News alert from Auto Trader Group Plc

Embargoed until 7.00am, 10 November 2022

AUTO TRADER GROUP PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

Auto Trader Group plc ('the Group'), the UK's largest automotive marketplace, announces half year results for the six months ended 30 September 2022

Strategic overview

-   The performance of our core Auto Trader¹ marketplace has strengthened over the last six months, achieving double digit revenue and operating profit growth year-on-year. Our customer numbers and product uptake have exceeded expectations, and our competitive position continues to be strong

-    We successfully executed our annual pricing event in April 2022, which included the launch of Retail Essentials, part of our Auto Trader Connect platform. Retail Essentials gives customers access to our most fundamental and powerful data, including our taxonomy, which improves advert quality, pricing decisions and enables stock to be updated on Auto Trader in real-time. We are increasingly using our platform to power our retailers' businesses, and provide services across the wider automotive ecosystem, which strengthens our core and is a key enabler for digital retailing

-     We saw strong levels of product growth driven by further uptake of our prominence products. Prominence includes upsell to our new higher-level advertising packages, our Market Extension product (allowing customers to sell vehicles outside their local area) and our pay-per-click product which appears at the top of the search listings. More customers bought our data products in the period, making use of our real-time pricing data

-     We launched a small-scale trial for our Deal Builder journey on Auto Trader which combines the component parts of part-exchange, reservations and finance applications, forming an end-to-end transaction journey. Initial feedback to date has been positive

-    In June 2022, we completed the acquisition of Autorama (UK) Limited, one of the UK's largest marketplaces for leasing new vehicles. Autorama's online marketplace and fulfilment capabilities will transform Auto Trader's existing leasing proposition. The acquisition positions the Group to better take advantage of significant disruption taking place within the new car market, particularly the growing penetration of electric vehicles and likely changes to distribution models

Financial results

-     Excluding the Autorama deferred consideration charge for the period of £13.8 million, which was included in Group central costs, Group operating profit was up 7% and basic EPS was up 8% on H1 2022

-     £82.3 million returned to shareholders (H1 2022: £148.4 million) through £30.6 million of share buy-backs and dividends paid of £51.7 million

Operational results

-     Cross platform visits^5,6were down 10% to 67.7 million per month (H1 2022: 74.9 million).Cross platform minutes^5,6 were down 14% to 498 million minutes per month on average (H1 2022: 579 million minutes). However, both visits and minutes were up significantly versus pre-pandemic levels(57.5 million and 447 million minutes respectively in H1 2020)

-     Our share of cross platform minutes remained strong at over 75%⁷ (H1 2022: over 75%)

-     The average number of retailer forecourts⁵ in the period was up2% to 14,161 (H1 2022: 13,892)

-     Average Revenue Per Retailer⁵ (ARPR) per month was up £205 to £2,404 on average per month(H1 2022: £2,199). This was driven by both price and product levers, with the stock lever broadly flat

-     Physical car stock^5,8 on site was up 1% to440,000 cars (H1 2022: 436,000)on average, within which our listings product for new cars declined to 22,000 on average(H1 2022: 39,000)

-     Number of employees (FTE⁵) in the Group increased to 1,112 on average during the period (H1 2022: 941), with the acquisition of Autorama contributing 122 of the increase

Cultural KPIs (excluding Autorama)

-     Employees that are proud to work at Auto Trader⁹ remained high at 93% (March 2022: 95%)

-     Diverse teams and an inclusive culture are critical to attracting, retaining and maximising the potential of our people and therefore our business:

o Board: We have more women than men on our Board (March 2022: five women and four men) and one ethnically diverse Board member

o Leadership: The percentage of women leaders¹⁰ was 40% (March 2022: 38%), and those who are ethnically diverse¹¹ was 5% (March 2022: 6%)

o Organisation: The percentage of employees who are women was at 40%¹² (March 2022: 40%), and those who are ethnically diverse^11,12 was 15% (March 2022: 14%)

-     The majority of our CO2 emissions are Scope 3 emissions attributable to our suppliers and we have been working through their respective carbon reduction plans. This work has influenced the calculation of CO2 emissions for the six month period, as we have adjusted our emissions according to those plans, giving total emissions for the period of 3.8k tonnes of carbon dioxide equivalent¹³ (FY22 11.7k tonnes). We are aiming to achieve net zero across our entire value chain (Scopes 1, 2 and 3) before 2040, and to halve our carbon emissions before the end of 2030.

Nathan Coe, Chief Executive Officer of Auto Trader, said:

"Our first half results demonstrate the strength of our position with car buyers and the depth of partnership we are building with customers. Achieving this in a period impacted by high levels of economic uncertainty is a credit to both our people and customers, and provides confidence in navigating the rest of the year.

"Longer-term we are well placed to grow as we further develop the core Auto Trader business, extend it to enable car buyers to complete more of their purchase online, and provide the industry-leading data and technology platform for our customers."

Outlook

The Board has confidence for the second half of the year due to:

-      consistent trading throughout October;

-      the recurring nature of our revenue and delivering our main growth initiatives in the first half of the year;

-   the fact that our financial performance in the first half was achieved despite changing economic circumstances, resulting in lower audience, continued low live stock volumes and weak used car transactions; and

-     a belief that Auto Trader margins can be maintained at 70%, despite high inflation, particularly given we have delivered the core components of digital retailing.

