV adverts now include
more information about battery range and charge
time, which are key to helping consumers to make
the switch. The number of EV models listed on
Auto Trader has grown from 84 to 129 in the year
and over 23,000 adverts appeared on our site
on average across the last year.
We launched an EV hub on site which has new
content and tools added to it all the time, so
consumers can get the information they need to
decide whether an EV is right for them, right now.
The team have published more than 110
electric-themed editorial reviews, news, help
and advice articles on site (2022: 91). Across our
tracked electric keyword set as a whole, including
consumer FAQs, our share of voice grew from 27%
to 33%. As part of this we grew our electric make
model terms share of voice by 11% over the year,
giving us the third highest market share in this area.
EVs have been a key marketing focus in the year,
with new partnerships formed and campaigns
launched. The EV monthly giveaway continued
and achieved over 3.5 million entries,and we
achieved a Guinness World Record which saw the
team host the largest online quiz to promote EVs.
We developed ‘Electric Sceptics’, our first original
social content series with full marketing mix
support, and signed a three-year partnership with
Green TV to build association with EVs, both with
consumers through their World EV Day and EV Live
events and with the industry at the EV Summit.
SUPPORTING WOMEN AND NEW AUDIENCES
IN MAKING THE SWITCH TO EVS
Our research shows that women are more likely to
say they don’t like the car buying process and they
don’t feel confident in buying a car. They are also
less likely to consider buying an electric vehicle.
So we are actively trying to change this by
engaging the media that influence women and
changing the conversation so that women feel
more empowered about buying their next car,
be that electric or otherwise.
23,000
EV adverts appeared on our
site on average across 2023
autotrader.co.uk/cars/electric
Evolving our
dedicated EV hub
The dedicated EV hub on our marketplace
makes it easy for consumers to access
articles and videos on electric vehicles,
reviews and advice. We also present the
facts regarding cost of ownership ensuring
they have all the info they need to make
the correct purchase decision, for them.
Cutting through the jargon, we cover all
of the pertinent topics, including:
• Charging at home
• Charging on the go
• Range
• Understanding the jargon
• Battery life
Auto Trader Group plc
Annual Report and Financial Statements 2023
37
Strategic report
Governance
Financial statements
Being a responsible business
continued
Our people & communities
Build diverse teams and an inclusive culture.
Maintain high levels of employee
engagement, supporting positive health
and wellbeing.
Partner with charities, community groups
and industry bodies to make a difference
to the communities where we work and live.
Our values
Our values underpin everything we
do from the delivery of our products
and services to recruitment, career
development and recognition.
BE COMMUNITY-MINDED
We look after each other, respect
diversity and advocate inclusion. We are
committed to making a difference to the
communities around us and think of
others before ourselves.
BE RELIABLE
We are outcome-oriented and we do
what we say we will do. We perform under
pressure and have a strong work ethic.
BE COURAGEOUS
We are bold in our thinking, overcoming
fears, challenging convention and
embracing change.
BE HUMBLE
We are open, honest, approachable
and we treat each other fairly.
We recognise success in ourselves
and others but admit and learn
from mistakes.
BE CURIOUS
We are always learning. We question
why, we search for better ways, ask
questions and actively listen.
BE DETERMINED
We are passionate, resilient and have
the conviction to do the right thing. We
roll up our sleeves to get the job done.
REFLECTING OUR CULTURE AND COMMITMENT TO MAKING A POSITIVE IMPACT
Auto Trader Group plc
Annual Report and Financial Statements 2023
38
How we govern this area
BOARD
RESPONSIBILITY
1
EXECUTIVE
RESPONSIBILITY
2
OPERATIONAL
LEADERSHIP
TEAM
3
REMUNERATION
COMMITTEE
4
EMPLOYEE GUILDS
& NETWORKS
5
THIRD-PARTY
CHARTERS &
ACCREDITATIONS
6
1. BOARD RESPONSIBILITY
Material ESG topics discussed by the Board include diversity and
inclusion, employee engagement and talent development. The Corporate
Responsibility Committee is responsible for holding the Executive Directors
to account and on a quarterly basis our people scorecard is reviewed
and progress against our cultural KPIs is monitored. The Board plays an
important role in ensuring our culture is aligned with our long-term strategy.
2. EXECUTIVE RESPONSIBILITY
The responsibility for assessing and managing our people and culture
sits at both Executive and Board level. Our Executive Directors have
responsibility for oversight of our diversity and inclusion agenda and
are responsible for ensuring that our values are embedded into all parts
of our business.
3. OPERATIONAL LEADERSHIP TEAM
Our Operational Leadership Team (‘OLT’) is responsible for driving
our culture that is values-led, customer-centric and data driven,
underpinned by a diverse and inclusive team. Having a progressive
culture and environment, ensuring the attraction, development and
retention of a talented, engaged and diverse workforce.
4. REMUNERATION COMMITTEE
The Committee introduced diversity related metrics into the Performance
Share Plan (‘PSP’) for the 2021 PSP award, and introduced an underpin for
the 2022 PSP award. For the 2023 PSP award performance will again be
measured against our diversity ambitions as part of an underpin rather
than as a standalone measure.
5. EMPLOYEE GUILDS & NETWORKS
Our employees play a fundamental role in the success of our ESG strategy.
Through our thriving networks and guilds, our ESG priorities and ambitions
are championed and driven forward by our employees. See page 42 for
more information about our networks. These networks feed into a wider
Diversity and Inclusion Guild which oversees the various networks to ensure
they drive real change across our organisation.
Our Board Engagement Guild is the primary mechanism for our Board
to engage with our employees and meetings are not attended by the
Executive Directors. Employees are able to share their experiences and
views, as well as providing the opportunity for them to ask questions
directly of Non-Executive Directors. The Board Engagement Guild has
representatives from across different parts of the business and canvasses
views and opinions from their colleagues to share with the Board.
6. THIRD-PARTY CHARTERS & ACCREDITATIONS
We have signed up to various third-party charters and have received a
number of accreditations, most notably:
•
Race at Work Charter.
•
Change the Race Ratio.
• Disability Confident Leader.
•
Social Mobility Top 75.
• Inclusive Companies.
Engaging our employees
We welcome open and honest feedback
from our employees and surveys are
conducted on a regular basis. We aim
to understand job satisfaction, measure
opinion and find where changes may be
necessary. Summary results are made
available and feedback acted upon by
management, which is then presented
to the Board. In our most recent survey
we were pleased that 91% (2022: 95%)
of our employees agreed or strongly
agreed with the statement “I am proud
to work for Auto Trader”, a measure which
we view as a proxy for engagement.
1
Wellbeing and safety
of our employees
We are committed to supporting our
employees in all aspects of their health
and wellbeing. We provide a comprehensive
range of healthcare benefits as well as
access to tools and education, mental
health support and supportive pathways
to empower our employees to have more
good days. We have tools to support
employees with their financial wellbeing
and all employees can join the Group’s
Save As You Earn Scheme, with 68% (2022:
66%) of eligible employees participating in
one of the current schemes. A Group personal
pension plan is offered to all employees,
under which they can contribute between
3% and 5% (or higher) of their salary and
Auto Trader contributes between 5% and 7%.
We are committed to creating a safe space
for our colleagues in the office environment.
Our principal objective is to prevent or
minimise accidents, injury and ill health to
staff working at our premises or remotely.
This includes contractors, and others,
who work at, or visit our premises. We have
a fully compliant Health and Safety Policy
and appropriate insurance for all employees.
We can report that we have had no fatalities
or serious injuries during the year, and there
was no impact to our operations due to
work-related incidents or work-related
occupational disease.
Following the introduction of our Connected
Working approach, which offers all
employees greater flexibility in where and
when they work, a programme of ergonomic
assessments was carried out to review and
ensure effective and safe homeworking
environments. This approach allows people
to stay connected with their team and the
wider Auto Trader community and maintains
our collaborative culture.
1.
The employee engagement score excludes employees of Autorama. Autorama currently conduct their own survey with a different question set. In their March 2023 survey,
Autorama employees were asked to rate the question “How likely is it you would recommend Vanarama as a place to work?” Answers were given on a 10-point scale,
10 representing highly recommend. The survey had a 71% response rate and 62% responded 9 or above.
Auto Trader Group plc
Annual Report and Financial Statements 2023
39
Strategic report
Governance
Financial statements
Being a responsible business
continued
Investing in and supporting our talent
Our ambition is to make sure that everyone’s
career is supported by learning opportunities,
including self-learning, mentoring, coaching
and formal programmes. We pride
ourselves on having a community focused
on development where everyone can be
successful. Despite challenging times we
still retain a strong level of retention and
employee engagement. Our attrition rate
remains low at 11% (2022: 11%) when compared
to industry and national averages.
Our learning academy platform provides
a range of opportunities to support
careers at Auto Trader and during the year
100% of our employees (including part-time
and contractors) were offered training.
We also provide sponsorship for professional
qualifications and access to continuing
professional development for our people.
Mandatory training covers our compliance
essentials to ensure compliance with our
legislative and regulatory requirements.
Our non-mandatory training covers a broad
range of learning and development, including
awareness, technical skills and soft skills.
Our mentoring and coaching programmes are
available to all employees. We currently have
five colleagues qualified as coaches, with
two more working towards their qualification,
to build internal coaching capability.
Year
1
2023
2022
Hours of mandatory training (see pages 44 to 47 for more detail)
2,286
2,657
Hours of non-mandatory training
27,316
19,739
Annual cost of training
2
£494k
£379k
Average cost per employee
£487
£378
Employees studying for professional qualification
8
6
Employees on an apprenticeship/early careers
78
61
1.
The number of hours/cost of training does not include Autorama employees.
2.
This includes external trainer and platform costs, but excludes the employment costs of our in-house
Learning & Development team.
Degree apprenticeship
programme
We are proud to support degree
apprenticeships – they provide the
opportunity to gain a paid-for degree
while getting industry experience and
earning a salary, and Auto Trader also
benefits from a great pipeline of talent.
Being on the degree
apprenticeship
programme has meant I
can study for a degree at
the same time as working
towards becoming an
experienced UX designer.
Eniya Ali
Digital User Experience Apprentice
Auto Trader Group plc
Annual Report and Financial Statements 2023
40
During the reporting period, the mean and
median ethnicity pay gaps have decreased
by 0.8% and 1.2% respectively (2021: increased
by 2.7% and 0.7% respectively). The main
drivers include the retention of ethnically
diverse colleagues in the upper quartiles
while also hiring new talent across the
As at 31 March 2023
As at 31 March 2022
Board
Executive
management
OLT
2
OLT direct
reports
Total company
Board
Executive
management
OLT
2
OLT direct
reports
Total company
Number
%
Number
of senior
positions
1
Number
%
Number
%
Number
%
Number
%
Number
of senior
positions
1
Number
%
Number
%
Number
%
Men
4
44%
4
4
44%
45
62%
696
57%
4
44%
4
5
56%
57
63%
599
60%
Women
5
56%
–
5
56%
28
38%
524
43%
5
56%
–
4
44%
34
37%
400
40%
Non binary
/other
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
–
3
–
As at 31 March 2023
As at 31 March 2022
Board
Executive
management
OLT
2
OLT direct
reports
Total company
Board
Executive
management
OLT
2
OLT direct
reports
Total company
Number
%
Number
of senior
positions
1
Number
%
Number
%
Number
%
Number
%
Number
of senior
positions
1
Number
%
Number
%
Number
%
White British
or other White
8
78%
3
9
100%
62
85%
876
72%
8
78%
3
9
100%
79
87%
739
74%
Mixed ethnic
groups
–
–
–
–
–
1
1%
29
2%
–
–
–
–
–
1
1%
23
2%
Asian
/Asian British
1
11%
–
–
–
4
6%
103
8%
1
11%
–
–
–
3
3%
79
8%
Black/African
/Caribbean
/Black British
–
–
–
–
–
2
3%
37
3%
–
–
–
–
–
1
1%
26
3%
Other
–
–
–
–
–
–
–
15
1%
–
–
–
–
–
1
1%
11
1%
Not disclosed
–
11%
1
–
–
4
6%
166
14%
–
11%
1
–
–
6
7%
124
12%
1.
Senior positions defined as CEO, CFO, SID and Chair of the Board.
2.
Excludes CEO, COO and CFO who are included in the Board numbers.
Gender and ethnicity pay gap
We released our third combined Gender
and Ethnicity Pay Gap Report 2022
(published in November 2022, reporting the
pay gap as at 5 April 2022). This year we
joined forces with other FTSE 100 companies
to encourage more companies to report
and to campaign to make ethnicity pay gap
reporting mandatory in the same way that
it is for gender. Please see our website,
plc.autotrader.co.uk, for more information.
We continue to make progress in reducing
our gender pay gap. Our mean gender pay
gap decreased by 0.3% (2021: 2.7% decrease),
however, our median pay gap increased
by 0.4% (2021: 0.7% decrease). During the
reporting period, we performed well in
retaining women in our upper quartiles
(25% women leavers compared to 57% for
men), and of the 136 new hires included in
the report, 43% were women (2021: 81 new
starters, 42% women). We believe that hiring
women early on in their careers and
progressing them through the business,
taking into consideration the fact that
women are greatly underrepresented
in both the technology and automotive
sectors, is the most sustainable way to
reduce the pay gaps in the long term.
Between April 2021 and March 2022, we were
pleased to see that women accounted for
41% of all promotions, and we continue
to strive to increase this further.
At a Board level, over half of our Board are women, exceeding the FTSE Women Leaders Review recommendation, which has a target
of 40% women’s representation. We also satisfied the recommendation of the Parker Review that at least one Director should be from
an ethnically diverse background.
The percentage of the total company who are from an ethnically diverse background has increased from 14% to 15% during the year,
with the percentage of those from an ethnically diverse background in leadership increasing from 6% to 8%.
business. The highest representation for
ethnically diverse colleagues is still in the
lower quartile pay bands, mainly driven
by our early careers intake. 33% (2021: 31%)
of early career hires during the reporting
period were ethnically diverse.
Auto Trader Group plc
Annual Report and Financial Statements 2023
41
Strategic report
Governance
Financial statements
Being a responsible business
continued
Diversity and inclusion
We define diversity as any classification
that can be used to differentiate groups
or individuals from one another, including:
gender; sex; age; sexual orientation;
disability & neurodiversity; race and ethnic
origin; religion & faith; marital status; and
social/educational background and way
of thinking. We define inclusion as a state
of being valued, respected and supported
for who you are. We, and our people, strongly
believe in pursuing this aim authentically and
systemically, expecting to see improvements
in metrics, but not being driven by them.
We are committed to driving long-term change
in both the technology and automotive
industries. Our focus is on developing diverse
leaders as well as representative workforces
in these industries. We invest heavily in our
early careers programmes, as well as supporting
several initiatives and partnerships, including
DigitalHer with Manchester Digital, AUTO30%
and our STEM Ambassador Programme.
Driving our D&I strategy through our internal networks
We have a number of internal networks that support and align
with our diversity and inclusion strategy. These employee-
driven networks and their leaders are a core part of our culture,
helping to welcome employees when they join our
organisation, empowering team members to thrive and
spearheading outreach programmes that support our local
communities. Everyone at Auto Trader is encouraged to join
one of our employee-driven networks.
Our Ethnicity Network is a well-established group
of Black, Asian and minority ethnic colleagues,
and allies, that works to tackle inequalities and
celebrate inclusivity.
Our Women’s Network is focused on improving and
evolving representation of women at all levels in
Auto Trader, the automotive industry and the digital
communities within which we operate, by recruiting,
retaining and developing female talent.
Our Disability & Neurodiversity Network continues to
create a more accessible and inclusive environment
for our colleagues. 13.5%
1
(2022: 12.8%) of our colleagues
have disclosed a disability or neurodiverse condition.
The network partners with various charities including
Leonard Cheshire, the Royal National Institute for
Deaf People and the Business Disability Forum to
educate colleagues and raise awareness.
The Career Kickstart Network brings together
colleagues from across the business to learn
and grow together through shared experiences,
resources and discussion.
Our LGBT+ Network representation is currently 9.1%
1
(2022: 8.3%) and the network has continued to support
our colleagues and connect with local LGBT+ charities,
including The Proud Trust and the George House Trust.
Our Age Network was launched last year and
focuses on creating an inclusive environment for
the multigenerational workforce of Auto Trader.
Supporting parents and carers across our business,
our Family Network works closely with our other
networks, our People team and with charities such
as Carers UK.
Our Social Mobility Network is focused on
understanding how socio-economic background
can influence individuals in the workplace and working
to remove barriers and open opportunities. Auto Trader
has signed the Social Mobility Pledge, committing to
putting social mobility at the heart of what we do.
Auto Trader Group plc
Annual Report and Financial Statements 2023
42
Promoting diversity in the workplace
We want to build a diverse and
inclusive workplace where every one
of us can be our best and true selves;
only with a mix of different ideas
and perspectives can we come
up with the most exciting new ideas
and create the best experience for
our customers and consumers.
We have a number of internal
networks that support and align with
our diversity and inclusion strategy.
Everyone at Auto Trader is
encouraged to join one of our
employee-driven networks.
These networks and their leaders
are a core part of our culture,
helping to welcome employees
when they join our organisation,
empowering team members to
thrive and spearheading outreach
programmes that support our
local communities.
Forever Manchester
The Auto Trader Community Fund,
powered by the charity Forever
Manchester, considers applications
and awards up to £1,000 aimed
at supporting grassroots projects
across Greater Manchester,
and in London.
During the year we celebrated the
sixth anniversary of the Auto Trader
Community Fund at Forever
Manchester that provides support
for a wide range of volunteer-led
community projects across
Greater Manchester.
Our representation of women at a total
company level increased from 40% to 43%.
During the year, the percentage of women
on our Operational Leadership Team
(‘OLT’) increased from 44% to 56%. We also
increased the percentage of women in
leadership roles to 40% as at 31 March 2023
(March 2022: 38%), as defined by the FTSE
Women Leaders Review (formerly the
Hampton-Alexander review).
To increase our representation across all
levels of the organisation, we aim to stimulate
the flow of diverse talent from early careers
through to senior leadership by both targeted
development programmes and equipping
our leaders to get the very best out of
everyone on their team and support their
development through the organisation.
Our Continuous Leadership Development
programme, made up of a range of training
interventions, supports our senior leaders
and people managers. We have also
continued with our Diverse Talent Accelerator
programme designed to support the
progression of mid-career colleagues.
Making a difference to our
communities and the industries
we operate in
Community-minded is one of the values that
shapes our culture and we are committed
to making a difference and having a positive
impact on the communities we operate in.
Our Make a Difference Guild is committed
to empowering our employees to support
our local communities and national charities.
During the year we continued our partnership
with Forever Manchester to operate the
Auto Trader Community Fund that provides
support for community projects across
Greater Manchester. We also launched
a new ‘Your Community Fund’ available
to all employees to nominate charities
close to their hearts and local communities.
We continue to work closely with our charity
partner in London and support and promote
all Disasters Emergency Committee (‘DEC’)
appeals. We operate in both the automotive
and technology industries. BEN is a key
charity supporting the automotive industry
with the aim to offer life changing support
which empowers people to take control of
their mental and physical health. As with all
charities, BEN was heavily impacted by the
pandemic, making it even more important
that we continue to support them.
Auto Trader Group plc
Annual Report and Financial Statements 2023
43
Strategic report
Governance
Financial statements
Being a responsible business
continued
Our governance
& compliance
Uphold the values of good corporate
governance and risk management and
consider the needs of all our stakeholders
in our strategic decision-making.
Comply with our legal and regulatory
obligations and behave ethically and
with integrity at all times.
Maintain a trusted marketplace for
our customers and consumers to find,
buy and sell vehicles.
Overview
To ensure that high standards are
embedded across the business and form
part of our culture, we have a compliance
framework in place, consisting of policies,
processes, guidance and training focused
on a number of core compliance topics.
Details of our Board governance framework
and policies can be found in the Governance
section (page 58 onwards).
As an online marketplace, cyber security and
protecting customer and consumer data are
primary areas of focus. They are fundamental
to our future success and to build trust with
our customers and consumers. As we shift to
an accelerated adoption of digital retailing
it is paramount that our cyber and data
security and infrastructure evolve with our
business priorities.
Cyber security
Attempts to breach our systems to access
our data and the threat of an unauthorised
malicious attack on our systems pose a
significant and perpetual threat. The nature
of cyber-attacks has continued to evolve
and changes in ways of working have
created more opportunities for cyber
criminals, increasing in both frequency
and sophistication. A successful breach
could lead to significant impairment of our
reputation with customers and regulators
and could be costly in terms of fraud losses,
regulatory sanction or remediation activity –
one of our viability scenarios reflects the risk
of a data breach (see page 57).
Whilst cyber security risks cannot be fully
mitigated, having an effective cyber security
risk and governance framework can help
to significantly reduce the impact of such
events. We have a security programme in
place that covers both our corporate systems
and the Auto Trader platform which includes
a defined security governance framework,
overseen by our Chief Technology Officer.
NIST Cybersecurity Framework
We have adopted the NIST Cybersecurity
Framework (‘NIST CSF’) to help us understand
and define our existing policies, processes
and technical measures in place with the aim
to better govern our cyber security position.
It enables us to identify areas of improvement
and focus our efforts by agreeing and setting
a target state, with the understanding that
the NIST CSF is designed to complement
and enhance existing business and cyber
security operations.
Internal Audit function
We operate a rolling internal audit programme
(outsourced to a third party) which includes
annual reviews of cyber security. As part
of this programme, a review of our NIST
Framework has been carried out to validate
the status and perform an operating
effectiveness review, the purpose of which
is to provide confidence that the framework
is robust, appropriate and effective.
Auto Trader Group plc
Annual Report and Financial Statements 2023
44
BOARD
RESPONSIBILITY
1
EXECUTIVE
RESPONSIBILITY
2
INTERNAL AUDIT
PROGRAMME
6
OPERATIONAL
LEADERSHIP
TEAM
3
AUDIT
COMMITTEE
4
SECOND LINE
FORUMS &
COMMITTEES
5
We have successfully adopted the practical
elements of the NIST CSF effectively.
Policies and procedures
• A proactive awareness programme to
educate all employees on cyber security risks.
• A dedicated security operations team to
detect and respond to security incidents
in line with our cyber security incident
management procedures.
• Enhanced backup solutions have been
implemented across consumer facing
and internal systems, to guard against
the increasing threat of ransomware.
• All employee accounts are protected
by multi-factor authentication (‘MFA’)
regardless of device and location, providing
enhanced authentication protection.
• Major incident response simulations
and business continuity tests are carried
out periodically.
•
System vulnerability and penetration testing
is carried out regularly by both external and
internal resources, including: application
vulnerability testing; penetration testing
of our platform and infrastructure; and Red
team testing to ensure our processes for
responding to a cyber incident are robust
and fit for purpose.
•
All aspects of our applications are designed
and deployed with security in mind so
that Auto Trader can deliver a secure and
trusted platform for our customers.
Protecting our customer
and consumer data
Data is at the heart of everything we do and
data compliance and protection is therefore
of critical importance to Auto Trader.
We operate a structured framework which
supports us in meeting our compliance
obligations, the expectations of customers
and clients, fulfil privacy rights and mitigate
the risks of a data breach. We comply with the
Data Protection Act 2018 (‘DPA 2018’), and the
UK General Data Protection Regulation (‘UK
GDPR’) as our benchmark for data protection.
When it comes to collecting and storing
personal data, be that for consumers,
customers or our employees, we have
a comprehensive set of policies which
reflect the applicable privacy legislation
and abide by a clear set of principles.
We act as data processor for our customers
and a data controller for the personal
data of our people.
We are committed to ensuring that the
personal information we collect is used for
the appropriate purpose, which does not
constitute an invasion of privacy and is held
securely, responsibly and transparently in
accordance with our privacy notices which
govern all our platforms and subsidiaries.
To ensure we are meeting our compliance
obligations we have a dedicated team
that is responsible for data privacy, data
breach prevention and reporting, policy
compliance, record keeping and data
subject rights. We have an assurance
framework in place to monitor compliance
with data privacy laws and to ensure any
breaches are dealt with in a robust manner.
We hold GDPR Steering meetings bimonthly,
attended by data owners from all business
areas. The meeting is a central point of
communication and coordination and
provides guidance on the governance
of our data strategy and ongoing
compliance with relevant data security
and privacy regulations.
1. BOARD RESPONSIBILITY
Material ESG topics are discussed by the Board including cyber security
and GDPR.
The Corporate Responsibility Committee assists the Board in fulfilling its
oversight responsibilities in respect of governance and compliance, where
topics have not been covered by the Board.
2. EXECUTIVE RESPONSIBILITY
Responsibility for assessing and managing our governance and
compliance sits at both Executive and Board level. Our Executive Directors
have responsibility for ensuring we conduct ourselves with the highest
standards of honesty and integrity.
3. OPERATIONAL LEADERSHIP TEAM
The Group’s Chief Technology Officer, Chris Kelly, is responsible for setting
the Group technology strategy, including our cyber security framework.
The Group’s Director of Governance, Claire Baty, is responsible for regulatory
compliance, customer security, procurement, legal services and risk
management. Her remit includes compliance with GDPR and FCA regulation.
4. AUDIT COMMITTEE
Internal audit reports are reported to the Audit Committee and monitored to
ensure recommendations are actioned.
5. SECOND LINE FORUMS & COMMITTEES
We operate the following second line forums and committees:
• Risk Forum.
• FCA Governance Committee.
• GDPR Steering.
• Cyber Security working group.
• Trust forum.
• Health & Safety Committee.
6. INTERNAL AUDIT PROGRAMME
We operate a rolling internal audit programme which provides independent
and objective assurance activities relating to the Group’s governance, risk
management and internal control processes. The programme includes
regular reviews of cyber security, enterprise risk management, GDPR
compliance and FCA compliance.
How we govern this area
Auto Trader Group plc
Annual Report and Financial Statements 2023
45
Strategic report
Governance
Financial statements
Being a responsible business
continued
All Auto Trader employees, including
part-time employees, contractors and all
Board members, are required to complete
annual data privacy and security training and
we have established processes to cover all
aspects of the GDPR: Data Protection Impact
Assessments (‘DPIAs’). These are conducted
to help identify and minimise any data
protection risks for new or changed products
or services; and all processes are recorded
and records of processing activity (‘ROPAs’)
are reviewed quarterly by data owners. These
include the lawful basis for processing and
data retention periods; our privacy notices
are reviewed and updated regularly. We have
separate notices for consumers, employees
and retailers; and we have processes in place
to respond to Subject Access Requests (‘SAR’)
and Erasure requests.
Where required, Auto Trader obtains consent
from consumers to gather personal data to
service their enquiries for products, services
or vehicles advertised on the site. Explicit
consent (gathered separately) is also obtained
to contact consumers for marketing purposes.
Where we pass personal data to third-party
service providers contracted to Auto Trader
in the course of dealing with customers or
employees, we carefully vet any third parties
that we share data with, and they are obliged
to keep it securely, and use it only to fulfil the
service they provide on our behalf.
We record all instances of data loss and
have a rigorous incident management
process in the unlikely event a breach
occurs. This includes reporting notifiable
breaches to the relevant regulatory
authorities without undue delay and within
stipulated deadlines. Where required we
take remedial action as soon as possible.
Maintaining a trusted marketplace
As a leading online marketplace, we strive to provide a
marketplace that is relevant, reliable and fair. It is important
to our customers and our consumer audience that adverts
displayed on Auto Trader are accurate and genuine. Our goal
is also to provide a valuable service for our customers and
consumers and provide an engaging user experience.
FCA compliance
Auto Trader Limited, the main trading subsidiary
of the Group, is authorised by the FCA for
consumer credit and insurance intermediary
activities. Our activities primarily relate to
providing finance and insurance introductions
to consumers for third parties, be it retailers
or commercial partners. We are developing
and trialling consumer journeys for some
of our regulated activities as part of the
business’s wider digital retailing proposition
using the technology of Blue Owl Limited
(trading as ‘AutoConvert’), a wholly owned
subsidiary. AutoConvert became an Authorised
Representative of Auto Trader Limited in
2022 in respect of consumer credit activities.
Autorama UK Limited (trading as ‘Vanarama’),
acquired in 2022, is authorised by the FCA
for consumer credit and insurance activities.
The activities relate to brokering vehicle
leasing to retail and trade customers and
we also arrange General Insurance Services
under the trading name Vanarama Insurance
Services. We are developing and trialling
consumer journeys where consumers start
their journey on Auto Trader and complete an
onward journey with Vanarama.
We have specialist internal resource within
our Governance, Risk and Compliance
team with significant experience of working
in FCA regulated businesses, and we have
developed a detailed governance framework
to ensure that we comply with the principles,
rules and guidance applicable to our
activities. We have implemented the Senior
Managers & Certification Regime, which
came into effect in December 2019. Senior
Managers at Auto Trader are Nathan Coe,
Catherine Faiers, Jamie Warner and Claire
Baty. Certain members of the Operational
Leadership Team hold Certified Functions.
Senior Managers at Vanarama are members
of the company’s board and other members
of the Vanarama senior leadership team.
All of these individuals have been assessed
and certified as Fit and Proper. All employees
are subject to the Conduct Rules and have
received appropriate training and guidance.
We have a comprehensive suite of policies,
training and monitoring procedures to ensure
awareness of and compliance with the
requirements, including financial promotions,
product change management, complaint
handling, vulnerable customers and
transparency. Our Customer Charter outlines
our commitment to Treating Customers Fairly.
We also have in place a comprehensive
implementation plan in respect of ensuring
our compliance with the FCA’s forthcoming
Consumer Duty.
Retailer feedback
We actively seek retailer feedback
in all aspects of product and service
development to ensure that we continue
to provide market-leading solutions and
support to our retailer partners. We also
actively monitor consumer sentiment
across our various products and channels,
and our teams review thousands of items
of feedback a week.
Product research and testing
When we bring a product to market, we go
through a rigorous process of discovery
to ensure solutions meet the varied
needs of both our retailer partners and
consumers. Retailers are involved at all
stages of product development, including
beta testing prior to scaling solutions.
Sentiment tracking
We survey retailers on a monthly basis
through marketing channels to capture
structured feedback on our relationship
with retailers to ensure we’re meeting their
needs and gauge sentiment towards our
brand. This ensures we can keep an eye on
overall satisfaction, value for money and
the partnership we aim to foster.
Voice of the customer
We actively monitor feedback which our
Retailer Development and Support teams
capture from retailers during the course of
the thousands of inbound and outbound
calls we field per week, ensuring we keep
a good gauge on retailer sentiment and
can react to market challenges facing our
retailers quickly.
Consumer sentiment
We’ve maintained extremely positive
feedback scores across external review
platforms including Trustpilot (4.7/5 based
on 80,453 reviews), iOS App Store (4.8/5
based on 165,159 reviews) and Android Play
Store (4.7/5 based on 67,967 reviews).
TAG verification
We have achieved verification by TAG
(‘Trustworthy Accountability Group’),
achieving the Brand Safety Recognition
seal. TAG is the world’s leading
programme to fight criminal activity
and protect brand safety in digital
advertising. They have established best
in class global standards that protect
the industry from potentially harmful
threats around fraud, malware and
brand safety. Obtaining our TAG status
is recognition that we meet the high
standards required by TAG and our
contribution towards fighting criminal
activity and increasing trust and
transparency in digital advertising.
VSTAG forum
We continue to actively participate in
the Vehicle Safe Trading Advisory Group
(‘VSTAG’), an industry forum we founded
over 15 years ago. The forum brings
together the UK’s leading online
automotive advertising companies,
advisors from the Metropolitan Police,
Get Safe Online and Action Fraud to work
together to reduce online vehicle crime
and help protect buyers and sellers of
pre-owned vehicles from fraud.
Auto Trader Group plc
Annual Report and Financial Statements 2023
46
plc.autotrader.co.uk
careers.autotrader.co.uk
autotrader.co.uk
Business ethics and compliance
We have a zero tolerance approach to bribery,
corruption and other financial crime within
our business and/or in any dealings with our
customers, suppliers and other third parties
who we deal with in the course of our business.
We require regular compliance training for
all Auto Trader employees and contractors,
including all Board members. We have a well
established online training and awareness
programme which includes compliance
modules for information security, GDPR,
anti-bribery and corruption, the corporate
criminal offence of facilitating tax evasion,
anti-money laundering, modern slavery
and whistleblowing to ensure all employees
uphold our ethical standards in their
day-to-day decision-making and actions,
remain up to date and are alert to unethical
practices and potential risks to our consumers
or customers. We do not conduct business
with any service provider, customer or supplier
which does not meet the principles of our
policies with respect to these areas.
Human rights
We are opposed to all forms of discrimination
with respect to employment and occupation,
modern slavery, human trafficking, forced
or compulsory labour and child labour,
in our business and our supply chain. We are
committed to supporting human rights
through our compliance with national laws
and through our internal policies which
adhere to internationally recognised human
rights principles. In line with our commitment
to creating a diverse and inclusive culture,
our internal policies require respect and
equal and fair treatment of all persons
we come into contact with. All employees
are paid in excess of the Real Living Wage,
ensuring that all employees and contractors
working in our offices receive at least the
Living Wage. We are an accredited Living
Wage Employer. We safeguard our
employees through a framework of policies
and statements including Modern Slavery,
Gender Pay, Flexible Working, Equal
Opportunities and Inclusion Policies.
Modern slavery
We are committed to preventing slavery
and human trafficking in our business
and supply chains. We require the highest
standards of honesty and integrity in all our
business dealings and relationships. We will
not tolerate the mistreatment of people in
our employment and, wherever possible,
employed in our supply chain. During 2023,
no incidents of modern slavery or human
rights abuse have been identified in our
business or supply chain.
Tax transparency
Auto Trader is committed to being a
responsible taxpayer acting in a transparent
manner at all times. Our detailed tax policy
includes further transparency on our approach
to risk management and governance. In 2023,
our total tax contribution was £175.4m
(2022: £143.5m). Taxes borne by the Group
totalled £69.4m (2022: £63.8m) and consist
of corporation tax, employer’s NICs and
stamp duty. Taxes collected by the Group
totalled £106.0m (2022: £79.7m) and consist
of PAYE deductions, employees’ NICs and
net VAT collected.
Supplier ESG engagement
We hold ourselves and our suppliers to the
highest standards of behaviour. We want to
engage suppliers that share our values and
collaborate with them to build a stronger,
more responsible supply chain. We have an
established supplier engagement strategy
and the information we collect through our
supplier engagement/onboarding process
provides us with greater insight into numerous
aspects of our suppliers’ performance,
including Environmental, Social and
Governance practices such as: how they
are engaging the communities they are
based in; what charitable activities they
are undertaking; how they identify and
improve diversity and inclusion; what
governance they have in place to ensure
good practice and limit instances of
modern slavery, bribery or breaches of
other relevant legislation; and sustainability.
As part of our environmental strategy,
we have expanded our discussions on
sustainability with our highest spending
suppliers to deep dive into understanding
where our suppliers are on their own
sustainability journey. We have published
a supplier code of conduct which outlines
Auto Trader’s stance on important matters
and our expectations of our suppliers.
Grievance reporting
or escalation procedures
We aim to create a working environment
in which all individuals enjoy coming to
work, where they can perform at their best,
and where they are free from discrimination
or harassment.
We foster a culture of open and healthy
conversations, mutual appreciation and
respect. We treat any behaviour that
undermines this aim as totally unacceptable
and it will not be tolerated. We are committed
to a culture where staff can freely report
any issue that needs attention and access
support via the escalation procedures we
have in place. Our grievance policy sets out
both informal and formal avenues for
addressing concerns.
Whistleblowing
We are committed to carrying out all
business activities in an honest and open
manner and strive to apply high ethical
standards in all our business dealings.
We actively cultivate a transparent and
open culture, encouraging our employees
to speak up whenever they have concerns,
if they suspect anything inappropriate
or experience any serious malpractice
or wrongdoing in our business. We believe
this contributes to a fairer and transparent
marketplace where customers and
consumers know that we can be trusted.
We have an internal reporting facility for
employees to discuss concerns and we also
operate an anonymous and confidential
whistleblowing helpline through an
independent organisation. Reports are
directed to the Audit Committee Chair
and the Company Secretary or via the
independent hotline.
Further information
To find out more about all of our governance
& compliance policies, please go online:
Auto Trader Group plc
Annual Report and Financial Statements 2023
47
Strategic report
Governance
Financial statements
How we manage risk
Risk management and internal control
The Company does not have a separate Risk Committee; instead the
Board as a whole is collectively accountable for determining the
nature and extent of the principal risks Auto Trader is willing to take
in achieving its strategic objectives.
The Board is also accountable for establishing and maintaining
the Group’s system of risk management and internal controls.
It receives regular reports from management identifying and
evaluating our response to key risks. Our risk management
framework is described opposite.
Our risk management process
Effective risk management is critical if we are to achieve our strategic
objectives, to achieve sustainable long-term growth, and ultimately
to achieve our purpose of Driving Change Together. Responsibly.
A four-step process is adopted to help us manage our principal
risks. OLT members are responsible for identifying, assessing,
mitigating and monitoring risks, and reporting against these risks.
The Governance, Risk and Compliance function facilitates this process
and supports the OLT in designing responses to risks, thereby ensuring
that the response is aligned to the Group’s risk appetite. The risk
management process can be summarised as follows:
Risk appetite
The Board has considered the nature and extent of the principal risks Auto Trader currently faces, the potential risks we expose
ourselves to as we proceed with our strategy, and the wider market, economy and business environment. The Board has set its risk
appetite accordingly, which can be summarised as follows:
Flexible
Auto Trader acknowledges that, in some
circumstances, fast-paced and innovative
development of new products within the
technology space presents significant
opportunities and taking advantage of these
opportunities may result in financial loss.
We consider the opportunities can outweigh
the downside risks, and therefore, in pursuit of
our strategic objectives, we are flexible about
taking risks which relate to product innovation,
addressing competitive threats, and/or making
the most of market opportunities.
Cautious
As we pursue our strategic objectives, we must
remain cognisant of the potential for them to
have conflicting impacts on our stakeholders,
including employees, suppliers and third parties,
and the environment. Owing to the potential for
these risks to have significant knock-on impacts
across a wide range of categories, we are cautious
about taking risks in relation to such areas.
Averse
We are averse to taking risks which conflict with our
values; risks which could damage our reputation;
risks which threaten the security of our systems
and technology; risks leading to a breach of laws,
regulations or financial covenants; and/or risks
which could compromise the organisation’s going
concern status. Across these categories we
take all reasonable steps to ensure our business
activities do not give rise to significant risk of
damage to our stakeholders, and in pursuing our
strategic objectives we are averse to exposing
ourselves to higher levels of risk knowingly.
1
Identify risks
A top-down and bottom-up approach is used to identify
principal risks across the business. Whilst the Board has overall
accountability for the effectiveness of internal control and risk
management, the day-to-day management of risk is delegated
to the OLT. Independent support is provided to the OLT by the
Governance, Risk and Compliance function.
4
Monitor and review
The OLT is responsible for monitoring the effectiveness of
controls and mitigating actions, with continuous independent
challenge provided by the Group’s Governance, Risk and
Compliance function, and Internal Audit. The Board reviews the
Group’s risk register and assesses the adequacy of mitigating
actions to ensure that risks are being managed in a manner
consistent with our risk appetite.
2
Assess and quantify risks
Risks are evaluated to establish the root causes, the impact
and the likelihood of occurrence. Risks are categorised as:
•
Existential risks, being those which have the potential
to lead to fundamental change within our organisation
and wider industry.
•
Operational risks, being those arising out of the existing
business activities.
•
Emerging risks, being those which relate to new initiatives,
new products, and new laws and regulations.
EFFECTIVE
RISK
MANAGEMENT
3
Respond to, manage and mitigate risks
After identifying the root cause of a risk, owners must consider
whether the existing mitigations reduce the risk to an acceptable
level, with this assessment challenged independently by the
Governance, Risk, and Compliance function. The level of acceptable
risk is guided by our Group risk appetite. If the residual level of risk
after mitigation remains above our risk appetite, then further
mitigating actions are implemented.
Our risk management arrangements
The Board is collectively responsible for determining the nature and extent of
the principal risks the Group is willing to take in achieving its strategic objectives.
Auto Trader Group plc
Annual Report and Financial Statements 2023
48
Driving Change Together.
Responsibly.
AUTO TRADER GROUP PLC BOARD
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
DISCLOSURE
COMMITTEE
EXTERNAL
AUDITOR
INTERNAL
AUDITOR
OTHER
EXTERNAL
ASSURANCE
SUBSIDIARY BOARDS
OPERATIONAL LEADERSHIP TEAM & SENIOR LEADERS
THIRD LINE
NOMINATION
COMMITTEE
CORPORATE
RESPONSIBILITY
COMMITTEE
RISK MANAGEMENT
INTERNAL CONTROL
FCA COMPLIANCE
GDPR COMPLIANCE
LEGAL TEAM
PROCUREMENT
CYBER SECURITY TEAM
SECOND LINE
FUNCTIONS
ENVIRONMENTAL STRATEGY
SUSTAINABILITY
NETWORK
ENVIRONMENTAL
STRATEGY
WORKING GROUP
NET ZERO
WORKING
GROUP
EMPLOYEE GUILDS & NETWORKS
CAREER
KICKSTART
NETWORK
FAMILY
NETWORK
ETHNICITY
NETWORK
LGBT+
NETWORK
DISABILITY &
NEURODIVERSITY
NETWORK
MAKE A
DIFFERENCE
GUILD
WOMEN’S
NETWORK
WELLBEING
GUILD
AGE
NETWORK
SOCIAL
MOBILITY
NETWORK
BOARD
ENGAGEMENT
GUILD
SECOND LINE FORUMS
AND COMMITTEES
RISK FORUM:
SCOPE OF RISK FORUM
INCLUDES CLIMATE
FCA GOVERNANCE
COMMITTEE
HEALTH & SAFETY
COMMITTEE
GDPR STEERING
DISASTER RECOVERY
STEERING
CYBER SECURITY
WORKING GROUP
TRUST FORUM
6
1
8
3
5
9
4
2
7
5
2
4
7
6
3
1
8
9
10
10
Our risk management framework
The Group’s principal risks are recorded within a risk register which
captures details of each risk and the root causes; likelihood of the
risk occurring; the impact if it does occur; and details of the actions
being taken to manage the risk.
The Board considers whether, given the strategy and risk appetite of
the Group, the mitigations are reducing the risk to an acceptable level.
The risk landscape has continued to evolve
over the last 12 months, and we expect
changes to continue in the coming year.
Our view in 2023 is that the principal risks to
Auto Trader are a) those which could result
in fundamental changes to the automotive
retail industry, and b) those which could
prevent us achieving our strategic objectives.
Accordingly, our strategy is linked intrinsically
to our principal risks. We have taken great
strides in the last year to manage these risks.
Examples include the launch of Deal Builder
and improvements to our core marketplace
products. However, to execute our strategy,
it is crucial we protect ourselves against the
threats to achieving our strategic objectives.
The following pages provide detail on each
of our 10 principal risks and how we are
responding to each risk.
1.
Automotive economy, market
and business environment
2.
Climate change
3.
Employees
4.
Reliance on third parties
and partners
5.
IT systems and cyber security
Current year
Previous year
6.
Failure to innovate: disruptive technologies
and changing consumer behaviours
7.
Legal and regulatory compliance
8.
Competition
9.
Brand and reputation
10.
External catastrophic and geo-political events
Our risk assessment matrix
Likelihood (after mitigation)
Business impact (after mitigation)
Auto Trader Group plc
Annual Report and Financial Statements 2023
49
Strategic report
Governance
Financial statements
Principal risks and uncertainties
The Board has carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity.
The principal risks and uncertainties are detailed in this section.
Additional risks and uncertainties to the Group, including those that
are not currently known or that the Group currently deems immaterial,
may individually or cumulatively also have a material effect on the
Group’s business, results of operations and/or financial condition.
1
Automotive economy, market and business environment
Risk and potential impact
Key changes and outlook
How we manage the risk
An adverse change in supply
and demand in the new/used
car market could lead to reduced
retailer profitability and reduced
retailer wallets, resulting in
reduced advertising spend.
Adverse movements in supply
and demand of vehicles could
also lead to a contraction in the
number of retailers.
In addition, we continue to see
the movement towards an agency
model whereby retailers facilitate
OEM sales directly to consumers.
This could lead to a loss of revenue
from our retailer customers.
•
The low level of supply of new vehicles since 2020 has
continued for much of the last year. However, new car
registrations in Q1 (January to March) 2023 increased by 18%
compared to Q1 2022. Looking to the future, more reliable
supply of new vehicles will be important to the success of
Autorama’s integration into the Auto Trader Group.
•
The low level of new car supply since 2020 will likely affect
the availability of used car stock in the coming years.
In contrast, consumer demand remains high and retailer
profitability, in the main, remains high. In March 2023,
used car retail prices increased by 2% year on year,
being the 36
th
consecutive month of price growth.
•
In 2023 some OEMs begin operating an agency model.
We are aware that each OEM encounters unique challenges
if they switch to an agency model and we have been working
with OEMs to develop bespoke solutions.
•
Overall, the risks posed by changes to the automotive
economy, market and business environment continue
to evolve, however metrics and performance indicators
suggest that we are managing these risks to an acceptable
level through our strategic actions.
•
We monitor new and used car transactions
closely, using data from SMMT and DVLA,
observing behaviour on our marketplace,
and from engaging closely with our customers
and consumers.
•
Our agile culture enables us to respond quickly
to new and emerging threats. We continuously
develop new products and enhance existing
products. We are making significant progress
with our digital retailing strategy which aims
to bring more of the car buying journey online.
•
We use our own Auto Trader Retail Price Index
and valuations data to monitor the pricing trends
of used cars by trade sellers.
•
We are progressing well with integrating
Autorama into our business and are now
leveraging their leasing capabilities. Autorama
will diversify our business by providing a leasing
proposition to consumers, as well as helping us
to achieve our strategy relating to digital retailing
on new cars.
•
We have also maintained a strong balance sheet,
and our low leverage should enable us to respond
in the event of major threats crystallising.
Unchanged
How we mitigate our principal risks
Identifying, assessing, responding to and monitoring
the Group’s principal risks.
Auto Trader Group plc
Annual Report and Financial Statements 2023
50
2
Climate change
Risk and potential impact
Key changes and outlook
How we manage the risk
The automotive industry is intrinsically
linked to climate change and there
is increasing pressure from consumers
and government for the industry
to reduce its impact on the climate.
However, failure to deliver on our
environmental commitments will
negatively impact our brand as a
responsible business and may result in
legal exposure or regulatory sanctions.
Failure to overcome the uncertainty
created by the shift from internal
combustion engine (‘ICE’) to electric
vehicles (‘EVs’) could inhibit their
take-up, potentially leading to
changes in buying behaviours.
Factors include the high purchase
price of most EVs, potential for
improvement in public transport,
new and expanded emissions
zones, increasing EV running costs,
and consumer uncertainty over
the residual value of used EVs.
Changing and more stringent
regulatory requirements could
increase our cost base, and
increased frequency and severity
of extreme weather events
could lead to heightened costs,
including heating/air-conditioning,
insurance, and cloud infrastructure.
Extreme weather events could
also lead to short-term closure
of retailer forecourts (for example,
due to flooding).
•
Updates to our website in the last year position us as
front-runners in the switch to EVs and enable us to respond
to potential changes in OEM and retailer business models.
•
There is still a relatively small amount of data informing
the residual values of used EVs. We have positioned
ourselves well by leveraging Autorama’s capabilities,
providing those consumers switching to EVs for the first
time a viable alternative to outright purchase.
