Digital automotive marketplace Auto Trader (AUTO) resumed its dividend and provided a positive assessment of the outlook helping to lift its shares 6.3% to 614.4p.

The company reported lower annual profit as trade revenue was dented by the company's decision to provide free and cut-price advertising to retail customers.

For the year ended 31 March 2021, pre-tax profit fell £157.4 million as revenue slipped 29% to £262.8 million year-on-year.

Trade revenue was down 31% to £225.2 million, as a 'result of the decision to provide free advertising to our retailer customers in April, May, December and February and at a discounted rate in June,' the company said. Average revenue per retailer or ARPR declined by 32% to £1,324. The company proposed a final dividend of 5p per share.

POSITIVE OUTLOOK

In the year ahead, the company expects to deliver high single digit growth on FY20 average revenue per retailer and operating profit margins that are in line with FY20, which is the year ended March 2020.

Shore Capital analyst Roddy Davidson commented: ‘We regard Auto Trader as a well-managed company with a strong business model, dominant market position and attractive financial characteristics. More broadly, we are encouraged to note the robust performance, operational momentum and positive outlook assessment captured in today’s release.’

His counterpart at Numis Gareth Davies said: ‘Autotrader has released results that have come in comfortably ahead of our estimates. Of particular note was stronger retailer forecourts and an underlying ARPR increase of £87, both comfortably ahead of our estimates.

‘Strong progress has been made on the digital car buying journey, with monetisation benefit likely through H2 2022, building through 2023. Outlook comments are optimistic with a good start to the year and stock only expected to be a small headwind.’

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Issue Date: 10 Jun 2021