As per our previous outlook statement, we still anticipate average retailer forecourts to be marginally down year-on-year. However, we now expect stronger ARPR, with the full year growth rate likely to be slightly above that achieved in H1, with the stock lever flat for the full year. Auto Trader's operating profit margin for the full year is expected to be in line with financial year 2022. This outlook takes account of the Webzone disposal (see post balance sheet events). Autorama is likely to make an operating loss of c.£11m for the full year, with continued supply challenges across all vehicle types resulting in lower delivery volumes. Group central costs will be c.£45m, largely made up of the Autorama deferred consideration.

The outlook for future years is necessarily more uncertain, however the used car market is far less cyclical than the new car market and new car registrations are expected to recover, currently being at their lowest level in 30 years. We believe that there are significant opportunities for Auto Trader to grow revenue at high margins through our price and product levers and will continue to bring more of the car buying journey online through Deal Builder and Autorama. We will be disciplined on priorities, costs and capital allocation ensuring we continue to manage the business responsibly.

Analyst presentation

A presentation for analysts will be held via audio webcast and conference call at 9.30am, Thursday 10 November 2022. Details below:

Audio webcast:https://edge.media-server.com/mmc/p/yy63s5fq

Conference call registration:https://register.vevent.com/register/BI008115ae4d664356a7cedbf4c0651a85

Please note: Questions will only be taken from the conference call line. Please use the above conference call registration link to access the relevant dial-in number and your personal PIN. Please do not share your passcode with others as only one person can use this PIN at a time. Participants on the conference call who also plan on following the slides via the webcast should switch the webcast to Phone mode using the cogwheel icon located on the bottom right corner of the webcast screen to ensure the slides are synced to the phone audio rather than the webcast audio.

If you have any trouble registering or accessing either the conference call or webcast, please contact Powerscourt on the details below.

For media enquiries

Please contact the team at Powerscourt on +44 (0)20 7250 1446 or [email protected]

About Auto Trader

Auto Trader Group plc is the UK's largest digital automotive marketplace. Our marketplace sits at the heart of the vehicle buying process, with the largest number of car buyers and the largest choice of trusted stock. Auto Trader exists to grow both its car buying audience and core advertising business. It will change how the UK shops for cars by providing the best online car buying experience, enabling all retailers to sell online. We aim to build stronger partnerships with our customers, use our voice and influence to drive more environmentally friendly vehicle choices and create an inclusive and diverse culture. Auto Trader listed on the London Stock Exchange in March 2015 and is now a member of the FTSE 100 Index.

For more information, please visithttps://plc.autotrader.co.uk/who-we-are/about-us/

Cautionary statement

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.

To the extent available, the industry and market data contained in this announcement has come from third party sources. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the accuracy or completeness of such data. In addition, certain parts of the industry and market data contained in this announcement come from the Company's own internal research and estimates based on the knowledge and experience of the Company's management in the market in which the Company operates. While the Company believes that such research and estimates are reasonable and reliable, they, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this announcement.

Summary financial performance

1.   Auto Trader includes the results of Auto Trader, AutoConvert & Carzone in respect of online classified advertising of motor vehicles and other related products and services in the digital automotive marketplace including the Dealer Auction joint venture.

2.   Group central costs which are not allocated within either of the segment operating profit/(loss) comprise a £13.8 million charge for the expense of group shares expected to be issued to settle the Autorama deferred consideration and a £1.9 million amortisation expense relating to the fair value of intangible assets acquired in the Group's business combination of Autorama.

3.   Cash generated from operations is defined as net cash generated from operating activities, before corporation tax paid.

4.   Net bank debt/(cash) represents gross bank debt before amortised debt costs less cash and does not include amounts relating to leases

5.   Average during the period.

6.   Measured by Snowplow.

7.   Share of minutes is a custom metric based on Comscore minutes and is calculated by dividing Auto Trader's total minutes volume by the entire custom-defined competitive set's total minutes volume. The custom-defined list includes: Auto Trader, Gumtree motors, Pistonheads, Motors.co.uk, eBay Motors & CarGurus.

8.   Physical car stock advertised on autotrader.co.uk.

9.   Based on a survey to all Auto Trader employees in October 2022 asking our people to rate the statement "I am proud to work for Auto Trader?". Answers are given on a five-point scale from strongly disagree to strongly agree.

10. We define leaders as those who are on our Operational Leadership Team ('OLT'), one divisional leader and their direct reports.

11. Throughout 2022 we have asked our employees to voluntarily disclose their ethnicity, at the period end we had 89 employees (9%) who had not yet disclosed.

12. We calculate all our diversity percentages using total group headcount excluding Autorama (September 2022: 1,032, March 2022: 1,002) as at 30th September. At the period end, we had 412 employees who were women, 615 employees who were men and 5 who were non-binary.

13. The total amount of CO2 emissions includes Scope 1, 2 and 3. From the 15 different emission categories that fall within Scope 3, the following have been identified as relevant to Auto Trader: Purchased goods and services (an Environmentally Extended Input Output (EEIO) database methodology was used to calculate the GHG footprint across total spend for the financial year); Capital goods; Fuel and energy related activities (not included in Scope 1 and Scope 2); Waste generated in operations; Business travel; Employee commuting and Investments.

Operating performance in H1 2023

Group operating performance

Group revenue increased by 16% to £249.8 million (H1 2022: £215.4 million). Auto Trader revenue increased by 11% to £238.2 million (H1 2022: £215.4 million), and Autorama contributed £11.6 million following the completion of the acquisition on 22 June 2022.

Group operating profit declined by 2% to £149.1 million (H1 2022: £151.7 million). Auto Trader operating profit increased by 11% to £168.8 million (H1 2022: £151.7 million) which includes £1.1 million share of profit from our joint venture, Dealer Auction (H1 2022: £1.7 million). Autorama had an operating loss of £4.0 million.