•
Despite ongoing uncertainty surrounding EVs, data from
our website shows the electric share of ad-views has
a gradual upwards trend. Supply in the used EV market
increased this year as those EVs purchased on three-
and four-year agreements enter the used EV market.
•
Looking ahead, widespread take-up of EVs could be
affected by:
–
the availability of public charging for drivers unable
to access private charging,
–
EV purchase costs, which are still around 37% more
expensive than ICE equivalents on a like-for-like basis.
–
Increases in EV running costs owing to increased taxation
and charging costs (especially those EV drivers without
private charging).
•
Further regulation and legislation are likely, such as the
introduction of new clean air zones and congestion charges.
•
At Autorama, some vehicles are pre-registered and held
temporarily on the balance sheet. Consequently, we
capture the lifetime emissions of these vehicles when
calculating the Group’s carbon emissions. This has led
to a material increase in our reported carbon emissions.
•
Overall, the risks associated with climate change have
decreased in the last year owing to the actions we continue
to take. Nevertheless, looking to the future, the impact
of climate change means that managing these risks
effectively remains a key strategic priority. More detail
about the risks associated with climate change and the
mitigations is contained on pages 32 and 33.
•
We are evolving our product offering and
marketplace to provide consumers with more
information about EVs. A cross-functional
working group is focusing on helping consumers
make more environmentally friendly vehicle
choices. Our ongoing integration of Autorama
adds digital retailing and leasing capabilities
on new cars, including EVs. This places us in an
optimal position to provide a viable alternative
to consumers who are anxious about making
outright purchases.
•
Our Corporate Responsibility Committee
oversees our environmental commitments and
work is ongoing to reduce our carbon emissions
across all scopes.
•
As part of our climate commitments, we are
focusing not just on our own carbon footprint,
but positively supporting the industry. Our
partnership with the Carbon Literacy Trust,
for example, provides training and insights
to employees and external stakeholders.
•
We regularly meet with various government
departments, including HM Treasury and
the Department for Transport’s Office for
Zero Emission Vehicles, to share our data and
insights to help guide policy around the topic.
•
The climate records and commitments of suppliers
is a key factor in our procurement processes.
•
Development and evolution of our digital retailing
products provides customers and consumers with
purchasing options should extreme weather events
lead to short-term retailer forecourt closures.
Decreasing
Our purpose-driven strategy P10
Being a responsible business P26
OUR STRATEGIC PRIORITIES
Being a responsible business
Classified marketplace
Platform
Digital retailing
Auto Trader Group plc
Annual Report and Financial Statements 2023
51
Strategic report
Governance
Financial statements
Principal risks and uncertainties
continued
3
Employees
Risk and potential impact
Key changes and outlook
How we manage the risk
To enable us to achieve our
strategic objectives it is important
that we attract, retain and motivate
a highly skilled workforce, including
those with specialist skillsets in data
and technology.
Delivery of our strategy is also
dependent on us building a diverse
and inclusive workforce, and a
supportive, collaborative culture,
conducted in a safe environment,
all of which will enable optimum
performance from all our employees.
•
Our Glassdoor rating based on anonymous reviews is 4.4 out
of 5 and in our latest Culture Amp survey, 91% of respondents
said that they are proud to work at Auto Trader. This year
our employee turnover has remained low.
•
We now operate a Connected Working model where
employees are in the office for two ‘fixed’ days per week
plus an additional ‘flex’ day per week on a day which suits
them best. The aim of this working model is to increase
efficiency, collaboration and innovation whilst also
allowing flexibility and maximising inclusion.
•
Connected Working also includes a ‘remote first’ policy.
For periods in July, August, and December, employees can
work fully remotely to increase flexibility at times when
there are increased levels of annual leave.
•
The cost of living crisis and skills shortages in the market
continue to affect workforce costs. We monitor the
market proactively to ensure that our salaries are fair,
proportionate and aligned to market rates. In 2022
we made a cost-of-living payment to all employees
(except for the OLT and the Board) and increased the
size of our annual salary review.
•
In the marketplace, employees have increasing expectations
of their employers to act in a fair, responsible and sustainable
manner and we remain committed to ensuring that we
conduct our business in a morally responsible way.
•
Overall, the employee-related risks remain a principal risk
and we acknowledge that managing this risk effectively
is crucial to achieving our strategic objectives.
•
A values-led culture which is embedded
throughout the recruitment, induction,
training and appraisal processes.
•
Long-term incentive plans for senior and key
staff, including incentives with respect to
diversity and inclusion and Auto Trader’s
environmental impact.
•
Regular employee engagement surveys and
monitoring of Glassdoor ratings. We have regular
business updates, networks, guilds, and
all-employee conferences.
•
We continue to monitor the impact Connected
Working is having on engagement, inclusion,
employee safety and productivity, with reference
to both pandemic and pre-pandemic levels.
Any overseas working during the Remote First
periods must be reviewed and approved by
People Operations to ensure the safety of our
employees, security of our systems and compliance
with all relevant laws and regulations.
•
Active succession planning and career
development plans to retain and develop our
executives. Talent development is part of the
Terms of Reference of the Nomination Committee.
•
Diverse Talent Accelerator, Inclusive Leadership,
and Continuous Leadership Development
programmes aim to equip our employees, people
leaders and future leaders with the skills to lead,
manage and work within diverse teams.
Increasing
4
Reliance on third parties and partners
Risk and potential impact
Key changes and outlook
How we manage the risk
To achieve our strategic objectives,
we are reliant on partners engaging
with the changes we are introducing
to the industry. Getting lenders
on-board with our digital retailing
aspirations, for example, is a
key dependency.
We also rely on third parties to
support our technology infrastructure,
supply of data about vehicles and
their financing, and in the fulfilment
of some of our revenue generating
products. Consequently, it is important
that we manage relationships with,
and performance of, key suppliers
and key strategic partners.
•
We have implemented a refreshed onboarding and
monitoring process for critical suppliers. Despite the
threats posed to our suppliers in the external environment,
we have not experienced any material disruptions in the
last year.
•
As we progress further into digital retailing, we are likely
to see an increased reliance on third parties. Some of
the products we intend to launch will rely on partners and
lenders, and these could be barriers to growth should these
partners not engage with us. Ensuring that we manage
our relationships with these third parties will be crucial.
•
Overall, our significant strategic initiatives in relation to
platform and commercial data represent good progress
in reducing the level of reliance we have on third parties.
However, we remain aware of the importance of our
partners in achieving our aspirations in digital retailing.
•
Where possible, we limit reliance on single
suppliers to reduce single points of failure.
•
We have identified key suppliers and have
plans in place to respond to disruption.
•
Contracts and service level agreements are in
place with all key suppliers. New relationships go
through a robust procurement and legal review
process and are subject to regular review.
•
We carry out due diligence on our key suppliers
and partners at the onset of the relationship
and throughout the life of these relationships.
This includes financial viability, resilience and
alignment with our values and culture.
•
We seek to develop strong commercial
relationships with our partners and regularly
explore ways of working together even more
effectively. We monitor the performance of
partners and suppliers to ensure continued
quality and uptime.
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5
IT systems and cyber security
6
Failure to innovate: disruptive technologies
and changing consumer behaviours
Risk and potential impact
Key changes and outlook
How we manage the risk
As a digital business, we rely on
our IT infrastructure to provide our
services. A disruptive cyber security
and/or business continuity event
could lead to downtime of our
systems and infrastructure.
Execution of our strategy also
relies on us making appropriate
investments in secure systems
and technologies. Failure to invest
in appropriate technology and
safeguards could lead to us failing
to achieve our objectives.
Delivery of our strategic objectives
also relies on us using data to provide
valuable insights to customers.
A significant data breach, whether
because of our own failures or a
malicious cyber-attack, would lead
to a loss in confidence by the public,
retailers and advertisers.
•
We have completed a multi-year migration of our applications
to the cloud. This increases the resilience of our systems and
the security of our data.
•
Development of new products carries the threat of cyber-attack
and with digital retailing the impact of a potential data breach
is likely to increase. We are therefore developing systems which
provide not just the best customer and consumer experience,
but all necessary security to ensure we remain resilient.
•
Integration of Autorama’s leasing deals onto the Auto Trader
platform is complex, and we are mindful of IT and cyber
security threats during the integration. We are also committed
to continuously reviewing, testing and updating Autorama’s
IT disaster recovery and business continuity arrangements.
•
Whilst we have used artificial intelligence (‘AI’) for many
years, the recent emergence of generative AI poses a great
opportunity for us to enhance our products, customer and
consumer experience, and to improve efficiency. However,
it is important we use AI in a manner which does not expose
us to excessive security, compliance and or reputational risks.
•
AI could be used by criminals maliciously in future.
Deepfake technology, for example, increases the risks
of social engineering against stakeholders.
•
The cyber security landscape is constantly evolving.
We continue to make significant investments in safeguarding
our systems and data, as well as implementing best-in-class
systems to support the achievement of our strategic objectives.
•
We have a disaster recovery and business
continuity plan which is regularly reviewed
and tested.
•
We continuously monitor the availability and
resilience of processing systems and services.
The migration to the cloud has improved to the
efficiency of our systems and improved our ability
to respond to an incident in a timely manner.
•
We have dedicated security teams, including
white hat hackers, and carry out regular penetration
testing of key systems to identify vulnerabilities.
•
All employees are required to undergo IT security
awareness training on at least an annual basis.
•
We use two-factor authentication for all our car
retailers and employees to access our network.
•
We have now adopted the National Institute
of Standards and Technology (‘NIST’)
Cybersecurity Framework to manage and
reduce cyber security risks.
•
Our digital retailing teams regularly review
the IT systems and infrastructure required
to deliver our strategy.
Risk and potential impact
Key changes and outlook
How we manage the risk
The automotive industry is changing
at unprecedented pace. Should we
fail to innovate our business and
product offerings, we could lose
relevance with our key stakeholders,
including consumers and customers.
It is crucial that we develop and
implement new products, services
and technologies, and adapt to
changing consumer behaviour
towards car buying and ownership.
Failure to provide both customers
and consumers with the best
possible products and online
journey, including an online buying
experience, could lead to reduced
website traffic and loss of revenue.
•
We continue to develop new products in our marketplace,
platform and digital retailing. In the last year we have
launched a trial of Deal Builder with a small number of
retailers. This provides consumers with an omni-channel
buying journey where they can find, reserve, finance,
and part exchange online.
•
Leveraging Autorama’s systems, we launched a leasing
check-out journey on the Auto Trader website. Providing
consumers with a leasing option positions us to meet their
needs as buying behaviours change, particularly those
consumers wary about buying an EV for the first time.
•
We have continued to develop our AT Connect solution.
This online tool leverages our platform and data to
provide retailers with real-time connections to Auto Trader
systems which can be used to inform vehicle valuations,
maintain stock on our website in real-time and access our
vehicle taxonomy.
•
Our data has been recognised nationally through the provision
of our market pricing data to the ONS. We also work with
government to provide information about EV demand to
inform potential locations for EV chargers.
•
Overall, we have continued to manage the risks well over the
last year and continue to provide new and updated solutions
to both customers and consumers.
•
Continuous research into changing consumer
behaviour, regular horizon scanning and
monitoring of emerging trends, use of external
resources where needed, and regular contact
with similar businesses around the world to
enable peer-to-peer sharing of good practice.
•
An inclusive and diverse workforce enables
us to maximise creativity and performance,
leading to innovation.
•
An agile and collaborative culture, as well
as continuous investment in technology,
maximises innovation.
•
Dedicated workstreams as part of all our
strategic priorities. These workstreams are
aimed at developing the best products to meet
the needs of the consumer and customer.
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Annual Report and Financial Statements 2023
53
Strategic report
Governance
Financial statements
Principal risks and uncertainties
continued
7
Legal and regulatory compliance
8
Competition
Risk and potential impact
Key changes and outlook
How we manage the risk
The Group operates in a complex
regulatory environment. As we
progress in executing our strategy,
we are likely to be exposed to
increased legal and regulatory
risks, particularly those relating
to FCA and GDPR.
There is a risk that the Group,
or its subsidiaries, fail to comply with
legal and regulatory requirements.
This could lead to reputational
damage, financial or criminal
penalties and impact on our ability
to do business.
•
Providing consumers with an online car buying journey
will increase our exposure to regulatory risks, in particular
the amount of personal information we collect and in the
provision of the online finance application journey.
•
Integrating Autorama exposes us to increased FCA and
GDPR risks. This relates to both the leasing journey itself,
as well as the ancillary products offered as part of leasing,
such as gap insurance. Our compliance teams have been
working to ensure that Autorama’s policies and procedures
are compliant.
•
We are regularly ‘horizon scanning’ to prepare us for
upcoming changes to regulations and legislation.
Upcoming legislative and regulatory changes which may
affect us, albeit to varying degrees, include the UK Online
Safety Bill Digital Markets, Competition and Consumers Bill,
Data Protection and Digital Information Bill, the UK Audit
Reform Bill, FCA Consumer Duty regulations, and changes
to the UK Corporate Governance Code.
•
In the last year, in both response to, and in anticipation of,
changes in regulatory risk, we have increased our resource
in relation to risk and compliance monitoring, and increased
headcount in our Governance, Risk and Compliance function.
Overall, we consider the level of risk has increased.
•
We have dedicated internal expertise responsible
for identifying, assessing and responding to
upcoming changes in laws and regulations, and
we utilise external specialists where necessary.
•
We have a mature governance framework
to oversee our legal and regulatory risks.
Governance forums receive regular internal
reporting on our compliance with the principles,
rules and guidance applicable to our regulated
activities.
•
A comprehensive suite of policies is reviewed
regularly. Additionally, training and monitoring
ensures awareness of, and compliance with,
regulatory requirements, including information
security, data protection, financial promotions,
product change management, complaints
handling and vulnerable customers.
•
The regulated entities within the Group continue
to comply with the FCA’s Senior Managers &
Certification Regime. The relevant individuals
have been assessed and certified as Fit and
Proper. All employees are subject to the FCA’s
Conduct Rules and have received appropriate
training and guidance.
•
We have increased headcount in our Governance,
Risk and Compliance function.
Risk and potential impact
Key changes and outlook
How we manage the risk
Our data continues to show that
there is a low competitive threat
in our classified marketplace.
Nevertheless, we remain wary of the
risk that competitors could develop
a superior consumer experience or
superior retailer products. This could
lead to loss of market share.
Further, as the automotive industry
evolves, an agency model could
change the way that vehicles are
bought and sold. Under an agency
model, cars are sold by OEMs directly
to consumers via retailers. As we
progress with our own objectives
surrounding digital retailing, an
agency model could mean that
OEMs themselves emerge as a
direct competitor in the vehicle
retail industry. Failure to manage
this emerging threat could inhibit
our ability to achieve our objectives.
•
Large technology companies such as Facebook, eBay and
Amazon continue to operate in the automotive marketplace.
In the last year, however, we 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.
•
On Boxing Day 2022 we launched a new marketing
campaign which focuses on helping consumers to find the
right car for them. This was supported by social media and
digital audio content. We estimated that our advertising
reached 99% of the UK population between Boxing Day and
31 March 2023.
•
In 2023 we worked with certain OEMs to provide them
with advertising solutions following their switch to an
agency model.
•
Overall, we continue to see retailers and manufacturers
evolving their online offerings, and as we diversify our own
product offering, we broaden our competitive landscape,
potentially leading to exposure to increased competition.
It therefore remains imperative that we are innovative
across our classified marketplace, our platform and
digital retailing.
•
Continued investment in our brand helps us to
protect and grow our audience, to ensure that
we remain the most influential website for
consumers when purchasing a vehicle.
•
Working with OEMs to develop solutions to enable
them to advertise their new car pipeline stock on
our website.
•
We monitor competitor activity closely through
monthly reporting and formal quarterly competitor
reviews, and regularly review this at OLT and
Board level.
•
We continue to invest in and develop our product
offering to ensure we offer value to consumers,
retailers and manufacturers.
•
We work in an agile way which enables us to
respond quickly to emerging competitive threats.
Increasing
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Annual Report and Financial Statements 2023
54
9
Brand and reputation
10
External catastrophic and geo-political events
Risk and potential impact
Key changes and outlook
How we manage the risk
Our brand is one of our biggest
assets. Our research shows that
we are the largest and most trusted
automotive classified brand in the
UK. Failure to maintain and protect
our brand, and/or negative publicity
affecting our reputation could
diminish the confidence that
retailers, consumers and advertisers
have in our products and services.
This could result in a reduction in
audience and revenue.
•
Our research shows that Auto Trader has c.90% prompted
brand awareness with consumers. We are also voted
regularly as the most influential automotive website
by consumers in the car buying process.
•
We are supporting digital retailing product development
with marketing to ensure that consumers see us as the most
suitable place to transact online.
•
Owing to measures and monitoring techniques used by
our security team, we continue to see very low levels of
fraudulent and misleading adverts on our website. We use
a customer watch list which aims to manage our platforms
proactively in line with our values and relevant regulations,
to identify and stop customer behaviour that could harm
consumers, retailers or the Auto Trader brand.
•
To date, the trial of our Deal Builder product has been
provided to only a select number of retailers. All retailers
trialling this new product undergo enhanced checks
before being granted access, including reviews on
consumer feedback.
•
Overall, we consider there to be a decreasing risk to our
brand and reputation.
•
We have a clear and open culture with a focus
on trust and transparency.
•
We have a dedicated customer security team,
who closely monitor our site to identify and
quickly remove fraudulent or misleading adverts.
Customer security also work proactively with
retailers and the wider industry to flag potential
security concerns.
•
We invest in new and innovative marketing
campaigns and new ways of engaging car
buyers to continue to maintain brand awareness,
and to change perceptions of Auto Trader to
be a destination for new cars as well as used.
•
To get access to Deal Builder, retailers are
required to sign up to and adhere to a Seller
Promise. Seller Promise prescribes minimum
levels of consumer service and advertising.
•
Our approach to cyber security and data
protection helps to protect us from the
adverse impact of a significant data breach
or cyber-attack.
•
We have well developed breach reporting and
crisis management programmes that enable
us to identify, escalate and appropriately
handle any emerging issues that could result
in reputational damage.
Risk and potential impact
Key changes and outlook
How we manage the risk
In a connected, global industry,
we are increasingly prone to the
impacts of external events around
the globe, as are our customers and
consumers. We consider there to be
a threat to the short-to-mid-term
performance of our business
posed by external, unpreventable,
catastrophic and geo-political
events. Such events could result in
our customers being unable to trade,
leading to loss of revenue, stock,
audience and market share.
•
In the last year, adverse market reaction to UK Government
policy, the enduring impacts of COVID-19 and the conflict
in Ukraine have all led to high inflation. Should the resultant
rise in the cost of living be sustained for a lengthy period,
it could have an impact on the ownership model of vehicles,
potentially with a lower volume of vehicles per household.
However, our exposure to high interest rates is minimal
owing to our low levels of debt.
•
It is of paramount importance to the resilience of our
business that we can anticipate, and respond quickly to,
the impacts of external events, particularly those which
impact on our customers. We are therefore continuously
reviewing our business continuity and crisis management
arrangements to ensure that they consider the impacts
of external events.
•
Overall, we have performed well despite the uncertain
national economy. Nevertheless, we remain wary of the
threats posed by external events, and we continue to review
our crisis and business continuity arrangements regularly.
•
We monitor external events continuously and
assess the ways in which our business could
be impacted, both in the short term and in the
longer term.
•
Our Crisis Response team includes senior leadership
and internal experts. Where necessary we also
have external advisors available to support us
in our response.
•
Our business continuity plan, IT disaster
recovery plan, and wider crisis management
arrangements all set out the key steps required
for us to respond to major events and restore
operations in the event of downtime.
•
We have identified the key internal stakeholders
who are responsible for crisis management
across all areas of the business. We have
also nominated delegates to minimise single
person dependencies.
•
Our crisis management arrangements are
tested regularly via simulated ‘war games’
scenarios. All key stakeholders within the
organisation are involved and we capture
lessons learned to continually improve our
crisis management arrangements.
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Annual Report and Financial Statements 2023
55
Strategic report
Governance
Financial statements
Principal risks and uncertainties
continued
Viability statement
In accordance with the UK Corporate Governance Code 2018
(the ‘Code’), the Directors have assessed the prospects and
viability of the Group over a period significantly longer than
12 months from the approval of these financial statements.
Detailed financial forecasts that consider customer numbers, stock
levels, ARPR, revenue, profit, cash flow and key financial ratios have
been prepared for the five-year period to March 2028. Funding
requirements have also been considered, with particular focus on
the ongoing compliance with the covenants attached to the Group’s
Syndicated Revolving Credit Facility (‘Syndicated RCF’). The first
year of the financial forecasts is based off the Group’s 2024 annual
financial budget. The following years are prepared in detail and are
flexed based on the actual results in year one.
The key assumptions in the financial forecasts, reflecting the overall
strategy, include:
• continued growth in our core marketplace, as we develop
our advertising platform and we continue to invest in our
search experience;
• growth in digital retailing, as we continue to evolve both
our products and consumer experience, bringing more
of the car buying journey online;
• growth in the use of our data, being the industry standard
platform and further embedding our data into the industry,
giving buyers and retailers up-to-date insight; and
• increase in costs through salaries as the Group continues
to grow, supporting and developing new products.
These key assumptions are reflected in the Group’s principal risks
and uncertainties, which are set out on pages 50 to 55. The purpose
of the principal risks is primarily to summarise those matters that could
prevent the Group from delivering on its strategy. A number of other
aspects of the principal risks – because of their nature or potential
impact – could also threaten the Group’s ability to continue in business
in its current form if they were to occur. This was considered as part
of the assessment of the Group’s viability, as explained opposite.
Assessment of prospects
The Group’s overall strategy and business model, as set out on pages
10 to 13, and pages 8 and 9, respectively, are central to assessing its
future prospects. The Group’s aim is to grow both its car buying and
selling audiences, thereby strengthening its core advertising business.
It will change how the UK shops for cars by providing the best online
car buying experience and enabling all retailers to sell online.
As such, key factors likely to affect the future development,
performance and position of the Group are:
• data and technology: continuous investment is made in
developing platform technologies which lead to improvements
for consumers, retailers and manufacturers;
• market position: the Group is the UK’s largest digital automotive
marketplace, with the largest volume of in-market car buyers
and the most influential website a consumer visits when
purchasing a vehicle; and
• people: continued success and growth are dependent on the
ability to attract, retain and motivate a highly skilled workforce,
with a particular focus on specialist technological and data skills.
The Board has determined that a period of five years to March 2028 is
the most appropriate period to provide its viability statement as:
• it allows consideration of the longer-term viability of the Group;
•
it being more aligned with the Group’s strategic planning process; and
• it reflects reasonable expectations in terms of the reliability
and accuracy of operational forecasts.
The Group’s prospects are assessed primarily through its strategic
planning process. This process includes an annual review of
the ongoing plan, led by the Group CEO and CFO through the
Operational Leadership Team and in conjunction with relevant
functions. The Board participates fully in the annual process and
has the task of considering whether the plan continues to take
appropriate account of the external environment including
technological, social and macro-economic changes.
The output of the annual review process is a set of objectives which
collectively form our three strategic priorities and our Environmental,
Social and Governance (‘ESG’) strategy, an analysis of the risks that
could prevent the plan being delivered, and the annual financial
budget. The latest updates to the plan were finalised in March 2023,
which considered the Group’s current position and its prospects
over the forthcoming years. Progress against these plans is reviewed
monthly by both the Operational Leadership Team and the Board.
The Group will be able to
continue in operation and
meet its liabilities as they
fall due over the five-year
period ending March 2028.
Auto Trader Group plc
Annual Report and Financial Statements 2023
56
The war in Ukraine
The war in Ukraine has the potential to materially impact the
automotive value chain. As Russia is an exporter of key metals
and other materials used in parts production, and Ukraine makes
components used in production such as wiring harnesses, there is
a direct disruption and rising price risk. The supply chain is already
impacted by semi-conductor supply issues, and there could be a
further impact to new car transactions. This scenario has not been
modelled as the Group does not feel there is likely to be significant
impact than that already seen, however it will continue to monitor
the situation.
Syndicated Revolving Credit facility (‘Syndicated RCF’)
The above scenarios consider the bi-annual covenants attached
to the Group’s Syndicated RCF, ensuring thresholds are met. The
scenarios are hypothetical and severe for the purpose of creating
outcomes that have the ability to threaten the viability of the Group.
The results of the stress testing demonstrated that due to the Group’s
significant free cash flow, access to the Syndicated RCF and the
Board’s ability to adjust the discretionary share buyback programme,
it would be able to withstand the impact of any of these scenarios,
remain cash generative and meet the obligations of its debt facility.
Viability statement
Based on their assessment of prospects and viability above, the
Directors confirm that they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities
as they fall due over the five-year period ending March 2028.
Going concern
The Directors also considered it appropriate to prepare the financial
statements on the going concern basis, as explained in the Basis
of preparation paragraph in note 1 to the financial statements.
Assessment of viability
The output of the Group’s strategic and financial planning process detailed previously reflects the Board’s best estimate of the future
prospects of the business. To make the assessment of viability, however, additional scenarios have been modelled over and above
those in the ongoing plan, based upon a number of the Group’s principal risks and uncertainties which are documented on pages 50 to 55.
These scenarios were overlaid into the plan to quantify the potential impact of one or more of these crystallising over the assessment period.
While each of the Group’s principal risks has a potential impact and has therefore been considered as part of the assessment, only those
that represent severe but plausible scenarios have been modelled through the plan. These were as follows:
Scenario modelled
Links to principal risks
Scenario 1: Severe economic downturn
Given the increase in the cost of living and steep rise in interest rates, the impact of a severe economic downturn has been
considered. This would likely suppress consumer confidence, pressuring the used and new car markets, with retailers
impacted due to an increase in their cost of capital. In the longer term, this landscape could be a catalyst for structural
changes in the ownership model of vehicles, potentially including a rise in subscription-based models.
Revenue assumptions:
Approximately one third of retailers are lost, with underlying ARPR reducing through a loss of stock
resulting in a 45% decrease in Trade revenue. A 40% decrease in all other revenue streams, including Autorama, was assumed
due to reduced demand. Modest recovery was assumed for the financial year March 2026.
Cost assumptions:
Cost of sales and marketing decreased in line with revenue.
Risk 1:
Automotive economy,
market and business
environment
Risk 10:
External catastrophic
and geo-political
events affecting
customer and
consumer behaviours
Scenario 2: Data breaches
The impact of any regulatory fines has been considered. The biggest of these is the General Data Protection Regulation
(‘GDPR’) fine for data breaches, which was enacted in May 2018. This scenario assumes a data breach resulting in the
maximum fine (4% of Group revenue), coupled with a significant level of reputational damage to the Group’s brand.
Revenue assumptions:
A severe reduction was modelled through Trade revenue, resulting in an initial 45% decrease in revenue
driven by lost retailers. A 45% decrease in Consumer Services, Manufacturer and Agency and Autorama revenue was also
assumed through the loss of consumer and partner confidence. Modest recovery was assumed for the financial year
March 2025.
Cost assumptions:
Cost of sales and marketing decreased in line with revenue.
Risk 5:
IT systems and
cyber security
Risk 7:
Legal and regulatory
compliance
Risk 9:
Brand and reputation
Scenario 3: Banning the sale of diesel cars
The impact of climate change has been considered through the potential ban of diesel cars. The government has outlined
plans to ban the sale of new conventional petrol and diesel cars from 2030. This scenario assumes the government brings
forward the ban of diesel cars, and also applies it to used cars, in the financial year to March 2026. This would result in a
significant impact on stock available as well as a loss of retailers who cannot operate viably without the sale of diesel cars.
Revenue assumptions:
Approximately one third of retailers are lost, with underlying ARPR reducing through a loss of stock,
resulting in a 40% decrease in Trade revenue. A 16% decrease in Consumer Services revenue was assumed through lost
private diesel car volumes. A modest impact to Manufacturer and Agency revenue was assumed with Manufacturers well
progressed into the transition to selling electric vehicles. Autorama revenue decline of 30% due to reduction in volumes.
Modest recovery was assumed through retailers for the financial year March 2027 and beyond.
Cost assumptions:
Cost of sales and marketing decreased in line with revenue.
Risk 1:
Automotive economy,
market and business
environment
Risk 2:
Climate change
Risk 6:
Failure to innovate:
disruptive technologies
and changing
consumer behaviours
Scenario 4: Combination of all three scenarios as above
This is seen as a worst-case scenario, and highly unlikely.
All of the above
The Company’s Strategic report, set out on pages 2 to 57,
was approved by the Board on 1 June 2023 and signed
on its behalf by:
Nathan Coe
Chief Executive Officer
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
57
Strategic report
Governance
Financial statements
3
5
Percentage of independent Directors
on the Board: 62.5%
Independent
Non-independent
4
5
Percentage of women on the Board: 55.6%
Women
Men
8
1
White
Ethnically diverse
4
4
1
0–3 years
3–6 years
6–9 years
Governance overview
Number of Directors as at 31 March 2023
2
1.
Excluding the Chair.
2.
No change from 31 March 2022.
3.
As per the Parker Review, a Director was
defined as being ethnically diverse if they
identified as Asian, Black, Mixed or Other.
4. Refers to the period since appointment
to the PLC Board.
Independence
1
Number of Directors as at 31 March 2023
2
Gender diversity
Ethnic diversity
3
Number of Directors as at 31 March 2023
2
Length of tenure
4
Number of Directors as at 31 March 2023
Dear shareholders
Compliance with the Corporate
Governance Code
The reports on the following pages,
including the Committee reports,
set out the governance arrangements
we have in place, and detail how we have
met the Code requirements. Once again,
the Company complied with all provisions
set out in the Code for the period.
Board succession planning
Succession planning has been a major
focus area during the year. The Board has
approved the appointment of Matt Davies
as Chair Designate with effect from 1 July 2023,
to succeed me as Chair prior to the conclusion
of the 2023 AGM. Two of our Non-Executive
Directors (David Keens and Jill Easterbrook)
will reach the end of their third three-year
terms in 2024, the ninth anniversary of Auto
Trader Group plc’s admission to the London
Stock Exchange’s official list. Jeni Mundy will
reach the end of her third three-year term in
2025. The Nomination Committee report sets
out in some detail the succession plan for
these changes, including the overarching
goals, skills and experience requirements
and the expected timelines. The Company
will continue to update on our progress at
the appropriate time, as suitable candidates
are identified and appointments are made.
Annual General Meeting
Our Annual General Meeting (‘AGM’) will be
held at 10:00am on Thursday 14 September
2023 at 4
th
Floor, 1 Tony Wilson Place,
Manchester, M15 4FN. Myself and the other
Directors will join the meeting either in person
or by telephone. We strongly encourage
all shareholders to cast their votes by proxy,
and to send any questions in respect of AGM
business to ir@autotrader.co.uk.
Ed Williams
Chair
1 June 2023
These reports explain our governance policies and procedures in detail
and describe how we have applied the principles contained in the UK
Corporate Governance Code 2018 (the ‘Code’).
Auto Trader Group plc
Annual Report and Financial Statements 2023
58
Driving Change Together.
Responsibly.
AUTO TRADER GROUP PLC BOARD
AUDIT
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
CORPORATE
RESPONSIBILITY
COMMITTEE
DISCLOSURE
COMMITTEE
EXTERNAL
AUDITOR
INTERNAL
AUDITOR
OTHER
EXTERNAL
ASSURANCE
SUBSIDIARY BOARDS
OPERATIONAL LEADERSHIP TEAM & SENIOR LEADERS
RISK FORUM – SCOPE
OF RISK FORUM
INCLUDES CLIMATE
RISK MANAGEMENT
SECOND LINE
THIRD LINE
ENVIRONMENT STRATEGY
EMPLOYEE GUILDS & NETWORKS
BOARD
ENGAGEMENT
GUILD
SECOND LINE FORUMS
AND COMMITTEES
Compliance with the 2018 Code
The Company has complied in full with all
provisions of the 2018 Corporate Governance
Code during the year as referenced below:
The Board is responsible for setting the Group’s purpose,
for determining the basis on which the Group generates value
over the long term and developing a strategy for delivering
the objectives of the Group. The Strategic report, which
can be found on pages 2 to 57, sets out the Group’s purpose,
strategy, objectives and business model. Details of how the
Board assesses and monitors culture can be found on page 62.
The Board’s engagement with employees, shareholders and
other stakeholders is described in detail on pages 14 to 17 and
page 62.
Board leadership and company purpose
1
The Board has established a Nomination
Committee, chaired by Ed Williams,
with all other members comprising
Independent Non-Executive Directors.
The main responsibilities of this
Committee are to keep under review
the structure, size and composition
of the Board and its Committees;
to identify and nominate candidates
for appointment to the Board; and to
ensure that there are formal and orderly
succession plans in place.
Composition, succession
and evaluation
3
The Board has established an Audit
Committee, chaired by David Keens
and comprised entirely of Independent
Non-Executive Directors. The Chair is not a
member of the Committee. The Committee
has defined Terms of Reference which
include assisting the Board in discharging
many of its responsibilities with respect
to financial and business reporting,
risk management, internal control,
internal audit and external audit.
Audit, risk and internal
control
4
The Board has established a
Remuneration Committee, chaired by
Jill Easterbrook and comprised entirely
of Independent Non-Executive
Directors. The Remuneration
Committee is responsible for
determining the Remuneration Policy,
Remuneration
5
The responsibilities of the Chair, Chief Executive Officer,
Senior Independent Director, Non-Executive Directors and
Company Secretary are set out on page 63. The Board has
adopted a formal schedule of matters reserved for its
approval and has delegated other specific responsibilities
to its Committees. The schedule sets out key aspects of the
affairs of the Company which the Board does not delegate
and is reviewed at least annually. Each Committee has
formally approved Terms of Reference which are reviewed
and approved at least annually, or more frequently as
circumstances require. Details are published on our website
at plc.autotrader.co.uk/investors.
At the date of this report, the Board consists of the Non-Executive
Chair, five Independent Non-Executive Directors and three
Executive Directors. Refer to page 64 for details of Board and
Committee meetings and attendance, and to the biographies
on pages 60 and 61 for details of Board members’ external
commitments, all of which were approved by the Board.
Division of responsibilities
2
A robust corporate governance framework
FURTHER DETAIL
For the full detail on how we govern ESG:
Being a responsible business P26
How we manage risk P48
During the year, the Committee focused
on implementation of the succession plan
for the Chair and Non-Executive Directors
who are reaching their nine-year tenure.
The Committee also led an evaluation
of the Board, the Committees and each
individual Director. The work of the
Committee is described on pages 66 to 69.
The Board and its Committees have an
appropriate balance of skills, experience
and knowledge of the Group to enable
them to discharge their respective
duties and responsibilities effectively.
Biographies of all members of the
Board appear on pages 60 and 61.
The work of the Committee is described
on pages 70 to 75.
The Company does not have a separate
Risk Committee; the Board is collectively
responsible for determining risk
appetite, and the nature and extent of
the principal risks it is willing to take in
achieving its strategic objectives. Refer
to page 73 for details of the evaluation
of the risk management and internal
control framework, and to pages 48 to
55 for details of risk management and
the principal risks facing the Company.
and for setting remuneration for the
Executive Directors, the Chair and
senior employees; for monitoring the
remuneration policies for the wider
organisation; and for ensuring the
alignment of reward with the culture
of the organisation. The work of the
Committee is described on pages
80 to 93.
Auto Trader Group plc
Annual Report and Financial Statements 2023
59
Strategic report
Governance
Financial statements
Board of Directors
Biography
Ed was appointed as Chair of Auto
Trader Group plc in February 2015.
He was the founding Chief Executive
of Rightmove plc, serving in that
capacity from November 2000
until his retirement from the business
in April 2013. Rightmove plc was
floated on the London Stock
Exchange in February 2006.
Prior to Rightmove, Ed spent
the majority of his career as a
management consultant with
Accenture and McKinsey & Co.
Ed holds an MA in Philosophy,
Politics and Economics from St
Anne’s College, Oxford.
Appointed to PLC Board
February 2015
Independent on appointment?
Yes
External appointments
•
Baltic Classifieds Group plc
Committee memberships
N
Biography
Nathan was first appointed to
the Board as Chief Operating
Officer (‘COO’) in April 2017 and
as Chief Financial Officer (‘CFO’)
in July 2017. Nathan was appointed
Chief Executive Officer (‘CEO’)
in March 2020, following the
announcement of former CEO
Trevor Mather’s retirement.
Nathan joined Auto Trader in 2007
to oversee the transition from a
magazine business to a pure digital
company. Prior to his appointment
to the Board, Nathan was the
joint Operations Director, sharing
responsibility for the day-to-day
operations of the business.
Prior to joining Auto Trader, Nathan
was at Telstra, Australia’s leading
telecommunications company, where
he led Mergers and Acquisitions
and Corporate Development for its
media and internet businesses.
He was previously a consultant at PwC,
having graduated from the University
of Sydney with a B.Com (Hons).
Appointed to PLC Board
April 2017
Independent on appointment?
N/A
External appointments
None
Committee memberships
D
Biography
Catherine joined Auto Trader in
August 2017 and was appointed as
Chief Operating Officer (‘COO’) in
May 2019. Catherine is responsible
for the day-to-day operations of
Auto Trader’s business. She is also
focused on guiding the Group’s
strategy and development.
Prior to this, Catherine was Chief
Operating Officer at Addison Lee,
Corporate Development Director
at Trainline and a Director at Close
Brothers Corporate Finance.
Catherine graduated from the
University of Durham with a
BA in Economics and is a qualified
Chartered Accountant, training
at PwC.
Appointed to PLC Board
May 2019
Independent on appointment?
N/A
External appointments
• Allegro.eu Group
Committee memberships
None
Biography
Jamie was appointed Chief
Financial Officer (‘CFO’) in March
2020. Prior to this he was Auto Trader’s
CFO-Designate and Deputy CFO.
During his time at Auto Trader,
Jamie has worked in a variety
of different roles across finance,
covering commercial finance,
financial reporting, pricing and
investor relations.
Jamie initially worked as a freight
derivatives broker for inter-dealer
broker GFI. Jamie left to join a start-up
company, Swapit, developing a
children’s online swapping and trading
community, that was subsequently
acquired by Superawesome.
He then joined Auto Trader in 2012.
Jamie graduated from Bristol
University with a BSc in Economics and
Economic History and is a qualified
Chartered Management Accountant.
Appointed to PLC Board
March 2020
Independent on appointment?
N/A
External appointments
None
Committee memberships
D
Biography
David was appointed as a
Non-Executive Director on 1 May 2015.
David was previously Group Finance
Director of NEXT plc (1991 to 2015) and
its Group Treasurer (1986 to 1991). He
was a Non-Executive Director and
Audit Chair of J Sainsbury plc (2015
to 2021), and most recently has taken
up the role as Senior Independent
Non-Executive Director and Audit
Chair of Moonpig Group plc.
Previous management experience
includes nine years in the UK and
overseas operations of multinational
food manufacturer Nabisco (1977
to 1986) and prior to that seven years
in the accountancy profession.
David is a member of the
Association of Chartered Certified
Accountants and of the Association
of Corporate Treasurers.
Appointed to PLC Board
May 2015
Independent on appointment?
Yes
External appointments
• Moonpig Group plc
Committee memberships
N
R
CR
A
Ed Williams
Chair
Nathan Coe
Chief Executive Officer
Catherine Faiers
Chief Operating Officer
Jamie Warner
Chief Financial Officer
David Keens
Senior Independent
Non-Executive Director
Auto Trader Group plc
Annual Report and Financial Statements 2023
60
Biography
Jill was appointed as a Non-Executive
Director to the Board on 1 July 2015.
Jill is also a Non-Executive Director
of Ashtead Group plc, the FTSE 100
international equipment rental
company; a Non-Executive Director
of UP Global Sourcing Holdings plc,
a FTSE small cap consumer goods
business; a Non-Executive Director of
Tracsis plc, an AIM listed provider of
software, hardware, data analytics/
GIS and services for the transport
industries; and is Chair of Headland,
a PR and Communications agency.
Jill brings strong digital experience
within retail environments to the
Board. Previously, Jill was a member of
the Executive Committee at Tesco Plc
where she held a variety of senior roles,
and was the Chief Executive Officer
of JP Boden & Co. She also spent time
as a management consultant having
started her career at Marks & Spencer.
Appointed to PLC Board
July 2015
Independent on appointment?
Yes
External appointments
• Ashtead Group plc
•
UP Global Sourcing Holdings plc
•
Verde Bidco Limited (Headland)
• Tracsis plc
Committee memberships
N
R
CR
A
Biography
Claire joined Auto Trader in
July 2015 and is Company Secretary
and Director of Governance.
She is responsible for corporate
governance; legal services;
regulatory compliance;
customer security; procurement;
and risk management.
Claire was previously Deputy
Company Secretary at Betfair
Group plc and prior to that was
Company Secretary at Centaur
Media plc.
Claire is a qualified accountant,
a member of the Institute of
Chartered Secretaries and
Administrators and holds an MBA
from Manchester Business School.
Committee memberships
D
Jill Easterbrook
Independent
Non-Executive Director
Committee memberships
A
Audit
CR
Corporate Responsibility
D
Disclosure
N
Nomination
R
Remuneration
Chair
Biography
Jeni was appointed as a Non-Executive
Director on 1 March 2016.
Jeni is currently Visa Inc’s SVP Global
Head of Merchant Sales and Acquirers
responsible for driving the growth
of digital commerce for the world’s
sellers. She joined Visa in 2018 as
the Managing Director for UK
and Ireland. Jeni was previously
at Vodafone Plc (1998 to 2017).
Most recently she held Group
Director roles across product
management and sales. Prior to
that she was Chief Technology
Officer on the UK and New Zealand
Executive Boards.
Jeni started her career as a
Telecommunications Engineer
in New Zealand and holds an MSc
in Electronic Engineering from
Cardiff University.
Appointed to PLC Board
March 2016
Independent on appointment?
Yes
External appointments
None
Committee memberships
N
R
CR
A
Biography
Sigga was appointed as a
Non-Executive Director to the
Board effective 1 November 2019.
Sigga is currently part of the UK
executive team at Experian and
is responsible for their UK Direct
to Consumer Business. Sigga has
worked in the financial services
industry since 2001, pioneering
digital transformation at both
American Express and Santander
UK. She was responsible for the
development and launch of Asto,
a Santander Fintech business,
providing innovative cash flow
solutions to small businesses.
Sigga holds a doctorate in
Leadership and Innovation from
Manchester Business School, an
MBA from IESE Business School as
well as a BS degree in Marketing from
the University of South Carolina.
Appointed to PLC Board
November 2019
Independent on appointment?
Yes
External appointments
• Frumtak Ventures
Committee memberships
N
R
CR
A
Biography
Jasvinder was appointed as
a Non-Executive Director on
1 January 2022.
Jasvinder is currently Managing
Director of Motor at Direct Line Group,
leading Motor Insurance strategy and
business delivery across household
names such as Direct Line, Churchill
and Privilege, and is a member of the
Direct Line Group Executive Team.
Prior to this, she held a number of roles
within Direct Line including most
recently Chief Strategy Officer
and before that, Managing Director
of Direct Line for Business.
Jasvinder is a champion of gender
diversity and women in top positions
in business. She has been named on
Green Park’s BAME 100 Board Talent
Index, on the Cranfield University Top
100 women to watch in 2018 list and
also featured on the Northern Power
Women list of ‘Top 50 Women to Watch’.
Appointed to PLC Board
January 2022
Independent on appointment?
Yes
External appointments
• UK Insurance Business
Solutions Limited
Committee memberships
N
R
CR
A
Jeni Mundy
Independent
Non-Executive Director
Sigga Sigurdardottir
Independent
Non-Executive Director
Jasvinder Gakhal
Independent
Non-Executive Director
Claire Baty
Company Secretary
Auto Trader Group plc
Annual Report and Financial Statements 2023
61
Strategic report
Governance
Financial statements
Corporate governance statement
Whistleblowing
A whistleblowing policy has been adopted
which includes access to a whistleblowing
telephone service run by an independent
organisation, allowing employees to raise
concerns on an entirely confidential basis.
Reports are directed to the Audit Committee
Chair and the Company Secretary. The Audit
Committee receives regular reports on the
use of the service, any significant reports
that have been received, the investigations
carried out and any actions arising as a result.
Engagement with shareholders
The Board has a comprehensive investor
relations programme to ensure that existing
and potential investors understand the
Company’s strategy and performance.
As part of this programme, the Executive
Directors give formal presentations to
investors and analysts on the half-year
and full-year results. These updates are
webcast live and posted on the Group’s
investor relations website.
The results presentations are followed by
formal investor roadshows covering UK
and overseas shareholders.
In September 2022, an investor day was
held, attended by institutional investors,
buy-side and sell-side analysts, during which
the Executive Directors and members
of senior management outlined the evolution
of our strategy. The investor day presentations
are available on the Company’s website:
plc.autotrader.co.uk/investors.
There is also an ongoing programme of
attendance at conferences, one-to-one
and group meetings with institutional
investors, fund managers and analysts.
These meetings cover a wide range of
topics, but care is exercised to ensure that
any price-sensitive information is released
to all shareholders, institutional and private,
at the same time. Meetings which relate
to governance are attended by the Chair
or another Non-Executive Director and
the Company Secretary as appropriate.
Private shareholders are encouraged
to give feedback and communicate with
the Board through ir@autotrader.co.uk.
The Board receives regular reports on
issues relating to share price, trading activity
and movements in institutional investor
shareholdings. The Board is also provided
with current analyst opinions, forecasts and
feedback from its joint corporate brokers,
Bank of America and Numis, on the views of
institutional investors on a non-attributed
and attributed basis, and on the views of
analysts from its financial PR agency,
Powerscourt. Any major shareholders’
concerns are communicated to the Board
by the Executive Directors.
The Chair, the Senior Independent Director
and other Non-Executive Directors are
available to meet with shareholders and
arrangements can be made through the
Company Secretary.
Annual General Meeting
At the 2022 AGM, all resolutions were passed
with votes in support ranging from 92.26%
to 100%. The 2023 AGM will take place at
10:00am on Thursday 14 September 2023 at
the Company’s registered office: 4
th
Floor,
1 Tony Wilson Place, Manchester, M15 4FN.
Myself and the other Directors will join
the meeting.
All proxy votes received in respect of each
resolution at the AGM are counted and the
balance for and against, and any votes
withheld, are indicated. At the meeting
itself, voting on all the proposed resolutions
is conducted on a poll rather than a show
of hands, in line with recommended best
practice. We encourage shareholders to
cast their votes by proxy, and to send any
questions in respect of AGM business to
ir@autotrader.co.uk. Following the meeting,
responses to questions will be published on
the website at plc.autotrader.co.uk/investors.
The Notice of the AGM can be found in a
booklet which is being mailed out at the same
time as this Annual Report. The Notice of the
AGM sets out the business of the meeting
and an explanatory note on all resolutions.
Separate resolutions are proposed in respect
of each substantive issue.
Results of resolutions proposed at the AGM
will be published on the Company’s website:
plc.autotrader.co.uk/investors following
the AGM.
This statement also includes items required
by the Listing Rules and the Disclosure
Guidance and Transparency Rules (‘DTRs’).
The UK Corporate Governance Code
(the ‘Code’) is available on the Financial
Reporting Council website at frc.org.uk.
