Auto Trader’s share price soars to record highs after FY results

Risk appetite on UK share markets remains quite subdued as we approach end-of-week trading. But not all British stocks are struggling for grip today. The Auto Trader Group (LSE: AUTO) share price, for instance, is soaring following the release of latest financials.

Prices of the online car sales platform were recently up 7% on the day at 619p. This makes it the best-performing stock on the FTSE 100 today. Auto Trader had struck record highs of 624p earlier in the session before settling lower again.

Sales slump at Auto Trader

Auto Trader’s surged following the release of full-year financials. Revenues at the e-commerce firm dropped 29% in the 12 months to March, to £262.8m. This reflected the firm’s decision to run free advertising for its retailer customers in April, May and December during the height of coronavirus lockdowns, and to offer discounted rates in June.

As a consequence, pre-tax profits at the firm plunged 37% year-on-year to £157.4m.

But the FTSE 100 firm is hopeful that its troubles are in the rear-view mirror. And so it’s decided to reinstate dividends and to pay a 5p per share reward for last year.

“There has been a dramatic shift towards buying online which means we now have more buyers than ever turning to Auto Trader to help with their next car purchase, making us even more relevant to retailers and manufacturers,” chief executive Nathan Coe said. Cross platform visits rose 15% from financial 2020 to 58.3m per month.

Coe added that Covid-19 is having“little” on trading in the current year to date. Though he cautioned that the pandemic could re-emerge as a “significant negative factor” later on.

Potholes on the horizon?

Commenting on last year’s performance Neil Shah, director of research at Edison Group, says Auto Trader’s decision to reduce, or cancel altogether, advertising costs to support the motor industry could bode well going ahead. He said that “the rise in online sales and the more positive outlook for automotive retail sales more generally” means the Footsie firm could be on course “for a much better set of results” in this financial year.

That said, the road ahead for Auto Trader isn’t completely without obstacles. Shah added that “while we’re seeing a strong used car market with higher residual values being reported by automotive dealers, it remains to be seen as to whether there will be further impacts on the business from Covid-19.”

Researchers at Hargreaves Lansdown have also struck an upbeat tone looking ahead. They say that Auto Trader’s dominant market position, “comfortable liquidity position and very flexible cost base means it has the tools to ride out the (hopefully) last few miles of the crisis.”

But analysts there also warned that “we can’t rule out ups and downs though [as] we don’t know the full extent of medium-term forecourt closures yet.”