Group central costs included the Autorama deferred consideration charge for the period of £13.8 million and an amortisation charge of £1.9 million relating to the Autorama intangible assets recognised under IFRS 3 business combinations. This resulted in Group operating profit margin declining to 60% (H1 2022: 70%).

Group profit before tax was £148.0 million (H1 2022: £150.0 million) and cash generated from operations was £164.6 million (H1 2022: £169.9 million).

Auto Trader operating performance

Auto Trader revenue grew by 11% to £238.2 million (H1 2022: £215.4 million) underpinned by a strong performance in our retailer revenue line as customers continue to see value in advertising on our marketplace and taking additional products. Auto Trader operating profit grew 11% to £168.8 million (H1 2022: £151.7 million), and operating profit margin was broadly flat at 71% (H1 2022: 70%).

Our audience performance remains strong; we have 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 (H1 2022: over 75%). Our average monthly cross platform visits decreased by 10% to 67.7 million per month (H1 2022: 74.9 million) but were 18% above pre-pandemic levels recorded in H1 2020 (57.5 million). Engagement, which we measure by total minutes spent onsite, decreased by 14% to an average of 498 million minutes per month (H1 2022: 579 million minutes) although were 11% ahead of pre-pandemic levels (H1 2020: 447 million minutes). For both visits and minutes, we have changed the data source from Google analytics to Snowplow.

The average number of retailer forecourts advertising on our platform increased by 2% to 14,161 (H1 2022: 13,892). We continued to see lower levels of cancellation, as market conditions were broadly stable and the current strength of our position and standing with customers has been maintained.

Total live stock on site increased by 1% to an average of 440,000 cars (H1 2022: 436,000). New car stock declined to an average of 22,000 (H1 2022: 39,000) due to the continued shortage of new car supply. Used car stock was also impacted by supply shortages, although not as severely as seen in the previous financial year with used car live stock increasing 5% on average across the period.

Autorama operating performance

Autorama revenue was £11.6 million, with vehicle & accessory sales contributing £7.1 million and commission and ancillary revenue contributing £4.5 million. The operating loss for the period since acquisition on 22 June to the end of September was £4.0 million.

Total deliveries amounted to 2,747 vehicles, which comprised of 1,887 cars, 627 vans and 233 pickups. Both vans and pickups were particularly impacted by supply challenges in the period. Average commission and ancillary revenue per vehicle delivered was £1,635.

The UK car market

New car registrations were 11% below H1 2022 (March - September) with semiconductor shortages and supply chain challenges continuing to impact the volume of new cars available for sale in the UK. New car registrations were weaker within the fleet segment which was down 17% year-on-year and new light commercial vehicle ("LCV") registrations were down 28% year-on-year over the same period.  Used car transactions were 16% below H1 2022 levels, as transactions continued to feel the knock-on impact of low volumes of new car supply, which has fed into the availability of younger cars impacting our Franchise segment.

The average length of time that a person owns a car has reduced to 3.8 years in calendar year 2022 (2021: 4.2 years) due to the impact of enforced COVID-related showroom closures in 2021, although it remains above pre-COVID levels due to supply issues. Despite declining throughout the period, used car prices remain strong with our retail price index seeing a 22% year-on-year increase in prices.

Strategic overview

Our strategy has three focus areas: Firstly, we remain committed to investing and growing our core classified marketplace, which we believe has a long runway for growth. Secondly our marketplace has been built on a platform, which we have made available to the whole industry, enabling them to access the full benefit of our technology and data. This has embedded our services in our customers' workflows which is a key enabler to support the final area of our strategy, digital retailing. Digital retailing adds a transactional capability allowing our trade customers to sell vehicles to car buyers on Auto Trader.

Classified marketplace

Our core classified marketplace continues to grow. We evolved our advertising package structure in May 2021 and created a consistent cross platform experience with adverts appearing in search, based on a relevancy algorithm, enhancing the value we deliver to our customers. Penetration of our higher yielding packages continues to increase, with 32% of retailer stock now on a package above Standard as at September 2022 (September 2021: 25%). Our pay-per-click prominence product, which enables customers to promote a specific vehicle, also saw further uptake during the half.Our new car proposition has been impacted by continued supply shortages which has seen the number of new cars advertised decrease to 22,000 (H1 2022: 39,000). However, the number of customers on our new car product remains robust with c.1,900 paying for the product at the end of the half (September 2021: c.2,100).

We continue to invest in our electric vehicle (EV) content to ensure that we are the number one destination for car buyers interested in purchasing an EV. We continue to help consumers make more informed vehicle choices with EV charging information now on full page adverts; increased content in our electric vehicle hub, which attracted over 1 million views in the period and the launch of our 'electric sceptics campaign', which saw our YouTube Director Rory Reid challenge sceptical consumers about EVs in a series of videos. Engagement on our monthly EV giveaway also remains strong with over 1.4 million entries in the period.

Platform

We continue to invest in our technology, data and product platform which supports our classified marketplace and we have extended the use of this platform to our customers, which we believe will be a key enabler for digital retailing. In October 2021, we launched Auto Trader Connect which is the product through which our services are integrated with third parties. The Retail Essentials module which gives customers access to our taxonomy, improving advert quality, and introduces real-time updates between our systems and those of our customers was included in our retailer packages from April 2022. We currently have integration with 90+ third-party software providers with Auto Trader Connect.

Following the successful launch of Retail Essentials, we have recently launched a Valuations module of Auto Trader Connect. The product combines our detailed vehicle specification data with our valuations, which benefit from millions of vehicle observations. This gives improved pricing information to customers, enabling better sourcing and retailing decision-making, as well as giving enhanced price transparency for consumers. The valuations appear within our Dealer Portal software against every vehicle record, as well as being made available via an API.