Culture
Auto Trader has a distinctive culture that
is values-oriented and underpinned by a
diverse and inclusive workforce. The Board
plays an important role in ensuring that this
culture remains aligned with our long-term
strategy, in setting values, demonstrating
behaviours consistent with these values,
and in monitoring the culture and behaviours
of the organisation.
The Board receives a quarterly Cultural
Scorecard, designed to allow monitoring
of various cultural indicators such as staff
retention, diversity, investment in training,
absences, employee engagement, customer
feedback and complaints.
Workforce engagement
A Board Engagement Guild has been
established as the core mechanism by
which the Board engages with the
workforce. The Board Engagement Guild
comprises members from across different
parts of the business, all of whom are
members of the Company’s other existing
guilds covering areas such as family
& wellbeing, diversity & inclusion and
sustainability. Each member canvasses
views and opinions from their colleagues
to share with the Board.
The Board has decided that it is not
appropriate to designate a specific
Non-Executive Director to carry out this
role and instead shares this role across all
Non-Executive Directors, and so the Guild
meets with the Chair and all Non-Executive
Directors (without Executive Directors or any
members of senior management present).
Additionally there are a number of well
established ways in which the Company
engages with the workforce, for example,
regular check-in surveys; an annual
employee engagement survey; attendance
by Non-Executive Directors at some of our
Diversity and Inclusion Guild events; an
annual conference and quarterly virtual
conferences and updates; regular sharing
of information from the CEO via emails and
videos; and informal open forums.
This Corporate governance statement explains key features
of the Company’s governance framework. The Company has
complied in full with all provisions of the 2018 UK Corporate
Governance Code during the year.
Auto Trader Group plc
Annual Report and Financial Statements 2023
62
THE BOARD
BOARD ROLES
COMMITTEES
The full schedule of matters reserved for the Board and the Terms
of Reference of each Committee are published on the Company’s
website at plc.autotrader.co.uk/investors.
To ensure a clear division of responsibility at the head of the Company,
the positions of Chair and Chief Executive Officer are separate and not
held by the same person. The division of roles and responsibilities between
the Chair and the Chief Executive Officer is set out in writing and has been
approved by the Board. David Keens is the Senior Independent Director.
At the date of this report, the Board consists of the Non-Executive Chair,
five Independent Non-Executive Directors and three Executive Directors.
Ed Williams was considered to be independent on appointment. All of
the Non-Executive Directors (David Keens, Jill Easterbrook, Jeni Mundy,
Sigga Sigurdardottir and Jasvinder Gakhal) are considered to be independent
in character and judgement, and free of any business or other relationship
which could materially influence their judgement. The Chair’s fees and the
Non-Executive Directors’ fees are disclosed on page 87, and they received
no additional remuneration from the Company during the year. Therefore,
at 31 March 2023 and to the date of this report, the Company is compliant
with the Code provision that at least half the Board, excluding the Chair,
should comprise Independent Non-Executive Directors.
DIVISION OF RESPONSIBILITIES
Main responsibilities include:
•
Providing leadership for the long-term success of the Group.
•
Monitoring delivery of business strategy and objectives;
responsibility for any necessary corrective action.
•
Overall authority for the management of the Group’s business,
strategy, objectives and development.
•
Oversight of operations including effectiveness of systems of internal
control and risk management and high standards of business conduct.
•
Approval of the Annual Report and Financial Statements, equitable
engagement with shareholders and the wider investment community.
•
Approval of changes to the capital, corporate and/or management
structure of the Group, the dividend policy and capital policy.
•
Engagement with and consideration of the interests of employees
and other stakeholders.
•
Consideration of the business’s impact on the community and the
environment, and oversight of climate related risks and opportunities.
Nomination Committee
Reviews the structure,
size and composition
of the Board and its
Committees, evaluates
their performance and
makes recommendations
to the Board. Also
covers diversity, talent
development and
succession planning.
Read more P66
Audit Committee
Reviews and reports
to the Board on the
Group’s financial
reporting, internal
control, whistleblowing,
internal audit and the
independence and
effectiveness of the
external auditor.
Read more P70
Corporate
Responsibility
Committee
Assists the Board in
fulfilling its oversight
responsibilities in respect
of corporate responsibility
and sustainability for
the Company and
the Group as a whole.
Read more P76
Remuneration
Committee
Responsible for
all elements of the
remuneration of the
Executive Directors,
the Chair and
senior employees.
Read more P80
Disclosure Committee
Assists the Board
in discharging its
responsibilities relating
to monitoring the
existence of inside
information and its
disclosure to the market.
Read more online
Company Secretary
•
Available to all Directors to provide advice and assistance.
•
Responsible for providing governance advice.
•
Ensures compliance with the Board’s procedures,
and with applicable rules and regulations.
•
Acts as secretary to the Board and its Committees.
Chair
•
Leadership and governance of the Board.
•
Creating and managing constructive relationships between
the Executive and Non-Executive Directors.
•
Ensuring ongoing and effective communication between
the Board and its key stakeholders.
•
Setting the Board’s agenda and ensuring that adequate
time is available for discussions.
•
Ensuring the Board receives sufficient, pertinent,
timely and clear information.
Chief Executive Officer
•
Responsible for the day-to-day operations and results of the Group.
•
Developing the Group’s objectives, strategy and successful
execution of strategy.
•
Responsible for the effective and ongoing communication
with stakeholders.
•
Delegates authority for the day-to-day management of the
business to the Operational Leadership Team (comprising
the Executive Directors and senior management) who have
responsibility for all areas of the business.
Non-Executive Directors
•
Scrutinise and monitor the performance of management.
•
Constructively challenge the Executive Directors.
•
Monitor the integrity of financial information, financial controls
and systems of risk management.
Senior Independent Director
•
Acts as a sounding board for the Chair.
•
Available to shareholders if they have concerns which
the normal channels through the Chair, Chief Executive
Officer or other Directors have failed to resolve.
•
Meets with the other Non-Executive Directors without
Executive Directors present.
•
Leads the annual evaluation of the Chair’s performance.
Auto Trader Group plc
Annual Report and Financial Statements 2023
63
Strategic report
Governance
Financial statements
Corporate governance statement
continued
Board and Committee meetings attendance
Board meetings are planned around the
key events in the corporate calendar,
including the half-yearly and final results,
and the Annual General Meeting (‘AGM’),
and a strategy meeting is held each year.
A monthly financial update call is also held
at which the Board discusses results with
operational management. Once a year the
Directors spend a day visiting customers.
During the year, the Chair and Non-Executive
Directors have met without Executive
Directors present. In addition, the Non-
Executive Directors have met without the
Chair and the Executive Directors present,
and the Senior Independent Director has
met with the Executive Directors.
Board and Committee activities in 2023
The Board makes decisions in order to ensure
the long-term success of the Group whilst
taking into consideration the interests of wider
stakeholders, such as employees, consumers,
customers and suppliers, and other factors
as required of it under s172 of the Companies
Act 2006. Board meetings are one of the
mechanisms through which the Board
discharges this duty, and in order to formalise
this process, a stakeholder framework has
been established which is applied to all Board
papers and discussions. Further information
about engagement with the Group’s
stakeholders is included on pages 14 to 17.
The Board’s activities are structured through
the year to develop and monitor the delivery
of the Group’s strategy and financial results;
to receive feedback from and engage with
stakeholder groups such as employees,
customers and suppliers; and to maintain
a robust governance and risk management
framework. Some of the key activities during
the year are shown in the diagram on page 65.
Induction and development
All newly appointed Directors receive
an induction briefing on their duties and
responsibilities as Directors of a publicly
quoted company. There is a formal induction
programme to ensure that newly appointed
Directors familiarise themselves with
the Group and its activities, either through
reading, meetings with the relevant member
of senior management or through sessions
in the Board meetings.
Specific focus areas in the induction schedule
include: statutory and regulatory information,
Board and Committee specific information,
business overview and deep dives into people
and culture, technology and digital retailing.
The majority of Board meetings contain a
presentation from senior management on
one of the strategic priorities for the year.
Specific business-related presentations are
given to the Board by senior management
and external advisors when appropriate.
All Directors are offered the opportunity to
meet with customers and take part in sales
calls to understand the business from a
customer’s perspective, or to take part or
observe focus groups with consumers who
use our website. Directors receive regular
feedback from our sales and service team
to ensure they are kept informed of the latest
customer dialogue and sentiment.
The Board as a whole is updated,
as necessary, in light of any governance
developments as and when they occur,
and there is an annual legal and regulatory
update provided as part of the Board
meeting. All Directors are required to
complete our annual compliance training
modules covering anti-bribery, anti-money
laundering, data protection, information
security and other relevant subjects.
As part of the Board evaluation, the Chair
meets with each Director to discuss any
individual training and development needs.
Information and support
available to Directors
Full and timely access to all relevant
information is given to the Board. For Board
meetings, this consists of a formal agenda,
minutes of previous meetings and a
comprehensive set of papers including
regular operational and financial reports,
provided to Directors in a timely manner in
advance of meetings.
All Directors have access to the advice and
services of the Company Secretary, Claire Baty.
The appointment or removal of the Company
Secretary is a matter for the whole Board.
Concerns over operation of the Board
All of the Directors have the right to have
their opposition to, or concerns over,
any Board decision noted in the minutes.
Directors are entitled to take independent
professional advice at the Company’s
expense in the furtherance of their duties,
where considered necessary.
Letters of appointment
The Chair and the Non-Executive Directors
have letters of appointment which are
available for inspection at the registered
office of the Company during normal
business hours and at the place of the
AGM from at least 15 minutes before and
until the end of the meeting; or on request
from ir@autotrader.co.uk. These letters set
out the expected time commitment from
each Director. Non-Executive appointments
to the Board are for an initial term of up to
three years. Non-Executive Directors are
typically expected to serve two three-year
terms, although the Board may invite the
Director to serve for an additional period.
Conflicts of interest
In accordance with the Company’s Articles
of Association, the Board has a formal
system in place for Directors to declare
conflicts of interest and for such conflicts
to be considered for authorisation.
Any external appointments or other significant
commitments of the Directors require the
prior approval of the Board. We recognise
that our Executive Directors may be invited
to become non-executive directors of other
companies. Such non-executive duties
can broaden a Director’s experience and
knowledge which can benefit Auto Trader.
Following the year end, Catherine Faiers has
been appointed as a Non-Executive Director
of Allegro.eu Group. The Board approved the
directorship in advance to ensure that there
was no conflict of interest. None of the
other Executive Directors has any external
directorships as at the date of this report.
The Board is comfortable that external
appointments of the Chair and the Non-
Executive Directors do not create any
conflict of interest.
Attendance at meetings
Board
Nomination Committee
Audit Committee
Corporate Responsibility Committee
Remuneration Committee
Number of scheduled meetings held
11
3
4
3
5
Director
Ed Williams
11/11
3/3
N/A
N/A
N/A
Nathan Coe
11/11
N/A
N/A
N/A
N/A
Catherine Faiers
11/11
N/A
N/A
N/A
N/A
Jamie Warner
11/11
N/A
N/A
N/A
N/A
David Keens
1
10/11
3/3
4/4
3/3
4/5
Jill Easterbrook
11/11
3/3
4/4
3/3
5/5
Jeni Mundy
1
10/11
3/3
4/4
3/3
5/5
Sigga Sigurdardottir
1
10/11
2/3
4/4
3/3
5/5
Jasvinder Gakhal
11/11
3/3
4/4
3/3
5/5
1.
Where Directors were unable to attend a meeting date, this was either due to unavoidable personal circumstances or work commitments. Directors all received
the meeting papers and had an opportunity to feed comments in to the Board and Committee Chairs prior to the meetings.
In addition to the scheduled Board meetings detailed above, ad hoc calls took place throughout the year relating to various financial and
transactional decisions.
Auto Trader Group plc
Annual Report and Financial Statements 2023
64
Time commitment
Any external appointments or other
significant commitments of the Directors
require the prior approval of the Board.
The Chief Operating Officer holds one
external directorship as at the date of
this report. The Board is comfortable
that external appointments of the Chair,
the Non-Executive Directors and the Chief
Operating Officer do not impact on the time
that any Director devotes to the Company.
Election of Directors
The Board can appoint any person to be
a Director, either to fill a vacancy or as an
addition to the existing Board. Any Director
so appointed by the Board shall hold office
only until the next AGM and shall then be
eligible for election by the shareholders.
The AGM Notice sets out the specific reasons
for reappointing each Director.
Risk management and internal control
The Board acknowledges its responsibility
for establishing and maintaining the Group’s
system of risk management and internal
controls and it receives regular reports from
management identifying, evaluating and
managing the risks within the business.
The system of internal controls is designed
to manage, rather than eliminate, the risk
of failure to achieve business objectives
and can provide only reasonable, and not
absolute, assurance against material
misstatement or loss.
The processes in place for assessment,
management and monitoring of risks are
described in Principal risks and uncertainties
on pages 48 to 55.
The Board, assisted by the Audit Committee,
has carried out a review of the effectiveness
of the system of risk management and internal
controls during the year ended 31 March 2023
and for the period up to the date of approval
of the Consolidated financial statements
contained in the Annual Report. The review
covered all material controls, including
financial, operational and compliance
controls and risk management systems.
The Board considered the weaknesses
identified and reviewed the developing
actions, plans and programmes that it
considered necessary. The Board confirms
that no significant weaknesses or failings
were identified as a result of the review
of effectiveness.
Financial and business reporting
Assisted by the Audit Committee, the Board
has carried out a review of the 2023 Annual
Report and considers that, in its opinion, the
report is fair, balanced and understandable
and provides the information necessary
for shareholders to assess the Company’s
position and performance, business model
and strategy. Refer to the Report of the Audit
Committee on pages 70 to 75 for details of
the review process.
See pages 56 to 57 for the Board’s statement
on going concern and the viability statement.
KEY ACTIVITIES OF THE BOARD AND COMMITTEES DURING FY23
•
Review and approve the
mid-term financial plan
for viability scenarios.
• Strategy session focused
on how our customers are
thinking about digital
retailing and the wider
eco-system that we
operate in.
• Reviewed the technology
strategy with a focus
on cyber and risk.
• Autorama post
acquisition review.
•
Disposal of Webzone Ltd.
•
Deep dives into Auto
Trader as a platform.
•
Deep dive into digital
retailing’s end-to-end
consumer journey.
• Overview of competitive
landscape.
• Reviewed audience
and marketing plans.
•
Deep dive into the core
advertising business and
main revenue drivers.
•
Review and approve
financial year 2024 Plan.
•
Approval of half-yearly
report, Annual Report and
Preliminary Results.
•
Amendment and extension
of debt facility, reducing
the commitment from £250m
to £200m and extending
the term to February 2028.
•
Review of capital policy.
•
Review of tax compliance.
•
Review of managing core
marketplace revenue
and costs in a high
inflationary period.
•
Board Engagement Guild
meetings covering topics
including: gender
and ethnicity pay gap,
navigating the cost of
living crisis, executive
remuneration, Connected
Working and our annual
employee engagement
survey results.
•
Review of people changes,
recruitment, resourcing
needs and employee
engagement.
•
Review of remuneration
framework and target
setting.
•
Approval of FY22 bonus
outturn and Single
Incentive Plan vesting
for senior management.
•
FY23 PSP and Single
Incentive Plan targets
and grants.
•
Approval of cost of living
bonuses and increased
levels of salary review.
•
Succession planning for
senior management.
• Director and
senior management
salary reviews.
•
Gender and ethnicity pay
gap reporting.
•
Review of cultural KPIs.
• Review of stakeholder
materiality assessment.
•
ESG rating agencies update.
•
Approval of science based
targets and progress
on net zero strategy.
• Quarterly shareholder
analysis.
•
Review of feedback from
analysts and investors
from results roadshows.
•
Review of dividend policy
and capital structure.
•
Review of feedback from
investors and proxy
advisory agencies in
advance of Annual
General Meeting (‘AGM’).
•
Governance and regulatory
updates including:
Carbon Literacy training
and external legal and
regulatory update.
•
Review and approval
of Group risk register.
•
Internal audit update
including reviews of IT
General Controls; FCA
Consumer Duty readiness;
and key financial controls
at Autorama.
•
Review of insurance
programme.
•
Review and approval of
modern slavery statement.
•
Review of internal and risk
management framework
and internal controls.
•
Review of external audit
effectiveness.
•
Board evaluation feedback
and action plan.
•
Review of succession plans.
•
Review of crisis
management framework.
•
Business continuity planning.
•
Approval of material
contracts.
STRATEGY
& GROWTH
OPERATIONAL
FINANCIAL
PEOPLE
& CULTURE
SHAREHOLDERS AND
OTHER STAKEHOLDERS
GOVERNANCE,
RISK MANAGEMENT
AND INTERNAL CONTROL
Auto Trader Group plc
Annual Report and Financial Statements 2023
65
Strategic report
Governance
Financial statements
Board of Directors P60
Report of the Nomination Committee
Dear shareholders,
I am pleased to present the Report of the
Nomination Committee for 2023.
Role of the Committee
The Committee’s main role is to keep under
constant review the size and composition of
the Board and its Committees including its
gender and ethnic diversity, its independence,
and the skills, knowledge and experience
required for the effective oversight of the
Group. The Committee is also responsible
for ensuring that there are formal and
orderly succession plans in place for the
members of the Board.
How the Committee operates
All members of the Committee are
Independent Non-Executive Directors.
The Chair of the Board chairs all meetings
of the Committee unless they relate to the
appointment of his successor or such other
matters in which he may have a potential
conflict of interest. For those meetings, the
Senior Independent Director (‘SID’) takes the
Chair unless the SID is in contention for the
role or also has a potential conflict of interest.
The Committee meets at least once a
year, and on an ad hoc basis as required.
Only members of the Committee have
the right to attend meetings; however,
the Chief Executive Officer attends for all
or part of meetings so that the Committee
can understand his views, particularly on
key talent within the business.
Board evaluation
We carried out an internal Board evaluation
during the year. No significant issues were
identified. The results are included in the
table opposite.
Appointments to the Board
No new appointments were made during
the year, however, since the year end the
Board has appointed Matt Davies as a
Non-Executive Director and Chair Designate.
The Senior Independent Director led the
process for finding the next Chair, working
closely with the CEO. A detailed role
specification was drawn up, identifying the
skills and experience required. A wide search
was conducted, taking into consideration
the requirements of the role, and with due
regard to the benefits of diversity including
gender and ethnicity. Erevena, a recruitment
consultancy who has no other connection
with the Company, were used to identify
candidates. Extensive interviews were
conducted, including with all Executive
and Non-Executive Directors. Following this
process, the Committee identified Matt Davies
as the successful candidate, and therefore
Matt will be appointed as Chair Designate
with effect from 1 July 2023, and will assume
the role of Chair from the 2023 AGM.
For more information on the Committee’s
Terms of Reference:
plc.autotrader.co.uk/investors
Ed Williams
Chair of the Committee
The focus of the Committee’s work during
the year was on developing and implementing
a plan to renew the Non-Executive Directors,
including the Chair, in 2024.
AT A GLANCE
OVERVIEW
• Composed of the Chair and five Independent Non-Executive Directors.
• At least one meeting held per year. A significantly higher number
of meetings held this year due to increased activity levels.
• Meetings are attended by the Chief Executive Officer
and other relevant attendees by invitation.
OUR PROGRESS IN 2023
• Progressing the implementation of succession plans for the Chair,
Senior Independent Director and Audit Committee Chair in 2024.
• Concluding selection process for appointment of Chair Designate.
• Continuing to monitor succession plans for other Board members
and senior management succession.
• Held an internal Board evaluation and reviewed the results.
FOCUS AREAS FOR 2024
•
Implementing succession plans for the Non-Executive Directors.
• Following up on the Board evaluation recommendations.
• Continuing to monitor Board and senior management succession.
Reviewing the Board’s size and
composition, and ensuring effective
succession planning for the business.
Auto Trader Group plc
Annual Report and Financial Statements 2023
66
Policy on appointments to the Board
Appointments are made on merit, against
objective criteria and with due regard
to the benefits of diversity on the Board.
The Committee takes account of a
variety of factors before recommending
any new appointments to the Board,
including relevant skills to perform the
role, experience, knowledge and diversity,
including gender and ethnic diversity.
As set out in the table on page 41, 56% of
our Board Directors are women, exceeding
the targets set by the Listing Rules. We do
not currently have a woman in one of the
roles of Chair, SID, CEO or CFO. However,
we do have a female Executive Director,
Catherine Faiers, in the role of COO, which
we believe to be of equal status to those
roles. One of our Board Directors is from
a minority ethnic background.
At a leadership level, 56% of the Operational
Leadership Team (‘OLT’) and 38% of the OLT’s
direct reports were women, a combined
total of 40%.
Succession planning
The focus of the Committee’s work during
the year was on developing and implementing
a plan to renew the Non-Executive Directors,
including the Chair. A detailed description
of the approach we are adopting is set
out overleaf.
We also conducted a long-term review
of executive succession with two areas of
focus. The first was to confirm the identity
of our preferred internal candidate as the
eventual successor to our CEO, Nathan Coe.
The second area of focus was in regard to the
composition and potential of the next level
of executives outside the Executive Director
group. The intention is to both enlarge the
OLT and to communicate clearly to those with
the potential to join the OLT in the relatively
near term. We believe we have the talent
within the business to fill potentially all of
our future needs and we believe that offering
greater clarity to people in this group will
contribute to their retention.
Election and re-election of Directors
In accordance with the UK Corporate
Governance Code, all Directors will retire
and offer themselves for election or
re-election to the Board. Since the last
report, Sigga Sigurdardottir has entered
into her second three-year term. Following
the appointment of Matt Davies as
Chair Designate, I will not be standing
for re-election. Matt will be standing for
election and will assume the role of Chair
at the conclusion of the 2023 AGM. Following
confirmation by the Committee and Board
that they are satisfied that all Directors
continue to be effective in, and demonstrate
commitment to, their respective roles on
the Board and that each makes a valuable
contribution to the leadership of the Company,
Board evaluation and effectiveness
An internal evaluation was conducted in 2022/23. The internal review included the
completion of a detailed questionnaire by each of the Board Directors, covering the
following areas:
• Board meetings and information flows;
• the Board’s role, knowledge and skills;
• Board composition and succession planning;
• business strategy, performance and culture;
• risk management;
• engagement with shareholders and other stakeholders;
• the operation of each of the Board’s Committees; and
• a follow up on the recommendations raised in the previous review.
The results were reviewed by the Chair and then discussed with the Board in March 2023.
In addition, an assessment of the Chair’s performance was carried out, led by
the Senior Independent Director, and feedback was provided to him individually.
Overall, the results showed that the Board and its Committees continue to operate
both effectively and efficiently, and that each individual Director continues to make
an effective contribution.
The next external evaluation is due in 2023/24.
Results of the 2023 internal review
Areas of strength
Areas for improvement
The Board is a very inclusive environment,
open to discussion, feedback and
alternative views. Key relationships
are excellent and there is a high level
of transparency between Executives
and Non-Executives.
Although Board papers generally are of high
quality and clarity, more work could be done
to reduce jargon, focus on salient points
and to provide background and context.
This will become even more important as
new members join the Board in future.
The wider consequences of decisions
and the impact on different stakeholder
groups is well considered and
articulated in Board papers and Board
discussions, and is further enhanced
by the Employee Engagement Guild.
Whilst it was noted that it is unusual for
Non-Executive Directors to attend investor
meetings (unless in their capacity as a
Committee Chair), it was agreed it would
be useful for Non-Executive Directors
to attend investor days/analyst
presentations from time to time.
The induction process for newly
appointed Board Directors was noted
to be very good, and training/upskilling
sessions for the Board are excellent.
This will be of considerable importance
in the coming year as new members
join the Board.
It was noted that, taking into account
the need to renew the Board, we need to
ensure that we continue to have strong
finance experience, and that the Board
should evolve in line with changes in
business and strategy.
the Board recommends that shareholders
approve the resolutions to be proposed at
the 2023 AGM relating to the election and
re-election of the Directors.
I welcome any questions in respect of
the work of the Committee, which can
be submitted to ir@autotrader.co.uk,
or in person at our Annual General Meeting.
Ed Williams
Chair of the Nomination Committee
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
67
Strategic report
Governance
Financial statements
Report of the Nomination Committee
continued
Board succession plan
Much of the time of the Nomination Committee
over the last year has been taken up with
planning for and implementing the plan
for the renewal of Non-Executive Directors.
The need for a plan arises from the Code’s
requirement for independent directors and the
deemed loss of independence after nine years’
service. Auto Trader became a public company
in March 2015. Part of that process was the
replacement of a private equity board with
a public company board. The Committee
believes that it made sound choices of the initial
set of public company Non-Executive Directors.
As a consequence, the Company faced
a need to replenish the majority of its
Non-Executive Directors over the next two
years, including the Chair. It is in part a result
of the belief that a smaller Board has been
very beneficial for the business and is likely
to remain so into the future. The Committee
will look to stagger as much as possible
through this next round of appointments.
The panel opposite lists the Non-Executive
Board members by length of service,
their roles, the experience they bring and
identifies when they will be deemed to
lose their independence under the Code.
Following the appointment of Matt Davies
as Chair Designate, the Committee will now
be able to refine the criteria to be applied in
the search for other Non-Executive Directors
knowing the experience and skills the new
Chair brings to the business. It also allows
for the new Chair to play a role in making
the other appointments.
At the time of the IPO, it was felt important
to have a Chair with both public company
experience and a depth of knowledge in
online classifieds. These were complementary
to the then CEO who had a strong technology
background and experience of building a global,
though at the time private, entrepreneurial
business. Online marketplace experience
is no longer essential given the depth of
experience among the executive leadership,
and so the focus was on candidates with
public company experience, and a belief that
the person understands, values and will seek to
preserve and build on the Auto Trader culture
including the desire for inclusivity and diversity.
The panel opposite sets out the plan in some
detail and highlights the areas that are seen
as potentially the most challenging in its
successful execution.
The composition of your Board today
Chair of the Board, Senior Independent Director & Non-Executive Directors
Goals for the replacement of NEDs over the next two years
1.
Although Ed Williams joined the Auto Trader business as a Non-Executive Director in November 2010
when it was under private ownership, the understanding of the Committee and the Board, having
consulted with the FRC, is that the nine-year period commences on the date that Auto Trader listed
on the London Stock Exchange.
63%
Board independence, excluding
the Chair, as at 31 March 2023
(no change from 31 March 2022)
56%
of our Board are female
as at 31 March 2023
(no change from 31 March 2022)
Comply with the requirements of the
Corporate Governance Code during
and at the end of this process
Maintain the current number of
Board members (or possibly reduce
the number from nine to eight)
EXECUTIVE BOARD MEMBERS
Nathan Coe
Chief Executive Officer
Jamie Warner
Chief Financial Officer
Catherine Faiers
Chief Operating Officer
Name
Ed Williams
Role(s)
•
Chair of the Board
• Nomination Committee Chair
Executive experience
• Online marketplaces
• Public company CEO
Deemed loss of independence
March 2024
1
Name
David Keens
Role(s)
• Senior Independent Director
• Audit Committee Chair
Executive experience
• Retail
• Public company CFO
Deemed loss of independence
May 2024
Name
Jill Easterbrook
Role(s)
•
Remuneration Committee Chair
Executive experience
• Retail
• Business partnerships
Deemed loss of independence
July 2024
Name
Jeni Mundy
Role(s)
• Corporate Responsibility
Committee Chair
Executive experience
• Telcos
• Payments & technology
Deemed loss of independence
March 2025
Name
Sigga Sigurdardottir
Role(s)
• Non-Executive Director
Executive experience
• Retail banking
• Technology
Deemed loss of independence
November 2028
Name
Jasvinder Gakhal
Role(s)
• Non-Executive Director
Executive experience
• Insurance
• Data
Deemed loss of independence
January 2031
Auto Trader Group plc
Annual Report and Financial Statements 2023
68
The composition of your Board in the future
PLANNED APPOINTMENT TIMINGS
Ensure the right mix of experience
including prior public company
experience as a CEO or CFO, financial
experience and ideally some continued
online and retail industry experience
Achieve a greater staggering of
Board appointment dates to reduce
the risk of being in a similar position
in nine years’ time
EXECUTIVE BOARD MEMBERS
Nathan Coe
Chief Executive Officer
Jamie Warner
Chief Financial Officer
Catherine Faiers
Chief Operating Officer
Chair & Nomination
Committee Chair
Name
Matt Davies
From
September 2023
1
Chair of the Board
The Senior Independent Director led the
process of finding the next Chair, working
closely with the CEO. Matt Davies has been
appointed as Chair Designate from 1 July 2023
and will assume the role of Chair after the
2023 AGM.
2
Audit Committee Chair
Now the next Chair has been identified,
the Committee will focus on the role of
Audit Committee Chair. There are a number
of candidates in mind, though this will
be influenced by wanting complementary
experience to that of the new Chair. It will
not be a requirement that the successful
appointee also perform the role of SID,
though the experience required to perform
both roles is often found together.
3
Senior Independent Director
If the Audit Committee Chair is not also
appointed as SID, we will seek an additional
appointment to take on the role of SID, and
David Keens will remain in the role until such
time as a new SID has been announced.
4
Remuneration Committee Chair
The Committee expects to be able to appoint
one of the existing Remuneration Committee
members as Remuneration Committee Chair
in succession to Jill Easterbrook, meeting
the recommendation to have served on
a Remuneration Committee for at least 12
months on appointment. Therefore, Jill may
not be directly replaced when she steps
down from the Board in 2024.
5
Non-Executive Director
The Committee expects to make at least one
further appointment during 2025 (the end of Jill
Easterbrook’s nine years falls in July 2024 and
the end of Jeni Mundy’s nine years falls in March
2025). Jeni Mundy’s replacement as Chair of
the Corporate Responsibility Committee may
either be an existing Board member or be a new
Director, appointed during 2025.
These positions may or
may not be filled by
the same individual,
depending on relevant
experience & expertise
Senior Independent
Director (‘SID’)
Target date: 2024
Audit Committee
Chair
Target date: 2024
Name
Sigga Sigurdardottir
Role(s)
Non-Executive Director
Name
Jasvinder Gakhal
Role(s)
Non-Executive Director
Non-Executive
Director
Target date: 2025
Skills sought from our new Chair and Non-Executive Directors
Recent financial
experience
Experience as a public
company CEO or CFO
Retail industry or
online media experience
Maintain the record of having
women constitute at least 40%
of the Board
Auto Trader Group plc
Annual Report and Financial Statements 2023
69
Strategic report
Governance
Financial statements
Report of the Audit Committee
We reviewed the
Annual Report including:
recognition of revenue,
acquisition accounting,
impairment of assets,
and the assumptions
and scenarios in the
viability statement.
For more information on the Committee’s
Terms of Reference:
plc.autotrader.co.uk/investors
AT A GLANCE
OVERVIEW
• Five Independent Non-Executive Directors.
• David Keens is considered by the Board to have recent and relevant
experience. All members have significant commercial and operating
experience in consumer and digital businesses.
• At least three meetings held per year.
• Meetings are attended by the Chair of the Board, CEO, COO, CFO,
internal auditor and external auditor by invitation.
ACTIVITIES IN 2023
• Assess the Group’s going concern and viability statements.
• Review the acquisition accounting for Autorama.
• Discuss key areas of financial judgement.
• Evaluate the quality, effectiveness and independence
of external audit.
• Review the effectiveness of internal audit, internal controls and
risk management.
• Appointment of new internal auditors.
PLANNING FOR 2024
• Review the integration and control environment of Autorama.
• Agree with KPMG any changes for their 2024 audit.
• Consider the impact and timing of forthcoming Audit and Corporate
Governance Reform and any other regulatory changes or implications.
Monitoring the integrity of financial
reporting, internal controls
and the effectiveness of internal
and external audit.
Dear shareholders,
I am pleased to present the Report of the
Audit Committee for 2023.
The Committee is comprised entirely of
Independent Non-Executive Directors.
I fulfil the requirement for a Committee
member to have recent and relevant financial
experience. All members (and therefore the
Committee as a whole) have competence
in consumer and digital businesses.
The Board approves the Terms of Reference
and duties of the Committee, which include:
monitoring the integrity of the Group’s financial
reporting, effectiveness of the internal control
and risk management framework, internal
audit, and the quality, independence and
effectiveness of external audit.
Our Internal Audit function has been
co-sourced with Deloitte LLP for the eight
years since we became a listed plc in 2015.
They have provided an excellent, independent,
professional service for which we thank
them. Jointly, we determined that it was
appropriate to make a change in view of
the longevity of their tenure. We conducted
a competitive process and have appointed
BDO LLP as our new co-sourced Internal
Audit provider.
Our external auditor, KPMG LLP, and internal
auditor regularly attend Audit Committee
meetings. The Chair of the Board, Chief
Executive Officer, Chief Operating Officer,
Chief Financial Officer and other members
of management attend by invitation.
David Keens
Chair of the Committee
How we manage risk P48
Auto Trader Group plc
Annual Report and Financial Statements 2023
70
The Committee has reviewed the content
of the Annual Report, including the acquisition
accounting for Autorama; the presentation
of segmental reporting and profit measures;
and the Group’s policies over revenue
recognition, impairment of assets, and
the assumptions and scenarios in the
viability statement.
The Annual Report explains our strategy,
financial performance and position in
a way which we believe is fair, balanced
and understandable.
Whilst this Report of the Audit Committee
contains some of the matters addressed
during the year, it should be read in conjunction
with the external auditor’s report starting
on page 98 and the Auto Trader Group plc
financial statements in general.
At the 2022 AGM, shareholders approved
the re-appointment of KPMG as our external
auditor. The Committee has carried out a
review of the effectiveness and independence
of KPMG and has recommended to the Board
that they are re-appointed at the 2023 AGM.
David Keens
Chair of the Audit Committee
1 June 2023
Financial reporting
The primary role of the Committee in relation to financial reporting is to review and monitor the integrity of the financial statements, including
annual and half-year reports, results announcements, dividend proposals and any other formal announcement relating to the Group’s
financial performance.
The Committee assessed the accounting principles and policies adopted, and whether management had made appropriate estimates
and judgements. In doing so, the Committee considered management reports and the basis of judgements made. The Committee reviewed
external audit reports on the 2023 half-year statement and 2023 Annual Report.
The Committee, with assistance from management and KPMG, identified areas of financial statement risk and judgement as described below:
Description of significant area
Audit Committee action
Acquisition accounting
Management’s assessment of the allocation and valuation of goodwill
and intangible assets as part of the acquisition of Autorama.
The Committee reviewed the assumptions made by
management in respect of the identification and valuation
of intangible assets, and the allocation of consideration,
and was satisfied that these were appropriately accounted
for and disclosed under IFRS 3.
Revenue recognition
Revenue recognition for the Group’s revenue streams is not complex.
However this remained an area of focus due to the large volume of
transactions, the new revenue streams from Autorama, and as revenue
is the largest figure in the income statement.
The Committee was satisfied with the explanations provided
and conclusions reached in relation to the Group’s revenue
recognition, including management’s assessment of
Autorama revenue streams.
Going concern and viability statement
The Directors must satisfy themselves as to the Group’s viability and
confirm that they have a reasonable expectation that it will continue
to operate and meet its liabilities as they fall due. The period over which
the Directors have determined it is appropriate to assess the prospects
of the Group has been defined as five years. In addition, the Directors
must consider if the going concern assumption is appropriate.
The Committee reviewed management’s schedules supporting
the going concern assessment and viability statements.
These included the Group’s Medium Term Plan and cash flow
forecasts for the period to March 2028. The Committee
discussed with management the appropriateness of the
five-year period, and discussed the correlation with the Group’s
principal risks and uncertainties as disclosed on pages 50
to 55. The feasibility of mitigating actions and the potential
speed of implementation to achieve any flexibility required
were discussed. Scenarios covering events that could adversely
impact the Group were considered. The Committee evaluated
the conclusions over going concern and viability and the
proposed disclosures in the financial statements and satisfied
itself that the financial statements appropriately reflect
the conclusions.
Other areas of focus
Audit Committee action
Carrying value of goodwill
Following the acquisition of Autorama, the Group has two cash-generating
units (‘CGUs’), being the Digital CGU and Autorama CGU, which require
annual impairment testing. Management’s assessment of the recoverability
of the goodwill is based on future cash flow forecasts.
The Committee reviewed the assumptions made by
management, in particular the judgements around allocation
of goodwill to CGUs and the estimates that underpin the
value in use (Auto Trader CGU) and fair value (Autorama CGU)
recoverable amounts. The Committee concluded that the
judgements and estimates applied were appropriate.
Investment value in joint venture
The Group has a joint venture with Cox Automotive UK, Dealer Auction.
Management’s assessment of the recoverability of the investment value,
including goodwill, is based on future cash flow forecasts.
The Committee reviewed the assumptions made by
management, particularly in relation to cash flow forecasts
to support the carrying value, and was satisfied that these
were appropriately accounted for.
Auto Trader Group plc
Annual Report and Financial Statements 2023
71
Strategic report
Governance
Financial statements
Report of the Audit Committee
continued
Fair, balanced and understandable
At the request of the Board, the Committee has reviewed the content of the 2023 Annual Report and considered whether, taken as a whole,
in its opinion it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position,
performance, business model and strategy. The Committee was provided with a draft of the Annual Report and the opportunity to comment
where further clarity or information should be added. The final draft was then recommended for approval by the Board. When forming
its opinion, the Committee had regard to discussions held with management and reports received from internal and external auditors.
In particular, the Committee considered:
Is the report fair?
• Is a complete picture presented and has any sensitive material been omitted that should have been included?
•
Are key messages in the narrative aligned with the KPIs and are they reflected in the financial reporting?
• Are the revenue streams described in the narrative consistent with those used for financial reporting in the
financial statements?
Is the report
balanced?
•
Is there a good level of consistency between the reports in the front and the reporting in the back of the Annual Report?
• Do you get the same messages when reading the front end and the back end independently?
• Is there an appropriate balance between statutory and adjusted measures and are any adjustments explained
clearly with appropriate prominence?
•
Are the key judgements referred to in the narrative reporting and significant issues reported in the Report of the
Audit Committee consistent with disclosures of key estimation uncertainties and critical judgements set out in
the financial statements?
• How do these compare with the risks that KPMG include in their report?
Is the report
understandable?
• Is there a clear and cohesive framework for the Annual Report?
• Are the important messages highlighted and appropriately themed throughout the document?
• Is the report written in accessible language and are the messages clearly drawn out?
Following the Committee’s review, the Directors confirm that, in their opinion, the 2023 Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model
and strategy.
Auto Trader Group plc
Annual Report and Financial Statements 2023
72
Risk management and internal control
The Committee’s responsibilities include a review of Auto Trader’s risk management arrangements and internal controls to ensure that they
remain effective and that any identified weaknesses are remediated fully and in a timely manner. The Committee:
• reviews annually the effectiveness of the Group’s risk management systems;
• reviews annually the effectiveness of the Group’s internal control framework;
• monitors and oversees the response to any alleged instances of fraud, bribery and whistleblowing complaints;
•
commissions reports on the effectiveness of business processes and controls and ensures recommendations are implemented where appropriate;
• receives reports from the Group’s outsourced Internal Audit function and ensures recommendations are implemented where
appropriate; and
•
reviews reports from the external auditor on any issues identified in the course of their work, including any internal control reports
highlighting control weaknesses, and ensures that there are appropriate responses from management.
The Group has internal controls and risk management arrangements in place in relation to its financial reporting processes and preparation
of consolidated accounts. These systems include policies and procedures to ensure that adequate accounting records are maintained,
and transactions are recorded accurately and fairly to permit the preparation of financial statements in accordance with IFRS. The internal
control systems include the elements described below:
Element
Approach and basis for assurance
Risk management
Details of our governance structure can be found in the Risk management section of this Annual Report.
Risk management operates throughout all levels of our governance structure. The Board as a whole is accountable
for risk management. The day-to-day responsibility for managing key risks resides with the Operational Leadership
Team (‘OLT’). Assurance over the effectiveness of risk management activity is provided under the three lines of
defence model as described below.
Reports on the effectiveness of risk management and internal controls are presented to executive management
at monthly Risk Forum meetings, to the Audit Committee, and to the Board.
The Risk Forum agenda includes risk-based ‘deep dives’ into key risk areas and in the last year these have included:
crisis management; enterprise risk management; cyber security; audit and corporate governance reform;
FCA Consumer Duty; IT controls over key financial applications; and financial controls at Autorama.
Key risks and controls are documented in a Group risk register with OLT members designated as risk owners. A review
of the Group risk register is undertaken on a quarterly basis. The process for reviewing and updating the risk register
is facilitated by the Governance, Risk and Compliance function and overseen by the Board.
A risk-based internal audit programme provides independent, third-line assurance over the effectiveness of the risk
management arrangements and this year’s internal audit plan included reviews of the following areas: IT General
Controls; FCA Consumer Duty readiness; and key financial controls at Autorama.
Financial reporting
Group consolidation is performed on a monthly basis with a month-end pack produced that includes an income
statement, balance sheet, cash flow and detailed analysis. The pack also includes KPIs and these are reviewed
by the OLT and the Board. Results are compared against the Plan or re-forecast and narrative is provided by
management to explain significant variances.
The effectiveness of the controls within the financial reporting and consolidation process is reviewed on a quarterly
basis by the Governance, Risk and Compliance function. The Risk Forum reviews and oversees these reports.
Budgeting and
forecasting
An annual Plan is produced and monthly results are reported against this. The Plan is prepared using a bottom-up
approach, informed by a high-level assessment of market and economic conditions. Reviews are performed by the
OLT and the Board. The Plan is also compared to the top-down Medium Term Plan (‘MTP’) as a sense check. The Plan
is approved by the OLT and the Board.
A detailed monthly rolling forecast is produced, with inputs provided from all business owners. The rolling forecast
is then used to help identify potential risks and opportunities by comparison to the original budget plan. A business
review then takes place with the relevant OLT member, COO and CFO to agree actions.
Delegation of
authority and
approval limits
A documented structure of delegated authorities and approval for transactions is maintained within the Board’s
Terms of Reference. This is reviewed regularly by management to ensure it remains appropriate for the business.
Segregation
of duties
Procedures are defined to segregate duties over significant transactions, including: procurement, payments to suppliers,
payroll, discounts and refunds. Regular reviews of IT system access take place to ensure that segregated duties
remain enforced. Key reconciliations are prepared and reviewed on a monthly basis to ensure accurate reporting.
Auto Trader Group plc
Annual Report and Financial Statements 2023
73
Strategic report
Governance
Financial statements
Report of the Audit Committee
continued
Internal audit
Deloitte were the Group’s outsourced Internal Audit function. The Internal Audit function is accountable to the Audit Committee and uses a
risk-based approach to provide independent assurance over the adequacy and effectiveness of the control environment. The internal audit
work plan for 2022/23 included internal audit assignments in relation to the following areas of risk:
• Follow up into the timeliness and appropriateness of responses to previous internal audit recommendations.
• IT General Controls over key financial applications.
• Key financial controls at Autorama.
• Readiness for the FCA Consumer Duty across Auto Trader Ltd and Autorama UK Limited.
In 2023, following a competitive tender exercise, the provision of co-source Internal Audit services was awarded to BDO LLP. Under the
co-source arrangement, BDO will continue to report to the Audit Committee. The arrangements with BDO will enable the Group to leverage
existing internal resource to provide assurance over core areas of risk, and also leverage BDO’s expertise and independence.
The risk-based internal audit plan for FY24 was approved by the Audit Committee and covers a broad range of core financial and operational
processes and controls, focusing on specific risk areas. Whilst the plan has been approved, the Audit Committee will continue to review
it regularly to ensure that any new and emerging significant areas of risk are considered.
Management actions that are recommended following the internal audits are tracked to completion and reviewed by the Risk Forum and
then by the Audit Committee to ensure that identified risks are mitigated in a timely manner.
Without management present, the Committee met with both Deloitte and the newly appointed BDO. The Committee has also met with
management without the presence of Deloitte or BDO. There were no significant issues raised during these meetings.
A risk-based programme of key controls testing takes place on a quarterly basis. We continue to monitor the resource within our
Governance, Risk and Compliance function to ensure that we are able to meet future requirements which may arise following the BEIS
consultation into the future of audit and corporate governance.
External auditor
The Committee oversees the relationship with the external auditor, KPMG, and reviews their findings in respect of audit and review work. The
Committee received and discussed KPMG’s review of the half-year report to 30 September 2022 and their audit of the financial statements
for the year to 31 March 2023. The Committee met with KPMG without management present and with management without KPMG present,
to ensure that there were no issues in the relationship between management and the external auditor to be addressed. There were none.
One of the Committee’s roles is to evaluate the quality and effectiveness of audit services provided, and the level of professional scepticism
applied. The Committee has carried out a review based on discussion of audit scope and plans, materiality assessments, review of auditor’s
reports and feedback from management on the effectiveness of the audit process. The review concluded that the external auditor
remained effective and applied professional scepticism throughout. The review of the audit report and feedback from management also
confirmed that the external auditor challenged management’s judgements and estimates where necessary.
The Committee is also responsible for ensuring the external auditor remains independent. The Committee has reviewed, and is satisfied
with, the independence of KPMG as the external auditor. In particular, discussions have been held with KPMG’s senior management to verify
the Group’s audit partner’s performance and standing within KPMG. There were no conflicts or matters of concern conveyed. The year
ended 31 March 2023 was the third year the Group’s audit partner has been involved in the audit of the Group.
Auto Trader Group plc
Annual Report and Financial Statements 2023
74
Non-audit services provided by the external auditor
The external auditor is primarily engaged to carry out statutory audit work. There may be other services where the external auditor is
considered to be the most suitable supplier by reference to their skills and experience. It is the Group’s practice that it will seek quotes from
more than one firm, which may include KPMG, before engagements for non-audit projects are awarded. Contracts are awarded based on
individual merits. A policy is in place for the provision of non-audit services by the external auditor, to ensure that the provision of such services
does not impair the external auditor’s independence or objectivity, and will be assessed in line with FRC Ethical and Auditing Standards.
Non-audit service
Policy
Audit-related services directly related to the audit
For example, the review of interim financial statements,
compliance certificates and reports to regulators.
Pre-approval by the Committee is required for all non-audit
services. Permissible services may be approved to a maximum of
£100,000 for each individual engagement, and to a maximum
aggregate in any financial year of 70% of the average audit fees
paid to the audit firm in the last three consecutive years.
Prohibited services
In line with the EU Audit Reform, services where the auditor’s
objectivity and independence may be compromised. Prohibited
services are detailed in the FRC Revised Ethical Standard 2019 and
include tax services, accounting services, internal audit services,
valuation services and financial systems consultancy.
Prohibited, with the exception of certain services which are subject to
derogation if certain conditions are met and will be assessed going
forward in line with the new FRC Ethical and Auditing Standards.
Refer to plc.autotrader.co.uk/investors for full details of the policy.
During the year, KPMG charged the Group £48,000 (2022: £43,841) for audit-related assurance services directly relating to the audit for the
review of the Group’s interim report for the six months ended 30 September 2022.
The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 – statement of compliance
A competitive tender was carried out in 2016 and KPMG LLP were first appointed as statutory auditor for the year to March 2017. We have
therefore complied with the requirement that the external audit contract is tendered within the 10 years prescribed by UK legislation and the
Code’s recommendation. The Group confirms that it complied with the provisions of the Competition and Markets Authority’s Order for the
financial year under review.
David Keens
Chair of the Audit Committee
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
75
Strategic report
Governance
Financial statements
Report of the Corporate Responsibility Committee
We continue to make
good progress on
setting our near-term
and longer-term goals
across all ESG matters,
but we know there
is still more to do.
