Auto Trader Group plc (LON:AUTO), the UK’s largest digital automotive marketplace, today provided an unscheduled update as a result of the evolving COVID-19 situation.
Supporting our customers
The UK car retailing market is facing unprecedented levels of uncertainty. The UK Government itself is urging companies to hold on to their employees and for businesses to rally round to help the collective national effort.
As the UK’s leading automotive marketplace we have chosen to act in what we believe is a responsible way to protect our customers, who are key stakeholders in our business. Given the strength of our business we believe this to be in the long-term interests of our shareholders and employees, and will ensure that we continue to be the place where the UK public find their next car.
Today we will be contacting our customers to let them know we are doing two things immediately to support them. First, we will not charge our retailer customers for their advertising packages during April. Second, we will allow our customers to defer payment of their March advertising costs by 30 days.
Clearly this has an immediate financial impact on the business, which we set out below. Our Board has chosen this approach not in response to immediate pressures on our business, but rather to continue to support an industry that we have supported for the past 40 years, and one which has supported us. We have chosen to do this because we are able to: our low cost base, the strength of our balance sheet and our access to credit (see below).
Our full year results for the financial year ending 31 March 2020 will be broadly in line with market expectations. Due to current market conditions we cannot sensibly provide guidance for financial year 2021, however, the actions stated above will result in an operating loss for April in the range of £6m – £7m.
The Group’s balance sheet is strong. At the end of February we had drawings of £289m on our £400m revolving credit facility, with a net debt/EBITDA ratio of 1.1x which is well below our covenant level of 3.5x. We will not buy-back any further shares until we report our full year results in June, and we retain our long-term commitment to return cash to shareholders.
Nathan Coe, Auto Trader’s Chief Executive Officer, commented: “These are unprecedented times so I believe that it is vital that we pull together and support our people, our customers and our industry. We are committed to supporting our retailer customers throughout this uncertain time. It is equally important that we continue to prioritise the well-being and safety of our people, and we are taking all necessary action to ensure that they are receiving all the advice and support that they need.”
As previously announced, Auto Trader Groupwill report on its full year results for the financial year ending on 31 March 2020 on 4 June 2020, when we will provide a more detailed update.