We have now migrated all our services to Google's Cloud, which has enabled us to benefit from scalability, improved performance, enhanced security and a quicker product release cycle. We saw an increase in the number of product releases in the period to 24,000 (H1 2022: 20,500).

Digital retailing

Building on both our platform and strong classified marketplace, we are bringing more of the car buying journey online. We remain committed to being the best place to find, buy and sell a car in the UK on a platform that enables data-driven digital retailing for our customers. Our approach to digital retailing is to be "car first" and to enable any retailer to sell their cars online. With this goal in mind, we will initially offer two digital retailing consumer journeys; an end-to-end deal builder journey on Auto Trader; and a new vehicle leasing proposition through Autorama.

In the last six months, we continued to make progress building an end-to-end deal builder journey on Auto Trader, which leverages the three individual components of part-exchange, reservations and finance applications which we have previously piloted individually. Whilst we believe that the physical forecourt will continue to play a role in the car buying process for a number of years, there are several components that can be brought online which will drive sales and efficiencies for our retailer customers, provide a better consumer experience, and provide significant long-term growth opportunities for our business. Deal builder went live with one single site customer in August 2022, resulting in our first completed online deal only days after the car had been reserved. Over the coming months and into next year we aim to onboard further retailers onto the product, including larger groups who use our Dealer Portal software and over time through integrations with dealer management systems using Auto Trader Connect.

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. Uptake remains strong with over 6% of retailer stock on this product in September 2022 (September 2021: 4%), with the product being most relevant for those customers with either delivery capability or multiple forecourt locations.

On 22 June 2022, we completed the acquisition of Autorama (UK) Limited,one of the UK's largest marketplaces for leasing new vehicles. Autorama's online marketplace and fulfilment capabilities will transform Auto Trader's existing leasing proposition and help meet the demands of the growing number of consumers who might consider leasing their next new vehicle, while providing an efficient and professional channel to market for manufacturers and leasing companies. There is a significant structural opportunity for a new car leasing marketplace driven by the growth of electric cars, new manufacturers entering the UK market, lower take up of company car schemes and a shift towards new digital distribution models. Through leveraging Auto Trader's platform, we believe we have a compelling proposition for manufacturers, retailers, and funders, with an opportunity to reduce existing customer acquisition costs and grow the business profitability.

Making a difference

Our purpose is "Driving Change Together. Responsibly" and we aim to 'make a difference' to our people, our communities, our industry, and to the wider environment. We have a Corporate Responsibility Committee with oversight for Auto Trader's focus on the environmental, social and governance aspects of our business. We are currently assessing the equivalent measures for Autorama and will include them in our cultural KPIs that will be reported at full year. All the measures below are for our Auto Trader operating segment.  

Employees who are proud to work at Auto Trader⁹ remained high at 93% (March 2022: 95%).We believe creating a diverse workforce and an inclusive culture within our organisation improves individual and team performance and will allow us to identify and attract talent that we may not otherwise access. Much of our work around creating an inclusive culture and environment has been supported and informed by our many employee networks representing women, parents & carers, LGBT+, disabled & neurodiverse, multicultural and multigenerational colleagues. These groups are instrumental to supporting our overall diversity and inclusion strategy.

Over half of the Board is represented by women and at a total Group level our representation of women has remained consistent at 40% as of September 2022 (March 2022: 40%). At a leadership level, as defined by the FTSE Women Leaders Review, there was a small increase with 40% of women in leadership roles as of September 2022 (March 2022 38%). We have continued with our focus on ethnic diversity and we are committed to increasing the percentage of employees from an ethnically diverse background.  We have met the Parker Review recommendation that all FTSE100 Boards should have at least one director from an ethnically diverse background by the end of 2021. The percentage of the Group's employees who are from an ethnically diverse background has increased to 15% as of September 2022 (March 2022: 14%), with the percentage of those from an ethnically diverse background in leadership reducing slightly to 5% as of September 2022 (March 2022: 6%).

Reducing the impact our business has on the environment is embedded into our strategy and we are committed to being a net zero business by 2040. Our near-term Science Based Targets have already been validated by the SBTi and form a core component of our net zero strategy.  We have also submitted our net zero target for validation by the SBTi.  Initial calculations of our GHG emissions during the first half of the year total 3.8k tonnes of Co2e across Scopes 1, 2 and 3 (March 2022: 11.7k).  We have undertaken further analysis of our supplier base within our Scope 3 emissions and have calculated the half year emissions using this more accurate data. We are in the process of understanding the impact of Autorama's activities and aim to include their GHG emissions in our year end reporting.

Our environmental commitments also encompass initiatives to ensure our business continues to be relevant as the vehicle parc becomes increasingly electric and to raise environmental awareness with our employees and customers and support them in reducing their environmental impact. As our consumers increasingly look for and buy electric vehicles, we are supporting them in making the switch through increasing the coverage and exposure we give electric vehicles across all our platforms. As part of this commitment, we have entered into a partnership with Green.TV Media, the multi-platform sustainability media company, to be the headline partner for a series of electric themed events for the next three years. Green.TV Media host World EV Day, the EV Summit and EV Live all of which are aimed at furthering the adoption of electric vehicles. Earlier this year we worked with Carbon Literacy to launch the Carbon Literacy automotive toolkit and we are pleased to see increasing engagement with the toolkit with 75 companies already participating with it.