For more information on the Committee’s
Terms of Reference:
plc.autotrader.co.uk/investors
AT A GLANCE
OVERVIEW
• Composed of five Independent Non-Executive Directors.
•
The Chair of the Board, Executive Directors and other relevant individuals
attend the meetings when appropriate by invitation.
• The Assistant Company Secretary acts as secretary to the Committee.
• At least three meetings held per year.
OUR PROGRESS IN 2023
•
Long-term net zero targets validated and approved by the SBTi.
•
Carbon Literacy training completed by all members of the Board.
• Continued roll out of the Diverse Talent Accelerator programme.
• Launch of the Continuous Leadership Development programme.
• Launch of our Social Mobility Network.
• Review of our cyber security controls.
FOCUS AREAS FOR 2024
• Review our materiality assessment to ensure we are prioritising
and focusing on the right issues.
• Oversee and monitor the development of the Group’s carbon
reduction plan.
• Continued education and training for the Board as new ESG
challenges emerge and ESG regulation continues to grow.
Providing oversight, scrutiny and
challenge on matters relating
to the Group’s ESG strategy.
Dear shareholders,
I am pleased to present the Report of the
Corporate Responsibility Committee for
March 2023.
The Committee was formed to oversee
the progress towards fulfilling our
Environmental, Social and Governance
(‘ESG’) strategy.
We recognise that our activities – and
the way we carry them out – have impacts
that reach well beyond our financial
performance. Our business activities
impact a wide range of stakeholders
and we strive to make this impact
a positive one.
Our progress in 2023
We continue to make good progress with
our ESG strategy and our cultural KPIs:
Materiality assessment
In the prior year, the Group identified
the ESG issues that mattered most to its
stakeholders and where our ESG activities
should focus. The Committee continues to
support the areas identified by management
as areas of focus: diversity and inclusion;
employee wellbeing; engagement and
safety; product innovation; customer
satisfaction; and climate.
Jeni Mundy
Chair of the Committee
Being a responsible business P26
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Annual Report and Financial Statements 2023
76
Environmental strategy
The Committee has reviewed the Group’s
environmental strategy and recognises the
progress made during the year. Each of the
pillars making up the environmental strategy
has achieved key milestones and the
Committee commends the positive progress
made towards the Group’s ambitious targets.
Key achievements during the year include
verification of our long-term (2040) net
zero targets by the Science Based Targets
initiative (‘SBTi’) and the achievement of the
Platinum Award for Carbon Literacy (meaning
80% of our employees are now certified).
We have continued to report consistently
with the recommendations of the Task Force
on Climate-related Financial Disclosures
(‘TCFD’). As part of this, the Group has
undertaken climate scenario analysis
and refined its assessment of the risks
and opportunities posed by climate change
and how they might impact our business.
The Committee has reviewed the analysis
conducted and recognises that this analysis
will need to continually evolve as the Group
grows and changes and as we respond to
the risks and opportunities identified.
In addition, the Group has undertaken work
to understand the impact of the Autorama
acquisition on the Group’s carbon footprint
and has included them in the calculation
of our GHG emissions for the year. Our GHG
emissions have been audited by a third
party, EcoAct, providing an assurance
over our emissions reporting.
I am pleased to see the progress made in
our aim to become the number one electric
car destination and it is encouraging to see
the Group meet significant milestones in
this area.
Looking ahead to next year, the Committee
looks forward to seeing the Group’s progress
with its carbon reduction plan – with the
Group’s commitment to net zero and the
increased volume of emissions as a result
of the Autorama acquisition, a clear plan
and focused action will be required if we
are to achieve our ambitious target to be
net zero by 2040.
Non-financial reporting
frameworks
We continue to evolve our Environmental,
Social and Governance (‘ESG’)
reporting to meet the requirements
of leading industry frameworks and
our stakeholders’ expectations.
Our reporting focuses on the Task
Force on Climate-related Financial
Disclosures (‘TCFD’) and the
Sustainability Accounting Standards
Board (‘SASB’) standards referencing
the SASB’s reporting framework for the
Internet and Media Services and Media
& Entertainment industries. We have
also identified the UN Sustainable
Development Goals (‘SDGs’), which
we believe Auto Trader can make
a meaningful contribution to.
Measuring progress
We feel it is important to assess the
progress being made across the Group’s
commitments and goals. This is the third
year that we have reported our cultural KPIs
to sit alongside the existing financial and
operational KPIs and I am pleased to see
that there has been positive progress
with all of our diversity and inclusion KPIs.
Whilst they may seem like small changes
year on year, we recognise meaningful
change takes a number of years and the
main focus has to be systemic change
resulting in sustainable progress.
It is encouraging to see that employee
engagement scores remain high despite
these challenging times.
Progress towards our net zero target will
continue to be monitored throughout the
year to ensure that the Group is on target
to reach our goals.
Over the next year the Committee will continue
to oversee and monitor the business’s
commitments in relation to ESG and continue
to push forward our ESG strategy.
Jeni Mundy
Chair of the Corporate Responsibility
Committee
1 June 2023
Diversity and inclusion
There has been a growing emphasis on the
‘Social’ pillar within ESG and I am pleased
that the Group has continued to focus on
and make progress to improve the diversity
and inclusion within the organisation.
The Group has targeted programmes for
employees at different stages of their
careers including early careers, mid-career
and senior leaders. During the year, the
Committee received an update on the
Diverse Talent Accelerator programme and it
is encouraging to see positive progress with
a high proportion of participants benefiting
from opportunities within the business.
The Continuous Leadership Development
programme launched during the year which
is focused on supporting senior leaders
within the business.
I am pleased that work has already begun
to roll out our diversity and inclusion courses
and initiatives within Autorama, including
our ‘One Auto Trader’ workshops, and
further work will continue in the coming year.
As we face the additional challenges of
a growing opportunity gap in the wake
of COVID-19 and the cost of living crisis,
Auto Trader is committed to ensuring
everyone has the opportunity to succeed,
regardless of their background, and this
includes socio-economic diversity. This year
we launched our Social Mobility Network.
The Group has supported social mobility
for a number of years and has made many
changes to its outreach, recruitment,
application and onboarding processes.
The Social Mobility Network is committed
to taking steps to boost opportunities at a
time when social mobility is more challenging
than ever. This commitment has been
recognised by the Group being featured in
the Top 75 Employers in the Social Mobility
Index by the Social Mobility Foundation.
Ongoing ESG training
During the year all Board members
completed Carbon Literacy training
– the course covers a broad range of
climate change related topics and creates
greater awareness of the carbon costs
and impacts of everyday activities, as well
as understanding how individuals and
organisations can reduce their emissions.
ESG continues to receive heightened
stakeholder focus and disclosure
requirements for companies continue to
evolve, requiring companies to enhance and
standardise their disclosures, particularly in
relation to climate. In addition, as the Group
continues to evolve its ESG strategy to
incorporate risks and opportunities and their
impact on the long-term business strategy,
it is essential that the Committee remains
abreast of ESG issues and regulation.
To assist the Committee in successfully
overseeing the Group’s ESG strategy,
the Committee will continue to receive
regular training and education as new ESG
challenges and regulations emerge.
Auto Trader Group plc
Annual Report and Financial Statements 2023
77
Strategic report
Governance
Financial statements
Report of the Corporate Responsibility Committee
continued
TCFD alignment at a glance
The Task Force on Climate-related Financial Disclosures (‘TCFD’) recommendations are structured around four thematic areas
that represent core elements of how organisations operate: governance, strategy, risk management, and metrics and targets.
We have summarised our progress below and pages 30 to 35 in our Being a responsible business section includes disclosures
consistent with the recommendations of the TCFD.
TCFD recommended disclosure
Group progress
Governance
1.
Describe the Board’s oversight of
climate related risks and opportunities.
2. Describe management’s role in assessing
and managing climate related risks
and opportunities.
We have integrated climate governance into our existing governance processes and
sought to embed responsibility for the risks associated with climate change throughout
our business.
Oversight of climate risks and opportunities is described in ‘Our environment’ in the Being
a responsible business section on pages 30 and 31.
Strategy
3.
Describe the climate related risks and
opportunities the organisation has identified
over the short, medium and long term.
4. Describe the impact of climate related
risks and opportunities on the
organisation’s businesses, strategy
and financial planning.
5. Describe the resilience of the
organisation’s strategy, taking into
consideration different climate scenarios.
The global threat of climate change and the Paris Agreement are forcing action and car
buyers want to make the shift to more environmentally friendly vehicles. Public policy is
pushing de-carbonisation with the ban on petrol and diesel vehicles before 2030. We have
also strengthened our environmental strategy to focus on the following areas:
(i) Auto Trader’s net zero commitments;
(ii) Supporting the automotive industry; and
(iii) Supporting our consumers.
We have undertaken climate scenario analysis and refined its assessment of the risks and
opportunities posed by climate change and how they might impact our business, including
consideration of the resilience of our business strategy.
See pages 32 and 33 for more information.
Risk management
6. Describe the organisation’s processes
for identifying and assessing climate
related risks.
7.
Describe the organisation’s processes
for managing climate related risks.
8. Describe how processes for identifying,
assessing and managing climate related
risks are integrated into the organisation’s
overall risk management.
We have a well-established risk management framework that separates responsibilities
into three lines of defence – our OLT, oversight functions and committees and
independent assurance.
The Group Risk Register includes risk of climate change as a principal risk.
We have considered various risks and opportunities, which includes both physical and
transition factors. We are looking to take advantage of the opportunities presented by
a shift towards electric vehicles and mitigate risks. We have modelled a climate related
scenario in our viability statement and have also undertaken climate scenario analysis.
See pages 32 and 33 for more information.
Metrics and targets
9. Disclose the metrics used by the
organisation to assess climate related
risks and opportunities in line with its
strategy and risk management process.
10. Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse gas
(‘GHG’) emissions, and the related risks.
11. Describe the targets used by the
organisation to manage climate related
risks and opportunities and performance
against targets.
To help us accurately assess and develop strategies to reach our net zero target,
we have broadened the reporting of our GHG emissions to include a full inventory
of Scope 3. We have updated our reporting to include the impact of Autorama.
We are committed to the Science Based Targets initiative and our near-term (2030) and
long-term (2040) targets have both been validated by the SBTi. We are committed to:
(i)
Reduce absolute Scope 1 and 2 GHG emissions 50% by FY2030/31 from a FY2019/20 base year;
(ii) Reduce absolute Scope 3 GHG emissions 46.2% over the same timeframe; and
(iii) Reduce absolute Scope 1, 2 and 3 GHG emissions 90% by FY2040/41 from a FY2019/20
base year.
Our GHG emissions have been audited by a third party, EcoAct, providing an assurance
over our emissions reporting.
See page 34 for more information.
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Annual Report and Financial Statements 2023
78
SASB disclosure topics and accounting metrics
SASB standards enable businesses around the world to identify, manage and communicate financially material sustainability
information to their investors. The SASB standards are industry specific and identify the minimum set of financially material
sustainability topics and their associated metrics for the typical company in an industry. SASB assigns Auto Trader to Internet
& Media Services and the following disclosure sets out our progress according to the SASB standard for that sector.
Topic
Accounting metric
Group progress
Environmental footprint
of hardware infrastructure
1. Total energy consumed
2. Percentage grid electricity
3. Percentage renewable
Scope 1, 2 and 3 GHG emissions disclosed.
See page 34 for further information.
Discussion of the integration of environmental
considerations into strategic planning for data
centre needs.
We have continued with the migration of our data
centres to the cloud. We will have completed the
migration by June 2023.
Data privacy, advertising
standards and freedom
of expression
Description of policies and practices relating
to behavioural advertising and user privacy.
See pages 44 to 47 for more information on our
approach to data privacy.
List of countries where core products or
services are subject to government-required
monitoring, blocking, content filtering
or censoring.
None, Auto Trader is a UK based company with
a predominantly UK based target audience.
Data security
1. Number of data breaches
2.
Percentage involving personally identifiable
information (‘PII’)
3. Number of users affected.
We report qualifying incidents to the relevant
regulators (for example, the Information
Commissioner’s Office (‘ICO’) in the UK) and
impacted individuals, where we are legally
required to do so and within the mandated
timeframes. To the extent that the relevant
regulators ever find fault with our data breach
management and/or data security practices,
they publish their findings/sanctions on their
websites. There were no such sanctions
in 2022/23.
Description of approach to identifying and
addressing data security risks, including use
of third-party cyber security standards.
See pages 44 to 47 for our approach to data
security and privacy. We have adopted the
National Institute of Standards and Technology
(‘NIST’) Cybersecurity Framework to manage
and reduce cyber security risks.
Employee recruitment, inclusion
and performance
Percentage of employees that are
foreign nationals.
The Group has a total of 79 foreign nationals,
representing 6.4% of total employees as at
31 March 2023.
Employee engagement as a percentage.
91%, see page 20 for further information.
Percentage of gender and racial/ethnic group
representation for:
1. Management.
2. All other employees.
See pages 41 to 43 for further information.
Intellectual property protection
and competitive behaviour
Total amount of monetary losses as a result
of legal proceedings associated with
anticompetitive behaviour regulations.
No monetary losses as a result of legal proceedings.
Auto Trader Group plc
Annual Report and Financial Statements 2023
79
Strategic report
Governance
Financial statements
Directors’ remuneration report
For more information on the Committee’s
Terms of Reference:
plc.autotrader.co.uk/investors
The Committee is
conscious of the impact
of cost of living on our
colleagues and we
have taken steps to
support them during the
year, including one-off
payments and various
initiatives including
salary finance.
AT A GLANCE
OUR PROGRESS IN 2023
• Continued to monitor our approach to remuneration to
ensure it remains aligned with our strategy, including our
ESG ambitions, and the creation of sustainable long-term
value and that it is appropriate in the context of evolving
shareholder guidance and corporate governance.
• Reviewed pay arrangements considering the impact of
inflation and cost of living increases on the wider workforce.
• Considered the treatment of the acquisition of Autorama
and the disposal of Webzone Limited (trading as ‘Carzone’)
on the FY23 annual bonus and 2021 and 2022 PSP awards.
• Assessed the achievement of targets for the FY23 annual
bonus and 2020 PSP awards.
• Set appropriate targets for the FY24 annual bonus
and the PSP awards to be granted in 2023.
• Reviewed fees for incoming Chair.
FOCUS AREAS FOR 2024
•
Assess the achievement of targets for the FY24 bonus and
2021 PSP awards.
•
Review our Directors’ Remuneration Policy to ensure that it
continues to support our strategy, is aligned with our purpose
and values and provides appropriate motivation for our
Executive Directors.
• Continue to monitor our remuneration arrangements in the
context of our approach to the wider workforce, executive pay
environment, governance developments and market practice.
Advising and overseeing all
elements of remuneration for
the Chair, Executive Directors
and senior management.
OVERVIEW
•
Composed of five Independent Non-Executive Directors.
•
The Chair of the Board, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and other
relevant individuals including external advisors are
invited to attend the meetings when appropriate —
no person is present during any discussion relating
to their own remuneration.
• Ed Williams, Chair of the Board, was in attendance
at all meetings by invitation.
Jill Easterbrook
Chair of the Committee
Key performance indicators P18
Auto Trader Group plc
Annual Report and Financial Statements 2023
80
Annual statement by the Chair of the Remuneration Committee
Dear shareholders,
I am pleased to present, on behalf of the
Board, the Report of the Remuneration
Committee (the ‘Committee’) for the year
ended 31 March 2023.
Performance and reward in 2023
Annual bonus
As detailed in last year’s Directors’
remuneration report, the FY23 annual
bonus was based 75% on Operating profit
and 25% on progress made against our
digital retailing strategy. Performance
was measured excluding the impact of the
acquisition of Autorama and the disposal
of Webzone Limited (trading as ‘Carzone’)
to allow for a like-for-like comparison with
the original targets set.
However, in order to recognise that the
performance of Autorama has disappointed
compared to initial expectations, the
Committee has reduced the bonus outcome
by 7.9%. The Committee determined this
reduction taking into account the level of
performance versus initial expectations.
Following these adjustments, the Operating
profit element of the award will vest at 54.9%
out of a maximum of 75%. The Committee
assessed that the stretching digital retailing
strategic and operational milestones were
met at a level that justified a payout of
17.5% out of a maximum of 25%.The overall
bonus payout is therefore 72.4%, which the
Committee believes is a fair reflection of
the performance during the year.
Performance Share Plan (‘PSP’)
PSP awards granted in 2020 will vest in
August 2023 based on performance over
the three years to 31 March 2023. The awards
were based 100% on relative total shareholder
return (‘TSR’) compared to the FTSE 350
(excluding investment trusts). These awards
were granted during the COVID-19 pandemic,
when, due to the uncertainty at the time
it was considered very challenging to set
robust and fair financial targets for the
PSP and therefore the Committee took
the approach to base the awards solely
on TSR to ensure our focus on long-term
recovery rather than short to medium-term
performance. As detailed on page 88,
relative TSR was below the threshold
requirement, and this resulted in 0% of
the award vesting.
When reviewing the PSP outcome the
Committee recognised that management
has performed extraordinarily well over the
last three years. For much of the performance
period this award was tracking to achieve
some level of vesting. However, relative TSR
performance is measured versus the general
FTSE 350 market and Auto Trader has recently
suffered with the cross-sector impact on share
prices in the tech sector which meant TSR
performance fell below median at the end
of the performance period. The Committee
reviewed performance relative to our TSR
tech sector peers, which would have resulted
in some vesting of the award. However, given
shareholder sensitivity we have decided not
to apply positive discretion in this case.
Performance and reward in 2024
Our 2024 salary review
During the year, the Board and Committee were
mindful of the challenging circumstances in the
macro-economic environment as inflation
began to rise and the cost of living crisis
began to impact daily life. The Board was
conscious that these pressures were impacting
all employees, in particular those on lower
salaries. Allowance is being made for this
in the annual pay review, which will weight
increases towards employees on lower
incomes, with the lowest paid employees
planned to receive on average c.9% and
with a planned average overall increase of
c.6%, which is higher than in previous years.
In addition, a one-off payment of £700 per
employee (excluding the OLT and the Board)
was made in December 2022.
Having taken into account the above, the
Committee approved salary increases of
5% for the Executive Directors and for the
Chair, which is below the planned average
Company-wide pay increase of c.6% for
2024. The Board also approved increases
of 5% to Non-Executive Director fees.
As referenced in my 2022 statement,
and detailed further in the Nomination
Committee report, the Board is in the
process of implementing the succession
plan for the Chair and the Non-Executive
Directors that were on the Board at IPO.
The Committee has noted that the current
Chair’s fee is significantly behind market
practice, and therefore this will be increased
on appointment of the incoming Chair.
Similarly, the Board has reviewed the
current Non-Executive Director fees and
will also apply market-based increases to
the Committee Chair fees within the coming
year. Further details of the new fees are set
out on page 86.
Variable pay in 2024
For 2024 we will continue with the approach
we introduced for 2023 awards. The annual
bonus for 2024 will continue to be based
75% on Operating profit and 25% on strategic
measures linked to the achievement
of stretching strategic and operational
milestones against our digital retailing
objectives. PSP awards granted in 2023
will again be based on 70% Operating
profit growth, 20% Revenue growth, and 10%
Carbon reduction targets, with an underpin
linked to progress on our diversity ambitions.
The PSP targets are disclosed in full on
page 82 onwards.
I hope that you will support our Directors’
remuneration report at the AGM in
September. I will be available at the AGM
to answer any questions. Over the next year,
we will be undertaking a review of our Directors’
Remuneration Policy, and will consult with our
shareholders prior to proposing any changes.
In the meantime, I welcome any feedback
that you may have, which can be submitted
to ir@autotrader.co.uk.
Jill Easterbrook
Chair of the Remuneration Committee
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
81
Strategic report
Governance
Financial statements
75%
Operating profit
1
25%
Strategic: milestones linked
to our digital retailing strategic priority
70%
Operating profit growth
2
20%
Revenue growth
3
10%
Carbon reduction
NB: Awards will be subject
to a diversity underpin.
Maximum opportunity
CEO:
150% of salary
COO and CFO:
130% of salary
50%
of bonus
paid in cash
50%
of bonus deferred
into shares for two years
Malus and clawback
provisions apply.
Maximum opportunity
CEO:
200% of salary
COO and CFO:
150% of salary
3-year
performance period
2-year
holding period
Malus and clawback
provisions apply.
Directors’ remuneration report
continued
REMUNERATION AT A GLANCE: HOW EXECUTIVES WILL BE PAID IN FUTURE YEARS
An overview of our Policy and how it is proposed to apply in 2024 is set out below:
Fixed pay: to recruit and reward executives of a high calibre
Remuneration for the year ending 31 March 2024
Salary
CEO: £626,578
COO: £347,485
CFO: £364,032
A 5% increase below the planned average Company-wide increase of c.6%. The salary review
date is 1 July 2023 to align with the approach for the wider workforce. The COO’s salary has been
pro-rated to reflect that she works 4.5 days per week. Her full-time equivalent salary is £386,094.
Pension
7% of salary
Aligned with the maximum pension opportunity for the wider workforce.
Benefits
Includes private medical cover, life assurance and income protection insurance.
Performance Share Plan
To incentivise and recognise successful execution of the business strategy over the longer term. To align the long-term interests
of Executive Directors with those of shareholders.
Guidelines apply in-post, and extend
beyond tenure in-post guidelines
200% of salary.
Post-employment guidelines
100% of in-post shareholding guideline
(or actual shareholding if lower) for a
period of two years following departure.
1.
Operating profit will be based on Group operating profit, but excluding the impact of the deferred consideration charge in relation to the acquisition of Autorama.
2.
Compound annual growth rate targets have been set as three-year growth targets with reference to performance for 31 March 2023 as the base year. Operating
profit will be based on Group operating profit, but excluding the impact of the deferred consideration charges in relation to the acquisition of Autorama, which
are being spread over 2023 and 2024. This approach provides a like-for-like comparison for assessing performance across the three-year performance period.
3.
Revenue will be based on Group revenue, but excluding Vehicle & Accessory Sales attributable to Autorama, as this revenue does not generate any profit.
FY24 bonus metrics
FY24 PSP metrics
To incentivise and reward the achievement of long-term financial
and ESG objectives which are aligned to our corporate strategy
and our ESG ambitions.
Annual bonus
To incentivise and reward the achievement of annual financial and operational objectives which are closely linked to the corporate strategy.
Shareholding guidelines
Auto Trader Group plc
Annual Report and Financial Statements 2023
82
This report has been prepared in accordance with the Companies Act 2006, Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended in 2013) and the UKLA’s Listing Rules. This report is subject to an advisory
shareholder vote at the AGM on 14 September 2023.
Summary of Directors’ Remuneration Policy (‘Policy’) and implementation for 2024
Our Policy was put to shareholders for approval at the AGM on 17 September 2021 and applies to payments made from this date.
We consulted with shareholders when designing and implementing this Policy and received a strong level of support with 99.69%
of votes cast.
The following provides a summary of the Policy along with details of how the Policy will be implemented during 2024.
For full details of the Policy approved by shareholders please refer to the 2021 Annual Report and Accounts which can be found
at plc.autotrader.co.uk/investors.
Element
Overview of operation
Maximum opportunity
Performance assessment
Implementation for 2024
Salary
Salaries are normally
reviewed annually
with changes effective
from 1 July but may be
reviewed at other times
if considered appropriate.
There is no prescribed
maximum salary level or
salary increase; however,
any base salary increases
will normally be in line with
the percentage increases
awarded to other employees
of the Group.
N/A
CEO Nathan Coe:
£626,578 (2023: £596,741)
COO Catherine Faiers:
£347,485 (2023: £330,939)
CFO Jamie Warner:
£364,032 (2023: £346,698)
A 5% increase, below the
planned average Company-
wide increase of c.6%.
Benefits
Benefits include life
assurance, income
protection insurance and
private medical insurance.
The value of benefits is not
capped as it is determined
by the cost to the Company,
which may vary.
N/A
No change.
Pension
Directors are eligible
to receive employer
contributions to the
Company’s pension
plan (which is a defined
contribution plan), a salary
supplement in lieu of
pension benefits (or a
combination of the above)
or similar arrangement.
Maximum contribution in line
with other employees in the
Group, currently 7% of salary.
N/A
7% of salary, aligned with the
pension opportunity available
to the wider workforce.
Annual bonus
Based predominantly
on achievement of
performance over
the financial year.
Half of any bonus earned
is paid in cash with half
deferred into shares under
the Deferred Annual Bonus
Plan (‘DABP’) subject to
continued employment only.
Dividend equivalents provision
applies to DABP awards.
Recovery and withholding
provisions apply, described
on page 86.
Maximum 150% of
salary as determined
by the Committee.
Financial measures will
normally represent the
majority of the bonus, with
strategic or operational
non-financial targets
representing the balance
(if any).
Not more than 20% of each
part of the bonus will be
payable for achieving the
relevant threshold hurdle.
Measures and weightings may
change each year to reflect
any year-on-year changes
to business priorities.
The Committee has the
discretion to adjust targets
for any exceptional events
(including acquisitions or
disposals) that may occur
during the year.
The Committee also has the
discretion to adjust the bonus
outcome if it is not considered
to be reflective of underlying
financial or non-financial
performance of the business
over the period.
No changes. The maximum
annual bonus opportunity
for the CEO will be 150%
of base salary and for the
COO and CFO will be 130%
of base salary.
The FY24 award will
continue to be based on
the following measures:
75% linked to Operating
profit (excluding deferred
consideration).
25% linked to strategic
milestones linked to our digital
retailing strategic priorities.
Further detail on these
measures can be found
on page 84.
Annual Report on Remuneration
Auto Trader Group plc
Annual Report and Financial Statements 2023
83
Strategic report
Governance
Financial statements
Directors’ remuneration report
continued
Element
Overview of operation
Maximum opportunity
Performance assessment
Implementation for 2024
Performance
Share Plan
(‘PSP’)
Awards normally vest
after three years subject
to performance conditions
and continued employment.
Awards will normally be
made annually under the
PSP and will take the form
of nil-cost options or
conditional share awards.
Executive Directors are
required to retain vested
shares delivered under the
PSP for at least two years
from the point of vesting.
Recovery and withholding
provisions apply, as
described on page 86.
A dividend equivalent
provision applies.
Normal circumstances:
maximum of 200% of
salary as determined
by the Committee.
Exceptional circumstances:
maximum of 300% of
salary as determined
by the Committee.
The metrics and weightings
for each award will be set
out in the Annual Report on
Remuneration. Any strategic
measure(s) will account for no
more than 25% of the award.
No more than 25% of the
award vests for achieving
threshold performance.
No changes. PSP awards
for the CEO will be made
at 200% of base salary
and for the COO and CFO,
150% of base salary.
The 2023 PSP award
will be based on the
following measures:
• 70% linked to Operating
profit growth (excluding
deferred consideration).
• 20% linked to Revenue
growth (excluding vehicle
and accessory sales).
• 10% linked to Carbon
reduction.
• Awards will be subject
to a diversity and
inclusion underpin.
Further detail on these
measures can be found
on page 85.
All-employee
share plans:
SIP & SAYE
The Company operates
two all-employee tax-
advantaged plans, namely
a Save As You Earn (‘SAYE’)
and a Share Incentive Plan
(‘SIP’) for the benefit of
Group employees.
Executive Directors will
be eligible to participate
on the same basis as
other employees.
Maximum permitted
based on HMRC limits
from time to time.
N/A
No change.
Share
ownership
guidelines
Executive Directors are
expected to build and maintain
a holding of shares in the
Company. This is expected
to be built through retaining
a minimum of 50% of the net
of tax vested PSP and DABP
shares, until the guideline
level is met.
Post-cessation: following
stepping down from the
Board, Executive Directors
will normally be expected
to maintain a minimum
shareholding of 200% of
salary (or actual shareholding
if lower) for two years. The
Committee retains discretion
to waive this guideline if it is not
considered to be appropriate
in the specific circumstance.
The minimum share ownership
guideline is 200% of salary for
current Executive Directors.
N/A
No change.
Additional information
FY24 Annual bonus
The maximum annual bonus opportunity will continue to be 150% of base salary for the CEO, and 130% of base salary for the COO and CFO.
Awards will be subject to the following performance measures and targets:
Measure
Weighting
Basis
Threshold (0%
vesting)
Stretch (100%
vesting)
Operating profit
75%
Operating profit for the year ended 31 March 2024
1
£315m
£365m
Strategic targets
25%
Progress made against our digital retailing strategic objectives.
In assessing whether the target has been satisfied, the Committee will consider a range of
quantitative and qualitative indicators to inform its decision, including the achievement of
stretching strategic and operational milestones against our digital retailing strategic priority,
and measures relating to the engagement of car buyers and retailer customers.
1.
Operating profit will be based on Group operating profit, but excluding the impact of the deferred consideration charge in relation to the acquisition of Autorama.
Auto Trader Group plc
Annual Report and Financial Statements 2023
84
2023 PSP awards
PSP awards for the CEO will be made at the level of 200% of base salary and PSP awards for the COO and CFO will be made at the level of 150%
of base salary. Awards will be subject to the following performance measures and targets:
Measure
Weighting
Basis
Threshold
(25% vesting)
Stretch
(100% vesting)
Operating profit
70%
Operating profit compound annual growth rate for the three
years ended 31 March 2026.
1
5.5%
11%
Revenue growth
20%
Revenue compound annual growth rate for the three years
ended 31 March 2026.
2
6%
11%
Carbon reduction
10%
Reduction of carbon emissions by 31 March 2026.
3
13%
20%
Diversity underpin
N/A
The vesting under any of the performance conditions will
be subject to a diversity underpin.
The Committee will determine whether there has been
acceptable progress made against the key gender and ethnic
diversity objectives, including considering the proportion
of our staff who are women and who are ethnically diverse as
well as the proportion of leadership
4
who are women and who
are ethnically diverse.
In assessing whether the underpin has been satisfied,
the Committee will consider a range of quantitative and
qualitative benchmarks to inform its decision, including ‘how’
performance has been achieved and ‘what’ performance
has been achieved over the performance period.
Should the Committee consider that the underpin has not been
met, the Committee would consider whether a discretionary
reduction in the number of shares vesting was required.
1.
Compound annual growth rate targets have been set as three-year growth targets with reference to performance for 31 March 2023 as the base year. Operating
profit will be based on Group operating profit, but excluding the impact of the deferred consideration charges in relation to the acquisition of Autorama, which are
being spread over 2023 and 2024. This approach provides a like-for-like comparison for assessing performance across the three-year performance period.
2.
Revenue will be based on Group revenue, but excluding Vehicle & Accessory Sales attributable to Autorama, as this revenue does not generate any profit.
3.
Carbon emissions are calculated based on the financial consolidation approach as defined in the Greenhouse Gas Protocol, and include emissions from Scopes 1, 2
and 3. Our total carbon emissions for the year to 31 March 2023 (the base year) have been independently verified. Refer to page 34 for further details.
4.
Leadership is defined as the Operational Leadership Team (‘OLT’) and their direct reports (‘OLT-1’).
The Committee set these targets taking into account internal and external expectations of performance and organic growth of the
business. The Committee believes that these targets are appropriately stretching. For performance between the threshold and stretch
targets, vesting will be calculated on a pro-rata basis. There is no vesting for performance below the threshold target.
As noted on page 34, our carbon emissions for 2023 were impacted by the acquisition of Autorama, as we are required to account for the
projected life time carbon emissions of vehicles purchased and held temporarily on the balance sheet. To the extent that our approach to the
purchase of vehicles changes during the performance period, which would impact our disclosed carbon emissions, the Committee would review
the targets set to ensure that they remain stretching. The carbon reduction targets set are consistent with our original commitment set in 2022
to reduce our carbon emissions by 90% by 2040.
Each element will be assessed independently of the other at the end of the performance period. In line with best practice and shareholder
expectations the Committee will then consider the wider context and retains the discretion to adjust the payout from the PSP if it is not
considered to be reflective of underlying financial or non-financial performance of the business or the performance of the individual over the
performance period or where the outcome is not considered appropriate in the context of the experience of shareholders or other stakeholders.
UK Corporate Governance Code
The Directors’ Remuneration Policy has been developed taking into account the following principles as recommended in the revised 2018 UK
Corporate Governance Code:
•
Clarity:
The Policy is designed to allow our remuneration arrangements to be structured such that they clearly support, in a sustainable
way, the financial and strategic objectives of the Company. The Committee remains committed to reporting on its remuneration
practices in a transparent, balanced and understandable way.
•
Simplicity:
The Policy consists of three main elements: fixed pay (salary, benefits and pension), an annual bonus and a long-term incentive
award. The metrics used in our incentive plans directly link back to our key strategic ambitions and values and provide a clear link to the
shareholder experience. The Committee may change measures for future years to ensure they continue to be aligned with our strategy.
•
Risk:
The Policy is in line with our risk appetite. A robust malus and clawback policy is in place, and the Committee has the discretion
to reduce pay outcomes where these are not considered to represent overall Company performance or the shareholder experience.
Furthermore, our bonus deferral, post-cessation shareholding requirement and PSP holding period ensure that Executive Directors
are motivated to deliver sustainable performance.
•
Predictability:
The Committee considers the impact of various performance outcomes on incentive levels when determining quantum.
These can be seen as part of the Directors’ Remuneration Policy in the 2021 Annual Report and Financial Statements.
•
Proportionality:
A substantial portion of the package comprises performance-based reward, which is linked to our strategic priorities
and underpinned by a robust target-setting process. We are mindful of the alignment with our workforce, the shareholder experience
and our values and culture when considering the right and proportional approach to pay.
•
Alignment to culture:
When developing our Policy, the Committee reviewed our approach to remuneration throughout the organisation
to ensure that arrangements are appropriate in the context of the wider workforce. The themes considered include workforce
demographics, engagement levels and diversity to ensure that executive remuneration is appropriate from a cultural perspective.
Our 2024 PSP award includes carbon reduction objectives with the vesting of the award subject to a diversity underpin.
Auto Trader Group plc
Annual Report and Financial Statements 2023
85
Strategic report
Governance
Financial statements
Directors’ remuneration report
continued
Recovery and withholding provisions
Recovery and withholding provisions apply to variable pay, to enable the Company to recover amounts paid under the annual bonus and
PSP in the event of the following negative events occurring within three years of the payment of a cash bonus, the grant date of an award
under the DABP or the vesting date of PSP awards:
• a material misstatement of, or restatement to, the audited financial statements or other data;
• an error in calculation leading to over-payment of bonus;
• individual gross misconduct;
• serious reputational damage;
• corporate failure; or
• any other circumstance which the Committee considers is similar in nature or effect.
Should such an event be suspected, there will be a further two years in which the Committee may investigate the event. The amount to be
recovered would generally be the excess payment over the amount which would otherwise be paid, and recovery may be satisfied in a variety of
ways, including through the reduction of outstanding deferred awards, reduction of the net bonus or PSP vesting and seeking a cash repayment.
Service contracts and policy for payments on loss of office
The service contracts for the Executive Directors are terminable by either the Company or the Executive Director on 12 months’ notice and
make provision for early termination by way of payment of a cash sum equal to 12 months’ salary and pension. The Company may continue
to provide benefits until the end of the notice period or may make a payment to the value of 12 months’ contractual benefits.
Payment in lieu of notice can be paid either as a lump sum or in equal monthly instalments over the notice period and will normally be subject
to mitigation. The Committee will consider the particular circumstances of each leaver and retains flexibility as to at what point, and the
extent to which, payments are reduced.
The Executive Directors are subject to annual re-election at the AGM. Service contracts are available for inspection at the Company’s
registered office or on request from ir@autotrader.co.uk. The CEO’s service contract date is 1 April 2017, the CFO’s service contract date
is 1 March 2020, and the COO’s service contract date is 1 May 2019.
Remuneration Policy for the Chair and Non-Executive Directors
Element
Overview of operation
Implementation for 2024
Fees
Both the Chair and the Non-Executive Directors are
paid annual fees and do not participate in any of the
Company’s incentive arrangements, or receive any
pension provision or other benefits.
The Chair receives a single fee covering all of his duties.
The Non-Executive Directors receive a basic Board fee,
with additional fees payable for chairing the Audit,
Remuneration and Corporate Responsibility Committees
and for performing the Senior Independent Director role.
Fees were reviewed and will be increased by 5% with
effect from 1 July 2023 as follows:
Base fees
• Chair: £206,931 (2023: £197,078)
• Non-Executive Directors: £63,904 (2023: £60,861)
Additional fees
• SID: £10,954 (2023: £10,433)
• Audit Committee Chair: £10,954 (2023: £10,433)
• Remuneration Committee Chair: £10,954 (2023: £10,433)
• Corporate Responsibility Committee Chair: £10,954
(2023: £10,433)
There is no additional fee payable to the Chair of the
Nomination Committee as the Chair of the Board is
currently Chair of the Nomination Committee.
As set out on page 92, the fees for the Chair role and
for the additional fees have been reviewed and will
be increased as the succession plan is implemented.
All Non-Executive Directors have letters of appointment with the Company for an initial period of three years, subject to annual re-appointment
at the AGM. Appointment is terminable on six months’ written notice. The appointment letters for the Non-Executive Directors provide that
no compensation is payable upon termination of employment. The letters of appointment are available for inspection at the Company’s
registered office. Details of the appointment terms of the Non-Executive Directors are as follows:
Start of current term
Expiry of current term
Ed Williams
6 March 2021
5 March 2024
David Keens
1 May 2021
30 April 2024
Jill Easterbrook
1 July 2021
30 June 2024
Jeni Mundy
1 March 2022
28 February 2025
Sigga Sigurdardottir
1 November 2022
31 October 2025
Jasvinder Gakhal
1 January 2022
31 December 2024
Auto Trader Group plc
Annual Report and Financial Statements 2023
86
Single figure of remuneration for the year ended 31 March 2023 (audited)
The table below shows the aggregate emoluments earned by the Directors of the Company in the year ended 31 March 2023.
£’000
Salary
and fees
Benefits
Other
Annual
bonus
1
Long-term
incentives
2
Pension
Total fixed
remuneration
Total variable
remuneration
Total
Executive
Nathan Coe
592
1
–
648
–
40
633
648
1,281
Catherine Faiers
3
329
1
–
311
–
21
351
311
662
Jamie Warner
344
1
2
4
326
–
22
369
326
695
Non-Executive
Ed Williams
195
–
–
–
–
–
195
–
195
David Keens
81
–
–
–
–
–
81
–
81
Jill Easterbrook
70
–
–
–
–
–
70
–
70
Jeni Mundy
70
–
–
–
–
–
70
–
70
Sigga Sigurdardottir
60
–
–
–
–
–
60
–
60
Jasvinder Gakhal
60
–
–
–
–
–
60
–
60
Total
1,801
3
2
1,285
–
83
1,889
1,285
3,174
1.
Performance against annual bonus targets resulted in an overall outcome of 72.4% of maximum.
2.
0% of PSP awards granted in 2020 will vest in 2023 for performance over the three-year period to 31 March 2023. The award was based 100% on Relative Total
Shareholder Return (‘TSR’) compared to the FTSE 350 (excluding investment trusts). These awards were granted during the COVID-19 pandemic and due to the
uncertainty at the time it was considered very challenging to set robust and fair financial targets for the PSP and therefore the awards were based solely on
TSR to ensure our focus on long-term recovery rather than short to medium-term performance.
3.
Catherine Faiers works a 4.5 day working week and her salary has been pro-rated accordingly.
4.
Jamie Warner was granted 1,341 shares under the Company’s Save As You Earn scheme, at a discount of 20% to the market price. The total value of the discount
was £1,529 and has been included in the ‘Other’ column above.
Single figure of remuneration for the year ended 31 March 2022 (audited)
The table below shows the aggregate emoluments earned by the Directors of the Company in the year ended 31 March 2022.
£’000
Salary
and fees
Benefits
Other
Annual
bonus
Long-term
incentives
2
Pension
Total fixed
remuneration
Total variable
remuneration
Total
Executive
Nathan Coe
577
1
–
652
403
40
618
1,055
1,673
Catherine Faiers
1
320
1
–
313
280
21
342
593
935
Jamie Warner
335
1
1
3
328
96
4
23
360
424
784
Non-Executive
Ed Williams
187
–
–
–
–
–
187
–
187
David Keens
77
–
–
–
–
–
77
–
77
Jill Easterbrook
68
–
–
–
–
–
68
–
68
Jeni Mundy
68
–
–
–
–
–
68
–
68
Sigga Sigurdardottir
58
–
–
–
–
–
58
–
58
Jasvinder Gakhal
5
14
–
–
–
–
–
14
–
14
Total
1,704
3
1
1,293
779
84
1,792
2,072
3,864
1.
Catherine Faiers works a 4.5 day working week and her salary has been pro-rated accordingly.
2.
50.1% of PSP awards granted in 2019 vested in 2022 for performance over the three-year period to 31 March 2022. In last year’s report, for the purpose of the single
figure the vested shares were valued based on the three-month average share price to 31 March 2022 of 663.06p, giving a value of £457k for Nathan Coe, £318k for
Catherine Faiers, and £109k for Jamie Warner including dividend equivalents. The amounts in the table above have been revalued based on the share price on the
date of vesting of 584.24p. 4% of the vested value is due to share price appreciation since the date of award.
3.
Jamie Warner was granted 1,009 shares under the Company’s Save As You Earn scheme, at a discount of 20% to the market price. The total value of the discount
was £1,484 and has been included in the ‘Other’ column above.
4.
Jamie Warner’s long-term incentive vesting in the year was granted before he joined the plc Board.
5.
Jasvinder Gakhal was appointed to the Board on 1 January 2022.
Additional information to support the single figure
Benefits
Benefits included in the single figure relate to private healthcare. Directors also receive life assurance and income protection insurance,
the cost of which is not disclosed above as these are non-taxable benefits.
Pension
Employer’s pension contributions of between 5% and 7% of salary were paid in respect of Executive Directors in line with those received for
the wider UK employee population. Once Executive Directors have reached their annual pension limit, a salary supplement of 7% is paid in
lieu of pension benefits.
Auto Trader Group plc
Annual Report and Financial Statements 2023
87
Strategic report
Governance
Financial statements
Directors’ remuneration report
continued
Annual bonus for the year ended 31 March 2023 (audited)
The performance measures, targets and performance outcomes for the annual bonus for the year ended 31 March 2023 are shown in the
following table:
Performance measures
Weighting
Threshold
Stretch
Actual
performance
Payout (as a %
of maximum)
Financial
Operating profit for year
ending 31 March 2023
1
75%
Below or equal to
£300m
Equal to or above
£340m
£332.9m
61.7%
Addition to reflect
Webzone Limited disposal
2
£0.6m
1.1%
Reduction to reflect
Autorama performance
3
(£4.2m)
(7.9%)
Financial element
54.9%
Strategic targets
Milestones linked to our
digital retailing strategy
25%
0%
100%
70%
17.5%
Total payout
72.4 %
1.
To allow for comparison with the original targets set the Committee excluded the impact of the acquisition of Autorama during the year and therefore has used the
Auto Trader segmental Operating profit.
2.
The Committee has added back an element to reflect the expected performance of Webzone Limited, as included in the target, had the disposal not occurred.
3.
Whilst the performance of Autorama has been excluded from the performance calculation to ensure like-for-like performance with the targets set, in order to
recognise the performance of Autorama, an operating loss of £11.2m compared to initial expectations (at the bottom of the range) of a loss of £7m, the Committee
has reduced the bonus outcome by 7.9%.
Operating profit is a key performance indicator of the business and the Board believes continuing to deliver Operating profit performance
will generate long-term value for shareholders. Adjustments were made by the Committee to allow like-for-like comparison with the targets
set, as set out in the table above. The Committee also exercised its discretion to reflect Autorama’s performance.
In 2022, the Committee decided that 25% of the annual bonus would be determined based on progress relating to our digital retailing
strategy which would involve consideration of a range of quantitative and qualitative indicators, the achievement of stretching strategic
and operational milestones against our digital retailing pillar and measures relating to engagement of car buyers and retailer customers.
These milestones have been assessed based on the Committee’s holistic assessment of progress made. In reviewing performance in
FY23, the Committee considered that during the year, the business successfully executed the completion of Deal Builder, one of the largest
and most complex product development projects in the Company’s history, enabling our car retailer customers to provide a complete
transactional service to car buyers on the Auto Trader platform. The product was launched in summer 2022 as a trial with selected retailers.
This has now started to scale, and so by the end of the financial year there were over 50 retailers live and over 200 deals submitted in the year,
with encouraging conversion rates and positive feedback from both consumers and retailers. Overall, the Committee concluded that the
operational development and delivery of the software build had been exceptional, and satisfactory progress was being made towards
commercialisation. Based on these achievements, the Committee assessed performance under the digital retailing strategy milestones
to be at a level that results in an award of 17.5% out of the possible 25% of the overall maximum bonus.
The overall bonus payout is therefore 72.4%.
Performance Share Plan vesting for year ended 31 March 2023 (audited)
The PSP award granted in 2020 was based on performance to 31 March 2023. The performance conditions this award was based on and the
targets and performance delivered are set out in the table below:
Measure
Weighting
Threshold (25% vesting)
Stretch (100% vesting)
Actual
performance
Payout (as a %
of maximum)
Relative total shareholder return compared
to FTSE 350 (excluding investment trusts)
100%
Equal to Index
TSR (23%)
Equal to Index TSR plus
25% or above (48%)
14.39%
0%
Total vesting
0%
When reviewing the PSP outcome the Committee recognised that management has performed extraordinarily well over the last three years,
and for much of the performance period this award was tracking to achieve some level of vesting. However, relative TSR performance is
measured versus the general FTSE 350 market and Auto Trader has recently suffered with the cross-sector impact on share prices in the
tech sector which meant TSR performance fell below median at the end of the performance period. The Committee reviewed performance
relative to our TSR tech sector peers, which would have resulted in some vesting of the award. However, given shareholder sensitivity we
have decided not to apply positive discretion in this case.
Overall, the Committee considers that the Remuneration Policy has operated as it was intended during 2022/23. The performance-driven
focus of our total remuneration directly supports the sustainable long-term success of the business.
Scheme interests awarded during the year (audited)
Awards granted in the year under the PSP are shown below. Awards are granted as nil-cost options.
Executive Director
Number of
shares awarded
Multiple of salary
Face value of
awards
2
% award vesting
at threshold
(% maximum)
Performance period
PSP awards
1
Nathan Coe
194,795
200%
£1,158,720
25%
1 April 2022 to 31 March 2025
Catherine Faiers
81,021
150%
£481,950
25%
1 April 2022 to 31 March 2025
Jamie Warner
84,879
150%
£504,900
25%
1 April 2022 to 31 March 2025
1.
PSP awards will normally be eligible to vest three years from grant (23 June 2022) based on performance over the three years to 31 March 2025 and continued
employment. The net value of the vested awards is subject to a two-year holding period.
2.
As disclosed last year, face value was calculated based on the three-month average share price to the day before grant date (23 June 2022) of 594.8p. This approach
has been used to smooth out share price volatility and ensure that the number of shares awarded is not overly impacted by short-term changes in the share price.
Auto Trader Group plc
Annual Report and Financial Statements 2023
88
The performance conditions applying to the 2022 PSP awards shown in the table on the previous page are set out below:
Measure
Weighting
Basis
Threshold (25%
vesting)
Stretch (100%
vesting)
Operating profit
70%
Operating profit compound annual growth rate
for the three years ended 31 March 2025.
1
5.5%
10.5%
Revenue growth
20%
Revenue compound annual growth rate for the
three years ended 31 March 2025.
