LONDON (ShareCast) - (Sharecast News) - Auto Trader scrapped its final dividend as it said cross platform visits had risen 28% year on year in the first three weeks of June as coronavirus lockdowns eased.
The company said full year pre-tax profit was up 4% to £251.5m, adding that all furloughed employees returned to working last month and all money received to date under the government's furlough programme would be given back.

Current year guidance was scrapped, but the car-advertising portal forecast it anticipates first-quarter operating profit of £0.4m and expected July retailer revenue to be down year-on-year by mid-single digits.

"Since 1 June, when retailers were able to re-open their showrooms, both visitors and enquiries have rebounded strongly and are now at record levels. With high levels of demand in the market, used car pricing has remained strong," the company said on Thursday. Visits to the website had declined in April and May by 32% and 7% respectively as the lockdown took hold.

"Despite an increased number of vehicles on our platforms, the number of retailers has declined by 3%. Whilst we retained more retailers than during the same period last year, this was not offset by the normal levels of new business."

Auto Trader reported a higher-than-average pipeline of customers exercising their 30-day notice period to leave the platform, although this had not translated into increased levels of cancellations.

Steve Clayton who manages Hargreaves Lansdown's Select UK Growth Shares fund, which has a 2.9% position in the company said Auto Trader had shown itself to be "almost, but not quite immune to the impacts of Covid-19".

"Although their core car dealer clientele were shut down for a couple of months, creating a big drop in short term income, interest in the site from car buyers has reached record levels."

Clayton added that 75% of browsing time spent by prospective car buyers was spent on Auto Trader's website, making them nine times larger than their nearest competitor. "That's an amazing level of dominance to have achieved," he said.

However, he warned that the future was "not all plain sailing".

"Some dealers will go under, and the group say that whilst viewing interest on the site is high, they are seeing more dealers exercise their notice to quit the site, likely because the dealership is closing down."

Interactive investor analyst Richard Hunter said the company was undeniably well-placed, particularly if consumers stayed away from car showrooms in a post-pandemic world.

"However, in the midst of what is likely to be a deep (but hopefully brief) recession, what is less clear is consumer propensity to spend on new cars. As such, the growth engine which Auto Trader has symbolised to date could be rather more difficult to restart."

"The general view of the shares is broadly positive, with the market consensus currently standing at a cautious buy."

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