The Board

Two Non-Executive Directors and our Chair will have completed their third three-year term in 2024, the ninth anniversary of Auto Trader Group plc's admission to the London Stock Exchange's official list. The board ensures it has in place and is implementing a comprehensive succession plan for all directors. This process is underway and being led by the Senior Independent Director, in the case of the Chair and the Nomination Committee with regards to Non-Executive Directors. The Board will report on its progress at the appropriate time.

Investor calendar

The Group's full year results for the year ending 31 March 2023 will be announced on 01 June 2023.

Financial review

Group Results

Group revenue increased by 16% to £249.8m (H1 2022: £215.4m) driven by Auto Trader revenue which increased by 11% to £238.2m (H1 2022: £215.4m), and a contribution of £11.6m from Autorama as a result of the acquisition which completed on 22 June 2022.

Group operating profit declined by 2% to £149.1m (H1 2022: £151.7m). Auto Trader operating profit increased by 11% to £168.8m (H1 2022: £151.7m) which included £1.1m share of profit from joint ventures (H1 2022: £1.7m). Autorama had an operating loss of £4.0m.

Group central costs included a charge of £13.8m driven by the cost for the period of the Autorama deferred consideration of £50m, which will be settled in shares, 12 months after the completion date, and an amortisation charge of £1.9m relating to the Autorama intangible assets recognised under IFRS 3 business combinations. Group operating profit margin declined to 60% (H1 2022: 70%).

Group profit before tax was £148.0m (H1 2022: £150.0m) and cash generated from operations was £164.6m (H1 2022: £169.9m).

Auto Trader Results

Revenue increased to £238.2m (H1 2022: £215.4m), up 11% when compared to the prior year.Trade revenue, which comprises revenue from Retailers, Home Traders and other smaller revenue streams, increased by 11% to £214.3m (H1 2022: £192.3m).

Retailer revenue increased by 11% to £204.2m (H1 2022: £183.3m). The average number of retailer forecourts advertising on our platform increased 2% to 14,161 (H1 2022: 13,892), with lower levels of cancellations in the period.

Average Revenue per Retailer ('ARPR') per month increased by 9% to £2,404 (H1 2022: £2,199). This was driven by both the product and price levers, with the stock lever broadly flat.

·     Price: Our price lever contributed an increase of £72 (H1 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 1% to 440,000 (H1 2022: 436,000).New car stock declined, averaging 22,000 (H1 2022: 39,000) due to the well documented shortage of new car supply. Underlying used car stock increased by 5% in the period as we saw supply improve slightly from the previous year and higher levels of private listings.It is important to note that the stock lever is not driven by live stock but by the number of paid stock units, which were broadly flat in the period(H1 2022: increase £160).

·     Product: Our product lever contributed an increase of £133 (H1 2022: £119) to total ARPR. Half of this product growth was the result of seeing an increase in retailers purchasing more of our prominence products. These products include our higher yielding Enhanced, Super and Ultra packages with their penetration increasing to 32% (September 2021: 25%); Our new Market Extension product, allowing retailers to sell outside of their local area, also contributed to the product lever with 6% (September 2021: 4%) of retailer stock on the product by the end of the period; Finally there was also some contribution from our AT PPC product, where retailers can boost visibility of their stock in search through pay-per-click campaigns. The other half of the product lever was largely made up from our Auto Trader Connect: Retail Essentials product, which was included in retailer packages as part of our annual pricing event in April 2022 and smaller product contributions such as Auto Convert finance and further uptake of our data products.

Home Trader revenue increased by 16% to £5.2m (H1 2022: £4.5m). Other revenue increased by 9% to £4.9m (H1 2022: £4.5m).

Consumer Services revenue increased by 4% in the period to £18.7m (H1 2022: £18.0m). Private revenue, which is generated from individual sellers who pay to advertise their vehicle on the Auto Trader marketplace, increased by 12% to £12.3m (H1 2022: £11.0m) which was partially offset by Motoring Services revenue, which decreased 9% to £6.4m (H1 2022: £7.0m). Instant Offer contributed £0.4m to Consumer Services (H1 2022: £0.4m), which is included in Private revenue.

Revenue from Manufacturer & Agency customers increased marginally to £5.2m (H1 2022: £5.1m). New car advertising in H1 2023 continues to be impacted by semi-conductor supply issues, with Manufacturers lowering their marketing spend until there is more clarity on the supply of new cars into the market.

Total costs increased 8% to £70.5m (H1 2022: £65.4m).

People costs, which comprise all staff costs and third-party contractor costs, increased by 5% to £36.9m (H2 2021: £35.0m). The increase in people costs was primarily driven by an increase in the average number of full-time equivalent employees to 990 (H1 2022: 941) as we continue to invest in people to support the growth of the business. In addition to the increased headcount, underlying salary costs have increased as we invest in the best digital talent and review all salaries on an annual basis.

Marketing spend increased by 8% in H1 2022 to £11.4m (H1 2022: £10.6m).

Other costs, which include data services, property related costs and other overheads, increased by 17% to £18.9m (H1 2022: £16.2m). The increase was primarily due to increased overhead costs; including the return of travel, office & people related costs, as well as higher IT spend as we completed the move for all our services and applications to be in the cloud. Depreciation and amortisation decreased marginally to £3.3m (H1 2022: £3.6m).

Operating profit increased by 11% to £168.8m during the period (H1 2022: £151.7m). Operating profit margin remained broadly flat at 71% (H1 2022: 70%).

Our share of profit generated by Dealer Auction, the Group's joint venture, decreased 35% to £1.1m (H1 2022: £1.7m) in the period due to lower levels of auction activity as a result of tighter supply.