1
5.5%
10.5%
Carbon reduction
10%
Reduction of carbon emissions over the three years
to 31 March 2025.
23%
36%
Diversity underpin
N/A
The vesting under any of the performance conditions
will be subject to a diversity underpin.
The Committee will determine whether there has been
acceptable progress made against the key gender and ethnic
diversity objectives, including considering the proportion
of our staff who are women and who are ethnically diverse
as well as the proportion of leadership who are women and
who are ethnically diverse.
In assessing whether the underpin has been satisfied, the
Committee will consider a range of quantitative and
qualitative benchmarks to inform its decision, including ‘how’
performance has been achieved and ‘what’ performance has
been achieved over the performance period.
Should the Committee consider that the underpin has not been
met, it would consider whether a discretionary reduction in the
number of shares vesting was required.
N/A
N/A
1.
Operating profit and Revenue growth measures will be assessed excluding Autorama, Group central costs and with Webzone Limited removed from the base year,
being the year ended 31 March 2022. This approach provides a like-for-like comparison for assessing performance across the three-year performance period.
When determining vesting the Committee will consider the overall experience of shareholders and wider stakeholders over the
performance period.
Directors’ shareholding and share interests (audited)
Executive Directors are required to maintain a shareholding in the Company equivalent in value to 200% of salary. If an Executive Director
does not meet the guideline, they will be expected to retain at least half of the net shares vesting under the Company’s discretionary
share-based employee incentive schemes until the guideline is met. Non-Executive Directors do not have shareholding guidelines.
The table below sets out the number of shares held or potentially held by Directors (including their connected persons where relevant)
as at 31 March 2023. There have been no changes in these interests up until 1 June 2023.
Director
Beneficially
owned shares
1
Number of
awards held
under the PSP
conditional on
performance
Number of
awards held
under the DABP
conditional on
continued
employment
Number of
unvested
Sharesave
options and
Share Incentive
Plan shares
Number of
vested but
unexercised nil
cost options
Number of
vested
Sharesave
options and
Share Incentive
Plan shares
Target
shareholding
guideline (as a %
of salary)
Percentage of
salary held in
shares as at
31 March 2023
2
Executive Directors
Nathan Coe
3,186,555
662,975
54,786
–
–
–
200%
3,290%
Catherine Faiers
76,106
329,672
26,332
–
–
–
200%
142%
Jamie Warner
39,666
327,989
27,586
3,695
–
1,392
200%
70%
Non-Executive Directors
Ed Williams
5,375,444
–
–
–
–
–
N/A
N/A
David Keens
50,000
–
–
–
–
–
N/A
N/A
Jill Easterbrook
–
–
–
–
–
–
N/A
N/A
Jeni Mundy
–
–
–
–
–
–
N/A
N/A
Sigga Sigurdardottir
–
–
–
–
–
–
N/A
N/A
Jasvinder Gakhal
–
–
–
–
–
–
N/A
N/A
1.
Includes shares owned by connected persons. Only beneficially owned shares count towards the shareholding guideline.
2.
Based on the Director’s salary and the mid-market price at close of business on 31 March 2023 of 616.2p. Includes net (after tax) of options vested but not exercised.
Auto Trader Group plc
Annual Report and Financial Statements 2023
89
Strategic report
Governance
Financial statements
Directors’ remuneration report
continued
Gains on exercise of share options (audited)
During the year, Directors exercised share options in relation to long-term incentive plans, resulting in an aggregate gain of £1,406,993.
Payments to former Directors (audited)
There were no payments made to former Directors during the year.
Payments for loss of office (audited)
There were no payments for loss of office during the year.
Performance graph and CEO remuneration table
The graph below illustrates the Company’s TSR performance relative to the FTSE 350 Index (excluding investment trusts) from the start
of conditional share dealing on 18 March 2015. This index has been selected as it is a broad all-sector group of which the Company is a
constituent. The graph shows the performance over that period of a hypothetical £100 invested.
0
50
100
150
200
250
300
FTSE 350 (excluding investment trusts)
Auto Trader Group plc
31 March
2023
31 March
2022
31 March
2021
31 March
2020
29 March
2019
30 March
2018
31 March
2017
31 March
2016
31 March
2015
18 March
2015
Total shareholder return (£)
(rebased)
Source: Datastream (Thomson Reuters)
CEO remuneration
The table below sets out the CEO’s single figure of total remuneration together with the percentage of maximum annual bonus awarded
over the same period.
2023
2022
2021
2020
1
2019
1
2018
1
2017
1
2016
1
2015
1,2
CEO total remuneration (£’000)
1,281
1,673
3
523
1,659
2,052
2,929
980
1,339
20
Annual bonus (% of maximum)
72.40%
75.00%
N/A
4
N/A
5
76.75%
50.30%
51.80%
100.00%
N/A
6
PSP vesting (% of maximum)
0.00%
7
50.10%
0.00%
8
73.60%
51.20%
100.00%
N/A
9
N/A
9
N/A
9
1.
2015 to 2019 figures reflect Trevor Mather’s service as CEO. The 2020 figures reflect Trevor Mather’s service as CEO to 29 February 2020, and Nathan Coe’s service
as CEO from 1 March 2020.
2.
From the date of Admission in March 2015.
3.
The 2022 CEO total remuneration has been updated to reflect the value of the PSP based on the share price on the date of vesting of 584.24p rather than the
three-month average share price to 31 March 2022 of 663.06p.
4. No bonus plan operated in 2020/21.
5.
The CEO elected to waive his bonus in respect of 2019/20.
6.
Private company when bonus plan implemented in 2015.
7.
PSP award vesting in 2023 was based solely on Relative Total Shareholder Return (‘TSR’) compared to the FTSE 350 (excluding investment trusts) due to the impact
of COVID-19 on our business. As threshold was not met this award will lapse.
8.
PSP awards lapsed in 2020/21 as performance conditions were not met.
9.
No awards were eligible to vest in respect of long-term performance ending in 2015, 2016 or 2017.
Auto Trader Group plc
Annual Report and Financial Statements 2023
90
CEO pay ratio
The table below shows the ratio between the CEO’s total single figure (as calculated on the previous page) and the median, lower and upper
quartile total remuneration for our UK-based workforce. Our median all-employee to CEO pay ratio is 26.9.
A significant proportion of the CEO’s pay is in the form of variable pay through the annual bonus and the PSP. CEO pay will therefore vary
year on year based on Company and share price performance. The CEO to all-employee pay ratio will therefore also fluctuate taking this
into account.
It should be noted that the pay ratio when comparing 2022 to 2023 has reduced, due to the fact the CEO’s single figure of remuneration in
2022 included an annual bonus and a PSP award vesting. However, in 2023, only the annual bonus paid out, as the PSP award vested at 0%.
In 2023 our figures also included Autorama UK Limited employees. As part of the integration into Auto Trader, we are working on the alignment
of benefits to ensure a consistent offering.
The Board has confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and progression, and is
appropriate for the Company’s size and structure.
Year
Method
25
th
percentile
pay ratio
Median
pay ratio
75
th
percentile
pay ratio
FY23
A
36.6:1
26.9:1
18.2:1
FY22
A
46.6:1
33.5:1
23.7:1
FY21
A
15.9:1
10.9:1
7.8:1
FY20
A
50.4:1
34.2:1
24.8:1
–
Method A has been used to determine the relevant employees on the basis that this approach is in line with the approach used to calculate the single total figure
for the CEO and therefore is the most robust.
–
For 2023, Autorama UK Limited employees have been included in the figures.
–
For 2023, the salary for the P25 employee was £29,736 and total remuneration was £34,995. The salary for the P50 employee was £42,250 and total remuneration
was £47,649. The salary for the P75 employee was £61,625 and total remuneration was £70,227.
–
The P25, P50 and P75 employees were determined as at 31 March 2023 based on full-time equivalent remuneration. Only employees who were employed as at
the end of the financial year were included; salaries were annualised, taking account of mid-year increases. The total remuneration includes salary, allowances,
taxable benefits, pension contributions, bonus, commission and share-based payments. Taxable benefits are based on the previous tax year (2021–2022) for
company cars and the latest tax year (2022–2023) for healthcare benefits. Options under the SAYE scheme are included as at the date of grant, based on the
difference between the market value at grant date and the exercise price. Options under discretionary plans (PSP and Single Incentive Plan Award) are based
on the date that the performance conditions were achieved, and valued using the three-month average share price to 31 March 2023 of 588.34p.
–
For 2020, the CEO single figure reflects amounts to Trevor Mather (stepped down 29 February 2020) and Nathan Coe (appointed CEO 1 March 2020) for their
respective time in service.
–
The 2022 CEO pay ratio figures have been updated to reflect the change to the CEO total single figure of remuneration for the year ended 31 March 2022,
following the revalued PSP award based on share price on date of vesting.
Year-on-year change in pay for Directors compared to the average employee
In accordance with the requirement under The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations
2019, the table below shows the increase in each Director’s pay (salary, benefits and bonus) between 2020 to 2021, 2021 to 2022, and 2022 to
2023, compared to the average increase for the employees of the Group.
2023–2022
2022–2021
2021–2020
Base
salary/fees
Benefits
Annual
bonus
Base
salary/fees
Benefits
Annual
bonus
Base
salary/fees
Benefits
Annual
bonus
Executive Directors
Nathan Coe
1,2
3%
(8%)
(1%)
16%
(7%)
100%
8
26%
31%
(100%)
Catherine Faiers
1,3
3%
(8%)
(1%)
12%
(7%)
100%
8
(11%)
43%
(100%)
Jamie Warner
1,4
3%
(8%)
(1%)
16%
(7%)
100%
8
932%
1,477%
(100%)
Non-Executive Directors
Ed Williams
1
4%
–
–
36%
–
–
(25%)
–
–
David Keens
1
4%
–
–
35%
–
–
(25%)
–
–
Jill Easterbrook
1
4%
–
–
17%
–
–
(13%)
–
–
Jeni Mundy
1,5
4%
–
–
31%
–
–
(9%)
–
–
Sigga Sigurdardottir
1,6
4%
–
–
16%
–
–
108%
–
–
Jasvinder Gakhal
1,7
315%
–
–
N/A
N/A
N/A
N/A
N/A
N/A
Average employee
6.4%
(8%)
10
–
9
5.5%
37%
–
0%
27%
–
1.
Ed Williams and David Keens voluntarily waived their entire fees from 1 April 2020 to 30 June 2020. The remaining Board members voluntarily waived 50% of their
salaries and fees from 1 April 2020 to 30 June 2020.
2.
Nathan Coe was appointed as CEO on 1 March 2020 and his base salary increased on that date from £377,000 to £568,000.
3.
Catherine Faiers was appointed to the Board on 1 May 2020 and therefore her reported salary for 2020 represents only 11 months. Further, Catherine became
part-time from 1 September 2020 and therefore her salary was pro-rated from that date to reflect her 4.5 day working week.
4.
Jamie Warner was appointed to the Board on 1 March 2020 and therefore his reported salary for 2020 represents only one month.
5.
Jeni Mundy was appointed Chair of the Corporate Responsibility Committee from 1 January 2021 and received an additional fee of £9,742 per annum from that date.
6.
Sigga Sigurdardottir was appointed to the Board on 1 November 2019 and therefore her reported fee for 2020 represents only five months.
7.
Jasvinder Gakhal was appointed to the Board on 1 January 2022.
8.
100% value shown as no bonus was paid for 2021.
9.
For the purpose of the annual bonus this relates to performance related schemes only and therefore figures exclude any cost of living payments made to all
employees during the year.
10. The decrease in benefits relates to a reduction in our private medical insurance premiums.
Auto Trader Group plc
Annual Report and Financial Statements 2023
91
Strategic report
Governance
Financial statements
Directors’ remuneration report
continued
Relative importance of the spend on pay
The following table shows the Group’s actual spend on pay for all employees compared to distributions to shareholders. The average
number of employees has also been included for context. Revenue and Operating profit have also been disclosed as these are two key
measures of Group performance.
2023
£m
2022
£m
%
change
Employee costs (see note 7 to the Consolidated financial statements)
84.5
69.8
21%
Average number of employees (see note 7 to the Consolidated financial statements)
1,160
960
21%
Revenue (see Consolidated income statement)
500.2
432.7
16%
Operating profit
277.6
303.6
(9%)
Share buybacks and Dividends paid (see notes 26 and 28 to the Consolidated financial statements)
225.0
237.1
(5%)
Fees for the Chair and Non-Executive Directors
Fees for the Chair and Non-Executive Directors were reviewed in early 2023 and will be increased by 5% with effect from 1 July 2023.
As set out in the Nomination Committee report, the Board is in the process of implementing the succession plan for the Chair and the NEDs
that were on the Board at IPO. The fee for the Chair role was set at IPO reflecting the size and complexity of the business at that time and the
Chair’s equity stake in the business; it has not been increased significantly during his tenure. Since IPO the Company has grown significantly
and the complexity of its operations has increased, such that the current Chair’s fee is significantly behind market practice. Therefore the
Remuneration Committee has reviewed the fee and has approved that the fee for the incoming Chair will be set at £325,000. Furthermore,
the Board has reviewed the current NED fees, and has concluded that whilst the base fees are deemed to be appropriate, the additional SID
and Committee Chair fees are similarly positioned towards the lower end of market practice. Therefore the Board has decided that when
the next new Non-Executive Director is appointed, the Committee Chair fees will be increased to £18,500, and the SID fee will be increased
to £12,500 at the same time.
The following table sets out the new fees in financial year 2024 compared to those which applied in financial year 2023, and the new fees
to be applied to new appointees during the year:
Base fees
2023
Percentage
change
2024
Fees to be
applied post
succession plan
Chair
£197,078
5%
£206,931
£325,000
Non-Executive Director
£60,861
5%
£63,904
£63,904
Additional fees
Senior Independent Director
£10,433
5%
£10,954
£12,500
Audit Committee Chair
£10,433
5%
£10,954
£18,500
Remuneration Committee Chair
£10,433
5%
£10,954
£18,500
Corporate Responsibility Committee Chair
£10,433
5%
£10,954
£18,500
Auto Trader Group plc
Annual Report and Financial Statements 2023
92
Funding of equity awards
Share awards may be funded by a combination of newly issued shares, treasury shares and shares purchased in the market. Where shares
are newly issued or from treasury, the Company complies with Investment Association dilution guidelines on their issue. The current dilution
usage of all share plans is c. 1.14% of shares in issue.
Where shares are purchased in the market, these will be held by a trust, in which case the voting rights relating to the shares are exercisable
by the Trustees in accordance with their fiduciary duties. At 31 March 2023, the trust held 340,196 shares in respect of the Share Incentive Plan.
External directorships
Auto Trader recognises that its Executive Directors may be invited to become non-executive directors of other companies. Such non-executive
duties can broaden a Director’s experience and knowledge which can benefit Auto Trader. Following the year end, Catherine Faiers has
been appointed as a Non-Executive Director of Allegro.eu Group. The Board approved the directorship in advance to ensure that there was
no conflict of interest, and the Remuneration Committee approved that Catherine will retain the remuneration from the appointment.
Membership of the Committee
Jill Easterbrook is the Committee Chair, and its other members are David Keens, Jeni Mundy, Sigga Sigurdardottir and Jasvinder Gakhal. Refer to
pages 64 and 80 for further details of the membership of the Committee, the Terms of Reference, the meetings held and activities during the year.
External advisors
During the year the Committee received advice from Deloitte who were appointed in October 2017 following a competitive tender process.
Deloitte are founding members of the Remuneration Consultants Code of Conduct and adhere to this Code in their dealings with the
Committee. The Committee is satisfied that the advice provided by Deloitte is objective and independent. The Committee is comfortable
that the members of the Deloitte team that provide remuneration advice to the Committee do not have connections with the Company
or its Directors that may impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there
were appropriate safeguards against such conflicts.
Fees are charged on a time and materials basis. During the year Deloitte was paid £37,600 excluding VAT for advice provided to the
Committee. Deloitte provided additional services to the Company in relation to internal audit, debt advisory and tax services.
Statement of shareholder voting
Shareholder voting in relation to recent AGM resolutions is as follows:
Votes for
% of votes
cast for
Votes against
% of votes
cast against
Abstentions
2022 AGM: Annual Report on Remuneration (advisory)
748,248,450
98.19%
13,814,962
1.81%
44,988
2021 AGM: Remuneration Policy (binding)
758,040,974
99.69%
2,355,178
0.31%
7,406,699
Approval
This Directors’ remuneration report has been approved by the Board of Directors.
Signed on behalf of the Board of Directors.
Jill Easterbrook
Chair of the Remuneration Committee
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
93
Strategic report
Governance
Financial statements
Directors’ report
Management report
This Directors’ report, on pages 94 to 97,
together with the Strategic report on pages
2 to 57, form the Management Report for the
purposes of DTR 4.1.5R.
Strategic report
The Strategic report, which can be found
on pages 2 to 57, sets out the Group’s
strategy, objectives and business model;
the development, performance and position
of the Group’s business (including financial,
operating and cultural key performance
indicators); a description of the principal
risks and uncertainties; and the main trends
and factors likely to affect the future
development, performance and position
of the Group’s business.
UK Corporate Governance Code
The Company’s statement on corporate
governance can be found in the Corporate
governance statement, the Report of
the Nomination Committee, the Report
of the Audit Committee, the Report of the
Corporate Responsibility Committee and
the Directors’ remuneration report and
policy report on pages 62 to 93; all of which
form part of this Directors’ report and are
incorporated into it by reference.
2023 Annual General Meeting
The 2023 AGM will take place at 10:00am
on Thursday 14 September 2023 at the
Company’s registered office: 4
th
Floor,
1 Tony Wilson Place, Manchester,
M15 4FN. We intend to hold the AGM
as a physical meeting.
We encourage all shareholders to cast
their votes by proxy, and to send any
questions in respect of AGM business
to ir@autotrader.co.uk.
The AGM Notice sets out the resolutions to
be proposed and specifies the deadlines for
exercising voting rights and appointing a proxy
or proxies to vote in relation to resolutions to
be passed at the AGM. All proxy votes will
be counted and the numbers for, against or
withheld in relation to each resolution will be
announced at the AGM and published on the
Company’s website.
The Directors have pleasure in submitting their report and the audited
financial statements of Auto Trader Group plc (the ‘Company’) and its
subsidiaries (together the ‘Group’) for the financial year to 31 March 2023.
STATUTORY INFORMATION
Information required to be part of the Directors’ report can be found elsewhere in this document, as indicated in the table below,
and is incorporated into this report by reference:
Section of Annual Report
Page reference
Employee involvement
Strategic report: Being a responsible business (page 26)
Employees with disabilities
Strategic report: Being a responsible business (page 26)
Financial instruments
Financial statements: Note 32 to the Consolidated financial statements (page 150)
Future developments of the business
Strategic report: Our purpose-driven strategy (page 10)
Greenhouse gas emissions
Strategic report: Being a responsible business (page 26)
Non-financial reporting
Strategic report: Non-financial information statement (page 21)
INFORMATION REQUIRED BY LR 9.8
Information required to be included in the Annual Report by LR 9.8 can be found in this document as indicated in the table below:
Section of Annual Report
Page reference
Allotment of shares during the year
Financial statements: Note 26 to the Consolidated financial statements (page 142)
Directors’ interests
Governance: Directors’ remuneration report (page 80)
Significant shareholders
Governance: Directors’ report (page 94)
Going Concern and Viability
Strategic report: Principal risks and uncertainties (page 50)
Long-term incentive schemes
Governance: Directors’ remuneration report (page 80)
Powers for the Company to buyback its shares
Governance: Directors’ report (page 94)
Significant contracts
Governance: Directors’ report (page 94)
Significant related party agreements
Governance: Directors’ report (page 94)
Corporate Governance Code Compliance
Governance: Governance overview (page 58)
Directors’ Service Contracts
Governance: Directors’ remuneration report (page 80)
TCFD Disclosures
Strategic report: Being a responsible business (page 26)
Gender and ethnicity targets
Strategic report: Being a responsible business (page 26)
Auto Trader Group plc
Annual Report and Financial Statements 2023
94
Board of Directors
The following individuals were Directors
of the Company for the whole of the
financial year ending 31 March 2023,
and to the date of approving this report
unless otherwise stated:
• Ed Williams.
• Nathan Coe.
• Catherine Faiers.
• Jamie Warner.
• David Keens.
• Jill Easterbrook.
• Jeni Mundy.
• Sigga Sigurdardottir.
• Jasvinder Gakhal.
The Board has approved the appointment
of Matt Davies as Chair Designate with
effect from 1 July 2023, to succeed Ed
Williams as Chair at the conclusion of the
2023 AGM. Therefore, Ed Williams will not
stand for re-election at the 2023 AGM.
All other Directors will stand for election
or re-election at the 2023 AGM in line with
the recommendations of the Code.
Appointment and replacement of Directors
At each AGM each Director then in office
shall retire from office with effect from the
conclusion of the meeting. When a Director
retires at an AGM in accordance with the
Articles of Association of the Company,
the Company may, by ordinary resolution
at the meeting, fill the office being vacated
by re-electing the retiring Director. In the
absence of such a resolution, the retiring
Director shall nevertheless be deemed to
have been re-elected, except in the cases
identified by the Articles.
Results and dividends
The Group’s and Company’s audited
financial statements for the year are set out
on pages 98 to 162.
The Company declared an interim dividend
on 10 November 2022 of 2.8 pence per share
which was paid on 27 January 2023.
The Directors recommend payment of a final
dividend of 5.6 pence per share ( 2022: 5.5
pence) to be paid on 22 September 2023
to shareholders on the register of members
at the close of business on 25 August 2023,
subject to approval at the 2023 AGM.
Share capital and control
The Company’s issued share capital
comprises ordinary shares of £0.01 each
which are listed on the London Stock
Exchange (LSE: AUTO.L). The ISIN of the
shares is GB00BVYVFW23.
During the year, 12,893 additional shares
were allotted for a consideration of £3.49
per share in relation to the exercise of share
options under the Company’s SAYE scheme.
The issued share capital of the Company
as at 31 March 2023 comprised 923,074,657
shares of £0.01 each, and 4,371,505 shares
were held in treasury. As at 1 June 2023,
the issued share capital of the Company
comprises 919,118,475 shares of £0.01 each,
and 4,306,497 shares held in treasury.
Further information regarding the Company’s
issued share capital and details of the
movements in issued share capital during the
year are provided in note 26 to the Group’s
financial statements. All the information
detailed in note 26 forms part of this Directors’
report and is incorporated into it by reference.
Details of employee share schemes
are provided in note 30 to the Group
financial statements.
Authority to allot shares
Under the 2006 Act, the Directors may
only allot shares if authorised to do so by
shareholders in a general meeting. At the
2022 AGM, special resolution 16 conferred
upon Directors the authority to allot ordinary
shares up to a maximum nominal amount
of £471,574 (47,157,400 shares), for cash,
on a non-pre-emptive basis.
In the Notice of the 2023 AGM (the ‘AGM Notice’),
ordinary resolution 15 seeks a new authority
to allow the Directors to allot ordinary shares
representing approximately two thirds
of the Company’s existing share capital
as at the date of the AGM Notice, of which
approximately one third of the Company’s
issued ordinary share capital can only
be allotted pursuant to a rights issue.
In accordance with the revised Statement
of Principles from the Pre-emption Group,
special resolutions 16 and 17 seek a new
authority to allow the Directors to allot
ordinary shares on a non-pre-emptive
basis up to a maximum of approximately
10% of the Company’s existing share capital
and special resolutions 16 and 17 seek a
new authority to allow the Directors to allot
ordinary shares on a non-pre-emptive basis
in connection with an acquisition or specified
capital investment, up to a further maximum
of approximately 10% of the Company’s
existing share capital at the date of the
AGM Notice.
Authority to purchase own shares
As described on page 25, the Company
intends to continue its share buyback
programme, under the authority passed
at the 2022 AGM under which the Company
is authorised to make market purchases of
up to a maximum of 10% ( 94,314,767 shares)
of its own ordinary shares (excluding shares
held in treasury), subject to minimum and
maximum price restrictions, either to be
cancelled or retained as treasury shares.
The Directors will seek to renew this
authority at the forthcoming AGM.
Rights attaching to shares
All shares have the same rights (including
voting and dividend rights and rights on
a return of capital) and restrictions as
set out in the Articles, described below.
Except in relation to dividends which have
been declared and rights on a liquidation
of the Company, the shareholders have no
rights to share in the profits of the Company.
The Company’s shares are not redeemable.
However, following any grant of authority
from shareholders, the Company may
purchase or contract to purchase any of
the shares on or off market, subject to the
Companies Act 2006 and the requirements
of the Listing Rules.
No shareholder holds shares in the Company
which carry special rights with regard to
control of the Company. There are no shares
relating to an employee share scheme which
have rights with regard to control of the
Company that are not exercisable directly
and solely by the employees, other than in
the case of the Auto Trader Group Share
Incentive Plan, where share interests of a
participant in such scheme can be exercised
by the personal representatives of a
deceased participant in accordance with
the Scheme rules.
Voting rights
Each ordinary share entitles the holder to
vote at general meetings of the Company.
A resolution put to the vote of the meeting
shall be decided on a show of hands, unless
the Directors decide in advance that a
poll will be conducted, or unless a poll is
demanded at the meeting. On a show of
hands, every member who is present in
person or by proxy at a general meeting of
the Company shall have one vote. On a poll,
every member who is present in person or by
proxy shall have one vote for every share of
which they are a holder. The Articles provide
a deadline for submission of proxy forms
of not less than 48 hours before the time
appointed for the holding of the meeting
or adjourned meeting. No member shall
be entitled to vote at any general meeting
either in person or by proxy, in respect of
any share held by the member, unless all
amounts presently payable by the member
in respect of that share have been paid.
Save as noted, there are no restrictions on
voting rights nor any agreement that may
result in such restrictions.
Restrictions on transfer of securities
The Articles do not contain any restrictions
on the transfer of ordinary shares in the
Company other than the usual restrictions
applicable where any amount is unpaid on a
share. Certain restrictions are also imposed
by laws and regulations (such as insider
trading and marketing requirements relating
to close periods) and requirements of the
Company’s share dealing code whereby
Directors and certain employees of the
Company require approval to deal in the
Company’s securities.
Auto Trader Group plc
Annual Report and Financial Statements 2023
95
Strategic report
Governance
Financial statements
Directors’ report
continued
Change of control
Save in respect of a provision of the
Company’s share schemes which may cause
options and awards granted to employees
under such schemes to vest on takeover,
there are no agreements between the
Company and its Directors or employees
providing for compensation for loss of
office or employment (whether through
resignation, purported redundancy or
otherwise) because of a takeover bid.
Significant contracts
The only significant agreement to which the
Company is a party that takes effect, alters
or terminates upon a change of control of the
Company following a takeover bid, and the
effect thereof, is the revolving credit facility
agreement, which contains customary
prepayment, cancellation and default
provisions including, if required by a lender,
mandatory prepayment of all utilisations
provided by that lender upon the sale of all
or substantially all of the business and assets
of the Group or a change of control.
Transactions with related parties
Compensation paid to Directors and Key
Management is as disclosed in note 8
to the Group financial statements.
Research and development
Innovation, specifically in software, is a
critical element of Auto Trader’s strategy
and therefore of the future success of
the Group. Accordingly, the majority of
the Group’s research and development
expenditure is predominantly related to this
area. Since 30 September 2013, the Group
has changed its approach to technology
development such that the Group now
develops its core infrastructure through
small-scale, maintenance-like incremental
improvements, and as a result the amount
of capitalised development costs has
decreased as less expenditure meets the
requirements of IAS 38, Intangible Assets.
Indemnities and insurance
The Company maintains appropriate
insurance to cover Directors’ and officers’
liability for itself and its subsidiaries and
such insurance was in force for the whole
of the financial year ending 31 March 2023.
The Company also indemnifies the Directors
under a qualifying indemnity for the purposes
of Section 236 of the Companies Act 2006:
in the case of the Non-Executive Directors in
their respective letters of appointment and
in the case of the Executive Directors in a
separate deed of indemnity. Such indemnities
contain provisions that are permitted by
the Director Liability provisions of the
Companies Act and the Company’s Articles.
Environmental
Information on the Group’s greenhouse
gas emissions is set out in the Being a
responsible business section on page 34
and forms part of this report by reference.
Political donations
There were no political donations made
during the year or the previous year.
Autorama UK Limited
As set out in note 31, on 22 June 2022,
the Group acquired the entire share capital
of Autorama UK Limited (‘Autorama’) for
initial consideration of £150.0m, with an
additional £50.0m which will be deferred
until 22 June 2023 and settled in shares to
the value of £50.0m, subject to employment
and customary performance conditions.
External branches
The Group had no active registered external
branches during the reporting period.
Financial instruments
Details of the financial risk management
objectives and policies of the Group,
including hedging policies and exposure
of the entity to price risk, credit risk, liquidity
risk and cash flow risk, are given in note 32
to the Consolidated financial statements.
Disclosure of information to auditor
Each of the Directors has confirmed that:
• so far as the Director is aware, there is
no relevant audit information of which
the Company’s auditor is unaware; and
• the Director has taken all the steps
that he/she ought to have taken as a
Director to make him/herself aware of
any relevant audit information and to
establish that the Company’s auditor
is aware of that information.
This confirmation is given and should
be interpreted in accordance with the
provisions of Section 418 of the Companies
Act 2006.
Statement of Directors’ responsibilities
in respect of the Annual Report and
Financial Statements
The Directors are responsible for preparing
the Annual Report and Financial Statements
and the Group and parent company financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors to
prepare Group and parent company financial
statements for each financial year. Under
that law they are required to prepare the
Group financial statements in accordance
with UK-adopted international accounting
standards and applicable law and have
elected to prepare the parent company
financial statements in accordance with
United Kingdom Accounting Standards and
applicable law, including Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’.
Interests in voting rights
At the year end the Company had been notified, in accordance with Chapter 5 of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, of the following significant interests in the issued ordinary share capital of the Company:
At 31 March 2023
At 1 June 2023
Shareholder
Number of ordinary
shares/voting rights
notified
Percentage of voting
rights over ordinary
shares of £0.01 each
Number of ordinary
shares/voting rights
notified
Percentage of voting
rights over ordinary
shares of £0.01 each
BlackRock Inc.
112,522,416
12.22%
112,522,416
12.22%
Kayne Anderson Rudnick Investment Management LLC.
56,107,221
5.95%
56,107,221
5.95%
Baillie Gifford & Co.
47,482,549
5.01%
47,482,549
5.01%
Auto Trader Group plc
Annual Report and Financial Statements 2023
96
In accordance with Disclosure Guidance
and Transparency Rule 4.1.14R, the financial
statements will form part of the annual
financial report prepared using the single
electronic reporting format under the TD
ESEF Regulation and EU ESEF Regulation.
The auditor’s report on these financial
statements provides no assurance over
the ESEF format.
Under company law the Directors must not
approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and parent company and of their profit or
loss for that period. In preparing each of
the Group and parent company financial
statements, the Directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable, relevant,
reliable and prudent;
• for the Group financial statements,
state whether they have been prepared
in accordance with UK-adopted
international accounting standards;
• for the parent company financial
statements, state whether applicable
UK accounting standards have been
followed, subject to any material
departures disclosed and explained in
the parent company financial statements;
• assess the Group and parent company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern; and
• use the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent company
or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the parent
company’s transactions and disclose with
reasonable accuracy at any time the
financial position of the parent company
and enable them to ensure that its financial
statements comply with the Companies Act
2006. They are responsible for such internal
control as they determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error, and have general responsibility for
taking such steps as are reasonably open
to them to safeguard the assets of the
Group and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic report, Directors’
report, Directors’ remuneration report
and Corporate governance statement that
complies with that law and those regulations.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the Directors
in respect of the annual financial report
We confirm, to the best of our knowledge:
• the financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and
fair view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole;
• the Strategic report/Directors’ report
includes a fair review of the development
and performance of the business and the
position of the issuer and the undertakings
included in the consolidation taken as a
whole, together with a description of the
principal risks and uncertainties that they
face; and
• we consider that the Annual Report
and Accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.
Approval of the Annual Report
The Strategic report and the Corporate
governance report were approved by
the Board on 1 June 2023.
Approved by the Board and signed
on its behalf:
Claire Baty
Company Secretary
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
97
Strategic report
Governance
Financial statements
Independent auditor’s report to the members of Auto Trader Group plc
1. Our opinion is unmodified
In our opinion:
•
The financial statements of Auto Trader Group plc give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 March 2023, and of the Group’s profit for the year then ended;
•
The Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
•
The Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework; and
•
The Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
What our opinion covers
We have audited the Group and Parent Company financial statements of Auto Trader Group plc (‘the Company’) for the year ended
31 March 2023 (‘FY23’) included in the Annual Report and Financial Statements, which comprise:
Group (Auto Trader Group plc)
Parent Company (Auto Trader Group plc)
Consolidated income statement
Company balance sheet
Consolidated statement of comprehensive income
Company statement of changes in equity
Consolidated balance sheet
Notes 1 to 12 to the Parent Company financial statements,
including the accounting policies in note 1.
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes 1 to 35 to the Group financial statements,
including the accounting policies in note 2.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit
opinion and matters included in this report are consistent with those discussed and included in our reporting to the Audit Committee (‘AC’).
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.
Auto Trader Group plc
Annual Report and Financial Statements 2023
98
2. Overview of our audit
Factors driving our view of risks
On 22 June 2022 the Company acquired Autorama UK Limited. The identification and valuation of acquired intangible assets is a new
significant audit risk of error and a key audit matter. This is due to the material values associated with the acquisition and the nature
of the judgements and estimates which the Group is required to make to identify and fair value the intangible assets acquired.
We have identified a key audit matter relating to revenue recognition over Trade revenue. This is the main driver of the Group’s results
and its size is reflected in the allocation of our resources in planning and executing the audit. Consistent with the prior year, we do not
consider this to be a significant audit risk of material misstatement, as based on our cumulative audit experience, we have concluded
that there is not a material judgement or estimation in Trade revenue recognition and no significant opportunity for fraudulent material
misstatement, given the low value and high volume of individual transactions.
We have identified a key audit matter over the recoverability of the parent company’s two investments in subsidiaries (2022: one investment).
The recoverability of the investments is not at a high risk of significant misstatement or subject to significant judgement. However, due to its
materiality in the context of the Parent Company financial statements, this is the area that had the greatest effect on our overall Parent
Company audit.
Key audit matters
Vs prior year
Item
Identification and valuation
of acquired intangible assets
4.1
Revenue recognition
(Trade revenue)
4.2
Parent Company: Recoverability
of parent company’s investments
in subsidiaries
4.3
Audit Committee interaction
During the year, the Audit Committee met 4 times. KPMG are invited to attend all Audit Committee meetings and are provided with an
opportunity to meet with the Audit Committee in private sessions without the Executive Directors being present. For each key audit matter,
we have set out communications with the Audit Committee in section 4, including matters that required particular judgement for each.
The matters included in the Audit Committee Chair’s report on page 70 are materially consistent with our observations of those meetings.
Our independence
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with UK ethical requirements
including the FRC Ethical Standard as applied to listed public interest entities.
We have not performed any non-audit services during FY23 or subsequently which are prohibited by the FRC Ethical Standard.
We were first appointed as auditor by the shareholders for the year ended 31 March 2017. The period of total uninterrupted engagement is for
the seven financial years ended 31 March 2023.
The Group engagement partner is required to rotate every five years. As these are the third set of the Group’s financial statements signed by
David Derbyshire, he will be required to rotate off after the FY25 audit.
The Group engagement partner is also responsible for component audits as set out in section 7 and has had a tenure of three years.
Total audit fee
£502,000
Audit related fees (including interim review)
£48,000
Other services
£nil
Non-audit fee (excluding interim review) as a percentage of total audit and audit-related fee percentage
0%
Date first appointed
22 September 2016
Uninterrupted audit tenure
7 years
Next financial period which requires a tender
2027
Tenure of Group engagement partner
3 years
Tenure of component signing partner
3 years
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
99
Independent auditor’s report to the members of Auto Trader Group plc
continued
2. Overview of our audit
continued
Materiality
(Item 6)
The scope of our work is influenced by our view
of materiality and our assessed risk of material
misstatement.
We have determined overall materiality for the
Group financial statements as a whole at £14.0m
(FY22: £15.0m).
Consistent with FY22, we determined that profit
before tax remains the benchmark for the Group.
As such, we based our Group materiality on profit
before tax of which it represents 4.8% (FY22: 5.0%).
Materiality for the parent company financial
statements as a whole was set at £13.0m (2022:
£6.1m), determined with reference to a benchmark
of total assets, limited to be less than materiality
for group materiality as a whole. It represents 0.75%
(2022: 0.5%) of the stated benchmark.
Group scope
(Item 7)
We have performed risk assessment and planning procedures to determine which of the Group’s components are likely to include
risks of material misstatement to the Group financial statements and the type of procedures to be performed at these components.
Of the Group’s 6 (FY22: 5) reporting components, we subjected 1 (FY22: 3) to a full scope audit for Group purposes. The audit of this
component and the audit of the parent company was performed by the Group team.
In addition, we have performed Group level analysis on the remaining components to determine whether further risks of material
misstatement exist in those components.
We consider the scope of our audit, as communicated to the Audit Committee, to be an appropriate basis for our audit opinion.
Coverage of Group financial statements
Revenue
96%
4%
Total assets
Profit before tax
93%
7%
96%
4%
Full scope audits
Remaining components
The impact of climate change on our audit
In planning our audit, we have considered the potential impact of risks arising from climate change on the Group’s business and its Financial
Statements. The Group has set out its commitments under the Paris Agreement to achieve net zero carbon emissions by 2040. Further information
is provided in the Group’s Task Force on Climate-related Financial Disclosures (‘TCFD’) recommended disclosures on pages 30 to 37.
As a part of our audit we have performed a risk assessment, including making enquiries of management, reading board meeting minutes
and applying our knowledge of the Group and sector in which it operates to understand the extent of the potential impact of climate change
risk on the Group’s Financial Statements. Taking into account the nature of the business and the limited impact of climate change on the
assumptions in impairment testing, we have not assessed climate related risk to be significant to our audit this year. There was no impact
on our key audit matters.
We have read the Group’s TCFD in the front half of the annual report and considered consistency with the Financial Statements and our audit
knowledge. We have not been engaged to provide assurance over the accuracy of the climate risk disclosures set out on pages 30 to 37
in the Annual Report.
Materiality levels used in our audit
£10.50m
£11.25m
£13.25m
£14.80m
£13.00m
£6.10m
£0.70m
£0.75m
£15.00m
£14.00m
Group materiality
Group performance materiality
Component materiality
Parent Company materiality
Audit misstatement posting threshold
FY23
FY22
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Annual Report and Financial Statements 2023
100
3. Going concern, viability and principal risks and uncertainties
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Parent
Company or to cease their operations, and as they have concluded that, the Group’s and the Parent Company’s financial position means
that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their
ability to continue as a going concern for at least a year from the date of approval of the financial statements (‘the going concern period’).
Going concern
We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over
the going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial
resources over this period were lower than forecast revenues arising from reduced customer demand in the automotive market. We also
considered less predictable but realistic second order impacts, such as the erosion of customer confidence, which could result in a rapid
reduction of available financial resources.
We considered whether these risks could plausibly affect the Group’s liquidity or covenant compliance in the going concern period by
assessing the degree of downside assumptions that, individually and collectively, could result in a liquidity shortfall, taking into account
the Group’s current and projected cash and borrowing facilities (a reverse stress test). We also assessed the completeness of the going
concern disclosure.
Accordingly, based on those procedures, we found the directors’ use of the going concern basis of preparation without any material
uncertainty for the Group and Parent Company to be acceptable. However, as we cannot predict all future events or conditions and
as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made,
the above conclusions are not a guarantee that the Group or the Parent Company will continue in operation.
Our conclusions
•
We consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate;
•
We have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s or Company’s ability to continue as a going concern for the
going concern period;
•
We have nothing material to add or draw attention to in relation to the directors’ statement in note 1 to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s
use of that basis for the going concern period, and we found the going concern disclosure in note 1 to be acceptable; and
•
The related statement under the Listing Rules set out on page 57 is materially consistent with the financial statements and our
audit knowledge.
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in respect
of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
•
The Directors’ confirmation within the viability statement on page 57 that they have carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;
•
The principal risks and uncertainties disclosures describing these risks and how emerging risks are identified and explaining how they
are being managed and mitigated; and
•
The Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have
done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the viability statement set out on page 57 under the Listing Rules.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit.
As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the
Group’s and Parent Company’s longer-term viability.
Our reporting
We have nothing material to add or draw attention to in relation to these disclosures.
We have concluded that these disclosures are materially consistent with the financial statements and our audit knowledge.
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Governance
Financial statements
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Annual Report and Financial Statements 2023
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Independent auditor’s report to the members of Auto Trader Group plc
continued
4. Key audit matters
What we mean
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on:
• The overall audit strategy;
• The allocation of resources in the audit; and
• Directing the efforts of the engagement team.
We include below the key audit matters in decreasing order of audit significance together with our key audit procedures to address
those matters and our results from those procedures. These matters were addressed, and our results are based on procedures
undertaken, for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
4.1 Identification and valuation of acquired intangible assets (Group)
Financial statement elements
Our assessment of risk
Our results
FY23
This is a new risk in FY23 as a result of the Group’s
acquisition of Autorama UK Limited on 22 June 2022.
FY23: Acceptable
Acquired intangibles
£66.5m
Description of the key audit matter
Our response to the risk
Subjective estimate
On 22 June 2022 Auto Trader Group plc acquired Autorama UK Limited.
The complete identification and valuation of acquired intangible
assets is a new significant audit risk of error and a key audit matter.
This is due to the material values associated with the business
combination: the judgements relating to the complete identification
of intangible assets acquired separate from goodwill; and the
estimates which the Group is required to make to assess the fair
value of those intangible assets which are separately identified.
Estimation is required in making assumptions relating to the fair value
of each intangible asset, including: useful economic life; the discount
rate, and, for the brand intangible asset, the rate of obsolescence
and the transaction volumes used in forecasting future revenue.
The effect of these matters is that, as part of our risk assessment
for audit planning purposes, we determined that the fair value of
separate intangible assets acquired of £66.5m had a high degree
of judgement and estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the financial
statements as a whole.
In conducting our final audit work, we concluded that reasonably
possible changes to the fair value of the brand intangible asset
only had a potential range of reasonable outcomes greater than
our materiality for the financial statements as a whole.
The financial statements (note 31) disclose sensitivity factors
estimated by the Group.
Due to the nature of the balance, we expect to obtain audit evidence
primarily through the procedures described below, rather than
seeking to rely on any of the Group’s controls.
Our procedures to address the risk included:
• Our sector experience: with the assistance of our valuation
specialists, assessing the completeness of intangible assets
identified, based on our experience of similar acquisitions,
including whether separate intangible assets arose from supplier
relationships (original equipment manufacturers and funders).
•
Methodology choice: with the assistance of our valuation specialists,
assessing that the valuation methodologies used were in accordance
with relevant accounting standards and acceptable valuation practice.
• Benchmarking assumptions: with the assistance of our valuation
specialists, challenging the key valuation assumptions, such as
the brand useful economic life, the brand obsolescence rate and
the discount rate, by comparing them to externally derived data
and comparable transactions.
• Benchmarking assumptions: comparing the transaction volumes
used in the brand valuation revenue assumption to market
forecasts relating to growth in motor vehicle leasing and electric
vehicle adoption.
• Test of detail: We compared the cost data used in the technology
asset valuation to the related historic accounting records.
• Sensitivity analysis: performing sensitivity analysis on the key
assumptions noted above.
• Assessing transparency: assessing the sufficiency of the Group’s
disclosures in respect of the critical accounting judgment over
identification of intangible assets acquired and the critical
accounting estimates relating to the valuation of separately
identifiable intangible assets and the residual goodwill.
Communications with Auto Trader Group plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Whether supplier relationships (original equipment manufacturers and funders) represent a separately identifiable intangible asset.
•
Our approach and conclusion on the appropriateness of valuation methodology; the key assumptions used in the valuation; and the
adequacy of financial statement disclosures.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
• Determination of whether supplier relationships (OEMs, funders and insurers) represent a separately identifiable intangible asset.
•
Evaluation of reasonably possible changes to the fair value of the brand intangible asset which had a potential range of reasonable
outcomes greater than our materiality for the financial statements as a whole.
Our results
We found the Group’s complete identification and fair valuation of intangible assets acquired in Autorama UK Limited to be acceptable.
Further information in the Annual Report and Accounts: See the Report of the Audit Committee on page 70 for details on how the Audit Committee
considered acquisition accounting as an area of significant attention, page 120 for the accounting policy on Business Combinations, and note 31
for the financial disclosures on page 148.
Auto Trader Group plc
Annual Report and Financial Statements 2023
102
4.2 Revenue recognition (Trade revenue) (Group)
Financial statement elements
Our assessment of risk vs FY22
Our results
FY23
FY22
Our assessment is that the risk is similar to FY22,
reflecting how the majority of the Group’s revenue
processing is performed and recognised on a
consistent basis in both years.
FY23: Acceptable
FY22: Acceptable
Trade revenue
£427.4m
£388.3m
Description of the key audit matter
Our response to the risk
Data processing error
Trade revenue primarily consists of fees for advertising on the
Group’s website and related data and access services. There are
a high volume of transactions, no significant concentration of
customers and a variety of set packages. Retailers have the ability
to select the combination of products they receive.
Based on our cumulative audit experience, we have concluded
that there is not a material judgement or estimation in Trade
revenue recognition and no significant opportunity for fraudulent
material misstatement, given the low value and high volume of
individual transactions.
We continue to consider Trade revenue recognition to be a key
audit matter as it is the main driver of the Group’s results and its
size is reflected in the allocation of our resources in planning and
executing the audit.
We performed the tests below rather than seeking to rely
significantly on the Group’s controls, other than bank reconciliations,
because the nature of the Group’s Trade revenue is such that we
were able to obtain sufficient audit evidence through substantive
audit procedures.
Our procedures to address the risk included:
• Control design and operation: testing the design,
implementation and operating effectiveness of bank
reconciliation controls, to provide evidence over reliability
of cash data used in our tests of detail.
• Accounting analysis: inspecting contractual terms, including
modifications agreed in the year, to identify performance
obligations and determine the timing of revenue recognition.
• Data comparisons: using computer assisted audit techniques
to match sales information from the billing system to the
accounting records.
• Tests of detail: using computer assisted audit techniques
to match the entire population of Trade sales transactions
recorded in the accounts to the billing system and from
the billing system to cash received and Trade receivables
(including accrued income) outstanding at the year end.
• Tests of detail: inspecting the level of credit notes raised
during the year and after the year end to assess the adequacy
of the credit note provision and to confirm that Trade revenue
recognised in the year is not reversed subsequent to year end.
• Tests of detail: using sampling techniques and substantive
analytical procedures to test that Trade revenue accrued income
(being uninvoiced Trade receivables) has been earned in the year
and is accurately and completely recorded.
Communications with Auto Trader Group plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Reporting of the findings from our computer assisted audit techniques, which matched sales transactions between the accounts,
the billing system, and cash received and trade receivables outstanding at year end.
Areas of particular auditor judgement
We identified no areas of particular auditor judgement.
Our results
We considered the amount of Trade revenue recognised in the year to be acceptable (2022: acceptable).
Further information in the Annual Report and Accounts: See the Report of the Audit Committee on page 70 for details on how the Audit Committee
considered revenue recognition as an area of significant attention, pages 115 to 117 for the accounting policy on Revenue, and note 5 for
the financial disclosures on page 124.
