Auto Trader : Annual report and financial statements 223

Auto Trader Group plc

Annual Report and Financial Statements 2023

Driving Change Together. Responsibly.

Auto Trader Group plc

is the UK's largest automotive marketplace

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.

Withthelargestnumberofcarbuyersandthelargest 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 technologyanddataplatform,whichisincreasingly usedacrosstheautomotiveindustry.AutoTraderis continuing to bring more of the car buying journey online, creatinganimprovedbuyingexperience,whilst enablingallitsretailerpartnerstosellvehiclesonline.

2		58		98
Strategic report	Governance	Financial statements
2	Chair's statement	58	Governance overview	98	Independent auditor's report to the
3	CEO's statement	60	Board of Directors		members of Auto Trader Group plc
6	Market overview	62	Corporate governance statement	109	Consolidated income statement
8	How we create value	66	Report of the Nomination Committee	110	Consolidated statement of
10	Our purpose-driven strategy	70	Report of the Audit Committee		comprehensive income
14	Section 172(1) statement	76	Report of the Corporate	111	Consolidated balance sheet
18	Key performance indicators		Responsibility Committee	112	Consolidated statement of changes in equity
21	Non-financial information statement	80	Directors' remuneration report	113	Consolidated statement of cash flows
22	Operational review	94	Directors' report	114	Notes to the consolidated
24	Financial review				financial statements
26	Being a responsible business			156	Company balance sheet
48	How we manage risk			157	Company statement of changes in equity
50	Principal risks and uncertainties			158	Notes to the Company financial statements
				163	Unaudited five-year record
				164	Shareholder information

plc.autotrader.co.uk	Auto Trader Insight	@ATInsight

Our purpose-driven strategy

We have a clear focus on our three strategic priorities, alongside

a commitment to always being a responsible business.

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DIGITAL RETAILING

PLATFORM

CLASSIFIED

MARKETPLACE

CLASSIFIED

MARKETPLACE

13,913

average retailer forecourts advertising with Auto Trader

(2022: 13,964)

69.6m

average monthly visits to autotrader.co.uk

(2022: 68.9m)

PLATFORM

c.90

software partners integrated with our Auto Trader Connect platform

(2022: 40)

19

lenders integrated with our finance platform

(2022: 9)

DIGITAL RETAILING

c.50

retailers on Deal Builder trial at end of March 2023

(2022: N/A)

c.7k

new vehicle leases delivered in 2023

(2022: N/A)

BEING A RESPONSIBLE BUSINESS

91%

of employees are proud to work for Auto Trader

(March 2022: 95%)

Net zero

our targets have been validated by the Science Based Targets initiative

Our purpose-driven strategy P10

Being a responsible business P26

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 asChairDesignatewitheffectfrom1July2023, tosucceedmeasChairattheconclusionof 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 heldatourManchesterofficeon14September 2023 at 10am.

A big thank you

AsthisismylaststatementasChair,itremains 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

2	Auto Trader Group plc  Annual Report and Financial Statements 2023

CEO's statement

Strategic report	Governance	Financial statements

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-leadingdata 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 operatingprofitdeclinedby9%to£277.6million (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.

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.

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

Auto Trader Group plc	Annual Report and Financial Statements 2023	3