Autorama Results

Autorama revenue was £11.6m, with vehicle & accessory sales contributing £7.1m and commission and ancillary revenue contributing £4.5m.

Total deliveries amounted to 2,747 units, which comprised of 1,887 cars, 627 vans and 233 pickups. Average commission and ancillary revenue per unit delivered was £1,635.

The Autorama business delivered 270 vehicles which were taken on balance sheet in the period from 22 June to 30 September. This represented 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 £3.7m, was through the 218 number of FTEs which were employed on average through the period. As a result of the acquisition being on 22 June 2022, the contribution to the Group's average number of FTEs in the period was 122. Marketing in the period was £1.7m. Other costs related to IT services, property, people-related costs and other overheads. There was depreciation of fixed assets and some amortisation of developed software.

The Autorama operating segment made an operating loss of £4.0m

Group net finance costs

Group net finance costs decreased to £1.1m (H1 2022: £1.7m). Interest costs on the Group's RCF totaled £0.9m (H1 2022: £0.9m), with the year on year decline coming from lower amortised debt issue costs. At 30 September 2022 the Group had drawn £75m of its available facility (30 September 2021: £nil). Amortisation of debt issue costs amounted to £0.3m (H1 2022: £0.8m) with the decrease driven by an acceleration of amortisation following the reduction of the Syndicated Revolving Credit Facility ('RCF') commitments, as referenced below, in the prior year. Interest costs relating to leases totaled £0.1m (H1 2022: £0.1m). This was offset by interest receivable on cash and cash equivalents of £0.2m (H1 2022: £0.1m).

Reduction of RCF commitments

With effect from 24 September 2021, the Group reduced the total commitments of its Syndicated Revolving Credit Facility ('RCF') by £150m from £400m to £250m. The facility will terminate in two tranches: £52.2m will mature in June 2023 and £197.8m will mature in June 2025. Additionally in 2021, there was an amendment to the Senior Facilities Agreement to reflect the discontinuation of LIBOR and the transition to SONIA (in respect of sterling loans); Loan Market Association updates; and to include the effect of IFRS 16 for the purposes of calculating financial covenants. There is no requirement to settle all, or part, of the debt earlier than the termination dates stated.

Taxation

Profit before taxation decreased by 1% to £148.0m (H1 2022: £150.0m). The Group tax charge of £32.8m (H1 2022: £28.3m) represents an effective tax rate of 22.2% (H1 2022: 18.9%). This is higher than the average standard UK rate due to the Autorama deferred consideration charge being non-deductible.

Earnings per share

Basic earnings per share decreased by 3% to 12.23 pence (H1 2022 12.63 pence) based on a weighted average number of ordinary shares in issue of 942,056,280 (H1 2022: 963,162,476). Diluted earnings per share of 12.17 pence (H1 2022: 12.61 pence) decreased by 3%, based on 946,494,793shares (H1 2022: 965,070,560) which takes into account the dilutive impact of outstanding share awards.

Earnings per share, excluding the charge in the period for Autorama's deferred consideration in relation to the acquisition, increased by 8% to 13.70 pence (H1 2022: 12.63 pence).

Cash flow

Cash generated from operations decreased to £164.6m (H1 2022: £169.9m) as a result of the decline in Operating profit and movements in working capital largely driven by an increase in trade debtors and a decrease in VAT payable. Corporation tax payments increased to £31.4m (H1 2022: £27.8m). Cash generated from operating activities was £133.2m (H1 2022: £142.1m).

Capital structure and dividends

The final dividend for the year ended 31 March 2022 of 5.5 pence per share (H1 2022: 5.0 pence per share) was paid on 23 September 2022, totaling £51.7m (H1 2022: £48.0m). The Board continued its share-buyback programme with a total of 4.9m shares repurchased in the period (H1 2021: 15.8m shares). The average price per share was 619.5p (H1 2022: 636.1p) for a total consideration of £30.6m (H1 2022: £100.4m) before transaction costs of £0.2m (H1 2022 £0.5m).

The Group's long-term capital allocation policy remains broadly 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, such as that received from the disposal of Webzone, will be used to continue our share buy-back programme and steadily reduce gross indebtedness. It is the Board's long-term intention that the Group will return to a net cash position.

For H1 2023, the Board has declared an interim dividend of 2.8 pence per share. The interim dividend will be paid on 27 January 2023 to members on the register on 6 January 2023.

Going concern

The Group generated significant cash from operations during the period. At 30 September 2022 the Group had drawn £75m of its £250munsecured revolving credit facility ('RCF') and had cash balances of £17.6m. The Group has a strong balance sheet and flexibility in terms of uses of cash to potentially manage increased economic uncertainty and higher interest rates. The £250m RCF is committed until June 2023, when it reduces to £197.8m through to maturity in June 2025.On the basis of facilities available and current financial projections for the next twelve months, the Directors have concluded that it is appropriate to prepare the condensed interim financial statements on a going concern basis.

Post balance sheet events

Sale of Webzone Limited

On 24 October 2022, Auto Traderannounced 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, Ireland's leading print and digital media publisher which also owns CarsIreland.ie and Cartell.ie, for consideration of €30 million.   

At 31 March 2022, Webzone Limited had £451k of net assets. The table below shows the P&L, which consolidates into the Group results for the last two reporting periods:

The estimated profit on disposal of Webzone Limited, after disposal of related goodwill, for the Group is estimated to be c.£19m.

Defined Benefit Pension Scheme

The Company sponsors a funded defined benefit pension scheme for qualifying UK employees, the Wiltshire (Bristol) Limited Retirement Benefits Scheme ('the Scheme'). In October 2022 the Scheme purchased a bulk annuity policy (known as a buy-in) from Just Retirement Limited ('Just Retirement') for £15.4 million, 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 30 September 2022 amounted to £12.8 million. 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. In relation to these, it is likely that there will be further contributions from the Company, the amounts for which are estimated to be c.£1 million. 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.