Strategic report
Governance
Financial statements
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Annual Report and Financial Statements 2023
103
Independent auditor’s report to the members of Auto Trader Group plc
continued
4. Key audit matters
continued
4.3 Recoverability of parent company’s investment in subsidiaries (parent company)
Financial statement elements
Our assessment of risk
Our results
FY23
FY22
↑
Our assessment is that the risk is increased on FY22
as a result of the additional investment in the year in
Autorama UK Limited.
FY23: Acceptable
FY22: Acceptable
Investment in
Auto Trader
Holding Limited
£1,228.4m
£1,224.9m
Investment
in Autorama
UK Limited
£198.8m
£nil
Description of the key audit matter
Our response to the risk
Low risk, high value
The carrying amount of the Parent Company’s investments in
subsidiaries represents 81% (FY22: 71%) of the Parent Company’s
total assets. The increase in the balance since 31 March 2022 reflects
a new investment of £198.8m in Autorama UK Limited which has
been made in the current financial year. The balance of £1,228.4m
relates to the core Auto Trader Holding Limited subsidiary.
The recoverability of the investments is not at a high risk of significant
misstatement or subject to significant judgement. However, due to its
materiality in the context of the Parent Company financial statements,
this is considered to be the area that had the greatest effect on our
overall Parent Company audit.
We performed the tests below rather than seeking to rely on any
of the company’s controls because the nature of the balance is
such that we would expect to obtain audit evidence primarily
through the detailed procedures described.
Our procedures to address the risk included:
• Assessing methodology: Assessing the Group’s identification
of whether there are any qualitative or quantitative impairment
indicators in respect of the investments held.
• Compare valuations: Comparing the aggregate carrying amount
of the investments to the market capitalisation of the Group,
as a test for an indication of impairment.
•
Tests of detail: Comparing the carrying amount of each investment
with the net assets of the relevant subsidiary included within
the Group consolidation, to identify whether the net asset value,
being an approximation of its minimum recoverable amount,
was in excess of its carrying amount and assessing whether the
subsidiary has historically been profit-making
• Our sector experience: Evaluating the current level of trading,
including identifying any indications of a change in expected
activity, by examining the post year end management accounts
and considering our knowledge of the Group and the market.
• Benchmarking assumptions: For the investments where the
carrying amount exceeded the net asset value, comparing the
assumptions used in the investment’s budgeted cash flows with
our knowledge of the subsidiary and the markets in which the
subsidiaries operate.
Communications with Auto Trader Group plc’s Audit Committee
Our discussions with and reporting to the Audit Committee included:
• Discussion of growth assumptions within the forecast cash flows relating to Autorama UK Limited.
Areas of particular auditor judgement
We identified the following as the areas of particular auditor judgement:
• We identified no areas of particular auditor judgement.
Our results
We found the carrying amount of the investment in subsidiaries to be acceptable (2022: acceptable).
Auto Trader Group plc
Annual Report and Financial Statements 2023
104
5. Our ability to detect irregularities, and our response
Fraud: identifying and responding to risks of material misstatement due to fraud
Fraud risk
assessment
To identify risks of material misstatement due to fraud (‘fraud risks’) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
• Enquiring of directors, the Audit Committee, internal audit and the company secretary and inspection of policy
documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the
outsourced internal audit function, and the Group’s channel for ‘whistleblowing’, as well as whether they have
knowledge of any actual, suspected or alleged fraud;
• Reading Board and other committee meeting minutes;
• Considering remuneration incentive schemes and performance targets for management and directors,
including the Group’s share based incentive schemes;
• Using analytical procedures to identify any unusual or unexpected relationships; and
•
Consultation with our own forensic professional regarding our fraud risk assessment and the identified fraud risk.
Risk
communications
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud
throughout the audit.
Fraud risks
As required by auditing standards and our overall knowledge of the control environment, we perform procedures
to address the risk of management override of controls, in particular the risk that Group management may be in
a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to
revenue recognition because there is no material judgement or estimation in revenue recognition and no significant
opportunity for fraudulent material misstatement, given the low value and high volume of individual transactions.
We did not identify any additional fraud risks.
Procedures to
address fraud risks
We performed procedures including:
• Identifying journal entries to test for all full scope components based on risk criteria and comparing the
identified entries to supporting documentation. These included those posted to unexpected accounts and
those posted with unusual descriptions.
• Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Laws and regulations: identifying and responding to risks of material misstatement relating to compliance with laws and regulations
Laws and
regulations risk
assessment
We identified areas of laws and regulations that could reasonably be expected to have a material effect on
the financial statements from our general commercial and sector experience and through discussion with the
directors and other management (as required by auditing standards), and discussed with the directors and other
management the policies and procedures regarding compliance with laws and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment
including the entity’s procedures for complying with regulatory requirements.
Risk
communications
We communicated identified laws and regulations throughout our team and remained alert to any indications
of non-compliance throughout the audit.
Direct laws context
and link to audit
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including
financial reporting legislation (including related companies legislation), distributable profits legislation, taxation
legislation, and pensions legislation in respect of defined benefit pension schemes and we assessed the extent
of compliance with these laws and regulations as part of our procedures on the related financial statement items.
Most significant
indirect law/
regulation areas
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition
of fines or litigation. We identified the following areas as those most likely to have such an effect: General Data
Protection Regulation, FCA compliance, competition law, employment law, anti-bribery and anti-corruption,
money laundering legislation and certain aspects of company legislation recognising the regulated nature
of the Group’s activities and its legal form.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations
to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any.
Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence,
an audit will not detect that breach.
Context
Context of the
ability of the audit
to detect fraud or
breaches of law
or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the financial statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further removed non-compliance with laws and
regulations is from the events and transactions reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all laws and regulations.
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
105
Independent auditor’s report to the members of Auto Trader Group plc
continued
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating
the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
Materiality for the Group financial statements as a whole: £14.0m (FY22: £15.0m)
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at £14.0m (FY22: £15.0m). This was determined with reference
to a benchmark of profit before tax.
Consistent with FY22, we determined that profit before tax remains the main benchmark for the Group as it is the metric in the primary
statements which best reflects the focus of the financial statements’ users.
Our Group materiality of £14.0m was determined by applying a percentage to profit before tax. When using a benchmark of profit before
tax to determine overall materiality, KPMG’s approach for listed entities considers a guideline range of 3% – 5% of the measure. In setting
overall Group materiality, we applied a percentage of 4.8% (FY22: 5.0%) to the benchmark.
Materiality for the Parent Company financial statements as a whole was set at £13.0m (FY22: £6.1m), determined with reference to a
benchmark of Parent Company total assets, of which it represents 0.75% (FY22: 0.5%). We increased Parent Company materiality during
our final audit from £7.0m set at planning to £13.0m to better reflect the risk profile of this entity, whilst still limiting materiality to be less
than that for Group materiality as a whole.
Performance materiality: £10.5m (FY22: £11.3m)
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as
to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Basis for determining performance materiality and judgements applied
We have considered performance materiality at a level of 75% (FY22: 75%) of materiality for Auto Trader Group plc’s financial statements
as a whole to be appropriate.
The Parent Company performance materiality was set at £9.8m (FY22: £4.6m), which equates to 75% (FY22: 75%) of materiality for the
Parent Company financial statements as a whole.
We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an
elevated level of risk.
Audit misstatement posting threshold: £0.7m (FY22: £0.8m)
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a quantitative point of view. We may
become aware of misstatements below this threshold which could alter the nature, timing and scope of our audit procedures, for example
if we identify smaller misstatements which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to Auto Trader Group plc’s Audit Committee.
Basis for determining the audit misstatement posting threshold and judgements applied
We set our audit misstatement posting threshold at 5% (FY22: 5%) of our materiality for the Group financial statements. We also report
to the Audit Committee any other identified misstatements that warrant reporting on qualitative grounds.
The overall materiality for the Group financial statements of £14.0m (FY22: £15.0m) compares as follows to the main financial statement
caption amounts:
Total Group revenue
Group profit before tax
Total Group assets
FY23
FY22
FY23
FY22
FY23
FY22
Financial statement
caption
£500.2m
£432.7m
£293.6m
£301.0m
£662.7m
£542.9m
Group materiality
as % of caption
2.8%
3.5%
4.8%
5.0%
2.1%
2.8%
Auto Trader Group plc
Annual Report and Financial Statements 2023
106
7. The scope of our audit
Group scope
What we mean
How the Group audit team determined the procedures to be performed across the Group.
Of the Group’s 6 (FY22: 5) reporting components, we subjected 1 (FY22: 3) to a full scope audit for Group purposes. The audit of this component
and the audit of the parent company was performed by the Group team.
Scope
Number of components
Materiality applied
Full scope audit
1
£13.3m
In addition, we have performed Group level analysis on the remaining components to determine whether further risks of material
misstatement exist in those components.
The scope of the audit work performed was fully substantive as we did not rely upon the Group’s internal control over financial reporting.
8. Other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.
All other information
Our responsibility
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information
therein is materially misstated or inconsistent with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not identified material misstatements or inconsistencies in the other information.
Strategic report and Directors’ report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
• We have not identified material misstatements in the strategic report and the directors’ report;
•
In our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• In our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
Our responsibility
We are required to form an opinion as to whether the part of the Directors’ Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether there is a material inconsistency between the financial statements and
our audit knowledge, and:
•
The directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy;
•
The section of the annual report describing the work of the Audit Committee, including the significant issues that the Audit Committee
considered in relation to the financial statements, and how these issues were addressed; and
•
The section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal
control systems.
Our reporting
Based on those procedures, we have concluded that each of these disclosures is materially consistent with the financial statements
and our audit knowledge.
We are also required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in this respect.
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
107
Independent auditor’s report to the members of Auto Trader Group plc
continued
8. Other information in the Annual Report
continued
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report to you if, in our opinion:
•
Adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
•
The Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• Certain disclosures of directors’ remuneration specified by law are not made; or
• We have not received all the information and explanations we require for our audit.
Our reporting
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 94, the Directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared using the single electronic
reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial
report has been prepared in accordance with that format.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
David Derbyshire (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
108
Note
2023
£m
2022
£m
Revenue
5
Operating costs
4
(225.1 )
(132.0 )
Share of profit from joint ventures, net of tax
16
Operating profit
6
Net finance costs
9
(3.1 )
(2.6 )
Profit on disposal of subsidiary
10
Profit before taxation
Taxation
11
(59.7 )
(56.3 )
Profit for the year attributable to equity holders of the parent
Basic earnings per share (pence)
12
Diluted earnings per share (pence)
12
For the year ended 31 March 2023
Consolidated income statement
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
109
For the year ended 31 March 2023
Note
2023
£m
2022
£m
Profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations
(0.3 )
Realisation of cumulative currency translation differences
Items that will not be reclassified to profit or loss
Remeasurements of post-employment benefit obligations, net of tax
25
(0.4 )
Other comprehensive income for the year, net of tax
(0.3 )
Total comprehensive income for the year attributable to equity holders of the parent
Consolidated statement of comprehensive income
Auto Trader Group plc
Annual Report and Financial Statements 2023
110
Note
2023
£m
2022
£m
Assets
Non-current assets
Intangible assets
13
Property, plant and equipment
14
Deferred taxation assets
24
Retirement benefit surplus
25
Net investments in joint ventures
16
Other investments
17
Current assets
Inventory
19
Trade and other receivables
18
Current income tax assets
Cash and cash equivalents
20
Total assets
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital
26
Share premium
Retained earnings
Own shares held
27
(26.0 )
(22.4 )
Capital reorganisation reserve
(1,060.8 )
(1,060.8 )
Capital redemption reserve
Other reserves
Total equity
Liabilities
Non-current liabilities
Borrowings
22
Provisions
23
Lease liabilities
15
Deferred income
5
Deferred taxation liabilities
24
Current liabilities
Trade and other payables
21
Provisions
23
Lease liabilities
15
Borrowings
22
Deferred consideration
Total liabilities
Total equity and liabilities
The financial statements were approved by the Board of Directors on 1 June 2023 and authorised for issue:
Jamie Warner
Chief Financial Officer
Auto Trader Group plc
Registered number: 09439967
1 June 2023
At 31 March 2023
Consolidated balance sheet
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
111
Note
Share
capital
£m
Share
premium
£m
Retained
earnings
£m
Own shares
held
£m
Capital
reorganisation
reserve
£m
Capital
redemption
reserve
£m
Other
reserves
£m
Total
equity
£m
Balance at 31 March 2021
(10.7 )
(1,060.8 )
Profit for the year
Other comprehensive income:
Currency translation differences
Remeasurements of post-employment
benefit obligations, net of tax
25
Total comprehensive income, net of tax
Transactions with owners
Employee share schemes –
value of employee services
30
Exercise of employee share schemes
(4.8 )
Transfer of shares from ESOT
27
(0.1 )
Tax impact of employee share schemes
Purchase of own shares for treasury
(17.8 )
(17.8 )
Purchase of own shares for cancellation
(0.2 )
(146.5 )
(146.5 )
Issue of ordinary shares
26
Dividends paid
(73.6 )
(73.6 )
Total transactions with owners,
recognised directly in equity
(0.2 )
(219.8 )
(11.7 )
(231.3 )
Balance at 31 March 2022
(22.4 )
(1,060.8 )
Profit for the year
Other comprehensive income:
Currency translation differences
(0.3 )
(0.3 )
Realisation of cumulative currency
translation differences
Remeasurements of post-employment
benefit obligations, net of tax
25
(0.4 )
(0.4 )
Total comprehensive income, net of tax
Transactions with owners
Employee share schemes –
value of employee services
30
Exercise of employee share schemes
(3.6 )
Tax impact of employee share schemes
Purchase of own shares for treasury
(8.7 )
(8.7 )
Purchase of own shares for cancellation
(0.2 )
(139.3 )
(139.3 )
Dividends paid
(77.7 )
(77.7 )
Total transactions with owners,
recognised directly in equity
(0.2 )
(175.6 )
(3.6 )
(178.8 )
Balance at 31 March 2023
(26.0 )
(1,060.8 )
For the year ended 31 March 2023
Consolidated statement of changes in equity
Auto Trader Group plc
Annual Report and Financial Statements 2023
112
Note
2023
£m
2022
£m
Cash flows from operating activities
Cash generated from operations
29
Income taxes paid
(60.5 )
(56.2 )
Net cash generated from operating activities
Cash flows from investing activities
Purchases of intangible assets
(1.0 )
Purchases of property, plant and equipment
(2.4 )
(2.8 )
Proceeds from sale of property, plant and equipment
Dividends received from joint ventures
16
Payment for acquisition of subsidiary, net of cash acquired
31
(144.2 )
Payment of deferred consideration for acquisition of subsidiary
31
(8.1 )
Payment for acquisition of shares in investment entities
(1.3 )
Proceeds on disposal of subsidiary, net of cash disposed
10
Net cash used in investing activities
(126.7 )
Cash flows from financing activities
Dividends paid to Company’s shareholders
28
(77.7 )
(73.6 )
Drawdown of Syndicated revolving credit facility
22
Repayment of Syndicated revolving credit facility
22
(50.0 )
(30.0 )
Repayment of other debt
33
(4.0 )
Proceeds from loan
33
Payment of refinancing fees
22
(1.4 )
Payment of interest on borrowings
33
(3.0 )
(1.5 )
Payment of lease liabilities
15
(2.9 )
(3.2 )
Purchase of own shares for cancellation
26
(138.6 )
(145.8 )
Purchase of own shares for treasury
27
(8.7 )
(17.7 )
Payment of fees on purchase of own shares
(0.7 )
(0.8 )
Contributions to defined benefit pension scheme
25
(1.0 )
(0.1 )
Proceeds from exercise of share-based incentives
Net cash used in financing activities
(174.9 )
(271.3 )
Net (decrease)/increase in cash and cash equivalents
(34.7 )
Cash and cash equivalents at beginning of year
20
Cash and cash equivalents at end of year
20
For the year ended 31 March 2023
Consolidated statement of cash flows
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
113
the United Kingdom
31 March 2023 comprise the Company and its interest in subsidiaries (together referred to as ‘the Group’). The Group’s principal business
is the operation of the Auto Trader platforms which form the UK’s largest automotive marketplace.
The Consolidated financial statements of the Group as at and for the year ended 31 March 2023 are available upon request to the
Company Secretary from the Company’s registered office at 4
th
The Consolidated financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and
in accordance with UK-adopted international accounting standards.
The Consolidated financial statements have been prepared on the going concern basis and under the historical cost convention,
The Consolidated financial statements are presented in sterling (£), which is the Group’s presentation currency, and rounded to the
Subsidiaries are all entities over which the Group has control. Control exists when the Group has existing rights that give it the ability to
direct the relevant activities of an entity and has the ability to affect the returns the Group will receive as a result of its involvement with
the entity. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial
statements of subsidiaries are included in the Consolidated financial statements from the date that control commences until the date
that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the date of exchange.
Costs directly attributable to the acquisition are expensed. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling
interest. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total
of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the
net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.
When the Group disposes of a subsidiary, it derecognises the assets and liabilities of the subsidiary. Any resulting gain or loss is recognised
in the income statement.
Intercompany transactions and balances between Group companies are eliminated on consolidation.
A joint arrangement is an arrangement over which the Group and one or more third parties have joint control. These joint arrangements
are in turn classified as: joint ventures whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets
and obligations for its liabilities; and joint operations whereby the Group has rights to the assets and obligations for the liabilities relating
to the arrangement.
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Where significant influence is not demonstrated but the shareholding is between 20% and
50%, the Group would account for its interest as an investment. All investments are initially recognised at cost and the carrying value
During the year ended 31 March 2023 the Group has continued to generate significant cash from operations. The Group has an overall
positive net asset position and had cash balances of £16.6m at 31 March 2023 (2022: £51.3m). During the year £225.0m was returned to
shareholders through share buybacks and dividends (2022: £237.1m).
The Group has access to a Syndicated revolving credit facility (the ‘Syndicated RCF’). At 31 March 2023 the Group had £60.0m (2022: nil)
drawn of its £200.0m Syndicated RCF. The £200.0m Syndicated RCF is committed through to maturity in February 2028.
Cash flow projections for a period of not less than 12 months from the date of this report have been prepared. Stress case scenarios
have been modelled to make the assessment of going concern, taking into account severe but plausible potential impacts of a severe
economic downturn and a data breach within the next 12 months. The results of the stress testing demonstrated that due to the Group’s
significant free cash flow, access to the Syndicated RCF and the Board’s ability to adjust the discretionary share buyback programme,
the Group would be able to withstand the impact and remain cash generative. Subsequent to the year end, the Group has generated
cash flows in line with its forecast and there are no events that have adversely impacted the Group’s liquidity.
The Directors, after making enquiries and on the basis of current financial projections and facilities available, believe that the Group
has adequate financial resources to continue in operation for a period not less than 12 months from the date of this report. For this
The preparation of financial statements in conformity with UK-adopted international accounting standards requires the use of certain
accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying the Group’s
accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Management believe that the estimates and assumptions listed below were significant in the preparation of the Consolidated balance
sheet at the financial year end.
Acquisition accounting (judgement and estimate)
The Group acquired Autorama UK Limited (‘Autorama’) in the year. Business combination accounting has been adopted in line with the
accounting policy in note 2. Judgement was required to determine the acquired intangible assets to be separately identified, as described
in note 31. In particular, it was concluded that supplier relationships with funders and car manufacturers did not meet the criteria for
recognition as separate intangible assets and their value would form part of the goodwill arising on acquisition. For those acquired
intangible assets which are separately identified, principally the Vanarama brand, estimation was then required to determine the
appropriate methodology, assumptions and data to measure their fair value at the acquisition date.
As also disclosed in note 31, the purchase of Autorama gave rise to a deferred payment in shares of £50.0m, with payment contingent
on post-acquisition employment and service conditions. This element of consideration payable has been determined to be a post-acquisition
income statement expense over the period of service, in accordance with IFRS 3. There is no significant estimate relating to the contingency,
which expires in June 2023.
There are no accounting estimates or judgements at the financial year end which have a significant risk of resulting in a material adjustment
to the carrying amounts of assets and liabilities within the next financial year. Other accounting estimates and judgements include:
Carrying values of goodwill (judgement and estimate)
The Group tests annually whether goodwill, held by the Group or its joint venture, has suffered any impairment in accordance with the
accounting policy stated within note 2. Judgement is required in the identification and allocation of goodwill to cash-generating units
New and amended standards adopted by the Group
The following amendments to standards have been adopted by the Group for the first time for the financial year beginning on 1 April 2022:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
• Annual Improvements to IFRS Standards 2018–2020
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
• Reference to the Conceptual Framework (Amendments to IFRS 3)
The adoption of these amendments has had no material effect on the Group’s Consolidated financial statements.
Standards, amendments and interpretations to existing standards that are not yet effective
There are a number of amendments to IFRS that have been issued by the IASB that, when endorsed in the UK, will become effective
in a subsequent accounting period including:
• IFRS 17 Insurance Contracts
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
• Definition of Accounting Estimates (Amendments to IAS 8)
•
Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12 Income Taxes)
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
•
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
Existing significant accounting policies
The following accounting policies applied by the Group have been applied consistently to all periods presented in the Consolidated
financial statements.
Revenue is measured based on the consideration specified in a contract with a customer and is recognised when a customer obtains
control of the services. Revenue is stated net of discounts, rebates, refunds and value-added tax.
Revenue principally represents the amounts receivable from customers for advertising on the Group’s platforms but also includes
non-advertising services such as vehicle leasing transactions and data services. The different types of products and services offered
to customers along with the nature and timing of satisfaction of performance obligations are set out as follows:
(i) Trade revenue
Trade revenue comprises fees from retailers, Home Traders and logistics customers for advertising on the Group’s platforms and utilising
the Group’s services.
Retailer revenue
Retailer customers pay a monthly subscription fee to advertise their stock on the Group’s platforms. Control is obtained by customers
across the life of the contract as their stock is continually listed. Contracts for these services are agreed at a retailer or retailer group
level and are ongoing subject to a 30-day notice period. Revenue is invoiced monthly in arrears.
Retailers have the option to enhance their presence on the platform through additional products, each of which has a distinct
performance obligation. For products that provide enhanced exposure across the life of the product, control is passed to the customer
over time. Revenue is only recognised at a point in time for additional advertising products where the customer does not receive the
benefit until they choose to apply the product. Additional advertising products are principally billed on a monthly subscription basis in
line with their core advertising package, however certain products are billed on an individual charge basis. The Group also generates
revenue from retailers for data and valuation services under a variety of contractual arrangements, with each service being a separate
performance obligation. Control is obtained by customers either across the life of the contract where customers are licensed to use the
Group’s services or at a point in time when a one-off data service is provided.
Contract modifications occur on a regular basis as customers change their stock levels or add or remove additional advertising products
from their contracts. Following a contract modification, the customer is billed in line with the delivery of the remaining performance
obligations. A receivable is recognised only when the Group’s right to consideration is only conditional on the passage of time.
Home Trader revenue
Home Trader customers pay a fee in advance to advertise a vehicle on the Group’s platform for a specified period of time. Revenue is
deferred until the customer obtains control over the services. Control is obtained by customers across the life of the contract as their
vehicle is continually listed. Contracts for these services are typically entered into for a period of between two and six weeks.
Logistics revenue
Logistics customers pay a monthly subscription fee for access to the Group’s Motor Trade Delivery platform. Control is obtained by
customers across the life of the contract as their access is continuous. Contracts for these services are agreed at a customer level and
are ongoing subject to a 30-day notice period. Logistics customers have the option to bid on vehicle moves advertised by retailers on the
platform. The logistics customer pays a fee if they are successful in obtaining business from retailers through the Group’s marketplace.
Revenue is recognised at the point in time when the vehicle move has been completed. A receivable is recognised only when the Group’s
right to consideration is only conditional on the passage of time.
Data revenue
Data customers pay a subscription fee to access elements of Auto Trader’s vehicle database or to access the Fleetware software. Control
is transferred to customers across the life of the contract where customers have continuous access to the database or the software.
AutoConvert revenue
AutoConvert customers pay a monthly subscription fee to access the AutoConvert platform. Control is transferred to customers across the life
of the contract where customers have continuous access to the platform and revenue is recognised across this period. Ancillary AutoConvert
revenues are charged on a per transaction basis and revenue is recognised at the point in time that these services are provided.
(ii) Consumer Services revenue
Consumer Services comprises fees from private sellers for vehicle advertisements on the Group’s websites, and third-party partners
who provide services to consumers relating to their motoring needs, such as insurance and loan finance. Private customers pay a fee in
advance to advertise a vehicle on the Group’s platform for a specified period of time. Control is obtained by customers across the life
of the contract as their stock is continually listed. Contracts for these services are typically entered into for a period of between two and
six weeks and revenue is recognised over this time. Revenue is also generated from third-party partners who utilise the Group’s platforms
to advertise their products under a variety of contractual arrangements, with each service being a separate performance obligation.
Control is obtained by customers at a point in time when the service is provided. Revenue is also generated through Instant Offer,
providing consumers with a guaranteed price for their vehicle offered by a third-party buyer. The Group’s fee is recognised as revenue
when the consumer’s vehicle is collected by the third-party buyer.
(iii) Manufacturer and Agency revenue
Revenue is generated from manufacturers and their advertising agencies for placing display advertising for their brand or vehicle on the
Group’s websites under a variety of contractual arrangements, with each service being a separate performance obligation. Control is
obtained by customers across the life of the contract as their advertising is displayed on the different platforms. Rebates are present in
the contractual arrangements with customers and are awarded either in cash or value of services based upon annual spend; an estimate
of the annualised spend is made at the reporting date to determine the amount of revenue to be recognised. A receivable is recognised
only when the Group’s right to consideration is only conditional on the passage of time.
(iv) Autorama revenue
Autorama revenue comprises consideration received from the sale of new vehicles and accessories as well as commission received for
facilitating the lease of new vehicles.
Vehicle & Accessory sales revenue
Vehicle & Accessory sales revenue is generated from new vehicles which are purchased from an original equipment manufacturer (‘OEM’)
or retailer and then sold to a lease funder. Control is obtained by the funder at a point in time when the vehicle is delivered and revenue
is only recognised at this point. Additional accessories can be added to vehicles at extra cost upon the request of the funder, and
control is once again obtained by the funder at a point in time when the vehicle is delivered. Where the Group obtains control of vehicles
or accessories in advance of selling those goods to a funder, including holding inventory risk, then the Group is acting as principal and
revenue and cost of sales are reported on a gross basis. Where the Group does not obtain control of vehicles, revenue is recorded as the
value of the related commission and recognised as described below.
Commission & Ancillary revenue
Commission & Ancillary revenue is generated from commission received from lease funders for facilitating the lease of new vehicles via
advertisement on the Autorama online marketplace. Control is obtained by the funder at a point in time when the lease is live and revenue
is only recognised at this point. Ancillary Autorama revenues are charged on a per transaction basis and revenue is recognised at the
point in time that these services are provided.
Rebates are present in the contractual arrangements with funders and are awarded in cash based upon the quarterly number of vehicles
provided. Similarly, rebates are present in the contractual arrangements with OEMs and are awarded in cash based upon the quarterly
number of vehicles purchased. Revenue is recognised as volume targets are met, when Autorama’s right to consideration is only
The Group operates several pension schemes and all except one are defined contribution schemes. Within the UK all pension schemes
set up prior to 2001 have been closed to new members and only one defined contribution scheme is now open to new employees.
a) Defined contribution scheme
The assets of the defined contribution scheme are held separately from those of the Group in independently administered funds.
The costs in respect of this Scheme are charged to the income statement as incurred.
b) Defined benefit scheme
The Group operates one defined benefit pension scheme that is closed to new members. The asset or liability recognised in the balance
sheet in respect of the defined benefit scheme is the present value of the defined benefit obligation at the balance sheet date less the
fair value of the Scheme’s assets. The defined benefit obligation is calculated annually by independent actuaries using the projected
unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that
have terms to maturity approximating those of the related pension liability. Remeasurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in
which they arise. Any Scheme surplus (to the extent it can be recovered) or deficit is recognised in full on the balance sheet. Contributions
paid to the Scheme by the Group have been classified as financing activities in the Consolidated statement of cash flows as there are no
remaining active members within the Scheme.
Equity-settled awards are valued at the grant date, and the fair value is charged as an expense in the income statement spread over the
vesting period. Fair value of the awards is measured using Black-Scholes and Monte Carlo pricing models. The credit side of the entry is
recorded in equity. Cash-settled awards are revalued at each reporting date with the fair value of the award charged to the profit and
Research and development expenditure is charged against profits in the year in which it is incurred, unless it is development that meets
Operating profit
Operating profit is the profit of the Group (including the Group’s share of profit from joint ventures) before finance income, finance costs,
profit on disposal of subsidiaries which do not meet the definition of a discontinued operation, and taxation.
Finance income is earned on bank deposits and finance costs are incurred on bank borrowings. Both are recognised in the income
The tax expense for the period comprises current and deferred taxation. Tax is recognised in the income statement, except to the extent
that it relates to items recognised in ‘other comprehensive income’ or directly in equity. In this case the tax is also recognised in other
comprehensive income or directly in equity, respectively. Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities.
Current taxation is provided at amounts expected to be paid (or recovered) calculated using the rates of tax and laws that have been
enacted or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income.
liabilities and their carrying amounts are included in the Consolidated financial statements. Deferred taxation is determined using tax
rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related
deferred tax asset is realised or the deferred tax liability is settled.
Deferred taxation assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred taxation is provided on temporary differences arising on investments in subsidiaries and interests in joint ventures, except
where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred taxation assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred taxation assets and liabilities relate to taxes levied by the same taxation authority on either the taxable
At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When a lease is recognised in
a contract the Group recognises a right of use asset and a lease liability at the lease commencement date other than as noted below.
The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease prepayments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right of use asset is
subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the
right of use asset or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those
of property, plant and equipment. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for
certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, or if the Group changes its assessment of whether it will exercise a purchase,
extension or termination option.
The Group presents right of use assets in property, plant and equipment and leased liabilities in lease liabilities in the balance sheet.
The Group has applied the recognition exemption of low value leases. For these leases, the lease payments are charged to the income
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at
fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
A trade receivable without a significant financing component is initially measured at the transaction price.
Under IFRS 9, trade receivables including accrued income, without a significant financing component, are classified and held at amortised
cost, being initially measured at the transaction price and subsequently measured at amortised cost less any impairment loss.
The Group recognises lifetime expected credit losses (‘ECLs’) for trade receivables and accrued income. The expected credit losses
are estimated using a provision matrix based on the Group’s historical credit loss experience, adjusted for any macro-economic factors.
At 31 March 2022, ECLs were adjusted for the macro-economic uncertainty around retailer profitability driven by used car price volatility.
A consistent level of ECLs has been recorded at 31 March 2023.
The Group assesses whether a financial asset is in default on a case by case basis when it becomes probable that the customer is unlikely
to pay its credit obligations. The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations
of recovering a financial asset in its entirety or a portion thereof. For all customers, the Group individually makes an assessment with
respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no
significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement
activities in order to comply with the Group’s procedures for recovery of amounts due.
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset
is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset
have occurred.
Financial liabilities are classified as measured at amortised cost or fair value through profit and loss. A financial liability is classified as at fair
value through profit and loss if it is classified as held-for-trading, it is a derivative, or it is designated as such on initial recognition and measured
at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities, including trade
payables, are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and
Goodwill represents the excess cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
subsidiary at the date of acquisition. Goodwill is tested annually for impairment and is carried at cost less accumulated impairment
losses. Impairment losses are charged to the income statement and are not reversed. The gain or loss on the disposal of an entity includes
the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing.
b) Trademarks, trade names, technology, non-compete agreements, customer relationships, franchise buybacks, brands and databases
Separately acquired trademarks, trade names, technology and customer relationships are recognised at historical cost. They have
a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to
allocate the cost over their estimated useful lives of between one and 15 years. Trademarks, trade names, technology, non-compete
agreements, customer relationships, franchise buybacks, brands and databases acquired in a business combination are recognised
at fair value at the acquisition date and subsequently amortised.
c) Software
Acquired computer software controlled by the Group is capitalised at cost, including any costs to bring it into use, and is carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost over the estimated useful life
of three to five years.
d) Software and website development costs and financial systems
Development costs that are directly attributable to the design and testing of identifiable and unique software products,
websites and systems controlled by the Group are recognised as intangible assets when the following criteria are met:
•
it is technically feasible to complete the software product or website so that it will be available for use;
• management intends to complete the software product or website and use or sell it;
• there is an ability to use or sell the software product or website;
• it can be demonstrated how the software product or website will generate probable future economic benefits;
•
adequate technical, financial and other resources to complete the development and to use or sell the software product or website
are available; and
• the expenditure attributable to the software product or website during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product, website or system include employee and contractor
costs. Other development expenditures that do not meet these criteria, as well as ongoing maintenance and costs associated with
routine upgrades and enhancements, are recognised as an expense as incurred. Development costs for software, websites and systems
are carried at cost less accumulated amortisation and are amortised over their useful lives (not exceeding 10 years) at the point at which
they come into use.
Licence agreements to use cloud software provided as a service are treated as service contracts and expensed in the Group income
statement, unless the Group has both a contractual right to take possession of the software at any time without significant penalty, and the
ability to run the software independently of the host vendor. In such cases the licence agreement is capitalised as software within intangible
All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost
comprises the purchase price of the asset and expenditure directly attributable to the acquisition of the item.
estimated residual values over the estimated useful lives as follows:
Land, buildings and leasehold improvements:
• Leasehold land and buildings
life of lease
• Leasehold improvements
life of lease
• Plant and equipment
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. The carrying value of
assets is reviewed for impairment if events or changes in circumstances suggest that the carrying value may not be recoverable. Assets will
be written down to their recoverable amount if lower than the carrying value, and any impairment is charged to the income statement.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation and depreciation are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Non-financial assets other than goodwill that have suffered an impairment are reviewed for possible reversal
of the impairment at each reporting date.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated
to the cash-generating unit (or group of units) and then to reduce the carrying amount of other assets in the unit (or group of units)
Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual
rights and obligations of each investor. Auto Trader Group plc has assessed the nature of its joint arrangements and determined them
to be joint ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint
ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses,
Inventory is measured at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell.
Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently carried at amortised cost,
with any difference between the proceeds (net of transaction costs) and the redemption value being recognised in the income statement
over the period of the borrowings using the effective interest method.
Finance and issue costs associated with the borrowings are charged to the income statement using the effective interest rate method
from the date of issue over the estimated life of the borrowings to which the costs relate.
Borrowings are derecognised when the contractual obligation is discharged, cancelled or expires. Where an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, such that the
difference in respective carrying amounts together with any costs or fees incurred are recognised in the income statement.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
Vehicle financing
A vehicle stocking loan is a financing arrangement which is used to purchase new and used vehicles prior to re-sale. This financing
arrangement can only be used for this purpose, typically has a maturity of 180 days or less and is repayable on the earliest of the vehicle
delivery date or the maturity date. Based on these factors, the Group recognises these arrangements as financial liabilities within trade
and other payables.
A provision is recognised when a present legal or constructive obligation exists at the balance sheet date as a result of a past event,
it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of that obligation can be made.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering
the class of obligations as a whole. If the effect is material, provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to
the obligation.
Contingent liabilities are not recognised but are disclosed unless an outflow of resources is remote. Contingent assets are not
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a
deduction from the proceeds.
W
here the Group purchases its own equity share capital, the consideration paid is deducted from equity attributable to the Group’s
shareholders. Where such shares are subsequently cancelled, the nominal value of the shares repurchased is deducted from share
capital and transferred to a capital redemption reserve. Where the Group purchases its own equity share capital to hold in treasury,
Shares held by Employee Share Option Trust
The Employee Share Option Trust (‘ESOT’) provides for the issue of shares to Group employees principally under share option schemes.
The Group has control of the ESOT and therefore consolidates the ESOT in the Group financial statements. Accordingly, shares in the
Company held by the ESOT are included in the balance sheet at cost as a deduction from equity.
Share premium
The amount subscribed for the ordinary shares in excess of the nominal value of these new shares is recorded in share premium.
Costs that directly relate to the issue of ordinary shares are deducted from share premium net of corporation tax.
Capital reorganisation reserve
The capital reorganisation reserve arose on consolidation as a result of the share-for-share exchange on 24 March 2015. It represents the
difference between the nominal value of shares issued by Auto Trader Group plc in this transaction and the share capital and reserves
of Auto Trader Holding Limited.
Capital redemption reserve
The capital redemption reserve arises from the purchase and subsequent cancellation of the Group’s own equity share capital.
Other reserves
Other reserves include the currency translation reserve on the consolidation of entities whose functional currency is other than sterling,
and other amounts which arose on the initial common control transaction that formed the Group.
The Group presents basic and diluted earnings per share (‘EPS’) for its ordinary shares. Basic EPS is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. For diluted
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
the dividend is approved by the Company’s shareholders in the case of final dividends, or the date at which they are paid in the case
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments,
a) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the
period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement
within administrative expenses.
b) Foreign operations
The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have
a functional currency other than sterling are translated into sterling as follows:
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; and
• income and expenses for each income statement are translated at average exchange rates.
These foreign currency differences are recognised in other comprehensive income and the translation reserve within other reserves.
On the disposal of a foreign operation, the cumulative exchange differences that were recorded in equity are recognised in the income
statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access
at that date. The fair value of a liability reflects its non-performance risk. A number of the Group’s accounting policies and disclosures
require the measurement of fair values, for both financial and non-financial assets and liabilities. When one is available, the Group
measures the fair value of an instrument using the quoted price in an active market for that instrument. If there is no quoted price in an
active market, then the Group uses valuation techniques that maximise the use of relevant observable outputs and minimise the use of
unobservable outputs. The chosen valuation technique incorporates all of the factors that market participants would take into account
Overview
In the course of its business the Group is exposed to market risk, credit risk and liquidity risk from its use of financial instruments.
This note presents information about the Group’s exposure to each of the below risks, the Group’s objectives, policies and processes
for measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout
these Consolidated financial statements.
The Group’s overall risk management strategy is to minimise potential adverse effects on the financial performance and net assets of
the Group. These policies are set and reviewed by senior finance management and all significant financing transactions are authorised
by the Board of Directors.
The Group has no significant foreign exchange risk as 99% of the Group’s revenue and 99% of costs are sterling-denominated. As the
amounts are not significant, no sensitivity analysis has been presented.
During the year the Group sold one of its subsidiaries, Webzone Limited, which traded in the Republic of Ireland under the Carzone brand.
ii. Interest rate risk
The Group’s interest rate risk arises from long-term borrowings under the Syndicated RCF with floating rates of interest linked to SONIA.
The Group monitors interest rates on an ongoing basis but does not currently hedge interest rate risk. The variation of 100 basis points in
the interest rate of floating rate financial liabilities (with all other variables held constant) will increase or decrease post-tax profit for the
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or banking institution fails to meet its contractual obligations.
i. Trade receivables
Credit risk relating to trade receivables is managed centrally and the credit risk for new Auto Trader customers is analysed before
standard payment terms and conditions are offered. Policies and procedures exist to ensure that Auto Trader’s existing customers have
an appropriate credit history and a significant number of balances are collected via direct debit. In March, more than 87.4% (2022: 87.4%)
of Auto Trader’s retailer customers paid via monthly direct debit, minimising the risk of non-payment. Sales to private individuals using
Auto Trader are primarily settled in advance using major debit or credit cards which removes the risk in this area.
Autorama’s main customers are funders who do not change regularly, so the risk in this area is also minimal.
The Group establishes an expected credit loss that represents its estimate of losses in respect of trade and other receivables.
Further details of these are given in note 32.
Overall, the Group considers that it is not exposed to a significant amount of either customer credit or bad debt risk, due to the
fragmented nature of the customer base and the robust nature of the used car market.
ii. Cash and cash equivalents
As at 31 March 2023, the Group held cash and cash equivalents of £16.6m (2022: £51.3m). The cash and cash equivalents are held with bank
and financial institution counterparties, which are rated between P-1 and P-2 based on Moody’s ratings. The Group’s treasury policy is
to monitor cash, and when applicable deposit balances, on a daily basis and to manage counterparty risk, whilst also ensuring efficient
management of the Group’s Syndicated RCF.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are
settled by delivering cash. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Cash flow forecasting is performed centrally by the Director of Group Finance. Rolling forecasts of the Group’s liquidity requirements
are monitored to ensure it has sufficient cash to meet operational needs. The Group’s revenue model is largely subscription-based,
which results in a regular level of cash conversion allowing it to service working capital requirements.
The Group has access to a Syndicated RCF which has total commitments of £200.0m. The £200.0m Syndicated RCF is committed through
to maturity in February 2028. The facility allows the Group access to cash at one working day’s notice. At 31 March 2023, £60.0m was
drawn under the Syndicated RCF (2022: £nil).
The Group has access to a vehicle stocking loan, with a limit of £12.0m. This financing arrangement can only be used to fund the purchase
of new and used vehicles prior to re-sale and has a maturity of 180 days or less. The loan is repayable on the earliest of the vehicle delivery
date or the maturity date. At 31 March 2023, £3.0m was recognised in the Consolidated balance sheet (2022: £nil).
Capital management
The Group considers capital to be net debt plus total equity. Net debt is calculated as total bank debt, other loans, vehicle stocking loans
and lease financing, less cash and cash equivalents as shown in note 20. Total equity is as shown in the Consolidated balance sheet.
The calculation of total capital is shown in the table below:
2023
£m
2022
£m
Total net debt/(cash)
52.4
(41.7)
Total equity
527.3
472.5
Total capital
579.7
430.8
The objectives for managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an efficient cost of capital structure. To maintain or adjust the capital
structure, the Group may pay dividends, return capital through share buybacks, issue new shares or take other steps to increase share
capital and reduce or increase debt facilities.
As at 31 March 2023, the Group had borrowings of £60.0m (2022: £nil) through its Syndicated RCF. Interest is payable on this facility at a rate
of SONIA plus a margin of between 1.2% and 2.1% depending on the consolidated leverage ratio of Auto Trader Group plc and its subsidiaries,
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, it has been determined that there are two
operating segments (2022: one operating segment). The acquisition of Autorama in June 2022 has led to Autorama being reported as
a separate segment during the period. The Group’s reportable operating segments have therefore been identified as follows:
•
Auto Trader: includes the results of Auto Trader, AutoConvert and Webzone in respect of online classified advertising of motor vehicles
and other related products and services in the digital automotive marketplace including share of profit from the Dealer Auction joint
venture.
•
Autorama: the results of Autorama in respect of a marketplace for leasing new vehicles and other related products and services.
Management has determined that there are two operating segments in line with the nature in which the Group is managed. The reports
reviewed by the Operational Leadership Team (‘OLT’), which is the chief operating decision-maker (‘CODM’) for both segments, split out
operating performance by segment. The OLT is made up of the Executive Directors and Key Management and is responsible for the strategic
decision-making of the Group. Revenue and cost streams for each operating segment are largely independent in the reporting period.
The OLT primarily uses the measures of Revenue and Operating profit to assess the performance of each operating segment. The revenue
from external parties reported to the OLT is measured in a manner consistent with that in the income statement. There are no inter-segment
revenues in the current or comparative periods.
Analysis of the Group’s revenue and results for both reportable segments, with a reconciliation to Group profit before tax, is shown below:
Auto Trader
segment
Autorama
segment
Group
central costs
Group
Year to 31 March 2023
£m
£m
£m
£m
Total segment revenue
473.0
27.2
–
500.2
People costs
(74.0)
(10.5)
(38.8)
(123.3)
Marketing
(22.3)
(4.7)
–
(27.0)
Costs of goods sold
–
(15.7)
–
(15.7)
Other costs
(39.6)
(5.4)
–
(45.0)
Depreciation & amortisation
(6.7)
(2.1)
(5.3)
(14.1)
Total segment costs
(142.6)
(38.4)
(44.1)
(225.1)
Share of profit from joint ventures
2.5
–
–
2.5
Total segment operating profit/(loss)
332.9
(11.2)
(44.1)
277.6
Profit on disposal of subsidiary
19.1
Finance costs – net
(3.1)
Profit before tax
293.6
Group central costs which are not allocated within either of the segment operating profit/(loss) reported to the CODM comprise:
(i)
People costs: a £38.8m charge for the expense of Group shares expected to be issued to settle the Autorama deferred consideration
(note 31).
(ii)
Depreciation & amortisation: £5.3m of amortisation expense relating to the fair value of intangible brand, technology and other
assets acquired in the Group’s business combination of Autorama.
Auto Trader
segment
Autorama
segment
Group
central costs
Group
Year to 31 March 2022
£m
£m
£m
£m
Total segment revenue
432.7
–
–
432.7
People costs
(69.8)
–
–
(69.8)
Marketing
(20.5)
–
–
(20.5)
Other costs
(34.5)
–
–
(34.5)
Depreciation & amortisation
(7.2)
–
–
(7.2)
Total segment costs
(132.0)
–
–
(132.0)
Share of profit from joint ventures
2.9
–
–
2.9
Total segment operating profit
303.6
–
–
303.6
Finance costs – net
(2.6)
Profit before tax
301.0
In the current year, the Group has classified expenditure by nature (2022: by function). The change, which is presented consistently for
the current and prior year in this note, has been adopted to provide more meaningful information about the Group’s expenditure following
The Group’s operations and main revenue streams are those described in these annual financial statements. The Group’s revenue is derived
from contracts with customers.
Other than disclosed in note 10, all revenues were earned from activities and customers in the United Kingdom.
In the following table, the Group’s revenue is detailed by customer type. This level of detail is consistent with that used by management
to assist in the analysis of the Group’s revenue-generating trends.
Revenue
2023
£m
2022
£m
Retailer
406.8
370.4
Home Trader
10.1
8.8
Other
10.5
9.1
Trade
427.4
388.3
Consumer Services
34.5
33.3
Manufacturer and Agency
11.1
11.1
Autorama
27.2
–
Total revenue
500.2
432.7
Revenue is largely recognised over time, other than Autorama revenue which is recognised at a point in time when related sales commission
or fees are earned. The Group has no major customers to disclose in either the current or prior year.
Contract balances
The following table provides information about receivables and contract assets and liabilities from contracts with customers.
2023
£m
2022
£m
Receivables, which are included in trade and other receivables
31.5
28.2
Accrued income
40.2
35.8
Deferred income
(14.0)
(11.9)
Accrued income relates to the Group’s unconditional rights to consideration for services provided but not invoiced at the reporting date.
Accrued income is transferred to trade receivables when invoiced.