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

·   the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted for use in the UK

·     the interim management report includes a fair review of the information required by:

(a)DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so

Consolidated interim income statement

For the six months ended 30 September 2022

Consolidated interim statement of comprehensive income

For the six months ended 30 September 2022

Consolidated interim balance sheet

As at 30 September 2022

Consolidated interim statement of changes in shareholders' equity

For the six months ended 30 September 2022

Consolidated interim statement of cash flows

For the six months ended 30 September 2022

Notes to the Condensed Consolidated interim financial statements

1              General information

Auto Trader Group plc ('the Company') is a company incorporated in the United Kingdom and its registered office is 4^th Floor, 1 Tony Wilson Place, Manchester, M15 4FN.

These condensed consolidated interim financial statements have been prepared as at, and for the six months ended, 30 September 2022. The comparative financial information presented has been prepared as at, and for the six months ended, 30 September 2021.

The condensed consolidated interim financial information presented as at, and for the six months ended, 30 September 2022 comprise the Company and its subsidiaries (together referred to as the Group). The consolidated financial statements of the Group as at, and for the year ended, 31 March 2022 are available on request from the Company's registered office and via the Company's website.

These condensed consolidated interim financial statements are unaudited but have been reviewed by the Auditor whose report is set out on pages 45-46.  They have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, "Interim Financial Reporting" issued by the IASB and adopted for use in the UK. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 March 2022 which were prepared in accordance with UK-adopted international accounting standards, in conformity with the requirements of the Companies Act 2006 and applicable law.

As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the company's published consolidated financial statements for the year ended 31 March 2022.

The comparative financial information for the year ended 31 March 2022 included in this interim statement of results does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 (the 'Act'). The statutory accounts for the year ended 31 March 2022 have been reported on by the Company's Auditor and were delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditor's report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Judgements and estimates

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, judgement was required in the identification of acquired intangible assets and their measurement is a key source of estimation uncertainty. The other judgements made by management in applying the Group's accounting policies and the other key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2022.                                  

Goingconcern

The Group generated significant cash from operations during the period. At 30 September 2022 the Group had £75m drawn of its £250m unsecured revolving credit facility ('RCF') and had cash balances of £17.6m. The £250m Revolving Credit Facility ('RCF') is committed until June 2023, when it reduces to £197.8m through to maturity in June 2025.

The combination of significant free cash flow and the discretionary nature of dividend payments and share buybacks provide the Group with significant liquidity and ability to comply with the RCF's financial covenants. On the basis of facilities available and current financial projections for the next twelve months, the Directors have concluded that it is appropriate to prepare the condensed interim financial statements on a going concern basis.

Changes in accounting policies

The accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 March 2022. Taxes on income in the interim periods are accrued using the effective tax rate that would be applicable to expected total annual profit or loss.

2              Segmental information

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). A result of 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 & Carzone in respect of online classified advertising of motor vehicles and other related products and services in the digital automotive marketplace including the Dealer Auction joint venture.

·     Autorama - the results of Autorama in respect of advertising new leasing 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, splits 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.

The OLT primarily uses the statutory 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 Groups' revenue and results for both reportable segments, with a reconciliation to Group profit before tax is shown below:

Group central costs which are not allocated within either of the segment operating profit/(loss) reported to the CODM comprise:

(i)   People costs: A £13.8 million charge for the expense of group shares expected to be issued to settle the Autorama deferred consideration (note 18).

(ii)  Depreciation & amortisation: £1.9 million of amortisation expense relating to the fair value of intangible brand and technology assets acquired in the Group's business combination of Autorama.

3              Revenue

In the following table Auto Trader's revenue is disaggregated by customer type and Autorama's revenue is shown separately. This level of disaggregation is consistent with that used by the OLT to assist in the analysis of the Group's revenue-generating trends.

4              Net finance costs

5              Income taxes

The taxation charge for the period is based on the standard rate of UK corporation tax for the period of 19% (March 2022: 19%). The taxation charge recognised is based on management's best estimate of the effective tax rate for the full year of 22.2% (September 2021: 18.9%) applied to the profit before taxation of the interim period. The increase in the effective tax rate is due to the deferred consideration relating to the acquisition of Autorama being a non tax-deductible expense.

6              Earnings per share

The difference between the basic and diluted weighted average number of shares represents the dilutive impact of the Share Incentive Plan, Performance Share Plan, Deferred Annual Bonus, Single Incentive Plan Award, Sharesave scheme and the dilutive impact of shares issued as deferred consideration for the acquisition of Autorama, which are conditional on a service condition. Shares issued to satisfy the Share Incentive Plan were purchased by the Employee Share Option Trust ('ESOT').

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:

The average market value for the Group's shares for the purposes of calculating the dilutive effect of share-based incentives was based on quoted market prices for the period during which the share-based incentives were outstanding.

7              Intangible assets

8              Leases and property, plant and equipment

The Group has right-of-use assets which comprise of property and motor vehicles which are held within property, plant and equipment. Information about leases for which the Group is a lessee is presented below.

9              Trade and other receivables

10           Trade and other payables

11           Retirement benefit obligations

Across the UK and Ireland, the Group operates several pension schemes. All except one are defined contribution schemes.