Deferred income relates to advanced consideration received for which revenue is recognised as or when services are provided. £5.7m
(2022: £3.0m) of the deferred income balance is classified as a current liability within trade and other payables (note 21). Included within
deferred income is £8.9m (2022: £9.5m) relating to consideration received from Dealer Auction Limited (joint venture) for the provision of
data services to Dealer Auction (note 16). Revenue relating to this service is recognised on a straight-line basis over a period of 20 years
to 31 December 2038; given this time period the liability has been split between current and non-current liabilities. Revenue of £0.6m was
Operating profit is after (charging)/crediting the following:
Note
2023
£m
2022
£m
Staff costs
7
(84.1)
(69.8)
Contractor costs
(0.4)
–
Depreciation of property, plant and equipment
14
(4.9)
(4.6)
Amortisation of intangible assets
13
(9.2)
(2.6)
Profit on sale of property, plant and equipment
0.7
–
During the year, the Group (including overseas subsidiaries) obtained the following services from the operating company’s auditor:
2023
£m
2022
£m
Fees payable for the audit of the Company and Consolidated financial statements
0.2
0.1
Fees payable for other services
The audit of the subsidiary undertakings pursuant to legislation
0.3
0.3
Total
0.5
0.4
Fees payable for audit-related assurance services in the year were £48,000 (2022: £43,841). Fees payable for other non-audit services
The average monthly number of employees (including Executive Directors but excluding third-party contractors) employed by the Group
was as follows:
2023
Number
2022
Number
Customer operations
566
422
Product and technology
403
384
Corporate
191
154
Total
1,160
960
The aggregate payroll costs of these persons were as follows:
Note
2023
£m
2022
£m
Wages and salaries
66.7
54.8
Social security costs
7.3
5.7
Defined contribution pension costs
25
3.5
3.2
77.5
63.7
Share-based payments and associated NI
30
6.6
6.1
Total
84.1
69.8
Wages and salaries include £27.7m (2022: £25.2m) relating to the product and technology teams; these teams spend a significant
proportion of their time on innovation of our product proposition and incremental enhancements to the Group’s platforms.
In addition to the share-based payments disclosed above, a share-based payment charge of £38.8m (2022: £nil) has been recorded
in the income statement for the year, relating to deferred consideration for the acquisition of Autorama, which is payable in shares and
The remuneration of Directors is disclosed in the Directors’ remuneration report on pages 80 to 93:
Key Management compensation
During the year to 31 March 2023, Key Management comprised the members of the OLT (who are defined in note 4) and the Non-Executive
Directors (2022: OLT and the Non-Executive Directors). The remuneration of all Key Management (including all Directors) was as follows:
2023
£m
2022
£m
Short-term employee benefits
4.2
4.1
Share-based payments
2.1
3.6
Pension contributions
0.2
0.2
Total
6.5
2023
£m
2022
£m
On bank loans and overdrafts
2.5
1.4
Amortisation of debt issue costs
0.5
1.0
Interest unwind on lease liabilities
0.2
0.2
Interest on vehicle stocking loan
0.1
–
Interest charged on deferred consideration
–
0.1
Interest receivable on cash and cash equivalents
(0.2)
(0.1)
Total
3.1
10. Disposal of a subsidiary
Sale of Webzone Limited
On 24 October 2022, the Group announced the sale of one of its subsidiaries, Webzone Limited, which trades in the Republic of Ireland
under the Carzone brand. The business was sold to Mediahuis Ireland for a consideration of €30.0m.
Revenue generated from Webzone Limited in the period to 24 October 2022 was £2.9m (year ended 31 March 2022: £4.9m). The disposal
of Webzone Limited does not represent a discontinued operation under IFRS 5 as the entity was neither a separate major line of business
or a material geographical area of operation.
A profit on disposal has been recognised in the Group’s Consolidated income statement:
24 October 2022
£m
Goodwill
5.7
Property, plant and equipment
0.6
Deferred taxation assets
0.1
Trade and other receivables
0.9
Cash and cash equivalents
0.8
Lease liabilities
(0.7)
Trade and other payables
(0.5)
Net identifiable assets/(liabilities) disposed of
6.9
Cash consideration received
26.4
Net identifiable assets disposed of
(6.9)
Realisation of cumulative currency translation difference
(0.4)
Gain on disposal of subsidiary
19.1
2023
£m
2022
£m
Current taxation
UK corporation taxation
61.2
56.5
Foreign taxation
0.1
0.2
Adjustments in respect of prior years
(0.2)
(0.4)
Total current taxation
61.1
56.3
Deferred taxation
Origination and reversal of temporary differences
(1.3)
0.3
Effect of rate changes on opening balance
–
0.2
Adjustments in respect of prior years
(0.1)
(0.5)
Total deferred taxation
(1.4)
–
Total taxation charge
59.7
56.3
The taxation charge for the year is higher than (2022: lower than) the effective rate of corporation tax in the UK of 19% (2022: 19%).
The differences are explained below:
2023
£m
2022
£m
Profit before taxation
293.6
301.0
Tax on profit at the standard UK corporation tax rate of 19% (2022: 19%)
55.8
57.2
Expenses not deductible for taxation purposes
8.5
0.8
Income not taxable – gain on disposal of subsidiary
(3.6)
–
Share of joint venture taxation
(0.5)
(0.6)
Adjustments in respect of foreign taxation rates
(0.1)
(0.1)
Effect of rate change on deferred taxation
–
0.1
Adjustments in respect of OCI group relief
(0.1)
(0.2)
Adjustments in respect of prior years
(0.3)
(0.9)
Total taxation charge
59.7
56.3
Expenses non-deductible for taxation purposes in the current year principally includes the share-based payment expense relating to the
deferred consideration and amortisation of intangible assets arising on acquisition of Autorama (note 4).
Taxation on items taken directly to equity was a credit of £0.4m (2022: £0.1m) relating to tax on share-based payments.
Taxation recorded in equity within the Consolidated statement of comprehensive income was a release of £0.4m (2022: charge of £0.2m)
relating to post-employment benefit obligations.
The taxation charge for the year is based on the standard rate of UK corporation tax for the period of 19% (2022: 19%).
Deferred income taxes have been measured at the tax rate expected to be applicable at the date the deferred income tax assets and
liabilities are realised.
On 10 June 2021, Royal Assent to the Finance Act was given to increase UK corporation tax from 19% to 25% from 1 April 2023. Management
has performed an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred
income tax assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 25% being used
to measure all deferred tax balances as at 31 March 2023 (2022: 20%).
With revenue exceeding £500.0m for the first time, the Group is potentially within scope of the UK’s digital services tax (‘DST’), however
certain revenue streams, such as vehicle and accessory sales, would be exempt, meaning we do not meet the threshold in financial year
2023. It is HMRC’s intention that the current UK DST will be repealed during financial year 2024 and replaced with an OECD model for
Basic earnings per share is calculated using the weighted average number of ordinary shares in issue during the year, excluding those
held in treasury and by the Employee Share Option Trust (‘ESOT’), based on the profit for the year attributable to shareholders.
Weighted average
number of
ordinary shares
Total
earnings
£m
Pence
per share
Year ended 31 March 2023
Basic EPS
935,138,578
233.9
25.01
Diluted EPS
944,144,242
233.9
24.77
Year ended 31 March 2022
Basic EPS
955,532,888
244.7
25.61
Diluted EPS
957,534,145
244.7
25.56
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:
2023
2022
Issued ordinary shares at 1 April
946,892,976
969,024,186
Weighted effect of ordinary shares purchased for cancellation
(7,112,698)
(9,573,664)
Weighted effect of ordinary shares held in treasury
(4,304,401)
(3,572,833)
Weighted effect of shares held in the ESOT
(348,989)
(371,316)
Weighted effect of ordinary shares issued for share-based payments
11,690
26,515
Weighted average number of shares for basic EPS
935,138,578
955,532,888
Dilutive impact of share options outstanding
9,005,664
2,001,257
Weighted average number of shares for diluted EPS
944,144,242
957,534,145
For diluted earnings per share, the weighted average number of shares for basic EPS is adjusted to assume conversion of all potentially
dilutive ordinary shares. The Group has potentially dilutive ordinary shares arising from share options granted to employees and shares
issued as deferred consideration. Options are dilutive under the Sharesave scheme where the exercise price together with the future
IFRS 2 charge is less than the average market price of the ordinary shares during the year. Options under the Performance Share Plan,
the Single Incentive Plan Award, the Deferred Annual Bonus Plan and the Share Incentive Plan are contingently issuable shares and are
therefore only included within the calculation of diluted EPS if the performance conditions are satisfied.
The average market value of the Group’s shares for the purposes of calculating the dilutive effect of share-based incentives was based
Goodwill
£m
Software and
website
development
costs
£m
Financial systems
£m
Brand
£m
Other
£m
Total
£m
Cost
At 31 March 2021
457.9
14.4
13.1
1.2
25.3
511.9
At 31 March 2022
457.9
14.4
13.1
1.2
25.3
511.9
Acquired through business combinations
92.5
13.7
–
47.6
5.6
159.4
Additions
–
1.0
–
–
–
1.0
Disposals
(5.7)
(1.8)
–
(0.6)
(1.2)
(9.3)
Exchange differences
(0.1)
–
–
–
–
(0.1)
At 31 March 2023
544.6
27.3
13.1
48.2
29.7
662.9
Accumulated amortisation and impairments
At 31 March 2021
117.0
8.3
12.8
0.6
15.0
153.7
Amortisation charge
–
0.9
0.3
0.1
1.3
2.6
At 31 March 2022
117.0
9.2
13.1
0.7
16.3
156.3
Amortisation charge
–
2.5
–
4.2
2.5
9.2
Disposals
–
(1.8)
–
(0.6)
(1.2)
(3.6)
At 31 March 2023
117.0
9.9
13.1
4.3
17.6
161.9
Net book value at 31 March 2023
427.6
17.4
–
43.9
12.1
501.0
Net book value at 31 March 2022
340.9
5.2
–
0.5
9.0
355.6
Net book value at 31 March 2021
340.9
6.1
0.3
0.6
10.3
358.2
Other intangibles include customer relationships, technology, trade names, trademarks and non-compete agreements. Intangible assets
which have a finite useful life are carried at cost less accumulated amortisation. Amortisation of these intangible assets is calculated
using the straight-line method to allocate the cost of the assets over their estimated useful lives (principally between 3 to 15 years).
The longest estimated useful life remaining at 31 March 2023 is 12 years (31 March 2022: 13 years).
For the year to 31 March 2023, the amortisation charge of £9.2m (2022: £2.6m) has been charged to operating costs in the Consolidated
income statement. At 31 March 2023, there were no software and website development costs representing assets under construction
(2022: £nil).
In accordance with UK-adopted international accounting standards, goodwill is not amortised, but instead is tested annually for
impairment, or more frequently if there are indicators of impairment. Goodwill is carried at cost less accumulated impairment losses.
Impairment test for goodwill
Goodwill is allocated to the appropriate cash-generating unit (‘CGU’) based on the smallest identifiable group of assets that generates
cash inflows independently in relation to the specific goodwill. Following the acquisition of Autorama, there are now two CGUs that exist
in the Group, being the Digital CGU and the Autorama CGU.
The carrying value of the CGUs is principally the sum of goodwill, property, plant and equipment (including lease assets), intangibles and
lease liabilities, as follows:
2023
£m
2022
£m
Digital
351.1
360.8
Autorama
152.8
–
Total
503.9
360.8
Digital
The recoverable amount of the Digital CGU is determined from value-in-use calculations that use discounted cash flow projections from
the latest business plan. The carrying value is forecast to be recovered based on less than two years of forecasted cash flows from this
mature operating business.
Income and costs within the budget are derived on a detailed ‘bottom up’ basis – all income streams and cost lines are considered and
appropriate growth, or decline, rates are assumed. Income and cost growth forecasts are risk adjusted to reflect specific risks facing
the CGU and take into account the market in which it operates. Assumptions, which are not sensitive to change, include revenue growth
rates, associated levels of marketing support and directly associated overheads. All assumptions are based on past performance
and management’s expectation of market development. Cash flows beyond the budgeted period of five years (2022: five years) are
extrapolated using the estimated growth rate stated into perpetuity; a rate of 2.0% (2022: 2.0%) has been used. This is lower than the
current rate of inflation in the UK but takes account of longer-term considerations.
The pre-tax discount rate used within the recoverable amount calculation is based upon the weighted average cost of capital reflecting
specific principal risks and uncertainties. The discount rate takes into account the risk-free rate of return, the market risk premium and beta
factor reflecting the average beta for the Group and comparator companies which are used in deriving the cost of equity. Other than as
included in the financial budget, it is assumed that there are no material adverse changes in legislation that would affect the forecast
cash flows.
The key assumptions used for the value-in-use calculation are as follows:
2023
2022
Terminal value growth rate
2.0%
2.0%
Discount rate (pre-tax)
12.8%
8.6%
The recoverable amount of goodwill shows significant headroom compared with its carrying value. The level of headroom may change
if different growth rate assumptions or a different pre-tax discount rate were used in the cash flow projections. There are no changes to
the key assumptions of growth rate or discount rate that are considered by the Directors to be reasonably possible, which give rise to an
impairment of goodwill relating to the Digital CGU.
Having completed the 2023 impairment review, no impairment has been recognised in relation to the Digital CGU (2022: no impairment).
Autorama
The Autorama impairment basis is assessed on a fair value basis due to the proximity of the transaction and the pre-integration phase
of the business at 31 March 2023.
Goodwill amounting to £92.5m in the Autorama CGU arose on the acquisition of Autorama UK Limited in June 2022.
The acquisition will enable Auto Trader to establish itself as a leading marketplace for leasing new cars which is set to benefit from:
the growth of electric cars ahead of the planned future UK ban on the sale of new petrol and diesel cars from 2030; new manufacturers
entering the UK market; lower take up of company car schemes; and a shift towards new digital distribution models. Leasing provides
consumers a cost-effective way to access a new car with a model that is consistent with any future move towards usership.
The consideration paid was to acquire the Autorama CGU in an arm’s length transaction. There have been no significant changes identified
in the Directors’ assessment of fair value arising from factors since acquisition. On this basis, the Directors consider that, as at 31 March 2023,
a fair value less cost to sell measurement provides the most appropriate and relevant evidence of the Autorama CGU’s recoverable
amount.
Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date under current market conditions, less incremental costs directly attributable to the disposal of an
asset or CGU, excluding finance costs and income tax expense. The valuation viewpoint is from that of a market participant and excludes
synergies and matters, including taxation, specific to the current owner. An income based fair valuation approach has been used to
determine fair value using discounted cash flows. The fair value measurement was categorised as Level 3 based on the valuation inputs used.
The key assumptions used in the estimation of the CGU’s recoverable amount are as follows:
2023
Forecast period
2024 – 2032
Annual revenue growth during the forecast period
Between 5% and 69% p.a.
Terminal value growth rate
2.0%
Discount rate post tax
18.0%
Assessment of the CGU’s fair value reflects long-term assumptions around changing distribution models for new car sales, including new
electric vehicles, and an increased proportion of vehicles being leased. The key driver of the forecast is the number of new vehicles transacted
by Autorama onto lease plans, with revenues, including ancillary sales, consequent on each vehicle lease transaction completed. The
forecasts do not assume a larger new car registration market than in 2019, before the disruption to supply that commenced during the
COVID-19 pandemic. The key assumption is rather an increase in the current proportion of vehicles which are currently leased through
brokers and the share of this market achieved by Autorama. In making these estimates, management have had regard to market data
published by SMMT and BVRLA. In the nine months since the acquisition, Autorama has delivered 6,895 vehicles. Both vans and pickups
were particularly impacted by supply challenges in the current year.
Revenue growth is spread over the forecast period in line with the new car market outlook. The risk arising from the duration of the
forecast period and the risk of growth assumptions over new vehicles transacted in this period not being achieved are reflected in the
higher level of post-tax discount rate applied.
Whilst an estimate, the comparison between the CGU’s fair value less cost to sell and its book carrying value has headroom at 31 March 2023.
This headroom arises because of the accounting requirement to expense £50m of the consideration paid to the former owners of Autorama
as an employee share-based payment over the 12-month period after the acquisition to 22 June 2023 (see note 31). £38.8m of this charge
has been expensed as at 31 March 2023.
This headroom results in no impairment charge under the following sensitivity scenarios, all of which reflect the key sources of estimation
uncertainty in the calculation of fair value:
Lower number of vehicle transactions: The growth in vehicle transactions executed by Autorama, and therefore earnings before interest
and tax, is at risk of growing at a level lower than the forecast. This sensitivity reduces volumes by 20% for financial year 2024 and financial
year 2025 to reflect the impact of the risk of lower new vehicle supply caused by manufacturing delays; and
Delay in timing: The timing of growth in vehicle transactions may take longer to realise than the base case forecast due to a slower take
up of electric vehicles and lease financing; continued disruption to new car supply; and/or a delay in the phasing out timetable of new petrol
and diesel cars which is currently scheduled for 2030. This sensitivity assumes growth is deferred by one year from financial year 2024; and
Change in discount rate: The post-tax discount rate could increase to a maximum of 21% before the carrying value of the Autorama CGU
Land, buildings
and leasehold
improvements
£m
Office
equipment
£m
Motor vehicles
£m
Total
£m
Cost
At 31 March 2021
16.5
13.0
1.9
31.4
Additions
6.6
1.3
0.2
8.1
Disposals and modifications
–
(0.4)
(0.5)
(0.9)
At 31 March 2022
23.1
13.9
1.6
38.6
Acquired through business combinations
4.0
0.3
1.0
5.3
Additions
2.2
2.0
0.3
4.5
Disposals
(7.6)
(3.0)
(0.9)
(11.5)
At 31 March 2023
21.7
13.2
2.0
36.9
Accumulated depreciation
At 31 March 2021
8.2
10.6
1.4
20.2
Charge for the year
3.3
0.9
0.4
4.6
Disposals
–
(0.4)
(0.5)
(0.9)
At 31 March 2022
11.5
11.1
1.3
23.9
Charge for the year
3.3
1.1
0.5
4.9
Disposals
(4.4)
(2.8)
(0.6)
(7.8)
At 31 March 2023
10.4
9.4
1.2
21.0
Net book value at 31 March 2023
11.3
3.8
0.8
15.9
Net book value at 31 March 2022
11.6
2.8
0.3
14.7
Net book value at 31 March 2021
8.3
2.4
0.5
11.2
Included within property, plant and equipment are £6.5m (2022: £8.3m) of assets recognised as leases under IFRS 16. Further details of
these leases are disclosed in note 15. The depreciation expense of £4.9m for the year to 31 March 2023 (2022: £4.6m) has been recorded
The Group’s lease assets including land and buildings and motor vehicles are held within property, plant and equipment. Information about
leases for which the Group is a lessee is presented below:
2023
£m
2022
£m
Net book value of property, plant and equipment owned
9.4
6.4
Net book value of right of use assets
6.5
8.3
15.9
14.7
Net book value of right of use assets
Land, buildings
and leasehold
improvements
£m
Office
equipment
£m
Motor vehicles
£m
Total
£m
Balance at 31 March 2021
4.9
0.1
0.6
5.6
Additions
5.1
–
0.2
5.3
Depreciation charge
(2.2)
–
(0.4)
(2.6)
Balance at 31 March 2022
7.8
0.1
0.4
8.3
Acquired through business combination
0.1
–
0.3
0.4
Additions
1.5
0.1
0.3
1.9
Disposals
(1.4)
–
(0.1)
(1.5)
Depreciation charge
(2.2)
–
(0.4)
(2.6)
At 31 March 2023
5.8
0.2
0.5
Lease liabilities in the balance sheet at 31 March
2023
£m
2022
£m
Current
2.5
3.0
Non-current
4.6
6.5
Total
7.1
9.5
A maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented within note 32. The term recognised
for certain leases has assumed lease break options are exercised. Certain lease rentals are subject to periodic market rental reviews.
During the year, the Group relocated its London office to a new premises and exited its existing lease. In accordance with IFRS 16,
the difference between the carrying value of the right of use asset and the lease liability at the date of the lease termination (£0.1m)
was recognised in the Consolidated income statement as a gain on disposal.
In the prior year, the Group entered into a new lease arrangement to rent an additional 16,000 square feet in our Manchester office to
support the needs of our growing workforce. The Group also extended the term of the existing lease of our Manchester office space.
These changes resulted in a lease modification under IFRS 16. The right of use assets were increased by £5.1m with corresponding
adjustments to the lease liability and dilapidations provision.
Amounts charged in the income statement
2023
£m
2022
£m
Depreciation charge of right of use assets
2.6
2.6
Interest on lease liabilities
0.2
0.2
Gain on disposal of right of use assets
(0.1)
–
Total amounts charged in the income statement
2.7
2.8
Cash outflow
2023
£m
2022
£m
Total cash outflow for leases
2.9
16. Net investments in joint ventures
Joint ventures are contractual arrangements over which the Group exercises joint control with partners and where the parties have rights
to the net assets of the arrangement, irrespective of the Group’s shareholding in the entity.
The Group owns 49% of the ordinary share capital of Dealer Auction Limited (previously Dealer Auction (Holdings) Limited). The basis of
the Group’s joint control is through a shareholder agreement and an assessment of the substantive rights of each shareholder, including
operational barriers or incentives that would prevent or deter rights being exercised.
Net investments in joint ventures at the reporting date include the Group’s equity investment in joint ventures and the Group’s share of the
joint ventures’ post acquisition net assets. The table below reconciles the movement in the Group’s net investment in joint ventures in the year:
Equity investments
in joint ventures
£m
Share of post
acquisition net
assets
£m
Net investments in
joint ventures
£m
Carrying value
As at 31 March 2021
48.1
6.5
54.6
Share of result for the year taken to the income statement
–
2.9
2.9
Dividends received in the year
(7.8)
–
(7.8)
As at 31 March 2022
40.3
9.4
49.7
Share of result for the year taken to the income statement
–
2.5
2.5
Dividends received in the year
(2.9)
–
(2.9)
As at 31 March 2023
37.4
11.9
49.3
Set out below is the summarised financial information for the joint venture, adjusted for differences in accounting policies between
the Group and the joint venture. The table also reconciles the summarised financial information to the carrying amount of the Group’s
interest in the joint venture.
2023
£m
2022
£m
Non-current assets
95.6
96.8
Current assets
Cash and cash equivalents
6.4
1.1
Other current assets
1.3
8.2
Total assets
103.3
106.1
Liabilities
Current liabilities
2.0
4.0
Total liabilities
2.0
4.0
Net assets
101.3
102.1
Group’s share of net assets
49.3
49.7
2023
£m
2022
£m
Revenues
10.5
12.0
Profit for the year
5.2
6.0
Total comprehensive income
5.2
6.0
Group’s share of comprehensive income
2.5
2.9
Dividends received by the Group
2.9
7.8
Non-current assets principally comprise goodwill and other intangible assets. The carrying value is assessed annually using a methodology
consistent with the Auto Trader cash-generating unit disclosed in note 13.
A list of the investments in joint ventures, including the name, country of incorporation and proportion of ownership interest, is given in note 35.
Shares in other undertakings
2023
£m
2022
£m
Investment in iAUTOS Company Limited
–
–
Investment in protected insurance cell (Advent Insurance PCC Limited)
1.1
–
Investment in protected insurance cell (Atlas Insurance PCC Limited)
1.2
–
Total comprehensive income
2.3
–
The Group designated the investment in iAUTOS Company Limited as an equity security at FVOCI as the Group intends to hold the shares
for long-term purposes. iAUTOS Company Limited is an intermediate holding company through which trading companies incorporated
in the People’s Republic of China are held. The fair value of the investment has been valued at £nil since 2014 as the Chinese trading
companies are marginally loss-making with forecast future cash outflows.
As at 31 March 2023, the Group’s wholly owned subsidiary, Autorama Holding (Malta) Limited, had an interest in two protected insurance
cells. During the year, the Group entered into a new arrangement with Atlas Insurance PCC Limited, with the intention of closing the
existing cell with Advent Insurance PCC Limited once the portfolio transfer had been made to the new cell. This process was not fully
complete by 31 March 2023, therefore two investments have been recognised. It has designated its investments as equity securities
at FVOCI as the Group intends to hold the investment in the protected insurance cell for long-term purposes.
The protected insurance cell writes insurance business which relates to Guaranteed Asset Protection insurance and business equipment
in transit. The interest in the protected insurance cell is not consolidated in these financial statements as a silo, as the cell company has
retained residual obligations in respect of the cell’s liabilities. Autorama UK Limited is listed as a guarantor to an agreement between the
£m
2022
£m
Trade receivables (invoiced)
28.5
25.7
Net accrued income
38.7
34.6
Trade receivables (total)
67.2
60.3
Prepayments
5.4
5.5
Other receivables
0.3
0.1
Total
72.9
Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are generally due
for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of
consideration that is unconditional and has been invoiced at the reporting date. The Group holds the trade receivables with the objective
to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.
Included within trade receivables (invoiced) is a provision for the impairment of financial assets of £3.0m (2022: £2.5m).
Accrued income relates to the Group’s rights to consideration for services provided but not invoiced at the reporting date. Accrued income
is transferred to receivables when invoiced. Included within net accrued income is provision for the impairment of financial assets of £1.5m
(2022: £1.2m).
In Autorama, the Group temporarily takes a small proportion of new vehicle deliveries on balance sheet as principal, which are held
within inventory.
2023
£m
2022
£m
Finished goods
3.6
–
Inventories
3.6
Cash at bank and in hand is denominated in the following currencies:
2023
£m
2022
£m
Sterling
16.6
51.0
Euro
–
0.3
Cash at bank and in hand
16.6
51.3
Cash balances with an original maturity of less than three months were held in current accounts during the year and attracted interest
£m
2022
£m
Trade payables
8.0
2.7
Accruals
15.8
14.4
Other taxes and social security
16.9
21.3
Deferred income
5.7
3.0
Vehicle stocking loan
3.0
–
Other payables
3.9
0.5
Accrued interest payable
0.3
0.1
Total
53.6
Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables
Non-current
2023
£m
2022
£m
Syndicated RCF gross of unamortised debt issue costs
60.0
–
Unamortised debt issue costs on Syndicated RCF
(2.5)
(1.4)
Total
57.5
(1.4)
Current
2023
£m
2022
£m
Loan from other investment
1.1
–
Total
1.1
–
Total borrowings
58.6
(1.4)
Unamortised debt issue costs on the Syndicated RCF increased to £2.5m in the year (2022: £1.4m) following the amendment and restatement
of the Group’s Syndicated RCF facility. At 31 March 2022, unamortised debt issue costs were within Prepayments.
Borrowings are repayable as follows:
2023
£m
2022
£m
Less than one year
1.1
–
Two to five years
60.0
–
Total
61.1
–
The carrying amounts of borrowings approximates to their fair values.
Syndicated revolving credit facility (‘Syndicated RCF’)
The Group has access to an unsecured Syndicated revolving credit facility (the ‘Syndicated RCF’). Associated debt transaction costs
total £5.9m, with £3.3m being incurred at initiation and £2.6m of additional costs associated with extension requests.
With effect from 1 February 2023 the Group entered into an Amendment and Restatement Agreement to extend the term of the facility for
five years from the date of signing and to reduce the capacity of the facility to £200.0m. There is no requirement to settle all or part of the
facility before the termination date of February 2028.The associated debt transaction costs were £1.6m, of which £1.4m was paid in the
period to 31 March 2023.
Individual tranches are drawn down, in sterling, for periods of up to six months at the compounded reference rate (being the aggregate
of SONIA 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 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.
Loan from other investment
During the year, the Group’s wholly owned subsidiary, Autorama Holding (Malta) Limited, elected to transfer the insurance portfolio held
in a protected insurance cell with Advent Insurance PCC Limited to Atlas Insurance PCC Limited. As part of this process, Advent Insurance
PCC Limited issued a loan to Autorama Holding (Malta) Limited to fund the investment in the new protected insurance cell until the portfolio
transfer was complete. This process is likely to be completed within the next 12 months. As at 31 March 2023, £1.1m was recognised on the
Consolidated balance sheet (2022: £nil).
Exposure to interest rate changes
The exposure of the Group’s borrowings (excluding debt issue costs) to SONIA rate changes and the contractual repricing dates at the
balance sheet date are as follows:
2023
£m
2022
£m
One month or less
60.0
–
Total
60.0
Dilapidations
provision
£m
Holiday pay
provision
£m
Total
£m
At 31 March 2022
1.3
0.7
2.0
Charged to the income statement
–
0.7
0.7
Recognised under IFRS 16
0.1
–
0.1
Utilised in the year
(0.1)
(0.7)
(0.8)
At 31 March 2023
1.3
0.7
2.0
2023
£m
2022
£m
Current
0.7
0.7
Non-current
1.3
1.3
Total
2.0
A net deferred tax liability of £5.8m has been recognised in the balance sheet at 31 March 2023. The movement in deferred taxation assets and
liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Deferred taxation assets
Share-based
payments
£m
Accelerated
capital
allowances
£m
Other temporary
differences
£m
Total
£m
At 31 March 2021
2.7
3.0
0.3
6.0
Credited to the income statement
0.3
(0.2)
0.5
0.6
Debited directly to equity
(0.2)
–
–
(0.2)
At 31 March 2022
2.8
2.8
0.8
6.4
(Debited)/credited to the income statement
1.1
(0.9)
(0.5)
(0.3)
Debited directly to equity
(0.2)
–
–
(0
.
2)
Acquired through business combinations
–
–
6.8
6.8
At 31 March 2023
3.7
1.9
7.1
12.7
Deferred taxation liabilities
Acquired
intangible assets
£m
Other temporary
differences
£m
Total
£m
At 31 March 2021
–
4.3
4.3
Credited to the income statement
–
0.5
0.5
Debited to the statement of comprehensive income
–
0.2
0.2
At 31 March 2022
–
5.0
5.0
Credited to the income statement
(1.2)
(0.5)
(1.7)
Debited to the statement of comprehensive income
–
(1.1)
(1.1)
Acquired through business combinations
16.3
–
16.3
At 31 March 2023
15.1
3.4
18.5
Net deferred tax asset at 31 March 2022
1.4
Net deferred tax liability at 31 March 2023
5.8
The Group has estimated that £1.5m (2022: £0.9m) of the Group’s net deferred income tax liability will be realised in the next 12 months.
This is management’s current best estimate and may not reflect the actual outcome in the next 12 months.
Deferred tax assets acquired through business combinations totalled £6.8m (2022: £nil). This includes £7.7m relating to tax losses offset
by a £0.9m deferred tax liability linked to a fair value adjustment on freehold property. Recognition is on the basis that there are sufficient
taxable temporary liability differences at the balance sheet date arising from acquired intangibles which are expected to reverse over
(i) Defined contribution scheme
The Group operates a number of defined contribution schemes. In the year to 31 March 2023, the pension contributions to the Group’s
defined contribution schemes amounted to £3.5m (2022: £3.2m). At 31 March 2023, there were £0.6m (31 March 2022: £0.5m) of pension
contributions outstanding relating to the Group’s defined contribution schemes.
(ii) Defined benefit scheme
The Company sponsors a funded defined benefit pension scheme for qualifying UK employees, the Wiltshire (Bristol) Limited Retirement
Benefits Scheme (‘the Scheme’). The Scheme is administered by a separate board of Trustees, which is legally separate from the Company.
The Trustees are composed of representatives of both the Company and members. The Trustees are required by law to act in the interest
of all relevant beneficiaries and are responsible for the investment policy for the assets and the day-to-day administration of the benefits.
The Scheme has been closed to future members since 30 April 2006 and there are no remaining active members within the Scheme.
No other post-retirement benefits are provided to these employees.
Profile of the Scheme
As at 31 March 2023, approximately 42% of the defined benefit obligation (‘DBO’) is attributable to former employees who have yet to
reach retirement (2022: 57%) and 58% to current pensioners (2022: 43%). The Scheme duration is an indicator of the weighted-average
time until benefit payments are made. For the Scheme as a whole, the duration is approximately 16 years (2022: 20 years).
Buy-in
In October 2022, the Scheme purchased a bulk annuity policy (known as a buy-in) from Just Retirement Limited (‘Just Retirement’) for £15.4m, which
was funded by a £1.0m contribution by the Company along with existing Scheme assets. This policy secured the full benefits of all Scheme
members, which as at the remeasurement date amounted to £13.7m. Given the financial strength of Just Retirement, this buy-in substantively
removes the risk of further contributions being required from the Company to provide benefits to members, beyond those noted below.
Following the buy-in, the Scheme’s assets largely comprise the bulk annuity policy held with Just Retirement, along with a small amount
of additional assets currently held with LGIM. The Scheme trustees are now working to progress towards a full buy-out, which will involve
various data and benefits exercises. It is anticipated that the Scheme buy-out will be completed in 2024. Once the buy-out is complete,
the Scheme has no further purpose and will be wound up.
Funding requirements
UK legislation requires that pension schemes are funded prudently. The ongoing funding valuation of the Scheme was carried out by
a qualified actuary as at 30 April 2021 and showed a surplus of £1.5m. The Company paid deficit contributions of £0.1m per annum to
31 January 2022, plus an additional £1.0m in October 2022 in respect of the shortfall versus the buy-in premium. The next funding valuation
is due no later than 30 April 2024, although it is anticipated that the Scheme will be bought-out and wound-up before the statutory
deadline for this valuation. The Company expects that a further contribution may be required in the year ending 31 March 2024 in respect
of the balancing premium, once the data cleansing and benefit rectification is completed. The Company also pays expenses and PPF
levies incurred by the Scheme.
Risks associated with the Scheme
The Scheme exposes the Company to some risks, although the purchase of a buy-in policy substantially mitigates these.
Asset volatility
The liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets
underperform this yield, this will create a deficit. The Scheme previously held a significant proportion of
gilt and bond assets which limits volatility and risk in the short term. The allocation of assets is monitored
to ensure it remains appropriate given the Scheme’s long-term objectives.
Inflation risk
A proportion of the Scheme’s benefit obligations are linked to inflation, and higher inflation leads to
higher liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect
against extreme inflation). The majority of the assets are either unaffected by or only loosely correlated
with inflation, meaning that an increase in inflation will also increase the deficit.
Change in bond yields
A decrease in corporate bond yields will increase the value placed on the Scheme’s liabilities for
accounting purposes, although this will be partially offset by an increase in the value of the Scheme’s
bond holdings.
Life expectancy
The majority of the Scheme’s obligations are to provide benefits for the lifetime of the member,
so increases in life expectancy will result in an increase in the liabilities.
Assumptions used
The results of the latest funding valuation at 30 April 2021 have been adjusted to the new balance sheet date, taking account of
experience over the period since 30 April 2021, changes in market conditions, and differences in the financial and demographic
assumptions. The present value of the defined benefit obligation, and the related current service cost, were measured using the
projected unit credit method.
The principal assumptions used to calculate the liabilities under IAS 19 are as follows:
2023
%
2022
%
Discount rate for scheme liabilities
4.70
2.75
CPI inflation
2.85
3.00
RPI inflation
3.55
3.80
Pension increases
Post 1988 GMP
2.20
2.35
Pre 2004 non GMP
5.00
5.00
Post 2004
3.25
3.55
The financial assumptions reflect the nature and term of the Scheme’s liabilities. The weighted average duration of the Scheme liabilities
at the year end is 16 years (2022: 20 years). This reduction is due to the discount rate increase which is the principal reason for the
decrease in the value of Scheme liabilities compared with the prior year.
The Group has assumed that mortality will be in line with nationally published mortality table SAPS S3 Heavy tables with CMI 2021
projections related to members’ years of birth with long-term rate of improvement of 1.5% per annum. No adjustment has been made
for the possible effects of COVID-19. These tables translate into an average life expectancy for a pensioner retiring at age 65 as follows:
2023
2022
Men
Years
Women
Years
Men
Years
Women
Years
Member aged 65 (current life expectancy)
86.7
89.0
86.6
88.3
Member aged 45 (life expectancy at age 65)
88.4
90.8
88.6
90.1
It is assumed that 50% of non-retired members of the Scheme will commute the maximum amount of cash at retirement (2022: 50% of
non-retired members of the Scheme will commute the maximum amount of cash at retirement).
Post-employment benefit obligations disclosures
The amounts charged to the Consolidated income statement are set out below:
2023
£m
2022
£m
Past service cost
0.5
–
Settlement cost
2.2
–
Total amounts charged to the Consolidated income statement
2.7
–
Past service cost
As part of the data cleansing exercise ahead of the Scheme’s buy-in, two items relating to the Barber window in relation to transferred in
assets and a slightly later effective date for pension increases were identified. As a result, a £0.5m past service cost has been recognised
in the Consolidated income statement (2022: £nil).
Current service costs and past service costs are charged to the income statement in arriving at Operating profit. Interest income
on Scheme assets and the interest cost on Scheme liabilities are included within finance costs.
Settlement cost
Given the intention is to convert the buy-in policy purchased during the year to a buy-out as soon as possible, a settlement cost of
£2.2m has been recognised in the Consolidated income statement for the year ended 31 March 2023. The settlement cost represents
the difference between the value of the liabilities under IAS 19 at the remeasurement date, 31 October 2022, (£13.2m) and the price paid
to settle the liabilities (£15.4m).
The following amounts have been recognised in the Consolidated statement of comprehensive income:
2023
£m
2022
£m
Return on Scheme assets (in excess of)/below that recognised in net interest
5.9
1.6
Actuarial gains due to changes in assumptions
(4.8)
(1.8)
Actuarial losses/(gains) due to liability experience
0.4
(0.2)
Effect of the surplus cap
–
–
Deferred tax on surplus
(1.1)
0.2
Total amounts recognised within the Consolidated statement of comprehensive income
0.4
(0.2)
Amounts recognised in the balance sheet are as follows:
2023
£m
2022
£m
Present value of funded obligations
13.6
17.5
Fair value of plan assets
(14.1)
(21.2)
Net asset recognised in the Consolidated balance sheet
(0.5)
(3.7)
The Trustees of the Scheme sought legal advice which concluded that the Group 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 IFRIC 14 does not
apply, and therefore has recognised the accounting surplus of £0.5m (2022: £3.7m) and an associated deferred tax liability of £0.2m
(2022: £1.3m) in the Consolidated balance sheet.
Movements in the fair value of Scheme assets were as follows:
2023
£m
2022
£m
Fair value of Scheme assets at the beginning of the year
21.2
22.8
Interest income on Scheme assets
0.5
0.5
Remeasurement losses on Scheme assets
(5.9)
(1.6)
Contributions by the employer
1.0
0.1
Settlements
(2.2)
–
Net benefits paid
(0.5)
(0.6)
Fair value of Scheme assets at the end of the year
14.1
21.2
Movements in the fair value of Scheme liabilities were as follows:
2023
£m
2022
£m
Fair value of Scheme liabilities at the beginning of the year
17.5
19.6
Past service cost
0.5
–
Interest expense
0.5
0.5
Actuarial gains on Scheme liabilities arising from changes in assumptions
(4.8)
(1.8)
Actuarial losses/(gains) on Scheme liabilities arising from experience
0.4
(0.2)
Settlements
–
–
Net benefits paid
(0.5)
(0.6)
Fair value of Scheme liabilities at the end of the year
13.6
17.5
Movements in post-employment benefit net obligations were as follows:
2023
£m
2022
£m
Opening post-employment benefit surplus
(3.7)
(3.2)
Past service cost
0.5
–
Settlement cost
2.2
–
Contributions by the employer
(1.0)
(0.1)
Remeasurement and experience (gains)/losses
1.5
(0.4)
Closing post-employment benefit surplus
(0.5)
(3.7)
Plan assets are comprised as follows:
2023
2022
£m
%
£m
%
Equities
–
–
–
–
Gilts
0.4
3.5
13.7
65.0
Bonds
–
–
7.2
34.0
Cash
0.1
0.7
0.3
1.0
Buy-in policy
13.6
95.8
–
–
Total
14.1
100.0
21.2
100.0
All plan assets have a quoted market price.
Sensitivity to key assumptions
The key financial assumptions used for IAS 19 are the discount and inflation rates. Given that the Scheme’s buy-in policy is valued exactly
Share capital
2023
2022
Number
’000
Amount
£m
Number
’000
Amount
£m
Allotted, called-up and fully paid ordinary shares of 1p each
At 1 April
946,893
9.5
969,024
9.7
Purchase and cancellation of own shares
(23,831)
(0.2)
(22,198)
(0.2)
Issue of shares
13
0.0
67
0.0
Total
923,075
9.3
946,893
9.5
In the year ended 31 March 2017, the Company commenced a share buyback programme. By resolutions passed at the 2022 AGM,
the Company’s shareholders generally authorised the Company to make market purchases of up to 96,678,535 of its ordinary shares,
subject to minimum and maximum price restrictions. In the year ended 31 March 2023, a total of 25,261,584 ordinary shares of £0.01
were purchased. The average price paid was 582.1p with a total consideration paid (including fees of £0.7m) of £148.0m. Of all shares
purchased, 1,430,372 were held in treasury with 23,831,212 being cancelled. In the year ended 31 March 2023, 12,893 ordinary shares were
issued for the settlement of share-based payments.
Included within shares in issue at 31 March 2023 are 340,196 (2022: 358,158) shares held by the ESOT and 4,371,505 (2022: 3,826,928) shares
Own shares held – £m
ESOT shares
reserve
£m
Treasury shares
£m
Total
£m
Own shares held as at 31 March 2021
(0.5)
(10.2)
(10.7)
Transfer of shares from ESOT
0.1
–
0.1
Repurchase of own shares for treasury
–
(17.8)
(17.8)
Share-based incentives exercised
–
6.0
6.0
Own shares held as at 31 March 2022
(0.4)
(22.0)
(22.4)
Repurchase of own shares for treasury
–
(8.7)
(8.7)
Share-based incentives exercised
–
5.1
5.1
Own shares held as at 31 March 2023
(0.4)
(25.6)
(26.0)
Own shares held – number
ESOT shares
reserve
Number of shares
Treasury shares
Number of shares
Total
Number of shares
Own shares held as at 31 March 2021
404,653
2,422,659
2,827,312
Transfer of shares from ESOT
(46,495)
–
(46,495)
Repurchase of own shares for treasury
–
2,718,193
2,718,193
Share-based incentives exercised
–
(1,313,924)
(1,313,924)
Own shares held as at 31 March 2022
358,158
3,826,928
4,185,086
Transfer of shares from ESOT
(17,962)
–
(17,962)
Repurchase of own shares for treasury
–
1,430,372
1,430,372
Share-based incentives exercised
–
(885,795)
(885,795)
Own shares held as at 31 March 2023
340,196
4,371,505
Dividends declared and paid by the Company were as follows:
2023
2022
Pence
per share
£m
Pence
per share
£m
2022 final dividend paid
5.5
51.7
5.0
48.0
2023 interim dividend paid
2.8
26.0
2.7
25.6
8.3
77.7
7.7
73.6
The proposed final dividend for the year ended 31 March 2023 of 5.6p per share, totalling £51.4m, is subject to approval by shareholders
at the Annual General Meeting (‘AGM’) and hence has not been included as a liability in the financial statements.
2023
£m
2022
£m
Profit after tax
233.9
244.7
Adjustments for:
Tax charge
59.7
56.3
Depreciation
4.9
4.6
Amortisation
9.2
2.6
Share-based payments charge (excluding associated NI)
5.8
5.1
Deferred contingent consideration
38.8
–
Share of profit from joint ventures
(2.5)
(2.9)
Profit on sale of property, plant and equipment
(0.7)
–
Net lease disposals and modifications
(0.1)
–
Post employment expenses relating to the defined benefit scheme
2.7
–
Finance costs
3.1
2.6
R&D expenditure credit
(0.1)
(0.1)
Profit on disposal of a subsidiary
(19.1)
–
Changes in working capital (excluding the effects of exchange differences on consolidation):
Trade and other receivables
(3.6)
(5.3)
Trade and other payables
(1.9)
20.5
Inventory
(2.7)
–
Cash generated from operations
327.4
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 £6.6m (2022: £6.1m). This included associated national insurance (‘NI’)
at the rate at which management expects to be effective when the awards are exercised (13.80%), and apprenticeship levy at 0.5%,
based on the share price at the reporting date.
In addition to this charge, the share-based payment charge reported in this period includes £38.8m relating to deferred share-based
payment consideration relating to the acquisition of Autorama (see note 31), making a total combined charge of £44.6m (excluding
associated NI).
Group
Company
2023
£m
2022
£m
2023
£m
2022
£m
Share Incentive Plan (‘SIP’)
–
–
–
–
Sharesave scheme (‘SAYE’)
0.5
0.7
–
–
Performance Share Plan (‘PSP’)
1.9
1.3
1.9
1.3
Deferred Annual Bonus and Single Incentive Plan
3.4
3.1
0.4
0.2
NI and apprenticeship levy on applicable schemes
0.8
1.0
0.3
0.3
Total charge from ongoing share schemes
6.6
6.1
2.6
1.8
Share-based payments relating to Autorama acquisition
38.8
–
–
–
Total charge
45.4
6.1
2.6
1.8
During the year, the Directors in office in total had gains of £1.4m (2022: £2.8m) arising on the exercise of share-based incentive awards.
Share Incentive Plan
In 2015, the Group established a Share Incentive Plan (‘SIP’). All eligible employees were awarded free shares (or nil-cost options in the
case of employees in Ireland) valued at £3,600 each based on the share price at the time of the Company’s admission to the Stock
Exchange in March 2015.
UK SIP
2023
Number
2022
Number
Outstanding at 1 April
116,808
163,157
Released
(20,493)
(46,349)
Outstanding at 31 March
96,315
116,808
Vested and outstanding at 31 March
96,315
116,808
The weighted average market value per ordinary share for SIP awards released was 578.0p (2022: 622.5p). The SIP shares outstanding at
31 March 2023 have fully vested (2022: fully vested). Shares released prior to the vesting date relate to those attributable to good leavers
as defined by the Scheme rules.
Performance Share Plan
The Group operates a Performance Share Plan (‘PSP’) for Executive Directors, the Operational Leadership Team and certain key
employees. The extent to which awards vest will depend upon the Group’s performance over the three-year period following the award
date. Both market based and non-market based performance conditions may be attached to the options, for which an appropriate
adjustment is made when calculating the fair value of an option. If the options remain unexercised after a period of 10 years from the date
of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Group before the options vest, unless under
exceptional circumstances.
On 23 June 2022, the Group awarded 360,695 nil cost options under the PSP scheme. For the 2022 awards, the Group’s performance is measured
by reference to growth in Operating profit (70% of the award), Revenue (20% of the award) and Carbon reduction (10% of the award) over a
three-year period to March 2025.
For other previous awards, the Group’s performance had been measured by reference to growth in Operating profit and Revenue over a
three-year period, total shareholder return relative to the FTSE 350 share index (2017 and 2020 awards), and diversity progress (2021 awards).
The fair value of the 2022 award was determined to be the share price at grant date. In previous years, the total shareholder return
element was valued using the Monte Carlo model. The resulting share-based payments charge is being spread evenly over the period
between the grant date and the vesting date.
PSP award holders are entitled to receive dividends accruing between the grant date and the vesting date and this value will be delivered
in shares. The assumptions used in the measurement of the fair value at grant date of the PSP awards are as follows:
Grant date
Condition
Share price at
grant date £
Exercise
price £
Expected
volatility
%
Option life
years
Risk-free
rate %
Dividend
yield %
Non-vesting
condition %
Fair value per
option £
16 June 2017
TSR dependent
4.00
Nil
31
3.0
0.2
0.0
0.0
2.17
16 June 2017
OP dependent
4.00
Nil
N/A
3.0
0.2
0.0
0.0
4.00
30 August 2017
TSR dependent
3.42
Nil
31
3.0
0.2
0.0
0.0
2.17
30 August 2017
OP dependent
3.42
Nil
N/A
3.0
0.2
0.0
0.0
3.42
17 August 2018
OP dependent
4.48
Nil
N/A
3.0
0.7
1.7
0.0
4.48
17 August 2018
Revenue dependent
4.48
Nil
N/A
3.0
0.7
1.7
0.0
4.48
17 June 2019
OP dependent
5.65
Nil
N/A
3.0
0.6
1.3
0.0
5.65
17 June 2019
Revenue dependent
5.65
Nil
N/A
3.0
0.6
1.3
0.0
5.65
8 July 2020
TSR dependent
5.27
Nil
32
3.0
(0.1)
0.0
0.0
2.83
17 June 2021
OP dependent
6.29
Nil
N/A
3.0
0.2
0.9
0.0
6.29
17 June 2021
Revenue dependent
6.29
Nil
N/A
3.0
0.2
0.9
0.0
6.29
17 June 2021
Diversity progress dependent
6.29
Nil
N/A
3.0
0.2
0.9
0.0
6.29
23 June 2022
OP dependent
5.31
Nil
N/A
3.0
2.0
1.3
0.0
5.31
23 June 2022
Revenue dependent
5.31
Nil
N/A
3.0
2.0
1.3
0.0
5.31
23 June 2022
Carbon reduction dependent
5.31
Nil
N/A
3.0
2.0
1.3
0.0
5.31
Expected volatility is estimated by considering historic average share price volatility at the grant date.
The number of options outstanding and exercisable as at 31 March 2023 was as follows:
2023
Number
2022
Number
Outstanding at 1 April
1,401,701
1,741,829
Options granted in the year
360,695
368,361
Dividend shares awarded
8,319
2,916
Options forfeited in the year
(129,684)
(344,766)
Options exercised in the year
(241,047)
(366,639)
Outstanding at 31 March
1,399,984
1,401,701
Exercisable at 31 March
79,348
181,875
The weighted average market value per ordinary share for PSP options exercised in 2023 was 587.2p (2022: 639.5p). The PSP awards
outstanding at 31 March 2023 have a weighted average remaining vesting period of 1.0 years (2022: 1.2 years) and a weighted average
contractual life of 7.9 years (2022: 7.9 years).
Deferred Annual Bonus and Single Incentive Plan Award
The Group operates the Deferred Annual Bonus and Single Incentive Plan Award for Executive Directors, the Operational Leadership Team
and certain key employees. The plan consists of two schemes, the Deferred Annual Bonus Plan (‘DABP’) and the Single Incentive Plan Award
(‘SIPA’).
Deferred Annual Bonus
The Group operates a Deferred Annual Bonus Plan (‘DABP’) for Executive Directors. Awards under the plan are contingent on the
satisfaction of pre-set internal targets relating to financial and operational objectives. The extent to which the awards vest will depend
upon the satisfaction of the Group’s financial and operational performance in the financial year of the award date (the ‘Performance
Conditions’). The awards will vest on the second anniversary of the date the Remuneration Committee determines that the Performance
Conditions have been satisfied (the ‘Vesting Period’). Awards are potentially forfeitable during that period should the employee leave
employment. The DABP awards have been valued using the Black-Scholes method where appropriate and the resulting share-based
payments charge is being spread evenly over the combined Performance Period and Vesting Period of the shares, being three years.
On 23 June 2022, the Group awarded 108,704 nil cost options under the DABP scheme (2022: nil). DABP award holders are entitled to
receive dividends accruing between the grant date and the vesting date and this value will be delivered in shares. The assumptions used
in the measurement of the fair value at grant date of the DABP awards are as follows:
Grant date
Share price at
grant date
£
Exercise price
£
Option life
years
Risk-free rate
%
Dividend yield
%
Non-vesting
condition
%
Fair value per
option
£
17 August 2018
4.48
Nil
2.0
0.7
1.7
0.0
4.48
17 June 2019
5.65
Nil
2.0
0.6
1.3
0.0
5.65
23 June 2022
5.31
Nil
2.0
2.0
1.3
0.0
5.31
The number of options outstanding and exercisable as at 31 March was as follows:
2023
Number
2022
Number
Outstanding at 1 April
–
121,289
Options granted in the year
108,704
–
Dividend shares awarded
–
1,211
Options exercised in the year
–
(122,500)
Outstanding at 31 March
108,704
–
Exercisable at 31 March
–
–
No DABP options were exercised in 2023; the weighted average market value per ordinary share for DABP options exercised in 2022 was 640.7p.
Single Incentive Plan Award
The Group operates a Single Incentive Plan Award (‘SIPA’) for the Operational Leadership Team and certain key employees. The extent
to which awards vest will depend upon the satisfaction of the Group’s financial and operational performance in the financial year of
the award date (the ‘Performance Conditions’). The awards will vest in tranches, with the first tranche vesting on the date on which the
Remuneration Committee determines that the Performance Conditions have been satisfied, and subsequent tranches vesting on the first
and second anniversary of this date, subject to continuing employment.
On 23 June 2022, the Group awarded 681,586 nil cost options under the SIPA scheme. For the 2022 awards, 75% of the award value is
dependent on FY23 Operating profit and the remaining 25% is subject to successful implementation of digital retailing related products
by 31 March 2023. The fair value of the 2022 award was determined to be £5.31 per option, being the share price at grant date.
The resulting share-based payments charge is being spread evenly over the period between the grant date and the vesting date. SIPA
holders are entitled to receive dividends accruing between the grant date and the vesting date and this value will be delivered in shares.
The assumptions used in the measurement of the fair value at grant date of the SIPA awards are as follows:
Grant date
Share price at
grant date
£
Exercise
price
£
Expected
volatility
%
Option life
years
Risk-free rate
%
Dividend
yield
%
Non-vesting
condition
%
Fair value per
option
£
17 August 2018
4.48
Nil
N/A
3.0
0.7
1.7
0.0
4.48
17 June 2019
5.65
Nil
N/A
3.0
0.6
1.3
0.0
5.65
8 July 2020
5.27
Nil
N/A
3.0
(0.1)
0.0
0.0
5.27
24 November 2020
5.52
Nil
N/A
3.0
(0.1)
0.0
0.0
5.52
17 June 2021
6.29
Nil
N/A
3.0
0.2
0.9
0.0
6.29
23 June 2022
5.31
Nil
N/A
3.0
2.0
1.3
0.0
5.31
The number of options outstanding and exercisable as at 31 March was as follows:
2023
Number
2022
Number
Outstanding at 1 April
1,291,868
1,012,199
Options granted in the year
681,586
718,634
Dividend shares awarded
5,710
5,440
Options exercised in the year
(214,290)
(429,283)
Options forfeited in the year
(247,108)
(15,122)
Outstanding at 31 March
1,517,766
1,291,868
Exercisable at 31 March
412,346
179,065
The weighted average market value per ordinary share for SIPA options exercised in 2023 was 601.1p (2022: 646.2p). The SIPA awards
outstanding at 31 March 2023 have a weighted average remaining vesting period of 1.2 years (2022: 0.8 years) and a weighted average
contractual life of 8.2 years (2022: 8.6 years). The charge for the year includes an estimate of the awards to be granted after the balance
sheet date in respect of achievement of 2021 targets.
Sharesave scheme
The Group operates a Sharesave (‘SAYE’) scheme for all employees under which employees are granted an option to purchase ordinary
shares in the Company at up to 20% less than the market price at invitation, in three years’ time, dependent on their entering into a
contract to make monthly contributions into a savings account over the relevant period. Options are granted and are linked to a savings
contract with a term of three years. These funds are used to fund the option exercise. No performance criteria are applied to the exercise
of Sharesave options. The assumptions used in the measurement of the fair value at grant date of the Sharesave plan are as follows:
Grant date
Share price at
grant date
£
Exercise
price
£
Expected
volatility
%
Option life
years
Risk-free rate
%
Dividend
yield
%
Non-vesting
condition
%
Fair value per
option
£
14 December 2018
4.48
3.49
29
3.0
0.7
1.7
16
1.29
13 December 2019
5.74
4.32
25
3.0
0.6
1.3
10
1.63
16 December 2020
5.75
4.41
32
3.0
0.0
0.5
10
1.86
16 December 2021
7.13
5.88
32
3.0
0.5
0.5
10
2.05
14 December 2022
5.64
4.56
34
3.0
3.2
1.3
10
1.87
Expected volatility is estimated by considering historic average share price volatility at the grant date. The requirement that an employee
has to save in order to purchase shares under the Sharesave plan is a non-vesting condition. This feature has been incorporated into the
fair value at grant date by applying a discount to the valuation obtained from the Black-Scholes pricing model.
2023
2022
Number of share
options
Weighted average
exercise price
£
Number of share
options
Weighted average
exercise price
£
Outstanding at 1 April
1,446,582
4.72
1,505,816
3.88
Options granted in the year
688,115
4.56
482,325
5.88
Options exercised in the year
(406,060)
3.86
(446,884)
3.21
Options lapsed in the year
(362,285)
5.39
(94,675)
4.38
Outstanding at 31 March
1,366,352
4.72
1,446,582
4.72
Exercisable at 31 March
53,892
4.32
242,707
3.49
The weighted average market value per ordinary share for Sharesave options exercised in 2023 was 597.4p (2022: 646.2p). The Sharesave
options outstanding at 31 March 2023 have a weighted average remaining vesting period of 2.0 years (2022: 1.7 years) and a weighted
Purchase of Autorama UK Limited
On 22 June 2022, the Group acquired the entire share capital of Autorama UK Limited (‘Autorama’) for initial consideration of £150.0m,
with an additional £50.0m deferred until 22 June 2023 and settled in shares to the value of £50.0m, subject to employment and customary
performance conditions.
Autorama, one of the UK’s largest marketplaces for leasing new vehicles, is a leading end-to-end digital platform, which aggregates leasing
deals from multiple funders and OEMs (under its ‘Vanarama‘ brand), enabling buyers to transact online across a wide range of vehicles.
The total consideration of £150.0m excludes acquisition costs of £2.1m which were recognised within costs in the Consolidated income
statement. The following table provides a reconciliation of the amounts included in the Consolidated statement of cash flows for the period:
2023
£m
Cash paid for subsidiary
150.0
Less: cash acquired
(5.8)
Payment for acquisition of subsidiary, net of cash acquired
144.2
As the settlement of the deferred £50.0m consideration is subject to a condition for continuing employment to 22 June 2023, the amount
is not included in the business combination but is recorded as a post-acquisition income statement expense over the period of service, which
extends to the first anniversary of the acquisition. A charge of £38.8m has been recorded in the period from acquisition to 31 March 2023.
From the period of acquisition to 31 March 2023, Autorama contributed revenue of £27.2m, and a loss of £11.2m to the Group’s results.
Further analysis is within note 2.
The purchase has been accounted for as a business combination under the acquisition method in accordance with IFRS 3. The fair value
of net assets acquired was assessed and, other than in respect of the intangible assets and related deferred tax, described below,
no material adjustments from book value were made to existing assets and liabilities. The goodwill calculation is summarised below:
Fair value
£m
Intangible asset recognised on acquisition
Brand
47.6
Technology
13.7
Customer relationships
2.9
Order book
2.3
Deferred tax liability arising on intangible assets
(16.3)
50.2
Other non-current assets
Investments
1.0
Property, plant and equipment
5.3
Intangible assets
0.4
Deferred tax asset
6.8
13.5
Current assets
Cash and cash equivalents
5.8
Trade and other receivables
4.5
Inventory
0.9
Other debtors
0.9
12.1
Current liabilities
Trade and other payables
11.6
Deferred income
2.3
13.9
Non-current liabilities
Borrowings
4.0
Lease liabilities
0.4
4.4
Total net assets acquired
57.5
Goodwill on acquisition
92.5
Total assets acquired
150.0
Fair value of cash consideration
150.0
The brand, technology, customer relationships and order book obtained through the acquisition met the requirements to be separately
identifiable under IFRS 3. Refer to note 2 for further details on fair value techniques for valuing intangibles.
The business operates under the Vanarama brand name and is one of the UK’s longest running e-commerce brands. The asset was valued
using the Multi-period Excess Earnings Method and cross-checked using relief from royalty. A useful economic life and obsolescence
decline period of 10 years was assumed. Revenue forecasts during this period were consistent with those described for Autorama in
note 13, before adjustment for brand obsolescence. A post-tax discount rate of 14% was applied. This discount rate is lower than that for
Autorama as a whole at the date of acquisition and reflects factors including the finite brand forecast period, compared to cash flows
into perpetuity used to support the goodwill.
The technology is Autorama’s propriety technology which helps manage a complex vehicle lease purchasing process into a streamlined
online transaction via a customer friendly user interface, which has been developed in-house. The asset was valued using the cost
approach specifically replacement costs and crosschecked using relief from royalty. The order book is customer orders not yet delivered,
which is expected to unwind.
The goodwill recognised on acquisition principally relates to value arising from intangible assets that are not separately identifiable
under IFRS 3. Such assets include the value of the acquired workforce (including technical experience), returning customers, supplier
relationships with funders and car manufacturers and future market growth opportunities. Customer lists have not been valued separately
on the basis they are inseparable in their own right from the brand. Supplier relationships are not separately valued on the basis that their
terms are in line with industry standards of what would be typically agreed with a market participant.
The valuation of the Vanarama brand name is sensitive to a change in the obsolescence rate assumption. An obsolescence profile has
been assumed which is considered to be a representative curve for a consumer asset in the absence of continued marketing spend,
showing a slow decline in the early years due to the benefit of historic spend, then decline accelerating in the middle years as consumer
brand consciousness falls, before slowing in the final years to reflect a slower drop off of residual awareness. Slowing or accelerating
the assumed rate of obsolescence by one year, with all other factors being unchanged, would increase or decrease the valuation of the
brand by £14m or £16m respectively. Residual goodwill would be adjusted by an equal and opposite amount, net of taxation. The discount
rate used in the brand valuation is less sensitive to change, reflecting the finite useful economic life of 10 years and the lower positive cash
flows in the latter years due to the obsolescence decline.
None of the acquired intangible assets or goodwill is expected to be deductible for tax purposes. A deferred tax liability has been recorded
on the fair value of the intangible assets recognised, other than goodwill, measured at the substantively enacted UK rate of corporation tax
from April 2023 of 25%. This deferred tax liability has been debited against and increased the value of goodwill recognised.
Settlement of deferred consideration in relation to Blue Owl Network Limited
In addition, in July 2022, the deferred consideration of £8.1m was settled in respect of the acquisition of Blue Owl Network Limited (‘Blue
Owl’). On 31 July 2020, the Group acquired the entire share capital of Blue Owl for consideration of £18.2m, of which £8.1m was deferred
Financial assets
Note
2023
£m
2022
£m
Net trade receivables (invoiced)
18
28.5
25.7
Net accrued income
18
38.7
34.6
Net trade receivables (total)
18
67.2
60.3
Other receivables
18
0.3
0.1
Cash and cash equivalents
20
16.6
51.3
Total
84.1
111.7
Credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2023
was £84.1m (2022: £111.7m). The maximum exposure to credit risk for trade receivables and accrued income at the reporting date by
geographic region was:
2023
£m
2022
£m
UK
67.2
59.5
Ireland
–
0.8
Total
67.2
60.3
The maximum exposure to credit risk for trade receivables and accrued income at the reporting date by type of customer was:
2023
£m
2022
£m
Retailers
52.7
50.6
Manufacturer and Agency
5.1
3.7
Other
5.3
6.0
Autorama
4.1
–
Total
67.2
60.3
The Group’s most significant customer accounts for £1.2m (2022: £1.2m) of net trade receivables as at 31 March 2023.
Expected credit losses are measured using a provisioning matrix based on actual credit loss experience over the past three years and
adjusted, when required, to take into account current macro-economic factors. For certain customers the Group applies experienced
credit judgement that is determined to be predictive of the risk of loss to assess the expected credit loss, taking into account external
ratings, financial statements and other available information. The following table provides information about the exposure to credit
risk and expected credit losses for trade receivables and accrued income from individual customers as at 31 March 2023.
Expected credit
loss rate
Gross carrying
amount
£m
Loss allowance
£m
Credit-impaired
Accrued income
3.7%
40.2
(1.5)
No
Current
2.8%
25.4
(0.7)
No
Past due 1–30 days
8.8%
3.4
(0.3)
No
Past due 31–60 days
27.8%
0.4
(0.1)
No
Past due 61–90 days
83.3%
0.1
(0.1)
No
More than 91 days past due
81.1%
2.2
(1.8)
No
71.7
(4.5)
At 31 March 2022, ECLs were adjusted for the macro-economic uncertainty around retailer profitability driven by used car price volatility.
A consistent level of ECLs has been recorded at 31 March 2023. Sensitivity analysis has been performed in assessing the expected credit
loss rate. There are no changes to the rate that are considered by the Directors to be reasonably possible, which give rise to a material
difference in the loss allowance.
Comparative information about the exposure to credit risk and expected credit losses for trade receivables from individual customers
as at 31 March 2022 is set out below:
Expected credit
loss rate
Gross carrying
amount
£m
Loss allowance
£m
Credit-impaired
Accrued income
3.4%
35.8
(1.2)
No
Current
2.6%
23.4
(0.6)
No
Past due 1–30 days
9.5%
2.1
(0.2)
No
Past due 31–60 days
14.3%
0.7
(0.1)
No
Past due 61–90 days
50.0%
0.2
(0.1)
No
More than 91 days past due
83.3%
1.8
(1.5)
No
64.0
(3.7)
The Group has identified specific balances for which it has provided an impairment allowance on a line by line basis across all ledgers,
in both years. The allowance accounts in respect of trade receivables are used to record impairment losses unless the Group is satisfied
that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the financial
asset directly.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows.
Note
2023
£m
2022
£m
At 1 April
18
2.5
2.9
Charged during the year
1.0
0.5
Acquired through business combinations
0.3
–
Utilised during the year
(0.8)
(0.9)
At 31 March
18
3.0
2.5
The movement in the allowance for impairment in respect of accrued income during the year was as follows.
Note
2023
£m
2022
£m
At 1 April
18
1.2
1.3
Charged during the year
0.5
0.1
Utilised during the year
(0.2)
(0.2)
At 31 March
18
1.5
Cash and cash equivalents
The cash and cash equivalents are held with bank and financial institution counterparties, which are rated between P-1 and P-2 based on
Moody’s ratings. The Directors do not consider deposits at these institutions to be at risk.
2023
2022
As per balance
sheet
£m
Future interest
cost
£m
Total cash flows
£m
As per balance
sheet
£m
Future interest
cost
£m
Total cash flows
£m
Trade and other payables
27.9
–
27.9
17.7
–
17.7
Vehicle stocking loan
3.0
–
3.0
–
–
–
Borrowings (gross of debt issue costs)
58.6
–
58.6
–
–
–
Deferred consideration
–
–
–
8.0
0.1
8.1
Leases
7.1
0.3
7.4
9.5
0.4
9.9
Total
96.6
0.3
96.9
35.2
0.5
35.7
Trade and other payables are as disclosed within note 21, excluding vehicle stocking loan, other taxation and social security liabilities and
deferred income.
IFRS 7 requires the contractual future interest cost of a financial liability to be included within the above table. As disclosed in note 22 of
these Consolidated financial statements, borrowings are currently drawn under a syndicated debt arrangement and repayments can be
made at any time without penalty. As such there is no contractual future interest cost. Interest is payable on borrowings’ drawn amounts
at a rate of SONIA prevailing at the time of drawdown plus the applicable margin, which ranges from 1.2% to 2.1%. Interest paid in the year
in relation to borrowings amounted to £3.0m (2022: £1.4m).
The Company had no derivative financial liabilities in either year. It is not expected that the cash flows included in the maturity analysis
could occur earlier or at significantly different amounts.
Liquidity risk
The maturity of financial liabilities based on contracted cash flows is shown in the table below. This table has been drawn up using the
undiscounted cash flows of financial liabilities based on the earliest date on which the Group is obliged to pay. The table includes both
interest and principal cash flows. Floating rate interest payments have been calculated using the relevant interest rates prevailing at the
year end, where applicable.
As at 31 March 2023
Trade and other
payables
£m
Vehicle
stocking loan
£m
Borrowings
£m
Deferred
consideration
£m
Leases
£m
Total
£m
Due within one year
27.9
3.0
1.1
–
2.5
34.5
Due within one to two years
–
–
–
–
2.4
2.4
Due within two to five years
–
–
57.5
–
2.5
60.0
Due after more than five years
–
–
–
–
–
–
Total
27.9
3.0
58.6
–
7.4
96.9
As at 31 March 2022
Trade and other
payables
£m
Vehicle
stocking loan
£m
Borrowings
£m
Deferred
consideration
£m
Leases
£m
Total
£m
Due within one year
17.7
–
–
8.1
3.0
28.8
Due within one to two years
–
–
–
–
2.8
2.8
Due within two to five years
–
–
–
–
2.1
2.1
Due after more than five years
–
–
–
–
2.0
2.0
Total
17.7
–
–
8.1
9.9
35.7
Analysis of net debt
Net debt is calculated as total borrowings, vehicle stocking loan and lease liabilities, less cash and cash equivalents. Non-cash changes
represent the effects of the recognition and subsequent amortisation of fees relating to the bank facility, changing maturity profiles,
acquisition of debt and new leases entered into during the year.
March 2023
At
1 April 2022
£m
Cash flow
£m
Non-cash
changes
£m
At
31 March 2023
£m
Debt due within one year
–
1.1
–
1.1
Debt due after more than one year
–
54.6
2.9
57.5
Vehicle stocking loan
–
–
3.0
3.0
Accrued interest
0.1
(3.0)
3.2
0.3
Lease liabilities
9.5
(2.9)
0.5
7.1
Total debt and lease financing
9.6
49.8
9.6
69.0
Cash and cash equivalents
(51.3)
34.7
–
(16.6)
Net debt/(cash)
(41.7)
84.5
9.6
52.4
Non-cash changes on debt due after more than one year include borrowings of £4.0m which were acquired as part of the Autorama
business combination, and were subsequently repaid in July 2022.
March 2022
At
1 April 2021
£m
Cash flow
£m
Non-cash
changes
£m
At
31 March 2022
£m
Debt due after more than one year
27.6
(30.0)
2.4
–
Accrued interest
0.3
(1.5)
1.3
0.1
Lease liabilities
7.5
(3.2)
5.2
9.5
Total debt and lease financing
35.4
(34.7)
8.9
9.6
Cash and cash equivalents
(45.7)
(5.6)
–
(51.3)
Net debt/(cash)
(10.3)
(40.3)
8.9
(41.7)
Reconciliation of movements in liabilities to cash flows arising from financing activities
Liabilities/(Assets)
Equity
Borrowings
and accrued
interest
Vehicle
stocking
loan
Lease
liabilities
Share
capital
Retained
earnings
Own shares
held
Other
reserves
Total
Balance as of 1 April 2022
(1.2)
–
9.5
9.5
1,332.4
(22.4)
(847.0)
480.8
Changes from financing cash flows
Dividends paid to Company shareholders
–
–
–
–
(77.7)
–
–
(77.7)
Drawdown of Syndicated RCF
110.0
–
–
–
–
–
–
110.0
Repayment of Syndicated RCF
(50.0)
–
–
–
–
–
–
(50.0)
Repayment of other debt
(4.0)
–
–
–
–
–
–
(4.0)
Proceeds from loan
1.1
–
–
–
–
–
–
1.1
Payment of refinancing fees
(1.4)
–
–
–
–
–
–
(1.4)
Payment of interest on borrowings
(3.0)
–
–
–
–
–
–
(3.0)
Payment of lease liabilities
–
–
(2.9)
–
–
–
–
(2.9)
Purchase of own shares for cancellation
–
–
–
(0.2)
(138.6)
–
0.2
(138.6)
Purchase of own shares for treasury
–
–
–
–
–
(8.7)
–
(8.7)
Fees on repurchase of own shares
–
–
–
–
(0.7)
–
–
(0.7)
Proceeds from exercise of share-based incentives
–
–
–
–
2.0
–
–
2.0
Total changes from financing cash flows
52.7
–
(2.9)
(0.2)
(215.0)
(8.7)
0.2
(173.9)
Other changes – liability related
Interest expense
3.1
–
0.2
–
–
–
–
3.3
Other
4.3
3.0
0.3
–
–
–
–
7.6
Total liability-related other changes
7.4
3.0
0.5
–
–
–
–
10.9
Total equity-related other changes
–
–
–
–
272.9
5.1
0.5
278.5
Balance as of 31 March 2023
58.9
3.0
7.1
9.3
1,390.3
(26.0)
(846.3)
596.3
Liabilities/(Assets)
Equity
Borrowings
and accrued
interest
Lease
liabilities
Share
capital
Retained
earnings
Own
shares
held
Other
reserves
Total
Balance as of 1 April 2021
27.9
7.5
9.7
1,307.3
(10.7)
(847.6)
494.1
Changes from financing cash flows
Dividends paid to Company shareholders
–
–
–
(73.6)
–
–
(73.6)
Repayment of Syndicated RCF
(30.0)
–
–
–
–
–
(30.0)
Payment of interest on borrowings
(1.5)
–
–
–
–
–
(1.5)
Payment of lease liabilities
–
(3.2)
–
–
–
–
(3.2)
Purchase of own shares for cancellation
–
–
(0.2)
(145.8)
–
0.2
(145.8)
Purchase of own shares for treasury
–
–
–
–
(17.7)
–
(17.7)
Fees on repurchase of own shares
–
–
–
(0.8)
(0.1)
–
(0.9)
Issue of ordinary shares
–
–
–
–
–
0.2
0.2
Proceeds from exercise of share-based incentives
–
–
–
1.4
–
–
1.4
Total changes from financing cash flows
(31.5)
(3.2)
(0.2)
(218.8)
(17.8)
0.4
(271.1)
Other changes – liability related
Interest expense
2.4
0.2
–
–
–
–
2.6
Other
–
5.0
–
–
–
–
5.0
Total liability-related other changes
2.4
5.2
–
–
–
–
7.6
Total equity-related other changes
–
–
–
243.9
6.1
0.2
250.2
Balance as of 31 March 2022
(1.2)
9.5
9.5
1,332.4
(22.4)
(847.0)
Dealer Auction Limited
The Group transacted the following related party transactions with its joint venture, Dealer Auction Limited, during the period.
The Group provided data services to Dealer Auction under a licence agreement established as part of the formation of the joint
venture in January 2019. The value of services provided to Dealer Auction was £0.6m (2022: £0.6m) and has been recognised within
revenue. At 31 March 2023, deferred income outstanding in relation to the licence agreement was £8.9m (2022: £9.5m).
Other related party transactions
Key Management personnel compensation has been disclosed in note 8.
The Group sponsors a funded defined benefit pension scheme. Details of transactions with the Wiltshire (Bristol) Limited Retirement
Subsidiaries
At 31 March 2023 the Group’s subsidiaries were:
Subsidiary undertakings
Country of registration or
incorporation
Principal activity
Class of shares
held
Percentage
owned by the
parent
Percentage
owned by the
Group
Auto Trader Holding Limited
1
England and Wales
Intermediary holding
company
Ordinary
100%
100%
Auto Trader Limited
1
England and Wales
Online marketplace
Ordinary
–
100%
Trader Licensing Limited
1
England and Wales
Dormant company
Ordinary
–
100%
Autorama UK Limited
2
England and Wales
Online marketplace
Ordinary
100%
100%
Vanarama Limited
2
England and Wales
Dormant company
Ordinary
–
100%
Autorama Holding (Malta) Limited
3
Malta
Investment company for a
protected cell company
Ordinary
–
100%
Vanarama USA Inc
4
United States of America
Dormant company
Ordinary
–
100%
Blue Owl Network Limited
1
England and Wales
Finance platform
Ordinary
–
100%
1.
Registered office address is 4
th
Floor, 1 Tony Wilson Place, Manchester, M15 4FN.
2.
Registered office address is Maylands Avenue, Hemel Hempstead, Hertfordshire, HP2 7DE.
3.
Registered office address is The Landmark, Level 2, Suite 1, Triq L-Iljun, Qormi, Malta.
4.
Registered office address is 800 Battery Ave SE, Suite 100, Atlanta, GA, 30339-5107, United States.
During the year, the Group disposed of Webzone Limited and liquidated KeeResources Limited.
All subsidiaries have a year end of 31 March, apart from Vanarama Limited, which has a year end of 30 November, and Autorama Holding
(Malta) Limited and Vanarama USA Inc, which have a year end of 31 December.
Joint ventures
At 31 March 2023 the Group’s interests in joint ventures were:
Joint ventures
Country of registration or
incorporation
Principal activity
Class of shares
held
Percentage
owned by the
parent
Percentage
owned by the
Group
Dealer Auction Limited
1
England and Wales
Online marketplace
Ordinary
–
49%
Dealer Auction (Operations) Limited
1
England and Wales
Dormant company
Ordinary
–
49%
Auto Trader Autostock Limited
1
England and Wales
Dormant company
Ordinary
–
49%
Dealer Auction Services Limited
1
England and Wales
Dormant company
Ordinary
–
49%
1.
Registered office address is Central House, Leeds Road, Rothwell, Leeds, West Yorkshire, England, LS26 0JE.
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
155
Note
2023
£m
2022
£m
Fixed assets
Investments
3
1,427.2
1,224.9
1,427.2
1,224.9
Current assets
Debtors
4
338.1
487.6
Cash and cash equivalents
5
0.3
0.2
338.4
487.8
Creditors: amounts falling due within one year
6
(905.5)
(664.2)
Net current assets
(567.1)
(176.4)
Net assets
860.1
1,048.5
Capital and reserves
Called-up share capital
9
9.3
9.5
Share premium
182.6
182.6
Own shares held
10
(26.0)
(22.4)
Capital redemption reserve
1.2
1.0
Retained earnings
693.0
877.8
Total equity
860.1
1,048.5
The loss for the year of the Company was £9.0m (2022: loss £3.2m). The financial statements were approved by the Board of Directors on
1 June 2023 and authorised for issue:
Jamie Warner
Chief Financial Officer
Auto Trader Group plc
Registered number: 09439967
1 June 2023
Auto Trader Group plc
Annual Report and Financial Statements 2023
156
Share
capital
£m
Share
premium
£m
Own shares
held
£m
Capital
redemption
reserve
£m
Retained
earnings
£m
Total
equity
£m
Balance at 31 March 2021
9.7
182.4
(10.7)
0.8
1,100.8
1,283.0
Loss for the year
–
–
–
–
(3.2)
(3.2)
Total comprehensive expense, net of tax
–
–
–
–
(3.2)
(3.2)
Transactions with owners:
Purchase and cancellation of own shares
(0.2)
–
–
0.2
(146.5)
(146.5)
Dividends paid
–
–
–
–
(73.6)
(73.6)
Share-based payments
–
–
–
–
5.1
5.1
Exercise of employee share schemes
–
–
6.0
–
(4.8)
1.2
Transfer of shares from ESOT
–
–
0.1
–
(0.1)
–
Acquisition of treasury shares
–
–
(17.8)
–
–
(17.8)
Issue of ordinary shares
–
0.2
–
–
–
0.2
Tax on share-based payments
–
–
–
–
0.1
0.1
Total transactions with owners recognised directly in equity
(0.2)
0.2
(11.7)
0.2
(219.8)
(231.3)
Balance at 31 March 2022
9.5
182.6
(22.4)
1.0
877.8
1,048.5
Loss for the year
–
–
–
–
(9.0)
(9.0)
Total comprehensive expense, net of tax
–
–
–
–
(9.0)
(9.0)
Transactions with owners:
Purchase and cancellation of own shares
(0.2)
–
–
0.2
(139.3)
(139.3)
Dividends paid
–
–
–
–
(77.7)
(77.7)
Share-based payments
–
–
–
–
44.6
44.6
Exercise of employee share schemes
–
–
5.1
–
(3.6)
1.5
Acquisition of treasury shares
–
–
(8.7)
–
–
(8.7)
Tax on share-based payments
–
–
–
–
0.2
0.2
Total transactions with owners recognised directly in equity
(0.2)
–
(3.6)
0.2
(175.8)
(179.4)
Balance at 31 March 2023
9.3
182.6
(26.0)
1.2
693.0
860.1
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
157
1. Accounting policies
Auto Trader Group plc is a public limited company which is listed on the London Stock Exchange and is domiciled and incorporated
in the United Kingdom under the Companies Act 2006. The Company was incorporated on 13 February 2015.
Statement of compliance and basis of preparation
The Company financial statements of Auto Trader Group plc have been prepared in compliance with United Kingdom Accounting
Standards, including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ applicable in the United Kingdom and the
Republic of Ireland (‘FRS 101’) and the Companies Act 2006.
In preparing these financial statements, the Company applies recognition, measurement and disclosure requirements of UK-adopted
international accounting standards (‘Adopted IFRSs’), but makes amendments where necessary in order to comply with the Companies
Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.
The Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• no separate parent company cash flow statement with related notes has been included;
• no separate parent company statement of comprehensive income with related notes has been included; and
• Key Management personnel compensation has not been included a second time.
As the Group financial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101
available in respect of the certain disclosures required by IFRS 2 Share-Based Payments in respect of group settled share-based
payments, IFRS 13 ‘Fair Value Measurement’ and the disclosures required by IFRS 7 ‘Financial Instruments: Disclosures’.
The Company financial statements have been prepared under the historical cost convention, as modified for the revaluation of
certain financial assets and liabilities through profit or loss. The current year financial information presented is at and for the year
ended 31 March 2023. The comparative financial information presented is at and for the year ended 31 March 2022.
The Company’s accounting policies are the same as those set out in note 1 to the Consolidated financial statements.
The Directors have used the going concern principle on the basis that the current profitable financial projections and facilities
of the consolidated Group will continue in operation for a period not less than 12 months from the date of this report.
The Company financial statements have been prepared in sterling (£), which is the functional and presentational currency of the
Company, and have been rounded to the nearest hundred thousand (£0.1m) except where otherwise indicated.
As permitted by Section 408 of the Companies Act 2006, an entity profit and loss account is not included as part of the published
Consolidated financial statements of Auto Trader Group plc. The loss for the financial period dealt with in the financial statements
of the parent company was £9.0m (2022: loss of £3.2m).
Amounts paid to the Company’s auditor in respect of the statutory audit were £200,000 (2022: £77,000). The charge was borne
by a subsidiary company and not recharged.
Estimation techniques
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also
requires management to exercise their judgement in the process of applying the Company’s accounting policies. The area involving
a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements,
is the carrying value of investments.
The Group considers annually whether there is an indicator that the carrying value of investments may have suffered an impairment,
in accordance with the accounting policy stated. Where an indicator is identified, the recoverable amounts of investments are
determined based on value-in-use calculations, which require the use of estimates.
Share-based payments
Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are
accounted for as equity-settled share-based payment transactions. The accounting policies of such arrangements are disclosed in note 1
to the Consolidated financial statements. The fair value of services received in return for share options is calculated with reference to
the fair value of the award on the date of grant. Black-Scholes and Monte Carlo models have been used where appropriate to calculate
the fair value and the Directors have therefore made estimates with regard to the inputs to these models. Estimation also arises over the
number of share awards that are expected to vest, which is based on whether non-market conditions are expected to be met (see note 30
to the Consolidated financial statements).
Investments in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. Annually, the Directors consider whether any events
or circumstances have occurred that could indicate that the carrying amount of fixed asset investments may not be recoverable. If such
circumstances do exist, a full impairment review is undertaken to establish whether the carrying amount exceeds the higher of net realisable
value or value in use. If this is the case, an impairment charge is recorded to reduce the carrying value of the related investment.
Notes to the Company financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
158
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity
as a deduction from the proceeds.
Where the Group purchases its own equity share capital, the consideration paid is deducted from equity attributable to the Group’s
shareholders. Where such shares are subsequently cancelled, the nominal value of the shares repurchased is deducted from share
capital and transferred to a capital redemption reserve. Where the Group purchases its own equity share capital to hold in treasury,
the consideration paid for the shares is shown as own shares held within equity.
Shares held by the Employee Share Option Trust
Shares in the Company held by the Employee Share Option Trust (‘ESOT’) are included in the balance sheet at cost as a deduction from equity.
Taxation
UK corporation tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the balance sheet date,
where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred
on the balance sheet date.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all evidence available, it can be
regarded as more likely than not that there will be suitable taxable profits against which to recover carried-forward tax losses and from
which the future reversal of underlying temporary differences can be deducted.
Deferred tax is measured at the average rates that are expected to apply in the periods in which the temporary differences are expected
to reverse based on the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax
is measured on an undiscounted basis.
Financial instruments
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at
fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
A trade receivable without a significant financing component is initially measured at the transaction price.
Under IFRS 9, trade receivables including accrued income, without a significant financing component, are classified and held at amortised
cost, being initially measured at the transaction price and subsequently measured at amortised cost less any impairment loss.
The Company recognises lifetime expected credit losses (‘ECLs’) for trade receivables and accrued income. The expected credit losses
are estimated using a provision matrix based on the Company’s historical credit loss experience, adjusted for any macro-economic
factors. At 31 March 2022, ECLs were adjusted for the macro-economic uncertainty around retailer profitability driven by used car price
volatility. A consistent level of ECLs has been recorded at 31 March 2023.
The Company assesses whether a financial asset is in default on a case by case basis when it becomes probable that the customer is
unlikely to pay its credit obligations. The gross carrying amount of a financial asset is written off when the Company has no reasonable
expectations of recovering a financial asset in its entirety or a portion thereof. For all customers, the Company individually makes
an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery.
The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be
subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.
At each reporting date, the Company assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset
is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset
have occurred.
Financial liabilities are classified as measured at amortised cost or fair value through profit and loss. A financial liability is classified as at
fair value through profit and loss if it is classified as held-for-trading, it is a derivative, or it is designated as such on initial recognition and
measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities,
including trade payables, are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign
exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss.
Dividend distribution
Dividends to the Company’s shareholders are recognised as a liability in the Company’s financial statements in the period in which the
dividends are approved by the Company’s shareholders in the case of final dividends. In respect of interim dividends, these are recognised
once paid.
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
159
2. Directors’ emoluments
The Company has no employees other than the Directors. Full details of the Directors’ remuneration and interests are set out in the
Directors’ remuneration report on pages 80 to 93.
3. Investments in subsidiaries
2023
£m
2022
£m
At beginning of the period
1,224.9
1,221.2
Additions – acquisition of subsidiary
150.0
–
Additions – investment in subsidiary
10.0
–
Additions – share-based payments relating to acquisition
38.8
–
Additions – share-based payments
3.5
3.7
At end of the period
1,427.2
1,224.9
Subsidiary undertakings are disclosed within note 35 to the Consolidated financial statements. The Company directly owns shares in two
subsidiaries, Auto Trader Holding Limited and Autorama UK Limited.
The additions in the year relating to the acquisition of a subsidiary principally relate to the purchase of 100% of the share capital of Autorama
UK Limited (‘Autorama’) of £150.0m, and a further investment of £10.0m. The remaining additions in the current and prior year relate to
equity-settled share-based payments granted to the employees of subsidiary companies.
The recoverable amount of the investment in Autorama has been determined using the methodology and assumptions disclosed in note 13
to the Consolidated financial statements. There is limited headroom between the recoverable amount and the carrying value of the Autorama
investment in the parent company due to the requirement to capitalise the £38.8m share-based payment charge relating to deferred
consideration in the parent company.
No impairment indicators were identified for the investment in Auto Trader Holding Limited.
4. Debtors
2023
£m
2022
£m
Amounts owed by Group undertakings
336.8
486.6
Other receivables
0.2
0.2
Deferred tax asset
1.1
0.8
Total
338.1
487.6
Amounts owed by Group undertakings are non-interest-bearing, unsecured and have no fixed date of repayment. These amounts are not
expected to be settled in the next 12 months.
5. Cash and cash equivalents
2023
£m
2022
£m
Cash at bank and in hand
0.3
0.2
6. Creditors: amounts falling due within one year
2023
£m
2022
£m
Amounts owed to Group undertakings
903.3
660.5
Accruals and deferred income
2.2
3.7
Total
905.5
664.2
Amounts owed to Group undertakings are non-interest-bearing, unsecured and have no fixed date of repayment.
Notes to the Company financial statements
continued
Auto Trader Group plc
Annual Report and Financial Statements 2023
160
7. Financial instruments
Financial instruments utilised by the Company during the year ended 31 March 2023 and the year ended 31 March 2022 may be analysed
as follows:
Financial assets
2023
£m
2022
£m
Financial assets measured at amortised cost
337.0
486.8
Financial liabilities
2023
£m
2022
£m
Financial liabilities measured at amortised cost
905.5
664.2
Current assets and liabilities
Financial instruments included within current assets and liabilities (excluding cash and borrowings) are generally short term in nature and
accordingly their fair values approximate to their book values.
8. Dividends
Dividends declared and paid by the Company were as follows:
2023
2022
Pence
per share
£m
Pence
per share
£m
2022 final dividend paid
5.5
51.7
5.0
48.0
2023 interim dividend paid
2.8
26.0
2.7
25.6
8.3
77.7
7.7
73.6
The proposed final dividend for the year ended 31 March 2023 of 5.6p per share, totalling £51.4m, is subject to approval by shareholders
at the Annual General Meeting (‘AGM’) and hence has not been included as a liability in the financial statements.
The 2022 final dividend paid on 23 September 2022 was £51.7m. The 2023 interim dividend paid on 27 January 2023 was £26.0m.
The Directors’ policy with regard to future dividends is set out in the Financial review on page 25.
9. Called-up share capital
Share capital
2023
2022
Number
’000
Amount
£m
Number
’000
Amount
£m
Allotted, called-up and fully paid ordinary shares of 1p each
At 1 April
946,893
9.5
969,024
9.7
Purchase and cancellation of own shares
(23,831)
(0.2)
(22,198)
(0.2)
Issue of shares
13
–
67
–
Total
923,075
9.3
946,893
9.5
In the year ended 31 March 2017, the Company commenced a share buyback programme. By resolutions passed at the 2021 AGM,
the Company’s shareholders generally authorised the Company to make market purchases of up to 96,678,535 of its ordinary shares,
subject to minimum and maximum price restrictions. In the year ended 31 March 2023, a total of 25,261,584 ordinary shares of £0.01 were
purchased. The average price paid was 582.1p with a total consideration paid (inclusive of fees of £0.7m) of £148.0m. Of all shares
purchased, 1,430,372 were held in treasury with 23,831,212 being cancelled. In the year ended 31 March 2023, 12,893 ordinary shares were
issued for the settlement of share-based payments.
Included within shares in issue at 31 March 2023 are 340,196 (2022: 358,158) shares held by the ESOT and 4,371,505 (2022: 3,826,928) shares
held in treasury, as detailed in note 27.
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
161
10. Own shares held
Own shares held – £m
ESOT shares
reserve
£m
Treasury
shares
£m
Total
£m
Own shares held as at 31 March 2021
(0.5)
(10.2)
(10.7)
Transfer of shares from ESOT
0.1
–
0.1
Repurchase of own shares for treasury
–
(17.8)
(17.8)
Share-based incentives
–
6.0
6.0
Own shares held as at 31 March 2022
(0.4)
(22.0)
(22.4)
Repurchase of own shares for treasury
–
(8.7)
(8.7)
Share-based incentives
–
5.1
5.1
Own shares held as at 31 March 2023
(0.4)
(25.6)
(26.0)
Own shares held – number
ESOT shares
reserve
Number of shares
Treasury
shares
Number of shares
Total
number of
own shares
held
Own shares held as at 31 March 2021
404,653
2,422,659
2,827,312
Transfer of shares from ESOT
(46,495)
–
(46,495)
Repurchase of own shares for treasury
–
2,718,193
2,718,193
Share-based incentives exercised in the year
–
(1,313,924)
(1,313,924)
Own shares held as at 31 March 2022
358,158
3,826,928
4,185,086
Transfer of shares from ESOT
(17,962)
–
(17,962)
Repurchase of own shares for treasury
–
1,430,372
1,430,372
Share-based incentives exercised in the year
–
(885,795)
(885,795)
Own shares held as at 31 March 2023
340,196
4,371,505
4,711,701
11. Related parties
During the year, a management charge of £5.9m (2022: £4.9m) was received from Auto Trader Limited in respect of services rendered.
At the year end, balances outstanding with other Group undertakings were £336.8m and £903.3m respectively for debtors and creditors
(2022: £486.6m and £660.5m) as set out in notes 4 and 6.
12. Contingent liability – financial guarantee
During the year, the Company became a financial guarantor for the arrangement between Autorama UK Limited and its vehicle stocking
loan provider, Lombard North Central PLC. As at 31 March 2023, the maximum amount the Company would be required to pay if called
upon is £3.6m, plus interest.
Notes to the Company financial statements
continued
Auto Trader Group plc
Annual Report and Financial Statements 2023
162
2023
£m
2022
£m
2021
£m
2020
£m
2019
£m
Trade
427.4
388.3
225.2
324.3
304.6
Consumer Services
34.5
33.3
26.6
28.3
28.0
Manufacturer and Agency
11.1
11.1
11.0
16.3
22.5
Autorama
27.2
–
–
–
–
Revenue
500.2
432.7
262.8
368.9
355.1
Operating costs
(225.1)
(132.0)
(104.0)
(113.2)
(112.3)
Share of profit from joint ventures
2.5
2.9
2.4
3.2
0.9
Operating profit
277.6
303.6
161.2
258.9
243.7
Net interest expense
(3.1)
(2.6)
(3.8)
(7.4)
(10.2)
Profit on disposal of subsidiary
19.1
–
–
–
8.7
Profit before taxation
293.6
301.0
157.4
251.5
242.2
Taxation
(59.7)
(56.3)
(29.6)
(46.4)
(44.5)
Profit after taxation
233.9
244.7
127.8
205.1
197.7
Net assets/(liabilities)
527.3
472.5
458.7
141.6
59.0
Net bank debt/(cash) (gross bank debt less cash)
43.4
(51.3)
(15.7)
275.4
307.1
Cash generated from operations
327.4
328.1
152.9
265.5
258.5
Basic EPS (pence)
25.0
25.6
13.2
22.2
21.0
Diluted EPS (pence)
24.8
25.6
13.2
22.1
20.9
Dividends declared per share (pence)
8.4
8.2
5.0
2.4
6.7
Unaudited five-year record
Strategic report
Governance
Financial statements
Auto Trader Group plc
Annual Report and Financial Statements 2023
163
Registered office and headquarters
Auto Trader Group plc
4
th
Floor, 1 Tony Wilson Place
Manchester
M15 4FN
United Kingdom
Registered number: 09439967
Tel: +44 (0)345 111 0006
Web: autotrader.co.uk
Web: plc.autotrader.co.uk
Investor relations: ir@autotrader.co.uk
Company Secretary
Claire Baty
Joint stockbrokers
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Independent auditor
KPMG LLP
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Tel UK: +44 (0)371 384 2030
Your call may be subject to a charge which will be determined
by your local provider. Please check with your telephone
provider for further information.
Web: equiniti.com
Financial calendar 2023–2024
Annual General Meeting
14 September 2023
2024 half-year results
9 November 2023
2024 full-year results
June 2024
Shareholder enquiries
Our registrar will be pleased to deal with any questions regarding
your shareholdings (see contact details in the opposite column).
Alternatively, if you have internet access, you can access
shareview.co.uk where you can view and manage all aspects
of your shareholding securely including electronic communications,
account enquiries or amendment to address.
Investor relations website
The investor relations section of our website,
plc.autotrader.co.uk/investors, provides further information
for anyone interested in Auto Trader. In addition to the Annual
Report and Financial Statements and share price, Company
announcements including the full-year results announcements
and associated presentations are also published there.
Cautionary note regarding forward-looking statements
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.
Shareholder information
Auto Trader Group plc
Annual Report and Financial Statements 2023
164
Manchester
Auto Trader Group plc
4
th
Floor, 1 Tony Wilson Place
Manchester
M15 4FN
United Kingdom
London
Auto Trader Group plc
1
st
floor, 14 Upper St Martin’s Lane
London
WC2H 9FB
United Kingdom
+44 (0)345 111 0006
ir@autotrader.co.uk
plc.autotrader.co.uk
Auto Trader Insight
@ATInsight