Defined contribution scheme

In the period the pension contributions to the Group's defined contribution scheme amounted to £1.7m (September 2021: £1.6m; March 2022: £3.1m). At 30 September 2022, there were £0.6m (September 2021: £0.5m; March 2022: £0.5m) of pension contributions outstanding relating to the Group's defined contribution scheme.

Defined benefit scheme

The defined benefit pension scheme provides benefits based on final pensionable pay and this scheme was closed to new joiners with effect from May 2002. New employees after that date have been offered membership of the Group's defined contribution scheme.

The most recent actuarial valuation of the defined benefit obligations was performed as at 30 September 2022 by a qualified independent actuary. The amounts recognised in the balance sheet are determined as follows:

During the year ending 31 March 2020, the Trustees of the Scheme sought legal advice which concluded that the Company 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 thatthe recognition restrictions of IFRIC14 do not apply, and therefore has recognised the accounting surplusof £2.0m and an associated deferred tax liability of £0.7m in the Consolidated balance sheet.

The amounts charged to the Consolidated income statement are set out below:

The amounts recognised in the statement of other comprehensive income are as follows:

Movements during the period in the post-employment defined benefit obligations are set out as below:

12           Dividends

Dividends declared and paid in the period were as follows:

An interim dividend of 2.8 pence per share for the six months to September 2022 (September 2021: 2.7 pence per share) has been declared by the Directors', totaling £26.3m (September 2021: £25.7m) based on the number of shares eligible for the distribution as at 30 September 2022. The interim dividend is payable on 27 January 2023 to shareholders on the register at the close of business on 6 January 2023. No provision has been made for the interim dividend and there are no income tax consequences.

13           Cash generated from operations

14           Borrowings

The Syndicated revolving credit facility is repayable as follows:

The carrying amounts of borrowings approximate their fair values.

Syndicated revolving credit facility

With effect from 24 September 2021 the Group entered into an Amendment and Restatement Agreement to amend and restate the original Senior Facilities Agreement. The primary purpose of the Amended and Restated Senior Facilities Agreement is to incorporate LIBOR transition language to reflect the discontinuation of LIBOR and the transition to SONIA (in respect of sterling loans); Loan Market Association updates; and to include the effect of IFRS 16 for the purposes of calculating financial covenants.

The Group continues to be highly cash generative and remains in a net cash position, such that the size of the original £400m facility was not required. Therefore on 21 September 2021, the Group served notice to cancel £150m of the £400m total commitments under the Senior Facilities Agreement, such cancellation being pro-rated between the lenders. The Amended and Restated Senior Facilities Agreement incorporates the reduced total commitments of £250m. 

The Group has access to an unsecured Syndicated revolving credit facility (the 'Syndicated RCF'). Associated debt transaction costs total £4.3m, with £3.3m being incurred at initiation and £1.0m of additional costs associated with extension requests. The Group has extended the termination date of the Syndicated RCF by two years and it will terminate in two tranches as follows:

•       £52.2m will mature at the original termination date of June 2023; and

•       £197.8m will mature in June 2025.

Individual tranches are drawn down, in sterling, for periods of up to six months at the compounded reference rate (being the aggregate of SONIA and the applicable baseline credit adjustment spread 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 Consolidated 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.

15           Sharecapital

During the period, 3.5m shares were purchased for cancellation (September 2021: 13.1m; March 2022: 22.2m) and 1.4m shares were purchased for treasury (September 2021: 2.7m; March 2022: 2.7m). The average price per share was 619.5p (H1 2022: 636.1p) for a total consideration of £30.6m (H1 2022: £100.4m) before transaction costs of £0.2m (H1 2022: £0.5m).

Included within shares in issue at 30 September 2022 are 348,034 (September 2021: 365,068; March 2022: 358,158) shares held by the ESOT and 4,629,543 (September 2021: 4,125,530; March 2022: 3,826,928) shares held in treasury, as detailed in note 16.

16           Own shares held

17           Share-based payments

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 £3.6m (September 2021: £3.9m; March 2022: £6.1m). This included associated national insurance ('NI') at the rate at which management expects to be effective when the awards are exercised (15.05% up until November 2022 and 13.80% thereafter), 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 this period includes £13.8m relating to deferred share based payment consideration relating to the acquisition of Autorama (note 18), making a total combined charge of £17.3m (excluding associated NI).

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, subject to a three-year service period ('Vesting Period'). The SIP shareholders are entitled to dividends over the Vesting Period. There are no performance conditions applicable to the vesting of SIP shares. The fair value of the SIP awards at the grant date was measured to be £2.72 using the Black-Scholes model. The resulting share-based payments charge was spread evenly over the Vesting Period.

Performance Share Plan

The Group operates a Performance Share Plan ('PSP') for Executive Directors, the Operating 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.

Deferred Annual Bonus and Single Incentive Plan Award

The Group operates the Deferred Annual Bonus and Single Incentive Plan Award for the Executive Directors, the Operational Leadership Team and certain key employees. The Plan consists of two schemes, the Deferred Annual Bonus ('DAB') 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.

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.

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 award holders are entitled to receive dividends accruing between the grant date and the vesting date and this value will be delivered in shares.

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.

Fair value is measured by use of a Black-Scholes model and the resulting share-based payments charge is being spread evenly over the period between the grant date and the vesting date.

18           Business combinations

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 subject to employment and performance conditions.

Autorama (UK) Limited, 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:  

As the settlement of the deferred £50.0m consideration is subject to 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 £13.8m has been recorded in the period from acquisition to 30 September 2022.

From the period of acquisition to 30 September 2022, Autorama contributed revenue of £11.6m, and a loss of £4.0m 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 period in which measurement adjustments could be made is still open on this acquisition and the provisional goodwill calculation is summarised below: