AutoWeb Annual Report 2019

FY2019 Annual Report · AutoWeb

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Driving
change

Auto Trader Group plc Annual Report
and Financial Statements 2019

Strategic report
02 2019 in summary
04 Chairman’s statement
05 Chief Executive Officer’s statement
06 Our approach
08
12
14
18
20
24 Operating and financial review
30 Principal risks and uncertainties
35 Corporate social responsibility

– Market overview
– Our business model
– Growth horizons
– Our strategy
– Key performance indicators

Governance
46 Governance overview
48 Board of Directors
50 Corporate governance statement
58 Report of the Nomination Committee
60 Report of the Audit Committee
64 Directors’ remuneration report
75 Directors’ report

Financial statements
79

Independent auditors’ report to the
members of Auto Trader Group plc only

83 Consolidated income statement
Consolidated statement of
84
comprehensive income
85 Consolidated balance sheet
Consolidated statement of
86
changes in equity

87 Consolidated statement of cash flows
Notes to the consolidated financial
88
statements

130 Company balance sheet
131

Company statement of changes
in equity
Notes to the Company financial
statements

132

137 Shareholder information

Who we are
Auto Trader Group Plc is the
UK's largest digital automotive
marketplace. Our purpose
is to lead the future of the
UK's digital automotive
marketplace.

What we do
There are over 10m
transactions each year and
we are driving change in how
consumers are shopping for
these cars online. We aim to
drive further efficiencies in
the market, benefitting
consumers, retailers and
manufacturers.

How we are driving change

Beneath our strategic pillars, we’re
focused on three horizons of growth.

We aim to significantly improve UK
car buying focused around our core
marketplace. We’ve identified adjacent
market opportunities which leverage
either our large consumer audience or
our relationships with retailers and
manufacturers. We believe future
opportunities exist in creating an online
transaction journey for car buyers.

Growth horizon 3

Future

page 17

Growth horizon 2

Adjacent

page 16

Growth horizon 1

Core

page 15

Auto Trader Group plc Annual Report and Financial Statements 2019 | 01

Strategic reportGovernanceFinancial statements
2019 in
summary

Purpose
To lead the future of the
UK's digital automotive
marketplace

Strategy
We continue to think about our
strategy in terms of three strategic
pillars, which address UK car buying,
the wider automotive ecosystem
and our culture as a business.
Each of these is critical in helping to meet our purpose to
lead the future of the UK’s digital automotive marketplace
and we have made progress against each pillar in 2019.

Read more
page 18

Growth horizons
We look to execute on our purpose and strategic pillars
by thinking about growth opportunities in three horizons:

Our core marketplace
continues to offer a strong
runway for growth, underpinned
by continuous improvement
of the car buying experience
and helping retailers improve
their profitability.

We’ve identified adjacent
opportunities to our core
marketplace in new car sales
and the way in which our
retailers source vehicles. We
believe the scale of our
consumer audience and our
relationships with retailers
and manufacturers help create
these opportunities.

The evolution of both our
products and our consumer
experience aims to keep
consumers online for
longer throughout the
buying journey.

Growth horizon 1

Core

Growth horizon 2

Adjacent

Growth horizon 3

Future

Growth horizon 1

Core

Our core marketplace continues to offer a strong
runway for growth, underpinned by continuous
improvement of the car buying experience and
helping retailers improve their profitability.

Continually enhance our core

Strategy

The industry will become more
digital and offline costs will reduce.
Auto Trader will be fundamental to
this change through:

— maintaining leadership with car buyers

— moving the car buying process online

— providing products, data and

services that deliver a higher ROI to
our retailers than the offline
alternatives they use today

There remains a mismatch between used
car retailing costs and the way in which
consumers are shopping for their next
vehicle. Throughout financial year 2019 we
have introduced products to help retailer
customers better target in-market car buyers.
We have grown penetration of our higher-level
advertising packages, which attract greater
levels of response from consumers. We
monetised our Dealer Finance product, which
surfaces a retailers' finance pricing earlier in
the buying journey. This product helps
consumers arrive at the forecourt better
informed on what their next vehicle purchase
is likely to be, helping make the actual
forecourt experience more efficient.

We have also overhauled and relaunched
our data-driven Managing products to help
retailers improve their price position and
speed of sale, thereby lowering the impact
of depreciation and discounting.

Online share of
research time

Split of retailer used
gross margin

Opportunity to drive
down retailer costs
and growth proﬁt

15% proﬁt

10% online

£0.4bn Digital marketing

70% online

30% ofﬂine

75% ofﬂine

£0.2bn Ofﬂine marketing

£2.0bn staff

O
p
p
o
r
t
u
n
i
t
y

£0.5bn Dep

£0.4bn Property

£0.3bn Other

Auto Trader Group plc Annual Report and Financial Statements 2019 | 15

Strategic reportGovernanceFinancial statementsGrowth horizon 2

Adjacent

We’ve identified adjacent opportunities to our core marketplace
in new car sales and the way in which our retailers source vehicles
to sell on their forecourts. We believe the scale of our consumer
audience and our relationship with retailers and manufacturers
help create these opportunities.

£2.0bn
2018 UK Automotive
Digital Advertising

Become to new cars
what we are in used

£0.4bn
offline

£0.1bn
digital other

£0.5bn
digital display

£0.3bn
Auto Trader

£0.7bn
digital search

We estimate there was c.£2.0bn spent on
automotive advertising in the UK in 2018
and of that c.£800m-£1bn was spent by
manufacturers promoting new cars.

Financial year 2019 has seen investment in both a
new native display product for manufacturers,
called InSearch, and also giving franchise retailers
the ability to advertise physical new cars on Auto
Trader. Consumers currently shop for a new car
using a new car configurator. This often leads to
frustration as consumers will have to wait a number
of months to take delivery of the vehicle. Our
proposition informs consumers which new cars
are immediately available to buy, including their
associated discounts.

Source of stock for used car
transactions sold by trade
customers in 2018 (m)

Develop a more efficient way
for retailers to source, dispose
and move vehicles

Fleets/OEM

Car
buying
schemes

1.4

0.3

B2B
Transactions

1.6

Unwanted

3.3 Part-
exchanges

R etain e d

1.7

3.3

Retailers

5.0

Consumers

There are c.3.3 million B2B transactions per year,
fuelled in part by the c.3.3 million part-exchanges
that occur when a consumer purchases a vehicle.

In 2019, Auto Trader entered into a joint venture with
Cox Automotive UK, to provide a leading digital
marketplace for wholesale vehicles in the UK,
under the brand Dealer Auction.

Cox Automotive UK has transferred both
Dealer-Auction.com, which offers an online auction
of trade-in vehicles from UK franchise dealers, and
Manheim Online, the online remarketing services
division of Cox Automotive UK, to the joint venture,
while Auto Trader has transferred its Smart Buying
business (formally known as Autotrade-mail), its
retailer-to-retailer platform.

The new Dealer Auction platform will provide a
digital led low cost B2B platform that is data-driven
to improve profitability for vendors and retailers in
a single marketplace with easy access to additional
services, such as logistics and wholesale funding
provided by partners. Since formation, Dealer
Auction has transacted over 30,000 vehicles and
advertised an additional 58,000 vehicles through
the Smart Buying platform.

16 | Auto Trader Group plc Annual Report and Financial Statements 2019

Strategy

Leveraging Auto Trader's large in-market
consumer audience, we believe we have a
big role in helping manufacturers and their
franchises sell new cars.

Today we generate just over £20 million from
manufacturers and their agencies, but we
believe we can take a more meaningful share
of new car advertising, by doing the following
things well and consistently:

— delivering the best UK new car buying

experience

— continue to grow the choice and quality of

physical new car inventory

— mobile-led advertising products with greater

scale and targeting

— deepening relationships and perceptions
with manufacturers and their agencies

Strategy

Sourcing vehicles is one of our customers’
biggest challenges and the costs can be
significant. Through our joint venture we are
looking to grow the online auction market in
several ways:

— Our online marketplace will be national,
whereas the existing physical auction
market revolves around regional centres

— Using Auto Trader’s digital relationship with

retailers we’re able to target potential
auction buyers and, following purchase,
create a process where a vehicle can be
advertised quicker to consumers using
Autotrader.co.uk

— We will power the search experience using
Auto Trader's unique metrics that inform
retailers the vehicles that are in demand in
their area and provide specification adjusted
valuations to guide their buying decisions

— The pricing of Dealer Auction, particularly

for buyers’ fees, will be cheaper than those
currently paid at physical auctions

— We will continue to grow our logistics
marketplace, Motor Trade Delivery

S
t
r
a
t
e
g
c
r
e
p
o
r
t

G
o
v
e
r
n
a
n
c
e

F
n
a
n
c
a

l
s
t
a
t
e
m
e
n
t
s

Growth horizon 3

Future

The evolution of both our products and our
consumer experience aim to keep consumers
online for longer throughout the buying journey.

Help consumers
transact online
Recent research suggests there
is growing appetite for a greater
online journey from consumers
when it comes to car buying.

In 2019, Auto Trader has shown monthly prices
on its adverts, increased the volume of
dealer reviews and in the last few months
launched a more comprehensive vehicle
check product, all giving greater confidence
to car buyers. In the next three years, much of
our product development is focused around
a deeper online journey. We have the
experience, resources and technology to
continue leading innovation in the UK
automotive marketplace.

Strategy

There are several elements to an online
journey and we have made good progress in
2019, with the next areas of focus being:

— We currently show a recommended

part-exchange guide price for consumers,
but believe we need a way to guarantee this
price for consumers

— Our finance product is currently an

advertisement of the monthly price,
however there is a need to develop the
application process and help consumers
understand eligibility

— Auto Trader owns a logistics marketplace,

however the concept of home delivery is not
well established

— The ability to take a full online payment or
deposit, including the finance approval,
would be required

The elements to deliver an
end-to-end online transaction

Guaranteed
part-exchange

Vehicle
finance

Car history
check

Deposits &
online finance
application

Price
indicator

Online
payment

Vehicle
delivery

Dealer
reviews

Auto Trader Group plc Annual Report and Financial Statements 2019 | 17

Our strategy
To be the UK’s leading digital
automotive marketplace

Strategic pillars

Horizon

Focus areas

2019 progress

Relevant risks

Improve
car buying
in the UK

Evolve the
automotive
ecosystem
in the UK

Become
the most
admired
UK digital
business

1
Maintain the best
consumer experience
for buying and selling
vehicles

The largest and most engaged consumer audience,
shopping for their next vehicle, underpins our network
effect marketplace model. We continue to invest in the
onsite experience and the tools available to consumers
to help them make the most informed decisions.

2
Create and maintain
high-performing,
data-orientated
teams

The successful development and scale of our products
and services comes down to our people, our most
important asset. We consistently invest in our people’s
development and work hard to ensure we have a
diverse and inclusive workforce. Data is fundamental
to decision making within the organisation and we
constantly strive to improve our capability in this area.

Average Revenue Per Retailer (‘ARPR’) is a key
determinant of revenue, with 83% of Group revenue
coming from retailer customers. Growth in ARPR is
split into three levers: price, stock and product.

3
Grow ARPR in a
balanced and
sustainable way,
by creating value
for our customers

4
Improve stock choice,
volumes, accuracy and
transparency in both
new and used vehicles

Stock is a key part of our network effect model.
It is vitally important we maintain our leadership
position across different profiles, including: age, price,
make/model and region, across both new and used
vehicles. We aim to replicate in new cars the success
we have achieved in used cars. All our stock is
underpinned by our extensive vehicle taxonomy.

5
Develop a more efficient
way for retailers to
source, dispose and
move vehicles

A consistent painpoint for retailers is how they currently
source vehicles outside of consumer part-exchanges.
Through market research it shows a challenge exists to
find quality stock, within a specific stocking policy, at
competitive prices whilst also maintaining margin.
Disposing of and moving vehicles in a cost effective
manner can also be challenging, with many retailers
wedded to one supplier.

6
Extend our product
offering further down
the buying funnel,
towards online
transactions

Our research suggests there is a growing desire to
complete more aspects of the car buying journey online.
We continue to look at the various component parts
which might make up that transaction journey and how
we might offer those on Auto Trader, extending the time
consumers currently spend online shopping for new
and used vehicles.

18 | Auto Trader Group plc Annual Report and Financial Statements 2019

Improvements made to search listings

and the full page advert view have

helped improve the onsite experience.

We have maintained share of minutes

spent on automotive classified sites

and grown cross platform visits as

measured by Google Analytics.

4 Failure to innovate: disruptive technologies and changing

consumer behaviours: If we fail to adapt to changing consumer

behaviour, we could be surpassed in offering the best

consumer experience by competitors.

5 IT systems and cyber security: Significant downtime or a data

breach, resulting in reputational damage, could result in a loss

of consumer trust in our marketplace.

7 Reliance on third parties: Disruption or downtime from a

supplier could result in a poor consumer experience.

How we measure progress

– Full page advert views

– Cross platform visits

The number of employees has

marginally declined year-on-year,

although this was partly impacted

through the transfer of 15 employees

to our new joint venture in Q4. We

have improved our data capabilities,

resulting in the launch of new iterations

of our data-driven Managing products.

ARPR saw growth of £149 in 2019.

The main contributor to this was the

successful execution of our annual

pricing event and the monetisation

of our new Dealer Finance product.

Upsell to our advanced and premium

advertising packages also contributed

to our product lever growth. Our paid

stock lever was marginally negative,

due to H1 pressure on supply.

Live stock on Auto Trader grew 2% in

2019, with the growth coming through

the introduction of our physical new car

product. Underlying used car stock saw

a small decline year-on-year, in line with

used car transaction volumes.

5 IT systems and cyber security: The data we hold on our

employees must be stored securely. Compliance training

must also be completed annually by all employees.

6 Employees: All our office locations are seeing increased

levels of competition for talent.

– Operating profit

– Operating profit margin

– Number of full-time equivalent

employees (‘FTEs’)

1 Economy, market and business environment: Reduced

transactions and lower dealer profitability could lower the

propensity for dealers to buy our products.

4 Failure to innovate: disruptive technologies and changing

consumer behaviours: Inability to react to market disruption

could limit our ability to grow our product lever revenue.

5 IT systems and cyber security: Significant downtime or a data

breach, resulting in reputational damage, could result in a loss

of customer confidence.

7 Reliance on third parties: Significant downtime or disruption

due to a third party could lead to loss of value to customers,

potentially resulting in lower product uptake.

– Revenue

– Operating profit

– Operating profit margin

– Number of retailer forecourts

– Average Revenue Per Retailer

(‘ARPR’)

– Live stock

1 Economy, market and business environment: Reduced new

and used car transactions could lead to lower volumes of

– Live stock

– Number of retailer forecourts

stock for sale in the market.

In December 2018 we completed a

joint venture with Cox Automotive

UK to provide a digital online auction

marketplace. Auto Trader contributed

a business called Smart Buying to

complement the Cox owned Dealer

Auction, the brand under which the

JV will operate, and a business called

Manheim Online.

4 Failure to innovate: disruptive technologies and changing

consumer behaviours: The way in which retailers source,

dispose and move their vehicles is currently inefficient

and requires innovation to significantly improve the

existing processes.

7 Reliance on third parties: The delivery of improvements in

how retailers source, dispose and move vehicles is likely to

rely on a greater number of partnerships with third parties.

– Operating profit

– Operating profit margin

In 2019 we monetised our dealer

finance product which allows

consumers to consider their finance

pricing earlier in the buying journey.

We also evolved our full page advert

to bring the part-exchange guide

pricing and finance quote into a

more integrated journey.

4 Failure to innovate: disruptive technologies and changing

consumer behaviours: If we fail to innovate in this area, it is

likely that we will miss the significant opportunity in bringing

more of the buying journey online and potentially have our

existing model undermined.

7 Reliance on third parties: The delivery of more components

of an online transaction journey is likely to rely on a greater

number of partnerships with third parties.

– Revenue

– Operating profit

– Operating profit margin

– Number of retailer forecourts

– Average Revenue Per Retailer

(‘ARPR’)

Strategic pillars

Horizon

Focus areas

2019 progress

Relevant risks

Improvements made to search listings
and the full page advert view have
helped improve the onsite experience.
We have maintained share of minutes
spent on automotive classified sites
and grown cross platform visits as
measured by Google Analytics.

4 Failure to innovate: disruptive technologies and changing

consumer behaviours: If we fail to adapt to changing consumer
behaviour, we could be surpassed in offering the best
consumer experience by competitors.

5 IT systems and cyber security: Significant downtime or a data
breach, resulting in reputational damage, could result in a loss
of consumer trust in our marketplace.

7 Reliance on third parties: Disruption or downtime from a
supplier could result in a poor consumer experience.

How we measure progress

– Full page advert views
– Cross platform visits

Growth horizon 1

Growth horizon 2

Growth horizon 3

Core

Adjacent

Future

The number of employees has
marginally declined year-on-year,
although this was partly impacted
through the transfer of 15 employees
to our new joint venture in Q4. We
have improved our data capabilities,
resulting in the launch of new iterations
of our data-driven Managing products.

ARPR saw growth of £149 in 2019.
The main contributor to this was the
successful execution of our annual
pricing event and the monetisation
of our new Dealer Finance product.
Upsell to our advanced and premium
advertising packages also contributed
to our product lever growth. Our paid
stock lever was marginally negative,
due to H1 pressure on supply.

Live stock on Auto Trader grew 2% in
2019, with the growth coming through
the introduction of our physical new car
product. Underlying used car stock saw
a small decline year-on-year, in line with
used car transaction volumes.

5 IT systems and cyber security: The data we hold on our

employees must be stored securely. Compliance training
must also be completed annually by all employees.

6 Employees: All our office locations are seeing increased

levels of competition for talent.

– Operating profit
– Operating profit margin
– Number of full-time equivalent

employees (‘FTEs’)

1 Economy, market and business environment: Reduced

transactions and lower dealer profitability could lower the
propensity for dealers to buy our products.

4 Failure to innovate: disruptive technologies and changing

consumer behaviours: Inability to react to market disruption
could limit our ability to grow our product lever revenue.

5 IT systems and cyber security: Significant downtime or a data
breach, resulting in reputational damage, could result in a loss
of customer confidence.

7 Reliance on third parties: Significant downtime or disruption
due to a third party could lead to loss of value to customers,
potentially resulting in lower product uptake.

– Revenue
– Operating profit
– Operating profit margin
– Number of retailer forecourts
– Average Revenue Per Retailer

(‘ARPR’)
– Live stock

1 Economy, market and business environment: Reduced new
and used car transactions could lead to lower volumes of
stock for sale in the market.

– Live stock
– Number of retailer forecourts

In December 2018 we completed a
joint venture with Cox Automotive
UK to provide a digital online auction
marketplace. Auto Trader contributed
a business called Smart Buying to
complement the Cox owned Dealer
Auction, the brand under which the
JV will operate, and a business called
Manheim Online.

4 Failure to innovate: disruptive technologies and changing
consumer behaviours: The way in which retailers source,
dispose and move their vehicles is currently inefficient
and requires innovation to significantly improve the
existing processes.

7 Reliance on third parties: The delivery of improvements in
how retailers source, dispose and move vehicles is likely to
rely on a greater number of partnerships with third parties.

– Operating profit
– Operating profit margin

In 2019 we monetised our dealer
finance product which allows
consumers to consider their finance
pricing earlier in the buying journey.
We also evolved our full page advert
to bring the part-exchange guide
pricing and finance quote into a
more integrated journey.

4 Failure to innovate: disruptive technologies and changing
consumer behaviours: If we fail to innovate in this area, it is
likely that we will miss the significant opportunity in bringing
more of the buying journey online and potentially have our
existing model undermined.

7 Reliance on third parties: The delivery of more components
of an online transaction journey is likely to rely on a greater
number of partnerships with third parties.

– Revenue
– Operating profit
– Operating profit margin
– Number of retailer forecourts
– Average Revenue Per Retailer

(‘ARPR’)

Risk that applies to all focus areas
2 Brand: Failure to protect our brand could result in a

reduction in audience, which would limit our ability to
execute on all focus areas.

3 Increased competition: It’s possible that audience,
customers, employees and innovation could all be
impacted by improvements from our competitors.

Measures that apply
to all focus areas
– Basic EPS
– Cash generated from operations

Auto Trader Group plc Annual Report and Financial Statements 2019 | 19

Maintain the best

consumer experience

for buying and selling

vehicles

The largest and most engaged consumer audience,

shopping for their next vehicle, underpins our network

effect marketplace model. We continue to invest in the

onsite experience and the tools available to consumers

to help them make the most informed decisions.

Create and maintain

high-performing,

data-orientated

teams

The successful development and scale of our products

and services comes down to our people, our most

important asset. We consistently invest in our people’s

development and work hard to ensure we have a

diverse and inclusive workforce. Data is fundamental

to decision making within the organisation and we

constantly strive to improve our capability in this area.

Average Revenue Per Retailer (‘ARPR’) is a key

determinant of revenue, with 83% of Group revenue

coming from retailer customers. Growth in ARPR is

split into three levers: price, stock and product.

Grow ARPR in a

balanced and

sustainable way,

by creating value

for our customers

Improve stock choice,

volumes, accuracy and

transparency in both

new and used vehicles

Stock is a key part of our network effect model.

It is vitally important we maintain our leadership

position across different profiles, including: age, price,

make/model and region, across both new and used

vehicles. We aim to replicate in new cars the success

we have achieved in used cars. All our stock is

underpinned by our extensive vehicle taxonomy.

Develop a more efficient

way for retailers to

source, dispose and

move vehicles

A consistent painpoint for retailers is how they currently

source vehicles outside of consumer part-exchanges.

Through market research it shows a challenge exists to

find quality stock, within a specific stocking policy, at

competitive prices whilst also maintaining margin.

Disposing of and moving vehicles in a cost effective

manner can also be challenging, with many retailers

wedded to one supplier.

Extend our product

offering further down

the buying funnel,

towards online

transactions

Our research suggests there is a growing desire to

complete more aspects of the car buying journey online.

We continue to look at the various component parts

which might make up that transaction journey and how

we might offer those on Auto Trader, extending the time

consumers currently spend online shopping for new

and used vehicles.

Strategic reportGovernanceFinancial statementsKey performance indicators
Financial

Revenue
£m

Average Revenue
Per Retailer (‘ARPR’)
£ per month

Operating profit
£m

Basic EPS

pence per share

Cash generated

from operations

£m

£355.1m

+8%

£1,844

+£149

£243.7m

+10%

2019

2018

2017

£355.1m

£330.1m

£311.4m

2019

2018

2017

£1,844

£1,695

£1,546

2019

2018

2017

69% Margin

£243.7m

67% Margin

£221.3m

65% Margin

£203.9

Relevant focus areas
1 2 3 4 5 6

Definition
The Group generates revenue from three
different streams: Trade, Consumer
Services and Manufacturer and Agency.
Trade is broken down into three
categories: Retailer, Home Trader and
Other, with Consumer Services similarly
split into Private and Motoring Services.

Progress
Revenue increased 8% year-on-year, with
the main driver of growth being our
Retailer line, supported by Manufacturer
and Agency. This growth was slightly
offset by a decrease in Consumer
Services, largely as a result of declining
private listings.

Definition
Average Revenue Per Retailer (‘ARPR’) is
calculated by taking the average monthly
revenue generated from retailer
customers and dividing by the average
monthly number of retailer forecourts
who subscribe to an Auto Trader
advertising package.

Progress
ARPR grew £149 in the year. Growth was
largely a function of the product lever
through: further upsell to our higher-level
packages; the monetisation of our new
Dealer Finance product; expanding the
products included within our packages to
include stock exports and improved
dealer landing pages; and small growth in
the volume of customers paying for a
data-driven Managing product. Growth
was further bolstered by an underlying
price increase, which was slightly
offset by a year-on-year decline in our
stock lever.

Definition
Operating profit is as reported in the
Consolidated income statement on page
83. This is defined as revenue less
administrative expenses, plus share of
profit from joint ventures. Operating
profit margin is Operating profit as a
percentage of revenue. Comparative
periods have been restated to reflect the
Group’s adoption of the new accounting
standard for Leases (‘IFRS 16’) from 1 April
2018 using the fully retrospective
approach.

Progress
Operating profit increased by 10%
reflecting top line revenue growth of 8%
and well managed costs. Operating profit
also benefitted from one quarter of profit,
contributed through our new joint venture,
Dealer Auction. Operating profit margin
saw improvement, growing by a further
2 percentage points to 69%.

21.00p

£258.5m

Relevant focus areas

1 2 3 4 5 6

Definition

1 2 3 4 5 6

Definition

Basic earnings per share is defined as

Cash generated from operations is as

profit for the year attributable to equity

reported in the Consolidated statement

holders of the parent divided by the

of cash flows on page 87. This is defined

weighted average number of shares in

as cash generated from operating

issue during the year. Comparative periods

activities, before corporation tax paid.

have been restated to reflect the Group’s

This is considered to be a more meaningful

adoption of the new accounting standard

measure of performance than the

for Leases (‘IFRS 16’) from 1 April 2018 using

statutory measure of cash generated from

the fully retrospective approach.

operating activities, which can be distorted

Progress

Basic EPS growth was 18%, demonstrating

the Group’s high operational gearing.

Much of the growth drops through from

growth in net income, which benefitted

from a one-off profit on disposal as we

entered a joint venture with Cox

Automotive UK. Basic EPS was also

by changes in funding structure and the

time lag that applies to the payment of

corporation tax. Comparative periods

have been restated to reflect the Group’s

adoption of the new accounting standard

for Leases (‘IFRS 16’) from 1 April 2018 using

the fully retrospective approach.

Progress

supported by a reduction in the weighted

Cash generated from operations

average number of shares in issue during

increased to £258.5 million in the year,

the year as a consequence of our share

giving growth of £30.1 million or 13%. This

buyback programme.

represented a high proportion of profit

converted into cash, which was largely

returned to shareholders through

dividends and share buybacks.

Relevant risks
1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

20 | Auto Trader Group plc Annual Report and Financial Statements 2019

Revenue

£m

Average Revenue

Per Retailer (‘ARPR’)

£ per month

Operating profit

£m

Basic EPS
pence per share

Cash generated
from operations
£m

£355.1m

£1,844

£243.7m

Relevant focus areas

1 2 3 4 5 6

Definition

1 2 3 4 5 6

Definition

1 2 3 4 5 6

Definition

The Group generates revenue from three

Average Revenue Per Retailer (‘ARPR’) is

Operating profit is as reported in the

different streams: Trade, Consumer

calculated by taking the average monthly

Consolidated income statement on page

Services and Manufacturer and Agency.

revenue generated from retailer

83. This is defined as revenue less

Trade is broken down into three

customers and dividing by the average

administrative expenses, plus share of

categories: Retailer, Home Trader and

monthly number of retailer forecourts

profit from joint ventures. Operating

Other, with Consumer Services similarly

who subscribe to an Auto Trader

split into Private and Motoring Services.

advertising package.

Progress

Revenue increased 8% year-on-year, with

ARPR grew £149 in the year. Growth was

the main driver of growth being our

largely a function of the product lever

Retailer line, supported by Manufacturer

through: further upsell to our higher-level

and Agency. This growth was slightly

offset by a decrease in Consumer

packages; the monetisation of our new

Dealer Finance product; expanding the

approach.

Progress

profit margin is Operating profit as a

percentage of revenue. Comparative

periods have been restated to reflect the

Group’s adoption of the new accounting

standard for Leases (‘IFRS 16’) from 1 April

2018 using the fully retrospective

Services, largely as a result of declining

products included within our packages to

Operating profit increased by 10%

private listings.

include stock exports and improved

reflecting top line revenue growth of 8%

dealer landing pages; and small growth in

and well managed costs. Operating profit

the volume of customers paying for a

also benefitted from one quarter of profit,

data-driven Managing product. Growth

contributed through our new joint venture,

was further bolstered by an underlying

Dealer Auction. Operating profit margin

price increase, which was slightly

saw improvement, growing by a further

offset by a year-on-year decline in our

2 percentage points to 69%.

stock lever.

21.00p

+18%

£258.5m

+13%

2019

2018

2017

21.00p

17.74p

15.62p

2019

2018

2017

£258.5m

£228.4m

£212.9m

Relevant focus areas
1 2 3 4 5 6

Definition
Basic earnings per share is defined as
profit for the year attributable to equity
holders of the parent divided by the
weighted average number of shares in
issue during the year. Comparative periods
have been restated to reflect the Group’s
adoption of the new accounting standard
for Leases (‘IFRS 16’) from 1 April 2018 using
the fully retrospective approach.

Progress
Basic EPS growth was 18%, demonstrating
the Group’s high operational gearing.
Much of the growth drops through from
growth in net income, which benefitted
from a one-off profit on disposal as we
entered a joint venture with Cox
Automotive UK. Basic EPS was also
supported by a reduction in the weighted
average number of shares in issue during
the year as a consequence of our share
buyback programme.

Definition
Cash generated from operations is as
reported in the Consolidated statement
of cash flows on page 87. This is defined
as cash generated from operating
activities, before corporation tax paid.
This is considered to be a more meaningful
measure of performance than the
statutory measure of cash generated from
operating activities, which can be distorted
by changes in funding structure and the
time lag that applies to the payment of
corporation tax. Comparative periods
have been restated to reflect the Group’s
adoption of the new accounting standard
for Leases (‘IFRS 16’) from 1 April 2018 using
the fully retrospective approach.

Progress
Cash generated from operations
increased to £258.5 million in the year,
giving growth of £30.1 million or 13%. This
represented a high proportion of profit
converted into cash, which was largely
returned to shareholders through
dividends and share buybacks.

Relevant risks

1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

Relevant risks
1 2 3 4 5 6 7

Linked to remuneration £

Directors’ remuneration report
page 64

Focus areas relevant to our KPIs

1 Maintain the best consumer
experience for buying and
selling vehicles

2 Create and maintain high-performing,

data-orientated teams

3 Grow ARPR in a balanced and

sustainable way, by creating value
for our customers

4 Improve stock choice, volumes,

accuracy and transparency in both
new and used vehicles

5 Develop a more efficient way for
retailers to source, dispose and
move vehicles

6 Extend our product offering further
down the buying funnel, towards
online transactions

Our strategy
pages 18-19

Risks relevant to our KPIs

1 Economy, market and
business environment

2 Brand
3 Increased competition
4 Failure to innovate: disruptive
technologies and changing
consumer behaviours

5 IT systems and cyber security
6 Employee retention

7 Reliance on third parties

Principal risks and uncertainties
pages 30-34

Auto Trader Group plc Annual Report and Financial Statements 2019 | 21

Strategic reportGovernanceFinancial statementsKey performance indicators
Operational

Cross platform visits
Monthly average visits spent across all
platforms (millions)

Advert views
Average number per month (millions)

Number of retailer
forecourts
Average number per month

49.1m

+1%

239m

-3%

13,240

+0%

2019

2018

2017

49.1m

48.7m

49.4m

2019

2018

2017

239m

246m

247m

2019

2018

2017

13,240

13,213

13,296

Relevant focus areas
1 2 3 4 5 6

Definition
Monthly average visits made across all
our platforms, as measured by Google
Analytics.

Progress
Cross platform visits, as measured by
Google Analytics, increased 1%
year-on-year and have been largely flat
over the last two years. We have changed
from the measure of absolute comScore
minutes due to volatility in the number
which does not correlate with internal
measures. The value in comScore lies in
the comparison to competitors where we
retained our 54% share of visits and over
70% share of minutes across automotive
classified sites.

Definition
When a consumer conducts a search on
Auto Trader, they are presented with a list
of search results meeting their search
criteria. The consumer can then click into
an advert to see the detailed specification
of the vehicle, images, videos and how to
contact the dealer. This click-through
classifies as an advert view.

Progress
2019 has seen a slight decline in advert
views, at a slightly higher rate than the
reduction in transaction volumes, which
were down 0.9%. Throughout the year we
have made improvements to our search
experience, presenting more parts of
the deal on the advert view, which has
made finding the right car easier.

Definition
The average number of retailer
forecourts per month that subscribe to
an Auto Trader advertising package.

Progress
The average number of retailer forecourts
in the year was broadly flat. Previously
we reported two years of modest decline
in retailer numbers, as the overall market
for retailers consolidates each year. We
believe this consolidation is continuing,
implying a marginal increase in our share
of retailer forecourts in the year.

Number of full-time

equivalent employees

Live car stock

Average number per month

Average number (including contractors)

(‘FTEs’)

804

461,000

Relevant focus areas

1 2 3 4 5 6

Definition

1 2 3 4 5 6

Definition

Full-time equivalent employees are

The average number of physical cars

measured on the basis of the number

(either new or used) that are advertised

of hours worked by full-time employees,

on autotrader.co.uk per month. Live stock

with part-time employees included on

is an important component of our network

a pro-rata basis. Number of FTEs (which

effect business model and we charge

includes contractors) is reported

our retailer customers on a cost per

internally each calendar month, with the

advertised slot basis for their advertising

full-year number being generated from

package, making the stock on our website

an average of those 12 time periods.

a key dependency of retailer revenue.

Progress

FTEs have decreased by 2% year-on-year.

Live car stock on site increased by 2%.

The decline was driven by continued

efficiency in the organisation and the

This growth was driven by our new

physical stock product, where Franchise

completion of our joint venture with Cox

retailers can list their physical new cars,

Automotive UK, where employees were

currently for free. Underlying used

transferred into the JV.

car stock was marginally down, despite

a stronger second half, following tight

used car supply at the beginning of

the year.

Relevant risks
1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

22 | Auto Trader Group plc Annual Report and Financial Statements 2019

Cross platform visits

Advert views

Monthly average visits spent across all

Average number per month (millions)

platforms (millions)

Number of retailer

forecourts

Average number per month

49.1m

239m

13,240

Number of full-time
equivalent employees
(‘FTEs’)
Average number (including contractors)

804

-2%

2019

2018

2017

804

824

461,000

+2%

2019

2018

2017

461,000

453,000

450,000

Live car stock
Average number per month

Linked to remuneration £

Directors’ remuneration report
page 64

1 2 3 4 5 6

Definition

Analytics.

Progress

Relevant focus areas

1 2 3 4 5 6

Definition

1 2 3 4 5 6

Definition

Monthly average visits made across all

When a consumer conducts a search on

The average number of retailer

our platforms, as measured by Google

Auto Trader, they are presented with a list

forecourts per month that subscribe to

of search results meeting their search

an Auto Trader advertising package.

Cross platform visits, as measured by

Google Analytics, increased 1%

year-on-year and have been largely flat

over the last two years. We have changed

from the measure of absolute comScore

Progress

criteria. The consumer can then click into

an advert to see the detailed specification

of the vehicle, images, videos and how to

contact the dealer. This click-through

classifies as an advert view.

Progress

The average number of retailer forecourts

in the year was broadly flat. Previously

we reported two years of modest decline

in retailer numbers, as the overall market

for retailers consolidates each year. We

minutes due to volatility in the number

2019 has seen a slight decline in advert

believe this consolidation is continuing,

which does not correlate with internal

views, at a slightly higher rate than the

implying a marginal increase in our share

measures. The value in comScore lies in

reduction in transaction volumes, which

of retailer forecourts in the year.

the comparison to competitors where we

were down 0.9%. Throughout the year we

retained our 54% share of visits and over

have made improvements to our search

70% share of minutes across automotive

experience, presenting more parts of

classified sites.

the deal on the advert view, which has

made finding the right car easier.

Relevant focus areas
1 2 3 4 5 6

Definition
Full-time equivalent employees are
measured on the basis of the number
of hours worked by full-time employees,
with part-time employees included on
a pro-rata basis. Number of FTEs (which
includes contractors) is reported
internally each calendar month, with the
full-year number being generated from
an average of those 12 time periods.

Progress
FTEs have decreased by 2% year-on-year.
The decline was driven by continued
efficiency in the organisation and the
completion of our joint venture with Cox
Automotive UK, where employees were
transferred into the JV.

Definition
The average number of physical cars
(either new or used) that are advertised
on autotrader.co.uk per month. Live stock
is an important component of our network
effect business model and we charge
our retailer customers on a cost per
advertised slot basis for their advertising
package, making the stock on our website
a key dependency of retailer revenue.

Progress
Live car stock on site increased by 2%.
This growth was driven by our new
physical stock product, where Franchise
retailers can list their physical new cars,
currently for free. Underlying used
car stock was marginally down, despite
a stronger second half, following tight
used car supply at the beginning of
the year.

Relevant risks

1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

Relevant risks

1 2 3 4 5 6 7

Relevant risks
1 2 3 4 5 6 7

Focus areas relevant to our KPIs

1 Maintain the best consumer

experience for buying and selling
vehicles

2 Create and maintain high-performing,

data-orientated teams

3 Grow ARPR in a balanced and

sustainable way, by creating value
for our customers

4 Improve stock choice, volumes,

accuracy and transparency in both
new and used vehicles

5 Develop a more efficient way for
retailers to source, dispose and
move vehicles

6 Extend our product offering further
down the buying funnel, towards
online transactions

Our strategy
pages 18-19

Risks relevant to our KPIs

1 Economy, market and business

environment

2 Brand
3 Increased competition
4 Failure to innovate: disruptive

technologies and changing consumer
behaviours

5 IT systems and cyber security
6 Employee retention

7 Reliance on third parties

Principal risks and uncertainties
pages 30-34

Auto Trader Group plc Annual Report and Financial Statements 2019 | 23

Strategic reportGovernanceFinancial statementsOperating and financial review

Against a backdrop
of general market
uncertainty, I am
pleased to report on
another excellent year
for the business.”
Nathan Coe
Chief Financial Officer and
Chief Executive Officer-designate

Operational review

70%

of consumers would use Auto Trader
to help them buy a brand-new car

78%

of consumers would use Auto Trader
to help them buy a used car

Introduction
Against a backdrop of general market
uncertainty, I am pleased to report on
another excellent year for the business,
both from an operational and financial
perspective. We continue to invest in both
our products and experience, ensuring that
we’re continually adding value to our
consumers, retailers and manufacturers,
as well as being focused on driving
efficiencies across our business and
delivering returns to shareholders.

Enhancing the car buying experience
Consumers are carrying out more of their car
buying research online. We commissioned
some independent research which found
that 52% of consumers who had already
started their car buying process claimed to
consider the cost of a car as a monthly price,
rather than the full retail price. We therefore
offer functionality so that consumers can
search by monthly payment whilst allowing
retailers the option to display their finance
pricing to the UK’s largest car buying
audience earlier in their car buying journey.
This Dealer Finance product was monetised
with retailers as part of our annual pricing
event with over 5,000 retailers now paying to
advertise their finance offers. In addition to
this, over 3,500 retailers chose to appear in
monthly search by advertising finance rates
provided by our third-party partner.

This year we have also made a significant
step forward in new cars, launching a
stock-based product allowing retailers to
upload physically available new cars at
current retail prices, much the same way as
they have been doing for decades with their
used car stock. We had over 30,000 of these
physical new cars onsite at the end of the
financial year, and there’s still room for
growth as we estimate that there are an
additional 90,000 of these cars that exist
today but are not actively being advertised
anywhere. Both consumers and retailers
are showing strong appetite for the new
car offering, however the technical and
operational challenges to get these cars
online have proven to be high. At present we
are offering this product on a free trial basis.
We intend to commence charging for the
product during the course of the coming
financial year.

Our highest two levels of advertising
packages, Advanced and Premium, continue
to gain recognition from retailers. These
higher yielding packages allow retailers
to pay for greater prominence on our
marketplace, which drives a higher volume
of advert views which in turn enables
those cars to sell faster.

24 | Auto Trader Group plc Annual Report and Financial Statements 2019

An independent brand tracker currently
suggests that 78% of consumers would use
Auto Trader to help them buy a used car and
70% would use Auto Trader to help them buy a
brand-new car. One of this year’s campaign
highlights was a social campaign called
ATGoals which ran during the Football World
Cup and gave fans a chance to win a car
every time England scored a goal in the
tournament. The award-winning campaign
culminated in a live TV screening of the
semi-final game in our home city of
Manchester and was viewed by over
27 million people.

The largest automotive marketplace
We continue to operate the UK’s largest
digital automotive marketplace and we
have maintained our market leading
audience position by a significant margin.
A large proportion of our audience is
unique to Auto Trader, and consumers are
more engaged with our platforms
compared to any other automotive site.

Average monthly cross platform visits
increased by 1% to 49.1 million (2018: 48.7
million). We will now report, where possible,
our own internal data as measured by Google
Analytics to ensure an accurate picture of
the cross platform traffic driven to our
marketplace. We have grown our market
share of time spent on automotive portals
as measured by Comscore to 76% (2018: 75%),
which is more than five times that of our
nearest competitor. Advert views saw
modest decline in line with broader
market trends.

The level of live stock on our site has
increased by 2% in the year, as the average
number of cars on the marketplace rose to
461,000 (2018: 453,000). The growth was
driven by new cars, through our newly
launched product, with a small decline in
used car volumes which were impacted by
supply side tightening at the beginning of the
financial year. The average number of retailer
forecourts using our marketplace remained
stable, increasing slightly to 13,240
(2018: 13,213).

Despite a tougher new car market,
manufacturers and agencies continue to see
the value in our marketplace to advertise
their new cars to consumers, with spend up
by 18%. However the short-term challenges
faced by both of these customer types did
impact our growth in the second half of the
year. Our fastest growing product is InSearch
which allows manufacturers to reach and
influence car buyers in a highly targeted
fashion.

We continue to invest in our data products
and during the year we completely
relaunched new ‘Managing’ products, Retail
Check and Retail Accelerator (formerly
known as i-Control). The new products
represent a significant enhancement with
new and improved data, analytics, design,
reporting and goal setting. The number
of retailer forecourts using one of these
products at the end of the year was 3,200
(2018: 3,000). Over 39% of trade stock is
managed using one of these data intelligence
solutions, which are now hosted on
mobile-friendly platforms. We now provide
richer valuation data and a proprietary Retail
Rating which takes account of supply and
demand, enabling retailers to get a more
accurate view of how their stock will perform
on the live retail market. Building on the
success of its predecessor, i-Control, Retail
Accelerator takes a retailer’s business goals
and creates a daily action plan aligned to
their desired stock turn and margin. It
enables them to manage their inventory more
effectively by constantly tracking changing
market conditions and delivering alerts on
valuation changes, incorrect pricing and
ageing stock, as well as dynamic
performance reporting to improve retailers'
competitive position.

As a technology business we are
constantly improving our core platform
and infrastructure which are key enablers
of our approach to software and product
development. This year we have invested in
new public cloud-based solutions enabling
security, resilience and importantly speed
when it comes to releasing software. Over
the last year we have released three times as
many software updates, achieving 15,000 in
the year. Using the public cloud has also
enabled us to increase the visibility of
application performance enabling us to
highlight and rectify issues in applications
quickly to avoid customer impacts.

We continue to invest in marketing to keep
our brand front of mind with consumers,
ensuring they are fully aware of all our
available products to help make their
purchase of a new or used car easier
and a more enjoyable experience.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 25

Strategic reportGovernanceFinancial statementsOperating and financial review continued

Financial review

Revenue

£355.1m
+8%

(2018: £330.1m)

Operating profit

£243.7m
+10%

(2018 restated: £221.3m)

Cash generated from operations

£258.5m
+13%

(2018 restated: £228.4m)

Cash returned to shareholders

£151.1m

(2018: £148.4m)

Revenue

Retailer

Home trader

Other

Trade

Consumer Services

Manufacturer and Agency

Total

Revenue
In 2019, we saw another strong year of
revenue growth at 8%, climbing to £355.1m
(2018: £330.1m), predominantly through
Trade revenue, and more specifically
Retailer revenue, as our core business
continued to grow.

Trade revenue – comprising Retailers, Home
Traders and other revenue – increased by 8%
to £304.6m (2018: £281.2m). Retailer revenue
grew 9% to £293.0m (2018: £268.7m), driven
by the launch of new products, our annual
pricing event and further penetration of
higher yielding advertising packages.
Average Revenue Per Retailer (‘ARPR’)
improved by £149 to £1,844 per month (2018:
£1,695). Average retailer forecourts were
stable, with a marginal increase in the year
to 13,240 (2018: 13,213).

ARPR growth of £149 per month was broken
down as follows into our three levers: price,
stock and product.

— Price: Our price lever contributed £50
(2018: £43) and 34% (2018: 29%) of total
ARPR growth. We executed our annual
event for the vast majority of customers
on 1 April 2018 which included a like-for-like
price increase.

— Stock: A small contraction in stock had
a negative effect on ARPR growth of
£22 (2018: positive effect of £20) and was
-15% (2018: +13%) of total ARPR growth.

2019
£m

293.0

10.2

1.4

304.6

28.0

22.5

355.1

2018
£m

268.7

11.4

1.1

281.2

29.8

19.1

330.1

Change

(11%)

27%

(6%)

18%

A reduction in the number of new cars
registered, lower volumes of pre-
registration and some consumer
uncertainty led to a lack of used car supply
in the market during the first half of the
year. Retailer stock has seen some level of
recovery through the second half of the
year although the market is still challenging.

— Product: Our product lever contributed £121
(2018: £86) and 81% (2018: 58%) of total ARPR
growth. Our annual event allowed us to
introduce two new products, stock exports
and profile pages, into all package levels
and we also monetised our Dealer Finance
product following a trial period. Since 1 April
2018, over 5,000 retailers have opted to pay
for the opportunity to advertise their
finance offers against their cars,
representing 70% of all eligible retailers. In
addition, the penetration of our higher
yielding Advanced and Premium advertising
packages has continued to grow as retailers
recognise the value of receiving greater
prominence within our search listings. At
the end of March, 19% of retailer cars
advertised were on one of these levels
(March 2018: 12%). There was also a small
contribution from our Managing products,
which despite re-platforming and
continued development in the year, still saw
growth to 3,200 customers (2018: 3,000).

ARPR levers
(£)

121

2017

2018

(22)

2019

Price
Stock
Product

26 | Auto Trader Group plc Annual Report and Financial Statements 2019

Operating profit
In the year, Operating profit grew 10% to
£243.7m (2018 restated: £221.3m). Operating
profit margin increased by two percentage
points to 69% (2018 restated: 67%).

On 31 December 2018, following clearance
from the Competition and Markets Authority,
the Group completed its joint venture
agreement with Cox Automotive UK Limited.
The new combined business, called Dealer
Auction, provides a leading digital
marketplace for B2B transactions in
the UK. The Group transferred Smart Buying
(formally known as Autotrade-mail), its
retailer-to-retailer platform, to the joint
venture and paid Cox Automotive UK Limited
£19.7m to hold 49% of the new entity. The
transfer of the business, combined with the
recognition of profits generated by Dealer
Auction from the point of completion, had
the following impact on Operating profit:

— a reduction in Average Revenue Per Retailer

('ARPR') of £3;

— no effect on costs overall. People costs
reduced by £0.4 million, but were offset
by increased overheads resulting from
amounts payable to the joint venture for
continued access to Smart Buying for Auto
Trader i-Control customers; and

— the share of the profit from the joint

venture at £0.9 million.

Operating profit

Revenue

Costs

Share of profits from
joint ventures

2019
£m

20181

£m Change

355.1

330.1

(112.3)

(108.8)

0.9

(3%)

n.m

10%

Operating profit

243.7

221.3

1 2018 has been restated for the impact of IFRS 16.

Home Trader had a challenging year, declining
11% to £10.2m (2018: £11.4m), as volumes were
impacted by supply constraints, particularly
in older, less expensive vehicles which are
often traded in this segment and we saw
some of these customers move to take up
subscription packages. Other revenue
increased 27% to £1.4m (2018: £1.1m).

Consumer Services revenue decreased
6% in the year to £28.0m (2018: £29.8m).
Private revenue, generated from individual
sellers who pay to advertise their vehicle on
the Group’s website, declined 7% to £20.1m
(2018: £21.6m), impacted by a lack of supply
in older vehicles, a greater propensity to part-
exchange (influenced by the transparency
we have enabled for part-exchange values),
and increased competition. Motoring
services revenue decreased 4% to £7.9m
(2018: £8.2m), as we discontinued a low
yielding display product, the impact of which
outweighed growth from our finance and
insurance third-party partners.

Manufacturer and Agency revenue grew 18%
to £22.5m (2018: £19.1m). The level of growth,
which was skewed towards the first half of
the year, was largely driven by InSearch; our
native performance product which allows
manufacturers to advertise new cars directly
within our main search, providing a highly
targeted way to influence in-market car
buyers. In the second half of the year we
have seen what we believe to be a transient
impact as a result of the well documented
uncertainties resulting from Brexit and cost
pressures facing both car manufacturers
and their advertising agencies.

Administrative expenses
The Group has adopted IFRS 16 ‘Leases’
in the period, which impacts Other costs
and Depreciation & amortisation within
Operating profit. Property and vehicle
rental charges are no longer included in
other costs, and depreciation now includes
depreciation on leased assets. Prior period
comparatives have been restated to reflect
these changes as the fully retrospective
approach has been used.

Operating costs continue to be well
controlled, with administrative expenses
increasing by 3% to £112.3m (2018 restated:
£108.8m).

People costs, which comprise all staff
costs including third-party contractor
costs, increased by 3% in the year to £56.4m
(2018: £54.8m). The increase in people costs
was driven primarily by underlying salary
costs which increased due to strong
competition for digital talent, however this
has been partially offset by a reduction in
average full-time equivalent employees
(‘FTEs’) (including contractors) to 804 (2018:
824). The number of FTEs was particularly
impacted in the fourth quarter by the
transfer of 15 staff to Dealer Auction, our
joint venture with Cox Automotive UK.
Share-based payments, including applicable
national insurance costs of £5.9m (2018:
£3.7m), have been included within people
costs. The year-on-year increase in the
share-based payment charge was due to
leavers under the Performance Share Plan in
2018 for which a credit was recognised in the
prior year, and a change in the way senior
management are remunerated. The Group
now settles a greater proportion of the
senior management incentive scheme in
shares which increases the share-based
payment charge with an offset realised
within cash bonuses.

Marketing spend increased in line with
revenue by 8% to £17.6m (2018: £16.3m), as we
look to maintain and enhance our audience
position and educate consumers on new
products such as new car offerings and
search by monthly payment.

Other costs, which include data services,
property related costs and other overheads,
remain well controlled and increased by
2% on a like-for-like basis to £29.4m (2018
restated: £28.7m).

Depreciation & amortisation remained
broadly flat at £8.9m (2018 restated: £9.0m).
Within this was depreciation of £2.0m in
relation to lease assets (2018 restated: £1.9m).

Costs

People costs

Marketing

Other costs

Depreciation and amortisation

Total administrative expenses

1 2018 has been restated for the impact of IFRS 16.

2019
£m

56.4

17.6

29.4

8.9

112.3

20181
£m

54.8

16.3

28.7

9.0

108.8

Change

(1%)

Auto Trader Group plc Annual Report and Financial Statements 2019 | 27

Strategic reportGovernanceFinancial statementsOperating and financial review continued

Profit before taxation
Profit before taxation increased by 15% to
£242.2m (2018 restated: £210.7m) following
the Operating profit performance, a small
reduction in net finance costs at £10.2m
(2018 restated: £10.6m) and a one-off profit
on disposal of subsidiary of £8.7m created
by the transfer of our Smart Buying business
to the joint venture, Dealer Auction.

In June 2018, the Group signed into a five-year
£400m Syndicated revolving credit facility
(the ‘Syndicated RCF’) to replace the
Syndicated Term Loan and the former
revolving credit facility. The new facility
allows the Group greater flexibility to manage
cash flows and allows for further reduction
on margin payable as the Group’s leverage
decreases further. Following the year end
the majority of the facility has been extended
for an additional year.

Interest costs on the new Syndicated RCF,
the Syndicated Term Loan and the former
revolving credit facility were £6.5m (2018:
£6.8m) reflecting a lower level of drawn debt
offset by a small increase in both LIBOR and
the margin payable given the increased level
of debt flexibility. Amortisation of debt issue
costs of £2.8m (2018: £3.0m) included £2.2m
of accelerated costs relating to the previous
facility following the decision to refinance
before the termination date of March 2020.
Following the adoption of IFRS 16, finance
costs relating to leases were £0.9m (2018
restated: £0.8m).

As part of the joint venture entered into with
Cox Automotive UK, the Group disposed of
its Smart Buying business, Auto Trader Auto
Stock Limited, for which it recognised a profit
on disposal of £8.7m. The profit recognised
on the disposal has no cash impact as
consideration was in the form of shares in
the newly formed Dealer Auction business.

Taxation
The Group tax charge of £44.5m (2018
restated: £39.6m) represents an effective
tax rate of 18% (2018: 19%) which, when
allowing for the profit on disposal above
which was non-taxable, is in line with the
average standard UK rate and a reflection of
our taxation policy to act in a responsible
and transparent manner in all tax matters.

Earnings per share
Basic earnings per share rose by 18% to 21.00
pence (2018 restated: 17.74 pence) based on a
weighted average number of ordinary shares
in issue of 941,506,424 (2018: 964,516,212).
Diluted earnings per share of 20.94 pence
(2018 restated: 17.68 pence) increased by
18%, based on 944,254,998 shares (2018:
967,912,689) which takes into account the
dilutive impact of outstanding share awards.

Cash flow and net external debt
Cash generated from operations increased
by 13% to £258.5m (2018 restated: £228.4m)
and was achieved as a result of strong
Operating profit with low working capital
requirements and a high level of cash
conversion driven by a particularly strong
performance in terms of customer
payments and collections.

Corporation tax payments totalled £42.2m
(2018: £39.4m). Net cash generated from
operating activities was £216.3m (2018
restated: £189.0m).

At 31 March 2019 the Group had £313.0m of the
Syndicated revolving credit facility drawn
(31 March 2018: £343.0m borrowed under the
former Syndicated Term Loan), representing
a net repayment of £30.0m (2018: £20.0m
repayment). Leverage, defined as the ratio
of gross borrowings less cash to Adjusted
underlying EBITDA, decreased to 1.19x (2018:
1.46x). Interest paid on these financing
arrangements was £6.6m (2018: £6.7m).

Post balance sheet event
On 5 June 2019, the Group extended the term
for £316.5m of the Syndicated revolving
credit facility for one year. The facility will
now terminate in two tranches: £316.5m will
mature in June 2024; and £83.5m will mature
at the original termination date of June 2023.

There is no change to the interest rate
payable and there is no requirement to settle
all, or part, of the debt earlier than the
termination dates stated.

Capital structure and dividends
During the year, a total of 20.2m shares
(2018: 26.8m) were repurchased for a total
consideration of £93.5m (2018: £96.2m)
before transaction costs of £0.5m (2018:
£0.5m). A further £57.6m (2018: £52.2m) was
paid in dividends, giving a total of £151.1m
(2018: £148.4m) in cash returned to
shareholders.

The Directors are recommending a final
dividend for the year of 4.6 pence per share,
which together with the interim dividend
makes a total dividend of 6.7 pence per
share, amounting to £62.5m, in line with our
policy of distributing approximately one third
of net income. Subject to shareholders’

28 | Auto Trader Group plc Annual Report and Financial Statements 2019

Contingent liability
The Group previously reported a contingent
liability in respect of the rate of VAT applicable
to our insurance intermediary revenue within
Consumer services, dating back from 2013
onwards. As reported at the half year, in July
2018 HMRC confirmed the Group’s treatment
of insurance intermediary revenue for VAT
purposes was appropriate. The Group did not
incur any liability and the enquiry in respect of
this matter is now closed.

Nathan Coe
Chief Financial Officer and
Chief Executive Officer-designate
6 June 2019

Operating profit

£243.7m
+10%

(20 18 restated: £221.3m)

Profit before taxation

£242.2m
+15%

(2018 restated: £210.7m)

Earnings per share

21.00p
+18%

(2018 restated: 17.74p)

approval at the Annual General Meeting
(‘AGM’) on 19 September 2019, the final
dividend will be paid on 27 September 2019 to
shareholders on the register of members at
the close of business on 30 August 2019.

The Group’s capital allocation policy
remains unchanged: continuing to invest
in the business enabling it to grow whilst
returning around one third of net income
to shareholders in the form of dividends.
Any surplus cash following these activities
will be used to continue our share buyback
programme and to steadily reduce gross
indebtedness.

At the 2018 AGM, the Company’s
shareholders generally authorised the
Company to make market purchases of up to
94,802,631 of its ordinary shares, subject to
minimum and maximum price restrictions.

This authority will expire at the conclusion of
the 2019 AGM and the Directors intend to seek
a similar general authority from shareholders
at the 2019 AGM. The programme will be
ongoing, and any purchases of its shares made
by the Company under the programme will be
affected in accordance with the Company’s
general authority to repurchase shares,
Chapter 12 of the UKLA Listing Rules and
relevant conditions for trading restrictions
regarding time and volume, disclosure and
reporting obligations and price conditions.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 29

Strategic reportGovernanceFinancial statementsPrincipal risks and uncertainties
Identify, evaluate and
manage the Group’s risks

Identify, evaluate and manage the Group’s risks

The Board has carried out a robust assessment of the
principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency or liquidity.

This included an assessment of the likelihood and impact
of each risk identified, and the mitigating actions being
taken. Risk levels were modified to reflect the current
view of the relative significance of each risk.

The principal risks and uncertainties identified are
detailed in this section. Additional risks and uncertainties
to the Group, including those that are not currently known
or that the Group currently deems immaterial, may
individually or cumulatively also have a material effect on
the Group’s business, results of operations and/or
financial condition.

Focus areas that are impacted by our risks

1 Maintain the best consumer experience for buying

and selling vehicles

2 Create and maintain high-performing, data-

orientated teams

3 Grow ARPR in a balanced and sustainable way, by

creating value for our customers

4 Improve stock choice, volumes, accuracy and
transparency in both new and used vehicles

5 Develop a more efficient way for retailers to source,

dispose and move vehicles

6 Extend our product offering further down the buying

funnel, towards online transactions

30 | Auto Trader Group plc Annual Report and Financial Statements 2019

1. Economy, market and
business environment

Impact

A contraction in the number of new or used car transactions
could lead to reduced retailer profitability, leading to a fall in
advertising spend or a contraction in the number of retailers.
It could also lead to a reduction in manufacturers’ spend on
digital display advertising.

There continues to be concerns about the implications surrounding
the UK’s departure from the EU. Economic conditions, currency
volatility and consumer confidence levels could all be adversely
affected, with the impact likely to be greater in a no-deal scenario.
If the prices of cars increase, as tariffs are introduced, and consumer
confidence levels decrease, manufacturers’ appetite to supply
cars to the UK market reduces, this could have an adverse impact on
our business.

Changes in the year

New car sales have fallen by 3.7% during this financial year,
compared to an 11% decline last financial year. The used car market,
which tends to lag new car sales, has also seen a decline of 0.9%.
However, the overall UK car parc has continued to grow as the
number of cars registered still outweighs the number of cars that
are scrapped each year.

We are not currently seeing evidence that consolidation by retailers
is accelerating. The number of retailer forecourts has remained flat
year-on-year. Advertising spend by retailers has also continued to
grow with ARPR rising by 9%, mostly driven by adoption of our
product innovations.

There continues to be significant uncertainty around ongoing Brexit
negotiations and the timing of the UK’s departure from the EU.

Overall, this risk has slightly increased.

Key mitigations

We monitor new and used car transactions closely, using data from
SMMT and directly from the DVLA.

We use our own Auto Trader Retail Price Index to monitor the pricing
trends of used cars by trade sellers.

We continue to diversify into related and adjacent activities to
reduce our reliance on stock and to improve the resilience of our
business model.

We closely manage our cost base and operate on a lean basis.
We should be able to respond swiftly in the event of a downturn.

The Board has considered the potential implications of the UK’s
departure from the EU, taking into account the factors above, as
well as the time lag between the registration of new cars and the
entry of cars into the used car marketplace and the strength of our
value proposition.

Relevant focus areas

Change

1 2 3 4 5 6

Slight increase

Read more about our Key
Performance Indicators
pages 20-23

2. Brand

3. Increased competition

Impact

Our brand is one of our biggest assets. Our research shows that we
are the most trusted automotive classified brand in the UK.

Failure to maintain and protect our brand, or negative publicity that
affects our reputation (for example, a data breach), could diminish
the confidence that retailers, consumers and advertisers have in
our products and services, and result in a reduction in audience
and revenue.

There are several online competitors in the automotive classified
market, and alternative routes for consumers to sell cars, such as car
buying services or part-exchange.

Competitors could develop superior consumer experiences or
retailer products that we are unable to replicate; or change focus to
try to expand their range of stock and disrupt our market position.

This could impact our ability to grow revenue due to the loss of
audience or customers, or erosion of our paid-for business model.

Changes in the year

Our research shows that Auto Trader has 90% prompted brand
awareness with consumers for new and used cars and is
consistently voted as the most influential automotive website by
consumers in the car buying process.

We continue to see very low levels of fraudulent and misleading
adverts, due to additional measures and monitoring techniques
used by our security team.

The competitive landscape continues to develop, with new
business models emerging. Big media players, such as Schibsted
and Facebook, are also entering the marketplace, mostly competing
for lower-value private sales. There has been some competitor
consolidation during the year, and retailers and manufacturers are
also evolving their online offerings.

During the year we diversified our offerings which widens our
competitive set.

We have maintained share of minutes spent on automotive
classified sites, grown cross platform visits as measured by Google
Analytics, and continue to increase the level of stock onsite,
however as we widen our activities into new areas, we increase the
number of other companies that could be considered to be
competitors. On this basis we judge competition to have increased
slightly during the year.

Key mitigations

We have a clear and open culture with a focus on trust and
transparency.

We have a dedicated customer security team, who closely
monitor our site to identify and quickly remove fraudulent or
misleading adverts.

We invest in new and innovative marketing campaigns and new ways
of engaging car buyers to continue to maintain brand awareness,
and to change perceptions of Auto Trader to be a destination for
new cars as well as used.

Our approach to cyber security and data protection, as described
on page 32, helps to protect us from the adverse impact of a
significant data breach or cyber attack.

We have the largest and most engaged audience of any UK
automotive site. Our investment in our brand helps us to protect and
grow our audience, to ensure that we remain the most influential
website for consumers when purchasing a vehicle.

We have a dedicated competitors’ working group to closely monitor
competitor activity and regularly review this at OLT and Board level.

We continue to invest in and develop our product offering to
improve the value we offer to consumers, retailers and
manufacturers.

We work in an agile way and to date have responded quickly to
emerging competitive threats.

Relevant focus areas

Change

Relevant focus areas

Change

1 2 3 4 5 6

No change

1 2 3 4 5 6

Slight increase

Auto Trader Group plc Annual Report and Financial Statements 2019 | 31

Strategic reportGovernanceFinancial statements

Principal risks and uncertainties continued
Identify, evaluate and
manage the Group’s risks

4. Failure to innovate: disruptive
technologies and changing
consumer behaviours

5. IT systems and cyber security

Impact

Failure to develop and execute new products or technologies, or to
adapt to changing consumer behaviour towards car buying, or
ownership, could have an adverse impact. For example, this could
lead to missed opportunities should we fail to be at the forefront of
industry developments.

As a digital business, we are reliant on our IT infrastructure to
continue to operate.

Any significant downtime of our systems would result in an
interruption to the services we provide.

A significant data breach, whether as a result of our own failures or
a malicious cyber-attack, would lead to a loss in confidence by the
public, car retailers and advertisers.

This could result in reputational damage, loss of audience, loss of
revenue and potential financial losses in the form of penalties.

Changes in the year

During 2019, we introduced “deal builder”, which brings
part-exchange guide pricing and the finance quote into a more
integrated journey for consumers. We also launched AT Vehicle
Check which enables dealers to check the provenance of the
vehicles they are sourcing, and to display this to consumers thereby
improving transparency. We have re-platformed our Managing
products to provide more powerful data to retailers, helping them to
manage and price stock more effectively. We have introduced a
service by which car retailers can advertise new cars including those
built but yet to be delivered to their physical premises.

We also launched a joint venture with Cox Automotive UK to provide
a digital online auction model to disrupt the auction marketplace.

Overall, we are at the forefront of innovation that is happening in the
digital automotive marketplace and therefore the risk has decreased.

The enactment of GDPR in May 2018 significantly increased the
financial impact of a data breach. We have reviewed all processes
that involve data collection, storage or processing, and updated
and amended policies and processes to ensure that they meet the
enhanced GDPR requirements.

During 2019, we have made significant progress in migrating our
applications to the cloud, which increases the resilience of our
systems and the security of our data. Our aim is to get all
applications migrated to the cloud in the next two years.

The constantly evolving threat of a cyber attack means that overall
the risk level is unchanged.

Key mitigations

Continuous research into changing consumer behaviour, regular
horizon scanning and monitoring of emerging trends, use of
external resources where needed, and regular contact with
similar businesses around the world.

Formal reviews of opportunities to disrupt the marketplace.

Ability to innovate and respond quickly due to our agile and
collaborative way of working, and continuous investment
in technology.

We have a disaster recovery and business continuity plan in place
which is regularly reviewed and tested. This includes the use of two
data centres and regular back ups of data. We are in the process of
migrating to the public cloud.

We continuously monitor the availability and resilience of
processing systems and services. If required, we can restore the
availability of and access to systems and data in a timely manner in
the event of a physical or technical incident.

We have dedicated security teams, including white hat hackers, and
carry out regular penetration testing and review of threats and
vulnerabilities. We invest in IT and security infrastructure to ensure
our systems remain robust.

All of our employees are required to undertake annual compliance
training which includes Information Security and GDPR.

We have two-factor verification for all our car retailers and
employees, to access our network.

We have been PCI DSS (payment card industry data security
standard) compliant since 2013 and use an external Quality Security
Assessor to maintain best practice.

Relevant focus areas

Change

Relevant focus areas

Change

1 2 3 4 5 6

Slight decrease

1 2 3 4 5 6

No change

32 | Auto Trader Group plc Annual Report and Financial Statements 2019

Read more about our Key
Performance Indicators
pages 20-23

6. Employees

7. Reliance on third parties

Impact

Our continued success requires us to attract, recruit, motivate and
retain our highly skilled workforce, with a particular focus on
specialist technological and data skills. Failure to do so could result
in the loss of key talent.

We rely on third parties particularly with regard to supply of data
about vehicles and their financing, so it is important that we manage
relationships with, and performance of, key suppliers. If these
suppliers were to suffer significant downtime or fail, this could lead
to a loss of revenue from dealer customers and a loss of audience
due to impaired consumer experience.

Changes in the year

This is not a new risk for the business but has been added as a
principal risk during 2019 as a result of an increasing number of our
products and services depending on data from suppliers.

Employee engagement remains high, with 92% of employees
completing our engagement survey saying they are proud to work at
Auto Trader. Our Glassdoor rating based on anonymous reviews is
4.5 out of 5.

The Remuneration Committee carried out a review of our long-term
incentive plans, and introduced a new Single Incentive Plan for
senior executive and key staff.

In preparation for the changes to the 2018 Corporate Governance
Code, we have established a new employee engagement forum
which will liaise with the Board to ensure we understand the views
of our workforce.

Overall, this risk remains unchanged.

Key mitigations

We use long-term incentive plans for our senior and key staff, which
are currently of material value to those in the schemes.

Where possible, we limit reliance on a single supplier to reduce
potential single points of failure.

We carry out active succession planning and career development
plans to retain and develop our executives. Talent development is
now part of the Terms of Reference of the Nomination Committee.

Contracts and service level agreements are in place with all key
suppliers. New relationships go through a robust procurement and
legal review process, and are subject to regular review.

We have a strong, values-led culture which is embedded through
recruitment, induction, training and appraisal processes.

We carry out employee engagement surveys and closely monitor
Glassdoor ratings. We have regular business updates, networks,
guilds and an all-employee annual conference.

We carry out due diligence on our key suppliers and partners at the
onset of the relationship and throughout the life of these
relationships. This includes financial viability, resilience and
alignment with our values and culture.

We seek to develop strong commercial relationships with our
partners and regularly explore ways of working together even more
effectively. We monitor the performance of partners and suppliers
to ensure continued quality and uptime.

Relevant focus areas

Change

Relevant focus areas

Change

1 2 3 4 5 6

No change

1 2 3 4 5 6

Increase

Auto Trader Group plc Annual Report and Financial Statements 2019 | 33

Strategic reportGovernanceFinancial statements

Principal risks and uncertainties continued
Viability statement
In accordance with Provision C.2.2 of the 2016 UK Corporate
Governance Code, the Directors have assessed the prospects
and viability of the Group over a period significantly longer than
12 months from the approval of these financial statements.

Assessment of prospects
The Board has determined that a period of
three years to March 2022 is the most
appropriate period to provide its viability
statement due to:

— it being consistent with the Group’s rolling
three-year strategic planning process;

— it reflects reasonable expectations in
terms of the reliability and accuracy of
operational forecasts;and

— projections looking out further than three

years become significantly less meaningful
given the pace of change in the digital
automotive market.

The Group’s overall strategy and business
model, as set out on pages 12 to 19, are central
to assessing its future prospects.

As such, key factors likely to affect the future
development, performance and position of
the Group are:

— Data and technology: continuous

investment is made in developing platform
technologies which leads to improvements
for consumers, retailers and manufacturers;

— Market position: the Group has the largest

and most engaged audience of any UK
automotive site and is the most influential
website a consumer visits when purchasing
a vehicle; and

— People: continued success and growth are
dependent on the ability to attract, retain
and motivate a highly skilled workforce,
with a particular focus on specialist
technological and data skills.

The Group’s prospects are assessed
primarily through its strategic planning
process. This process includes an annual
review of the ongoing plan, led by the Group
CEO and CFO/CEO-designate through the
Operational Leadership Team and in
conjunction with relevant functions.
The Board participates fully in the annual
process and has the task of considering
whether the plan continues to take
appropriate account of the external
environment including technological,
social and macroeconomic changes.

The output of the annual review process
is a set of objectives which the Group
determines to be its focus areas, an analysis
of the risks that could prevent the plan being
delivered, and the annual financial budget.
The latest updates to the plan were finalised
in March 2019, which considered the Group’s
current position and its prospects over the
forthcoming years.

Detailed financial forecasts that consider
customer numbers, stock levels, ARPR,
revenue, profit, cash flow and key financial
ratios have been prepared for the three-year
period to March 2022. Funding requirements
have also been considered, with particular
focus on the ongoing compliance with the
covenants attached to the Group's
Syndicated RCF.

The first year of the financial forecasts forms
the Group’s 2020 annual budget and is
subject to ongoing review through the year.
The second and third years are prepared in
detail and are flexed based on the actual
results in year one. Progress against financial
budgets and focus areas are reviewed
monthly by both the Operational Leadership
Team and the Board.

This control measure is in place to prevent
and mitigate the impact of factors that may
affect the Group’s prospects.

Assessment of viability
The output of the Group’s strategic and
financial planning process detailed previously
reflects the Board’s best estimate of the
future prospects of the business. To make the
assessment of viability, however, additional
scenarios have been modelled over and
above those in the ongoing plan, based upon
a number of the Group’s principal risks and
uncertainties which are documented on
pages 30 to 33. These scenarios were overlaid
into the plan to quantify the potential impact
of one or more of these crystallising over the
assessment period.

While each of the Group’s principal risks has
a potential impact and has therefore been
considered as part of the assessment, only
those that represent severe but plausible
scenarios have been modelled through the
plan. These were:

Scenario 1: Reduction of stock on the Auto
Trader marketplace
Link to risk – Economy, market and business
environment, Increased competition, Failure
to innovate: disruptive technologies and
changing consumer behaviour.
Macroeconomic factors such as consumer
confidence have an impact on the number
of new and used car transactions that occur
in the UK and therefore may impact retailer
and manufacturer profitability. A contraction
in the number of new and used car transactions
when coupled with failure to innovate new
products in order to grow ARPR in a sustainable
way, could lead to retailers reducing their
advertising spend in favour of competitors.

This scenario assumes a shock reduction in
live car stock around a pricing event. The
number of retailers advertising stock with
the Group was assumed to reduce in a short
space of time with further reductions in the
year after the shock event. No cost savings
were assumed.

Scenario 2: Data breaches
Link to risk – IT systems and cyber security,
Brand.
The impact of any regulatory fines has been
considered. The biggest of these is the
General Data Protection Regulation (‘GDPR’)
fine for data breaches, which was enacted
in May 2018. This scenario assumes a data
breach resulting in the maximum fine,
coupled with a significant level of
reputational damage to the Group’s brand.
A severe reduction in revenue was modelled
through each of the Trade, Consumer
Services and Manufacturer and Agency
areas. Marketing costs were increased to
model a potential need to increase traffic.

The scenarios above are hypothetical and
severe for the purpose of creating outcomes
that have the ability to threaten the viability
of the Group; however, multiple control
measures are in place to prevent and mitigate
any such occurrences from taking place.

The results of the stress testing
demonstrated that due to the Group’s
significant free cash flow, access to the
Syndicated RCF and the Board’s ability to
adjust the discretionary share buyback
programme, it would be able to withstand
the impact and remain cash generative.

Viability statement
Based on their assessment of prospects and
viability above, the Directors confirm that
they have a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due over
the three-year period ending March 2022.

Going concern
The Directors also considered it appropriate
to prepare the financial statements on the
going concern basis, as explained in the Basis
of preparation paragraph in note 1 to the
financial statements.

34 | Auto Trader Group plc Annual Report and Financial Statements 2019

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Corporate social
responsibility

We take our corporate social responsibilities seriously
and are constantly looking at what we can implement
to continue to make a difference.

Our CSR strategy is focused on ‘Making
a Difference’ and comprises three key
strands: making a difference to our people
and culture; making a difference to our
communities; and making a difference to
the industries in which we operate.

A key business strategic focus is to become
the UK’s most admired digital business and
we all agree that to achieve this we must
make a difference to our colleagues, to our
customers, to consumers and to wider
society. We have built a digital culture, that
is values-orientated, customer-centric,
data-driven, and also underpinned by
creating a diverse and inclusive workforce.

Our values reflect our culture and
commitment to make a difference

Our values

Be determined
We are passionate about our customers,
showing stamina and resilience, and have
the conviction to do the right thing. We will
roll up our sleeves to get the job done.

Be reliable
We are outcome-oriented and we do what
we say we will do. We perform under
pressure and have a strong work ethic.

Be courageous
We are bold in our thinking, overcoming
fears, challenging convention and embracing
change.

Be humble
We are open, honest, approachable and
we treat each other fairly. We recognise
success in ourselves and others but admit
and learn from mistakes.

Be curious
We are always learning. We question why,
we search for better ways, ask questions
and actively listen.

Be community- minded
We look after each other, respect
diversity and advocate inclusion. We are
committed to making a difference to the
communities around us and think of
others before ourselves.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 35

Corporate social responsibility continued

Making a
difference
to our people
and culture

Our employees
People are the Group’s most valuable
resource, so we have built a business
that puts people at the heart of
everything we do. Our success at
Auto Trader is down to the diverse
talent of innovative, courageous,
talented and determined people.

We value our people and their
opinions. Therefore, we organise
an annual employee conference
where all colleagues get the chance
to get together to celebrate our
achievements but also to hear the
latest strategic thinking and priorities.
We also hold regular business and
financial updates throughout the
year to keep employees informed of
the Group’s performance and
priorities as well as giving them the
opportunity to contribute with
questions and ideas.

2019

92%

of our people feel proud
to work for Auto Trader

Employee engagement and recognition
We conducted another employee
experience survey and achieved a response
rate of 91% of our total workforce. Overall
engagement remains positive with 92%
(2018: 90%) of our people feeling proud to
work for Auto Trader and 89% (2018: 88%)
saying they would recommend us as a great
place to work. Our Glassdoor rating based
on 250 anonymous reviews is 4.5 out of 5.
There were also areas to improve across our
different Tribes and our senior leaders have
taken actions to enhance the employee
experience based on the results of the
survey which have resulted in workshops to
produce action plans. We also hold regular
checks throughout the year that allow our
teams to spend time together in an open
and secure environment to discuss how they
feel in the workplace and how we are doing
against our key areas of improvement as
well as a six-month pulse survey.

For the third year running, we participated in
and joined the “Sunday Times Top 100 Best
Companies to Work for” and we achieved a
two-star “outstanding” rating.

Every year we host an annual benefits
roadshow, bringing together all of our benefit
providers, to really showcase the great
benefits we have to offer. Our “Incredible
Benefits” platform allows employees to
access all the benefits offered at Auto Trader
in one place, enabling them to tailor their
benefits package to meet their own specific
needs. It is evident that our employees place
a lot of value in the benefits on offer with 98%
of employees having one or more benefits
in place. This year, our company funded
healthcare benefit of either Private Medical
Insurance (employee level) or Health
Cashplan (up to family level) remained
very popular. We also have a wide range of
voluntary benefits that our employees
have the flexibility to choose from
including: critical illness, dental insurance
and any time benefits such as travel loans
and cycle to work schemes.

Our 2015 Save as You Earn (SAYE) scheme
reached maturity at the end of 2018 and the
introduction of the SAYE 2018 scheme saw
over 50% of employees join the scheme.
This year we have also introduced employee
friends and family manufacturer discounts
from the likes of BMW and Nissan and now
offer independent mortgage advice for
all employees.

36 | Auto Trader Group plc Annual Report and Financial Statements 2019

Training and development
Investing heavily in the development of
our people remains a key focus for our
business. All new starters are given a great
start to their careers with us through a
comprehensive onboarding programme
which includes a three-day induction that
allows them to understand the core values
of our business and help achieve a one-team
culture.

Everyone is responsible for their own career
and personal development at Auto Trader.
We aim to have quarterly development
conversations and personal development
plans with people leaders that provide an
opportunity to reflect and ensure we
remain successful in the future.

Our people managers take part in the
Practical People Leadership Programme
(PPLP) and our senior leaders take part in the
Leadership Development Programme (LDP),
both aimed at developing well rounded
leaders that will drive the future of
Auto Trader.

We are all unique and have different needs
as well as learning styles, so we offer a
variety of learning initiatives that are a
mixture of workshops, bitesize sessions,
on-the-job solutions, the chance to attend
and participate in conferences, coaching and
mentoring, online learning and professional
qualifications. Our Learning & Development
team has experts specialising in various
fields including: personal; career; leadership;
systems; business-related training; and
coaching and mentoring. We also utilise
external experts to bring insight and
knowledge into our organisation
when required.

Investing heavily in the
development of our
people remains a key
focus for our business.”

Employee wellbeing
Our objective is to retain and maintain a
healthy and happy workforce, so we need
to constantly have a culture that energises,
motivates and promotes resilience.

We’ve always been committed to making
Auto Trader a great place to work and we
continuously strive to provide the best
support, guidance and benefits to make this
a great environment for everyone to thrive.

We treat our people as individuals and
appreciate that everyone has their own
unique set of circumstances and challenges
around wellbeing. Consequently, we have
consciously built our wellbeing strategy
around three core pillars: mental; physical;
and financial wellbeing. Approaching health
from a holistic perspective helped us derive
the concept of having “more good days
at work”.

We want to provide the tools, support and
guidance for each individual to have more
good days whether that be utilising our
incredible benefits such as private medical
insurance, or a discounted gym membership
through our Auto Trader discount site, to
requesting to speak to one of our 20 newly
qualified Mental Health First Aiders.

In addition to these supportive services, we
recently focused on developing our People
Leads, specifically in the challenges around
mental ill health. We wanted to equip our
managers with the knowledge to spot the
signs and symptoms of mental health issues
and give them the confidence to guide their
people towards appropriate support. The
Mental Health First Aiders act as a support
to the wider business in this area.

To support our financial wellbeing strand,
we partnered with a mortgage broker who
offered free, no obligation one-to-one
mortgage advice sessions to anyone looking
to get on the property ladder. To make this
advice even more accessible, the service is
offered either face to face, via online video
call, or telephone appointments, meaning
getting an appointment is really easy no
matter where you are. We also launched the
incredibly popular Virgin Pulse 100 Day Global
Challenge to motivate people to get moving
through monitoring their daily step count via
a fitness tracker. The challenge sees teams
of seven work together to ‘walk’ around the
virtual globe and encourage healthy
competition on an organisational leader
board, whilst offering practical tips and
advice on a range of topics from nutrition
and sleep, to mindfulness.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 37

Strategic reportGovernanceFinancial statementsCorporate social responsibility continued

Diversity is the
mix, inclusion
is getting the
mix to work
well together.”

Making a difference to
diversity and inclusion

Striving to make Auto Trader an inclusive
employer where diverse people can enjoy
fulfilling careers, while making a positive
contribution to the communities we
operate in, remains a strategic priority for
our business. Our dedicated Diversity
& Inclusion working group has been
committed for the past three years to design
and deliver a comprehensive strategy
concentrating on all diversity strands with
a focus on: LGBT+; gender equality; disability
and neurodiversity; and BAME.

Diversity for everyone at Auto Trader means
respect for and appreciation of differences
in: gender identity and expression, age, sexual
orientation, disability, race and ethnic origin,
religion and faith, marital status, social,
educational background and way of thinking.
We believe that inclusion is a state of being
valued, respected and supported for who you
are. Diversity is the mix, inclusion is getting the
mix to work well together.

Colleagues from across the business
and our employee working groups have
continued to achieve positive results against
their commitments.

All new starters participated in one-day
workshops focusing on creating a common
understanding of D&I as well as exploring
participants’ unconscious biases and how
they can impact their own behaviour and
relationships with other people inside and
outside of work. They also met all of our
employee working groups and got an update
on how they can actively get involved in
delivering our strategy. We again extended
the invite to customers and partners who
participated in the workshop and took some
of the learnings back to their own
organisations.

Our employee groups and networks (Family
Network, Women’s Network; photography,
book, board game, running and film clubs)
continue to bring our colleagues together in
line with our philosophy that inclusion will be
achieved by respecting each other’s
differences but concentrating on finding
common ground.

LGBT+
We took part in the Stonewall Index
benchmarking and moved up the rankings by
more than 100 places compared to last year
after making significant progress including
reviewing our policies and processes while
improving the employee experience of
LGBT+ colleagues.

In August, more than a hundred of our
employees took part in the Manchester Pride
Festival parade and we were awarded “Best
Corporate Entry” for the third consecutive
year, recognising our passion for creativity.
We also sponsored the film “Invisible
Women” as part of the Superbia culture
festival; a short documentary charting the
last 50 years of Manchester LGBT+ history
through the personal story of two incredible
women. As part of our commitment to make a
difference to the community we have
sponsored community groups and charities,
including Manchester Frontrunners and the
George House Trust, who aim to support
LGBT+ people across the region.

Disability & Neurodiversity
This year we have launched our Disability &
Neurodiversity Employee Network led by
disabled and neurodiverse colleagues, as
well as allies. The network is working towards
creating a more accessible and inclusive
environment and supporting the work we are
doing with various charities including Action
on Hearing Loss and the Leonard Cheshire
Disability. We continue being part of the
Department of Work and Pension Disability
Confident Employer Scheme and are
progressing towards achieving the Disability
Leader level in 2019 following the completion
of an external audit by the Clear Company.

We remain committed to supporting
disabled and neurodiverse employees, and
those who become disabled during their
employment with us. Recognising that
everyone is unique, we provide the right
support to ensure they continue to realise
their full potential at work and develop their
careers with us. This year we have also added
more support and education for managers of
disabled and neurodiverse colleagues.

90%

of our women are proud
to work for Auto Trader

55%

of graduates who joined us
last year were women

38 | Auto Trader Group plc Annual Report and Financial Statements 2019

An example of this are workshops on autism,
dyslexia and hearing loss that we have run
throughout the year.

Our dedicated resourcing team is actively
reaching out to disabled and neurodiverse
candidates and welcomes their applications
for employment. They take great care in
making reasonable adjustments during the
assessment process according to the needs
of each individual, to ensure that they can
perform at their best.

BAME
A year ago, a working group comprising both
BAME (Black, Asian, and Minority Ethnic) and
non-BAME representatives was established
in order to celebrate multi-culturalism,
encourage inclusivity, and not exclusivity.
The group committed to raising awareness
of BAME within the business, supporting
the BAME community and helping with
the recruitment and retention of BAME
individuals. As well as running a series of
internal events for employees, the group
also held an external event in conjunction
with Inclusive Companies during Black
History Month which was open to local
businesses in the Manchester area. This
event coupled with a social media takeover
for the month really began to highlight the
importance of BAME to both Auto Trader
employees and the wider community.

We are pleased to report that the number of
those who identify themselves as BAME has
increased slightly from 13% to 14% in the year.
However, although this is encouraging, the
numbers don’t represent wider society and
so we will continue to focus on driving
initiatives to continue to positively influence
an upward trend of BAME individuals at
Auto Trader.

Gender
People can experience barriers based on
their gender as well as other diversity
characteristics simultaneously, so we have
changed our approach to address this. Our
Auto Trader Women’s Network is a working
group of men and women hosting events
focusing on supporting gender balance.
Within this, we have focused on helping
women to be resilient in the workplace,
building their own personal brand, as well as
launching a book group and support network.

We have established an internal mentoring
and coaching community, launched earlier
this year as part of the Auto Trader Women’s
Network. We have sponsored three of our
women colleagues to become qualified
coaches so that they can support our people
with their personal and professional career
development.

Our annual Employee Engagement Survey
answered by 91% of our workforce has provided
positive evidence about the experience of our
women colleagues in Auto Trader. 96% of our
women are proud to work for Auto Trader, 90%
of our women would recommend Auto Trader
as a great place to work, and 85% of our women
said they received support from people at
work when they need it.

In the 12 months to December 2018 women
have successfully secured 44% of all internal
vacancies. Our external recruitment efforts
remain successful and 46% of all external job
offers have been accepted by women who
have joined us. 55% of our graduates and 60%
of our apprentices who joined us last year
were women. We also introduced a
“re-training” programme for people who
want to change their career to digital and 60%
of participants are women.

Gender pay gap
When it comes to our gender pay gap we have
followed the government’s legislation in
terms of reporting on those who identify as
men or women, which in itself is a shame as
those gender definitions don’t include those
who identify as non-binary. We have made
progress and improved in all areas since last
year, and although a gap still exists, we are
working hard to address it. The mean hourly
gender pay gap for Auto Trader Group was
12% (2018: 15%) while the median gap was 13%
(2018: 18%). This gap is not about inequality of
pay. We are confident that men and women
are paid equally across the business for
comparable roles. Our gender pay gap arises
from under-representation of women in
certain highly paid functions, including
technology and other STEM related roles,
as well as under-representation of women
in leadership roles.

We won’t be satisfied until we reach parity,
and therefore remain dedicated to
eliminating the gender pay gap completely.
Our commitment that everyone has equal
opportunities to reach their full potential
remains in line with our focus to welcome
more women into our business and to offer
them exciting careers.

Gender diversity
We are committed to more women at senior
management level and throughout the
organisation. This is particularly prevalent in
parts of the business where women are
currently under-represented, such as
technology. Throughout most of the year,
50% of our Operational Leadership Team
(‘OLT’) were women, and we were delighted
to be able to promote Le Etta Pearce to Chief
Executive Officer of our new joint venture
with Cox Automotive UK, which meant
that she leaves our OLT to take up this
opportunity. At the end of our financial year,
42% of our OLT were women, and 36% of the
OLT’s direct reports were women.

Men Women

Men
as % of
total

Women
as % of
total

488

311

67%

58%

64%

61%

33%

42%

36%

39%

Board

OLT 1

OLT direct
reports

Total
Company

1 Senior managers for the purpose of s.414C of the

Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 39

Strategic reportGovernanceFinancial statementsCorporate social responsibility continued

Making a difference
to our communities

We have a dedicated team of colleagues
from across our business who are
committed to driving our Make a Difference
strategy, which aims to maximise the
support and impact we provide to the
communities in which we operate.

The Auto Trader Community Fund powered
by charity Forever Manchester considers
applications and awards up to £1,000 to
community groups and grassroots
projects across Greater Manchester. The
Community Fund also supports projects
with the Kings Cross Saint Pancras
Community Association. This year, the
Fund has donated £75,000 to various local
groups, in both cities, that bring people
together and empower them to create
sustainable changes in their lives.

Donations from Auto Trader directly to
other charities totalled an additional
£100K through our “AT Sponsorships”
initiative which provides match-funding
to employees, customers and partners
who were fundraising for charities that
are close to their hearts.

Also, this year we decided to replace
corporate Christmas gifts to customers
with donations to charities of their choice.
Our Give as You Earn scheme participation
has reached 16% of our total workforce and
£90,000 was donated to various charities
by our colleagues.

But making a difference extends to
more than donating money. 45% of our
colleagues have utilised one of our
Incredible Benefits, two optional
volunteering days, to support worthy
causes across the UK. They have
collectively offered 467 volunteering
days to try and battle food poverty,
renovate green spaces and provided
coaching and mentoring. The participants
of our Leadership Development
Programme took part in Ideathon; joining
a mix of leaders from some of the most
exciting organisations worldwide,
collaborating to solve a live strategic
challenge for the CEO of a
leading charity.

Our offices and colleagues
As a digital business, with offices in
Manchester, London and Dublin, we believe
our environmental footprint is small.
Nevertheless, we actively encourage our
colleagues to consider their individual and
our collective environmental impact. We
therefore operate recycling systems in the
offices, established with local authorities,
and we have no waste bins by desks which
encourages the amount of recycling we do.
As an online business, we naturally work in a
near paperless environment. During the year
we reduced the number of printers in all our
offices from seven to four. However, we
recognise that our responsibilities do not
stop with how we operate internally, and we
encourage all our customers, business
partners and suppliers to use online records
and reduce printing, especially emails.

£212,000

donated to charity in 2019

40 | Auto Trader Group plc Annual Report and Financial Statements 2019

We continue to develop our marketplace to
ensure we provide consumers with as much
information about different cars as possible,
to reduce the need for them to physically
view multiple cars, therefore reducing the
need to travel.

Last year, we started a sustainability working
group, set up by our employees to educate
and encourage sustainability. The group held
a week-long sustainability and climate
change project to showcase the need to be
more environmentally minded. The group has
implemented several initiatives across the
year, such as: reducing single-use drink items
including giving away re-usable bottles and
coffee cups to our employees; offering a 10p
discount on reusable coffee cups in our
Manchester staff canteen; offering plastic
bag reusing points in all locations; and
removing plastic milk containers in the
London office (so far saving 501 containers
from going to landfill). The group’s
achievements were recognised when one
of the group was selected to be part of the
Edie 30 under 30, which highlights the next
generation of sustainability leaders.

Our UK offices are both graded highly by the
BREEAM standard; Kings Cross in London
achieved an “outstanding” rating and our
Manchester office an “Excellent” rating.
We decided to re-fit our London office in the
last year and it now features more video
conferencing rooms, which facilitates
cross-office collaboration as well as
reducing the need for employees to travel
between offices as frequently.

We continue to use Fruitful Office to deliver
fruit to our offices each week. Fruitful Office
plants one tree in Malawi for every order of
breakfast fruit they receive. Last year 1,966
trees were planted on behalf of Auto Trader,
helping the organisation to mitigate the
effects of global warming and deforestation
and providing incomes to local communities.

Health and safety
Maintaining a safe working environment for our
employees, customers and visitors and anyone
affected by our business’s activities is very
important to us. It is therefore our policy that all
of the Group’s facilities, products and services
comply with applicable laws and regulations
governing safety and quality. During the year,
there were no major injuries reported under the
Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations.

Total CO2 emissions FY19

Scope 1

Manchester

London

Scope 2

Total

Revenue

Carbon intensity

Year-on-year change

1 Tonnes of carbon dioxide equivalent.
2 Absolute carbon emissions divided by revenue in millions.

FY19

FY18

FY17

FY16

263

213

258

521

355.1

1.47

-34%

390

281

340

731

330.1

2.21

-26%

491

361

437

928

311.5

2.98

-17%

565

357

445

1,010

281.6

3.59

Auto Trader is required to measure and
report its direct and indirect greenhouse
gas (‘GHG’) emissions by the Companies Act
2006 (Strategic Report and Directors’ Report)
Regulations 2013. The greenhouse gas
reporting period is aligned to the financial
reporting year. The methodology used to
calculate our emissions is based on the
financial consolidation approach, as
defined in the Greenhouse Gas Protocol,
A Corporate Accounting and Reporting
Standard (Revised Edition). Emission
factors used are from UK government
(‘BEIS’) conversion factor guidance for
the year reported.

The report includes the ‘Scope 1’ (combustion
of fuel) in relation to company cars and ‘Scope
2’ (purchased electricity and gas) emissions
associated with our offices. We have chosen
to include the emissions associated with
leased company cars in Scope 1, as we are
responsible for these emissions.

We have chosen to present a revenue
intensity ratio as this is a relevant indicator of
our growth and is aligned with our business
strategy. The reduction in our GHG emissions
is due to a reduction in the fuel emissions
from our company car fleet, as the fleet has
reduced. We have also reduced the amount
of electricity we use, and this coupled with
a decrease in BEIS conversion factors has
also contributed to our Scope 2 reduction.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 41

Strategic reportGovernanceFinancial statementsCorporate social responsibility continued

Making a
difference
to our
industries

Our Make a Difference strategy
extends to ensuring we support
the wider technology, automotive,
advertising and creative industries.

We are customer-centric and
consumer-orientated which means we
are relentlessly focused on developing
new products that will add value to our
retailer and manufacturer customers,
as well as constantly developing our
marketplace to ensure consumers
get a great experience whether they
are looking to buy or sell a car.

We take pride in our collaborative
work with partners from across the
automotive and media industries as
well as with recruitment businesses
who share our commitment in driving
greater diversity across industry.

We continue to promote Science,
Technology, Engineering, and
Maths (STEM) careers, through our
education outreach activities.

30%

Our ambition is to fill at
least 30% of key leadership
positions in automotive
with women by 2030

The automotive industry
Last year we worked with recruitment
specialists, Ennis & Co., to co-host a diversity
and inclusion event at our London offices,
where circa. 80 HR Directors and senior
executives from some of the industry’s
largest retailers, manufacturers and trade
bodies came together to share ideas,
experiences and best practice. The event
was followed by an in-depth whitepaper
developed by our Auto Trader colleagues
which explored the cultural and economic
benefits of attracting and retaining a
diverse workforce.

We formed a new partnership with the UK
Automotive 30% Club, which was created
with the ambition of filling at least 30% of key
leadership positions in automotive with
women by 2030. We are sponsoring a series
of events and thought leadership discussions
throughout 2019, helping the Club drive
its ‘30 by 30’ strategy.

We believe that supporting our industry
shouldn’t be limited to the board room
and conferences.

That’s why last year we once again took part
in the annual Bangers 4 Ben charity drive,
which saw some of our colleagues race
across Europe in an old ‘banger’ alongside
other industry partners, colleagues and
friends. The race raised funds for the
automotive industry’s official charity
organisation, Ben.

With over 40 years’ heritage and with a
privileged position at the very heart of the
UK automotive industry, we take our position
seriously. We actively celebrate and recognise
the best performing retailers each year, at our
annual Auto Trader Retailer Awards event.
Now in its 11th year, we hosted 130 of the best
performing retailers to share the latest
insights and to award their successes. The
awards are used by retailers to promote their
businesses to consumers on our marketplace.

Leading the industry, sharing ideas, and
inspiring change and action are at the heart
of our work with our retailer customers.
Through our masterclasses, conferences,
webinars, in-house discovery days and
award events we share the latest consumer
trends, best practice advice and insights
gleaned from our data to help shape the
future of the industry.

5,000

Retailers attended one of
our best practice events,
masterclasses or webinars

42 | Auto Trader Group plc Annual Report and Financial Statements 2019

We’re proudly
sponsoring the Digital
Her Roadshow which
aims to showcase
digital careers and
inspire Year 8 girls
into STEM subjects.”

Over 5,000 retailer customers or industry
figures joined us for one of these sessions.

The technology industry
We have 26 STEM Ambassadors and
volunteers throughout the business who
provide talks and workshops to schools and
colleges, including running “Code Clubs” to
teach younger students how to code. Over
the past year we have also: hosted digital
insight days for students and teachers;
hosted Continuous Professional
Development activities; brought the
curriculum to life with guest lessons/ talks;
and delivered digital career insight events for
careers advisors. We’re proudly sponsoring
the Digital Her Roadshow which aims to
showcase digital careers and inspire Year 8
girls into STEM subjects. We have also
partnered with Hey Girls, a social enterprise
focused on eradicating period poverty.
We're gifting each school we meet through
the Digital Her programme with boxes of
sanitary protection as we believe that no girl
should miss out on education due to lack of
sanitary protection.

We’ve also joined the Enterprise Advisor
Network and have an Enterprise Advisor
partnered with a local school. We are
supporting them by using our professional
network and industry knowledge to help
develop and implement an effective strategy
that puts opportunities with local employers
at the heart of a young person's education.

Following the success of the past three
years we continue to participate in the
“Change 100” programme organised by
the Leonard Cheshire Disability and
offered four summer placements to
disabled students in our Manchester
and London offices.

We've hosted and supported many
conferences and events over the past
year. From Tomorrow’s Tech Leaders, an
event designed to encourage young
women into the technology industry, to
Upfront and UX in the City, major technical
conferences in Manchester. As part of our
ongoing commitment to the surrounding
communities, we purchase ‘diversity
tickets’ where possible. This gives
underrepresented groups the opportunity
to attend conferences and events they
otherwise wouldn’t have the chance
to go to.

To support the arts and design in Manchester
we continue our partnership with HOME
arts centre. We supported various initiatives
including the PUSH festival of fresh creative
experiences from the North West showcasing
some of the most exciting film, theatre and
visual arts from the region.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 43

Strategic reportGovernanceFinancial statementsCorporate social responsibility continued

Being a
responsible
business

Auto Trader believes in promoting trust
and fairness in our marketplace and this
has become part of the way we work
across the organisation. We aspire to be
the UK’s most admired digital business
and we want that admiration to come
from employees, suppliers, partners
and customers alike.

The only way to deliver the best
experience for our consumers and the
best services for our customers – and
do the right things by our people – is to
approach things in the right way. We
have established policies, procedures
and training to ensure that everyone
at Auto Trader knows that they must
behave professionally, ethically
and legally; treating people with
decency and respect.

We promote a culture of compliance
and shared responsibility by providing
advice and information to keep our
employees, consumers and
customers smart, safe and secure.

Maintaining a trusted marketplace
Buying or selling a car should be a pleasant
and hassle-free experience‚ and should
be transparent and fair. At Auto Trader we
do everything we can to make sure that's
the case.

We put the consumer at the heart of
everything we do. By introducing tools such
as Price Indicator, Dealer Reviews and
Monthly price search, we improve the
transparency of the consumer’s car buying
journey and of the whole marketplace.

Consumers trust Auto Trader to show genuine,
accurate adverts when they search for
vehicles. We have a dedicated customer
security team working seven days a week, who
monitor our site to identify adverts that are
potentially fraudulent or misleading, whether
that be a misleading price or inaccurate
mileage in their advert. We also have
functionality to enable users of our site to
report a misleading advert whilst they are
searching, which we then investigate and, if
necessary, remove from the site. Our online
Safety and Security area offers tips, checklists
and advice to help car buyers and car owners
stay safe when using our platform. Over 10
years ago, we founded the Vehicle Safe
Trading Advisory Group (VSTAG), an industry
forum created to reduce online vehicle crime
and help protect buyers and sellers of
pre-owned vehicles from fraud. VSTAG brings
the UK's leading online car sales companies
together with advisors from the Metropolitan
Police, Get Safe Online and Action Fraud.

Customers and consumers trust our
platform, and we invest to keep it secure.
We continuously monitor the availability
and resilience of our platform and systems,
as well as investing in security infrastructure
to ensure they remain robust.

We employ dedicated security teams and
carry out regular penetration testing and
reviews of threats and vulnerabilities. We
have two-factor verification in place to
access our network, providing enhanced
authentication. We have been PCI DSS
(payment card industry data security
standard) compliant since 2013 and use an
external Quality Security Assessor to
maintain best practice.

Protecting consumer and customer data
Protecting the data of our consumers and our
retailer customers is also an important focus
for us. We have completed a comprehensive
programme of work to ensure the
organisation (both in the UK and Ireland)
complies with the new General Data
Protection Regulation.

We are a data-led business, and when it
comes to collecting and storing personal
data we abide by a clear set of principles.

We are committed to ensuring that personal
information we collect and use is appropriate
for the purpose, and does not constitute an
invasion of privacy. Where appropriate
Auto Trader obtains consent from consumers
to gather personal data to service their
enquiries for products, services or vehicles
advertised on the site. Explicit consent is
also obtained to contact consumers for
marketing purposes. We may pass personal
data to third-party service providers
contracted to Auto Trader in the course of
dealing with customers or employees. We
carefully vet any third parties that we share
data with, and they are obliged to keep it
securely, and to use it only to fulfil the
service they provide on our behalf.

We put the consumer at the heart of everything we
do. By introducing tools such as Price Indicator,
Dealer Reviews and Monthly price search, we
improve the transparency of the consumer’s car
buying journey and of the whole marketplace.”

44 | Auto Trader Group plc Annual Report and Financial Statements 2019

We have a zero-tolerance approach to
modern slavery and are committed to
acting ethically and with integrity in all our
business dealings and relationships, and to
implementing and enforcing effective
systems and controls to ensure modern
slavery is not taking place anywhere in our
own business or in any of our supply chains.
We expect the same high standards from all
our contractors, suppliers and other
business partners.

The Company’s Strategic Report
is set out on pages 1 to 45. Approved
by the Board on 6 June 2019 and
signed on its behalf by:

Nathan Coe
Chief Financial Officer
and Chief Executive Officer-designate
6 June 2019

Operating ethically and responsibly
We are committed to carrying out all
business activities in an honest, open
and ethical manner.

Each year, our employees complete
compliance training that covers fraud,
bribery, anti-money laundering,
information security and GDPR.

We take a holistic view when deciding which
suppliers and partners we should work with,
and alignment with our values and culture is
as important as commercial considerations.
We carefully vet new and existing
relationships to ensure that our standards
will be adhered to. We have a formal
procurement policy that ensures that
selection of suppliers and partners is
carried out in a consistent and fair manner.

We work closely with our key suppliers and
partners and engage regularly to further
strengthen relationships. As with all large
businesses, we publish information about
our supplier payment practices and
performance.

We treat all our customers fairly and
consistently, with transparent and
standardised pricing and business practices.

We have zero tolerance to any aspect of
bribery and corruption, both within our
business and in respect of any third parties
with whom we have dealings. We have an
established anti-bribery and corruption
policy and procedures in place including
reporting of gifts and hospitality, standard
contractual clauses with suppliers and
annual online compliance training for all
employees.

We have a culture of transparency and
openness and encourage our employees to
speak up whenever they have any concerns
or experience any serious malpractice or
wrongdoing in our business. We provide a
whistleblowing helpline through an
independent organisation, which is
anonymous and confidential. Reports are
directed to the Audit Committee chairman
and the Company Secretary.

Protecting human rights and
equal opportunity
We are committed to promoting diversity and
inclusion and treating all our employees and
job applicants fairly and equally. It is our policy
not to discriminate based on gender or gender
identity, sexual orientation, marital or civil
partner status, gender reassignment, race,
religion or belief, colour, nationality, ethnic or
national origin, disability or age, pregnancy, or
trade union membership or the fact that they
are a part-time worker or a fixed-term
employee. The equal opportunities policy
operated by the Group ensures all workers
have a duty to act in accordance with this.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 45

Strategic reportGovernanceFinancial statementsGovernance overview
A robust framework
for governance

The Company
complied with all
provisions set
out in the Code
for the period ”
Ed Williams
Chairman

I am pleased to introduce our corporate
governance statement which incorporates
reports from the Chair of each of our Board
Committees. These reports explain our
governance policies and procedures in
detail and describe how we have applied
the principles of corporate governance
contained in the UK Corporate
Governance Code 2016 (the ‘Code’).

Compliance with the Corporate
Governance Code
The Company complied with all provisions
set out in the Code for the period.

Directors and succession planning
As we announced on 29 April 2019, Trevor
Mather has decided to retire as CEO and
Director and will leave the Board on 31 March
2020. We had a robust succession plan in
place and we were pleased to be able to put
this into practice by appointing Nathan Coe
as CEO-designate, whilst retaining his CFO
responsibilities during the transition period.
As part of this plan, Catherine Faiers was
appointed as Chief Operating Officer and
joined the Board on 1 May 2019.

All Directors will offer themselves for
election or re-election by the shareholders
at the forthcoming AGM.

New Corporate Governance Code
The Board has completed a review of
the 2018 Corporate Governance Code
and assessed the impact on our current
governance arrangements.

For the majority of the changes, we were
already in line with the new requirements.
Where we identified gaps, proposals have
been considered by the Board and its
Committees, and we have already adopted
some of the new requirements:

— Terms of Reference of the Remuneration

Committee have been updated

— We have decided to introduce a post-

employment shareholding guideline in line
with best practice and the requirements
of the 2018 Code. Further details are set out
on page 67. After this change, our
Remuneration Policy will comply with the
expanded requirements of the 2018 Code

— We have already introduced a Cultural

Scorecard to assist the Board in assessing
and monitoring the culture of the
organisation

— Proposals have been considered in
respect of the method of workforce
engagement, and the Board has decided
that it will adopt an approach that builds on
the extensive engagement mechanisms
that are already in place in the business

— A suggested framework has been agreed
to assist the Board in ensuring that the
views of and impact on the wider
stakeholders are taken into account in
decision making and discussions.

These changes will be implemented over
the coming months and reported upon in
the 2020 Annual Report. Further details
are included within the relevant sections
of this report.

Remuneration Policy review
We carried out a review of our Remuneration
Policy during 2018, and we were pleased to
have received approval for the new policy
at our 2018 AGM. The policy has been
implemented in this financial year, as
described more fully in the Directors'
remuneration report on pages 64 to 74.

Annual General Meeting
Our Annual General Meeting (‘AGM’) will be
held at 10.00 am on Thursday 19 September
2019 at 4th Floor, 1 Tony Wilson Place,
Manchester, M15 4FN and we expect that
all Directors will be in attendance.

Ed Williams
Chairman
6 June 2019

46 | Auto Trader Group plc Annual Report and Financial Statements 2019

Leadership

Effectiveness

Accountability

Remuneration

e
c
n
a
n
r
e
v
o
G

Relations with shareholders

Read more
page 64

Read more
plc.autotrader.co.uk/investors

Auto Trader Group plc Annual Report and Financial Statements 2019 | 47

Strategic reportGovernanceFinancial statementsBoard of Directors

Ed Williams
Chairman

Trevor Mather
Chief Executive Officer

Nathan Coe
Chief Financial Officer and
Chief Executive Officer - designate

Catherine Faiers
Chief Operating Officer

Biography

Ed was appointed as Chairman
of Auto Trader Group plc in
February 2015. Prior to this, Ed was
a Non-Executive Director of
Auto Trader Holding Limited from
November 2010 and Chairman
from March 2014.

He was the founding Chief
Executive of Rightmove plc,
serving in that capacity from
November 2000 until his
retirement from the business in
April 2013. Rightmove plc was
floated on the London Stock
Exchange in February 2006. Prior
to Rightmove, Ed spent the
majority of his career as a
management consultant with
Accenture and McKinsey & Co.
Ed holds an MA in Philosophy,
Politics and Economics from St
Anne’s College, Oxford.

Trevor joined Auto Trader as
Chief Executive Officer ('CEO')in
June 2013, and was appointed as a
director of Auto Trader Group plc
in February 2015. Previously,
Trevor was President and CEO of
ThoughtWorks, a global IT and
software consulting company.

Trevor joined ThoughtWorks in
2001, to kick-start the UK branch
of the company, and then took
responsibility for all international
operations before becoming CEO
in 2007. He helped oversee the
business grow from a 300-person
North American company to a
2,200-person global business with
operations in 29 cities around the
world with a particular personal
focus on helping businesses
become truly digital. Before his
time at ThoughtWorks, Trevor
spent almost 10 years at Andersen
Consulting (now Accenture)
focusing on e-business solutions.
Trevor holds an MEng in
Aeronautics and Astronautics
from Southampton University.

As announced in April 2019, Trevor
will retire from the Board on
31 March 2020.

Nathan was appointed to the Board
as Chief Operating Officer (‘COO’)
in April 2017 and as Chief Financial
Officer (‘CFO’) in July 2017. Nathan
joined Auto Trader in 2007 to
oversee the transition from a
magazine business to being a pure
digital company. He was
responsible for launching a number
of new business areas, and led the
Company’s early entry and
subsequent growth in mobile and
online. Prior to his appointment to
the Board, Nathan was the joint
Operations Director, sharing
responsibility for the day-to-day
operations of the business.

Prior to joining Auto Trader, Nathan
was at Telstra, Australia’s leading
telecommunications company,
where he led Mergers and
Acquisitions and Corporate
Development for its media and
internet businesses. He was
previously a consultant at PwC,
having graduated from the
University of Sydney with a
B.Com. (Hons).

As announced in April 2019, Nathan
will become CEO on 1 April 2020.

Catherine joined Auto Trader in
August 2017 and was appointed as
Chief Operating Officer in May
2019. Catherine is responsible for
the day-to-day operations of Auto
Trader’s business. She is also
focused on guiding the Group's
strategy and development.

Prior to this, Catherine was Chief
Operating Officer at Addison Lee
where she was responsible for
all aspects of operations with a
team of over 750 employees,
management of the base of 6,000
driver partners, fleet logistics
and customer operations. She
was previously Corporate
Development Director at Trainline
with responsibility for strategy,
change management and M&A
and a Director at Close Brothers
Corporate Finance responsible for
the origination and execution of
M&A and Debt Advisory mandates
in the technology sector.

Catherine graduated from the
University of Durham with a BA in
Economics and is a qualified
Chartered Accountant, training
at PwC.

Appointed to PLC Board
February 2015

Appointed to PLC Board
April 2017

Appointed to PLC Board
May 2019

Independent on appointment
Yes

Independent on appointment
N/A

External appointments
Idealista S.A.

Committee memberships
Nomination (Chair)

External appointments
Matches Fashion Limited; Forever
Manchester

Committee memberships
Disclosure

External appointments
None

Committee memberships
Disclosure

External appointments
None

Committee memberships
None

48 | Auto Trader Group plc Annual Report and Financial Statements 2019

Jill Easterbrook
Independent
Non-Executive Director

David Keens
Senior Independent
Non-Executive Director

Jeni Mundy
Independent
Non-Executive Director

Claire Baty
Company Secretary

Biography

Jill was appointed as a
Non-Executive Director to the
Board on 1 July 2015.

David was appointed as a
Non-Executive Director on
1 May 2015.

Jeni was appointed as a
Non-Executive Director
on 1 March 2016.

Jill is currently the CEO of Boden,
the clothing retailer.

Jill was previously at Tesco PLC
(2001-16) where she was a member
of the Executive Committee,
having held a variety of roles
across Strategy and Operations.

Jill started her career at Marks
& Spencer in buying and
merchandising and also spent
time as a management consultant
with Capgemini Ernst & Young.

David was previously Group
Finance Director of NEXT plc
(1991 to 2015) and its Group
Treasurer (1986 to 1991). Previous
management experience includes
nine years in the UK and overseas
operations of multinational food
manufacturer Nabisco (1977 to 1986)
and prior to that seven years in the
accountancy profession. David
is a member of the Association of
Chartered Certified Accountants
and of the Association of
Corporate Treasurers.

Jeni is currently the Regional
Managing Director UK & Ireland
of Visa Inc.

Jeni was previously at Vodafone
(1998 to 2017). Most recently she
held Group Director roles across
Product Management and Sales.
Prior to that she was Chief
Technology Officer on the UK and
New Zealand Executive Boards.

Jeni started her career as a
Telecommunications Engineer
with BellSouth in New Zealand
and holds an MSc in Electronic
Engineering from Cardiff
University.

Claire joined Auto Trader in July 2015
and is Company Secretary and
Director of Governance.

Claire was previously Deputy
Company Secretary at Betfair Group
plc and prior to that was Company
Secretary at Centaur Media plc.

Claire is a qualified accountant, a
member of the Institute of Chartered
Secretaries and Administrators and
holds an MBA from Manchester
Business School.

Appointed to PLC Board
July 2015

Appointed to PLC Board
May 2015

Appointed to PLC Board
March 2016

Independent on appointment
Yes

External appointments
Boden Limited

External appointments
J Sainsbury plc.

Committee memberships
Remuneration (Chair), Nomination,
Audit

Committee memberships
Audit (Chair), Nomination,
Remuneration

External appointments
Visa UK Limited

Committee memberships
Remuneration,
Nomination, Audit

The dates of appointment shown are the dates on which the Directors were first appointed to the Board of Auto Trader Group plc.
Any reference pre February 2015 refer to the Group’s previous parent company, Auto Trader Holding Limited.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 49

Strategic reportGovernanceFinancial statementsCorporate governance statement

This corporate governance
statement explains key features
of the Company’s governance
framework and how it complies
with the UK Corporate Governance
Code published in 2016 by the
Financial Reporting Council.

A Leadership

Board and Committee meetings and attendance
Board meetings are planned around the key events in the corporate
calendar, including the half-yearly and final results and the Annual
General Meeting (‘AGM’), and a strategy meeting is held each year.

In months where there is no Board meeting, a financial update call is
held at which the Board discusses results with operational
management. Once a year, Directors spend a day visiting customers.

During the year, the Chairman and Non-Executive Directors have met
without Executive Directors present. In addition, the Non-Executive
Directors have met without the Chairman and the Executive
Directors present.

Attendance at meetings

Number of scheduled
meetings held

Director

Ed Williams

Trevor Mather

Nathan Coe

David Keens

Jill Easterbrook

Jeni Mundy

Board

Audit Remuneration

Nomination

n/a

Board responsibilities
The Board has adopted a formal schedule of matters reserved for its
approval and has delegated other specific responsibilities to its
Committees. The schedule sets out key aspects of the affairs of the
Company which the Board does not delegate. It is reviewed at least
annually, and is published on our website at plc.autotrader.co.uk/
investors

Insurance
The Company maintains appropriate insurance to cover Directors’
and officers’ liability for itself and its subsidiaries and such insurance
was in force for the whole of the financial year ending 31 March 2019.

50 | Auto Trader Group plc Annual Report and Financial Statements 2019

Introduction
This statement also includes items required by the Listing Rules and
the Disclosure Guidance and Transparency Rules (‘DTRs’). The UK
Corporate Governance Code (the ‘Code’) is available on the Financial
Reporting Council website at frc.org.uk

Compliance with the 2016 Code
The Company has complied in full with all provisions of the 2016
Corporate Governance Code during the year.

This report is structured to follow each of the sections of the Code:

Impact of the 2018 Corporate Governance Code
The new Code contains various new provisions that will have an
impact on our governance arrangements

— The requirement for the Board to assess and monitor culture

— Understand the views of the Company’s key stakeholders and
other matters under s172 Companies Act 2006, and consider
these in Board discussions and decision-making

— Engage with the workforce using one of the prescribed methods

or an alternative arrangement.

The Board has assessed the impact of the new Code and has
considered and approved proposals to ensure that we will be in a
position to comply with these new provisions.

— A Cultural Scorecard has been designed to allow monitoring of
various cultural indicators such as staff retention, diversity,
investment in training, absences, employee engagement and
customer feedback. The Board now receives and discusses this
on a regular basis during Board meetings.

— The Board already takes into consideration in its decision making

the interests of wider stakeholders, such as employees,
consumers, customers and suppliers, and other factors as
required of them under s172 of Companies Act 2006. However, in
order to formalise this process, the Board has established a
framework which will be applied to all Board papers and
discussions.

— There are already a number of established ways in which the

Company engages with the workforce, for example, an annual
employee engagement survey; an annual conference; regular
sharing of information from the CEO via regular business
updates, emails and videos; and informal open forums such as
breakfast forums. The Board intends to utilise these existing
mechanisms and increase the level of informal and formal
interaction with the workforce through these channels.

— There are also a number of employee “guilds” which have been
established to drive changes forward in areas such as family &
wellbeing; diversity & inclusion; recognition and career
development. The Company will establish a “guild of guilds”
which will act as a quasi-formal workforce advisory panel and
use this as a mechanism for the Board to engage with the
workforce.

— The Board has decided that it is not appropriate to designate a

specific NED to carry out this role; instead this should be shared
across all NEDs.

Full details of the actions and their implementation will be
included in the 2020 Annual Report.

Board roles
To ensure a clear division of
responsibility at the head of the
Company, the positions of Chairman and
Chief Executive Officer are separate
and not held by the same person.

The division of roles and responsibilities
between the Chairman and the Chief
Executive Officer is set out in writing
and has been approved by the Board.

David Keens is the Senior Independent
Director.

Chairman
— Leadership and governance of the Board.

— Creating and managing constructive
relationships between the Executive
and Non-Executive Directors.

4
— Ensuring ongoing and effective

communication between the Board
and its key shareholders.

— Setting the Board’s agenda and ensuring

that adequate time is available for
discussions.

— Ensuring the Board receives sufficient,
pertinent, timely and clear information.

Chief Executive Officer
— Responsible for the day-to-day

operations and results of the Group.

— Developing the Group’s objectives

and strategy and successful execution
of strategy.

— Responsible for the effective and ongoing

communication with shareholders.

— Delegates authority for the day-to-day
management of the business to the
Operational Leadership Team (comprising
the Executive Directors and senior
management) who have responsibility
for all areas of the business.

Non-Executive Directors
— Scrutinise and monitor the performance

Senior Independent Director
— Acts as a sounding board for the Chairman.

of management.

— Constructively challenge the Executive

Directors.

— Monitor the integrity of financial

information, financial controls and
systems of risk management.

— Available to shareholders if they have
concerns which the normal channels
through the Chairman, Chief Executive
Officer or other Directors have failed to
resolve.

— Meets with the other Non-Executive

Directors without Executive Directors
present.

— Leads the annual evaluation of the

Chairman’s performance.

Company Secretary
— Available to all Directors to provide

advice and assistance.

— Responsible for providing governance

advice.

— Ensures compliance with the Board’s

procedures, and with applicable rules
and regulations.

— Acts as secretary to the Board and all

Committees.

Overall authority for the management
and conduct of the Group’s business,
strategy, objectives and development.

Monitoring delivery of business
strategy and objectives; responsibility
for any necessary corrective action.

Oversight of operations including
effectiveness of systems of internal
controls and risk management.

Board
responsibilities
Providing leadership
for the long-term success
of the Group

Approval of changes to the capital,
corporate and/or management structure
of the Group.

Approval of the Annual Report and
Financial Statements, communications
with shareholders and the wider
investment community.

Approval of the dividend policy.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 51

Strategic reportGovernanceFinancial statementsCorporate governance statement continued

B Effectiveness

Board composition, balance and independence
At the date of this report, the Board consists of the Non-Executive
Chairman, three independent Non-Executive Directors and three
Executive Directors.

All of the Non-Executive Directors (David Keens, Jill Easterbrook
and Jeni Mundy) are considered to be independent in character
and judgement, and free of any business or other relationship which
could materially influence their judgement. Ed Williams was considered
to be independent on appointment. The Chairman’s fees and the
Non-Executive Directors’ fees are disclosed on page 69, and they
received no additional remuneration from the Company during the year.

Therefore, at 31 March 2019 and to the date of this report, the
Company is compliant with the Code provision that at least half the
Board, excluding the Chairman, should comprise independent
Non-Executive Directors.

The Board and its Committees have an appropriate balance of skills,
experience and knowledge of the Group to enable them to discharge
their respective duties and responsibilities effectively in accordance
with main principle B.1 of the Code. Biographies of all members of the
Board appear on pages 48 and 49.

Appointments to the Board
The Board has established a Nomination Committee, chaired
by Ed Williams, with all other members comprising independent
Non-Executive Directors, and one of the main responsibilities of this
Committee is to identify and nominate candidates for appointment
as Directors to the Board. The work of the Committee is described on
pages 58 and 59.

Non-Executive appointments to the Board are for an initial term of
up to three years. Non-Executive Directors are typically expected
to serve two three-year terms, although the Board may invite the
Director to serve for an additional period.

Letters of appointment
The Chairman and the Non-Executive Directors have letters of
appointment which are available for inspection at the registered
office of the Company during normal business hours and at the place
of the AGM from at least 15 minutes before and until the end of the
meeting. These letters set out the expected time commitment from
each Director.

External directorships
Any external appointments or other significant commitments of the
Directors require the prior approval of the Board. Trevor Mather is a
director on the board of Matches Fashion Limited, a global luxury
shopping online company. The Board approved the appointment and
confirmed that it was satisfied that there was no conflict of interest
arising. Trevor is also Chair of Forever Manchester, a charity which
Auto Trader supports through donations. Neither Nathan Coe or
Catherine Faiers have any external directorships as at the date of this
report. The Board is comfortable that external appointments of the
Chairman and the Non-Executive Directors do not impact on the time
that any Director devotes to the Company.

In accordance with the Company’s Articles of Association, the Board
has a formal system in place for Directors to declare conflicts of
interest and for such conflicts to be considered for authorisation.

52 | Auto Trader Group plc Annual Report and Financial Statements 2019

Induction and development
All newly appointed Directors receive an induction briefing on their
duties and responsibilities as Directors of a publicly quoted company.
There is a formal induction programme to ensure that newly
appointed Directors familiarise themselves with the Group and its
activities, either through reading, meetings with the relevant member
of senior management or through sessions in the Board meetings.

Each Board meeting contains a presentation from senior
management on one of the focus areas for the year. Specific
business-related presentations are given to the Board by senior
management and external advisors when appropriate – refer to the
table of activities opposite.

All Directors are offered the opportunity to meet with customers and
take part in sales calls to understand the business from a customer’s
perspective, or to take part or observe focus groups with consumers
who use our website. All Directors receive a weekly newsletter from
our sales and service team to ensure they are kept informed of the
latest customer dialogue and sentiment.

The Board as a whole is updated, as necessary, in light of any
governance developments as and when they occur, and there is
an annual Legal and Regulatory Update provided as part of the
Board meeting. All Directors are required to complete our annual
compliance training modules covering anti-bribery, anti-money
laundering, data protection, information security and other
relevant subjects.

As part of the Board evaluation, the Chairman meets with each
Director to discuss any individual training and development needs.

Information and support available to Directors
Full and timely access to all relevant information is given to the Board.
For Board meetings, this consists of a formal agenda, minutes of
previous meetings and a comprehensive set of papers including
regular operational and financial reports, provided to Directors in a
timely manner in advance of meetings.

All of the Directors have the right to have their opposition to, or
concerns over, any Board decision noted in the minutes. Directors
are entitled to take independent professional advice at the
Company’s expense in the furtherance of their duties, where
considered necessary.

All Directors have access to the advice and services of the Company
Secretary, Claire Baty.

Election of Directors
The Board can appoint any person to be a Director, either to fill a
vacancy or as an addition to the existing Board. Any Director so
appointed by the Board shall hold office only until the next AGM
and shall then be eligible for election by the shareholders.

Board and Committee activities in 2019

Strategy

Operational

Financial

People

Shareholders

Risk and governance

Regular reports received

Monthly operational
report with key
achievements and
issues in the month,
view of the industry,
competitors and
customers.

Maintain the best
consumer experience
for buying and selling
cars: focus on private
car sales.

Monthly financial
report with results,
KPIs, out-turn and
external view.

Quarterly financial
review.

Monthly report of
people changes,
recruitment,
resourcing needs
and employee
engagement.

Approval of new
Single Incentive Plan
for senior managers
(below Board level).

8
1
0
2

l
i
r
p
A

Regular feedback
from investor
meetings.

Quarterly shareholder
analysis.

Approval of material
contracts.

Governance and
regulatory updates.

Finalise shareholder
consultation for new
Remuneration Policy.

Follow up on external
Board evaluation
recommendations.

e Review and approval
n
of the mid-term
u
J
financial plan.

Improve stock choice,
volumes, accuracy
and transparency.

Approval of
Annual Report and
Preliminary Results
Announcement.

Approval of new
£400m revolving
credit agreement.

Approval of 2018
Bonus out-turn.

PSP and Single
Incentive Plan targets
and grants.

Approval of dividend
policy, capital
structure and share
buyback programme.

Recommendation of
final dividend.

Quarterly financial
review.

Introduction of new
Culture Scorecard.

Review of feedback
from analysts and
investors from results
roadshows.

Review of risk
management process.

Legal and regulatory
update.

Review of GDPR
compliance.

Review and approval
of Group risk register.

Review and approval
of viability statement.

Grow ARPR in a
balanced and
sustainable way.

Quarterly financial
review.

r Strategy off-site
e
b
-understanding
o
our consumers.
t
c
O

Extend our product
offering further down
the buying funnel:
Pricing and product
strategy for 2020.

Diversity and
inclusion.

Succession planning.

Talent development.

Reviewed feedback
from investors and
proxy advisory
agencies in advance
of Annual General
Meeting (‘AGM’).

Review and approval
of modern slavery
statement.

Insurance programme.

Consideration of the
impact of the 2018
Corporate
Governance Code.

Approval of half-yearly
report.

Approval of interim
dividend.

Review and approval
of Group risk register.

y Review of progress on
u
the joint venture with
J
Cox Automotive.

t Approval of the Dealer
s
u
Auction joint venture
g
u
with Cox Automotive.
A

r
e
b
m
e
t
p
e
S

r
e
b
m
e
v
o
N

9
1
0
2

y 2020 operating plan.
r
a
u
r
b
e
F

Develop a more
efficient way for
retailers to source
vehicles.

Review of tax
compliance.

Quarterly financial
review.

h
c
r
a
M

Large customer
update.

Approval of 2020
financial plan.

Review of feedback
from analysts and
investors from results
roadshows.

Review of
remuneration
framework.

Gender pay gap
reporting.

Salary reviews and
bonus targets for
2020.

Approval of planned
approach to
workforce
engagement.

Business continuity.

Supplier risk.

Review of internal and
risk management
framework.

Review of external
audit effectiveness.

Internal Board
evaluation feedback
and action plan.

Agreement on s172
framework for
decision making.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 53

Strategic reportGovernanceFinancial statementsCorporate governance statement continued

Board evaluation and effectiveness
In 2018, the Board engaged Independent Audit Limited to facilitate an external evaluation of the Board, Committees and individual Directors.

This year, an internal evaluation was conducted. The internal review included the completion of a detailed questionnaire by each of the Board
Directors, covering the following areas:

— Board meetings and information flows

— The Board’s role, knowledge and skills

— Board composition and succession planning

— Business strategy, performance and culture

— Risk management

— Engagement with shareholders and other stakeholders

— The operation of each of the Board’s Committees

— Follow up of the recommendations raised by the external review

The results were reviewed by the Chairman and then discussed with the Board in March 2019.

Actions arising from the 2018 external review

The Board and Committees operate with a relatively informal
and high trust approach, and should monitor that this
continues to function well.

This is kept under continuous review, and was specifically focused on during meetings of the
Chairman and Non-Executive Directors, including review of any behavioural early warnings,
weakening business performance relative to the economic cycle, and retrospective review of
major decisions taken.

The Board should develop a systematic approach to building
a view of and measuring the culture of the business.

A cultural scorecard has been developed and is used by the Board to formally measure and
track culture.

The Nomination Committee should focus on succession
planning and motivation of senior managers beyond
the Board.

The Terms of Reference of the Nomination Committee were broadened to explicitly include
talent development and succession planning below Board level, and these items were
discussed during the 2018/19 meeting cycle.

The Board should consider opportunities for deeper and
wider contact between the Non-Executive Directors and
the wider workforce.

Board papers should be reviewed to ensure they are
consistent and concise, and address the desired areas.

More opportunities for contact are being developed, including employee forums, attendance
at all-employee events and greater exposure to areas of the business on an ad hoc and
informal basis. This will be further increased during 2019/20 as the Board starts to implement
the requirements of the 2018 Corporate Governance Code around workforce engagement
(see below).

The Company Secretary reviews all Board papers to ensure that every paper has a clear
purpose and positioning to give focus to Board discussions. This will be further strengthened
during 2019/20 as the Board implements a framework for ensuring that due consideration is
given to all stakeholders under s172.

Actions arising from the 2019 internal review

Although Board papers are published on a timely basis, there
is often a large volume of pre-reading in a short space of time.

More discipline in ensuring the papers are as concise as possible without losing the detail
required. Papers are now published individually on a secure board portal when ready, rather
than in a “pack”.

As the Terms of Reference of each Committee expand, the
agendas for each meeting become very full.

Additional Committee meetings to be scheduled to spread the agenda items and enable more
time for focus areas and discussions.

As the induction process has not been needed for a number
of years, this becomes out of date and should be refreshed.

The induction process will be reviewed and refreshed to ensure that it continues to provide
Directors with the information and knowledge they need about the business and their role.

In addition, an assessment of the Chairman’s performance was carried out, led by the Senior Independent Director, and feedback was
provided to him individually.

Overall, the results showed that the Board and its Committees continue to operate well, and that each individual Director continues to
make an effective contribution.

54 | Auto Trader Group plc Annual Report and Financial Statements 2019

C Accountability

The Board has established an Audit Committee, chaired by David
Keens and comprised entirely of Independent Non-Executive
Directors. The Committee has defined Terms of Reference which
include assisting the Board in discharging many of its responsibilities
with respect to financial and business reporting, risk management
and internal control. The work of the Committee is described on
pages 60 to 63.

Financial and business reporting
Assisted by the Audit Committee, the Board has carried out a review
of the 2019 Annual Report and considers that, in its opinion, the report
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position and
performance, business model and strategy. Refer to the Audit
Committee report on page 60 for details of the review process.

See pages 12 to 19 in the Strategic report for a description of our
business model, strategy and focus areas.

See page 34 for the Board’s statement on going concern and the
viability statement.

Risk management process
We recognise that effective risk management is critical to enable
us to meet our strategic objectives and to achieve sustainable
long-term growth. A four-step process has been adopted to identify,
monitor and manage the risks to which the Group is exposed:

1. Identify risks
A top-down and bottom-up approach is used to identify principal risks
across the business. Whilst the Board has overall responsibility for the
effectiveness of internal control and risk management, the detailed
work is delegated to the Operational Leadership Team (‘OLT’).

2. Assess and quantify risks
Risks and controls are analysed and evaluated to establish the root
causes, financial impact and likelihood of occurrence. The Group
categorises risks into six areas:

— economy, market and business environment;

— financial and compliance risk;

— asset risk;

— operational risk;

— competitive risk; and

— product specific risk.

3. Respond to, manage and mitigate risks
The effectiveness and adequacy of controls in place are assessed.
If additional controls are required to mitigate identified risks then
these are implemented and responsibilities assigned.

4. Monitor and review
The OLT is responsible for monitoring progress against principal
risks in a continual process. They are assisted by the Group’s internal
audit programme run in conjunction with Deloitte.

The Board reviews the Group’s risk register and assesses the
adequacy of the principal risks identified and the mitigating controls
and procedures adopted.

Risk management and internal control
The Company does not have a separate Risk Committee; the Board is
collectively responsible for determining the nature and extent of the
principal risks it is willing to take in achieving its strategic objectives.

The Board acknowledges its responsibility for establishing and
maintaining the Group’s system of risk management and internal
controls and it receives regular reports from management
identifying, evaluating and managing the risks within the business.
The system of internal controls is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and can
provide only reasonable, and not absolute, assurance against
material misstatement or loss.

The processes in place for assessment, management and
monitoring of risks are described below.

Identify
risks

Monitor and
review

Assess and
quantify risks

Respond to,
manage and
mitigate risks

Auto Trader Group plc Annual Report and Financial Statements 2019 | 55

Strategic reportGovernanceFinancial statementsCorporate governance statement continued

Our framework
Risks are reviewed on an
ongoing basis and are
captured in a risk register,
identifying the risk area, the
likelihood of the risk
occurring, the impact if it
does occur and the actions
being taken to manage the
risk to the desired level. The
Board’s role is to consider
whether, given the risk
appetite of the Group, the
level of risk is acceptable
within its strategy.

Responsibilities:

Board’s responsibilities
— Overall responsibility for overseeing the Group’s risk management and internal control process

— Determines the Group’s risk appetite

— Ensuring appropriate and robust systems of risk management and internal controls are in place to

identify, manage and mitigate the risks to the overall viability of the Group

Audit Committee’s responsibilities
— Assessing the scope and effectiveness of the Group’s internal controls and risk management systems

— Agreeing the scope of the internal audit and external audit functions, and reviewing their work

Operational Leadership Team’s responsibilities
— Identify, assess, monitor, manage and mitigate risks and exploit opportunities

— Embedding risk management and internal controls as business as usual

— Ensuring actions to mitigate risks are implemented

Lines of defence:

1. First line
Operational Leadership Team
— Primary responsibility for day-to-day risk management

— Risk identification, analysis, evaluation and mitigation

— Design and execution of appropriate mitigations and internal controls

— Self-certification of operation of processes and controls

2. Second line
Oversight functions and committees
— Functions: Risk and Compliance, Legal, HR, Security, Internal Controls

— Groups: Governance and Risk steering group; FCA Governance group, Trust Council

— Establish appropriate policies, provide guidance, advice and direction on implementation

— Monitor the first line of defence

3. Third line
— Independent assurance-internal audit, PCI compliance assessors, external auditors

— Provide independent assurance that risk is being appropriately managed

— Identify process improvements and efficiencies

Our framework

r
o
t
i
d
u
a

a
n
r
e
t
x
E

Board

Audit
Committee

Operational Leadership Team

Risk register and risk review

Operational management

56 | Auto Trader Group plc Annual Report and Financial Statements 2019

The Audit Committee reviews the system of risk
management and internal controls through reports
received from management, along with others from
internal and external auditors. Management continues to
focus on how internal controls and risk management can
be further embedded into the operations of the business
and on how to deal with areas of improvement which come
to the attention of management and the Board.

The Board, assisted by the Audit Committee, has carried
out a review of the effectiveness of the system of risk
management and internal controls during the year ended
31 March 2019 and for the period up to the date of approval
of the consolidated financial statements contained in the
Annual Report. The review covered all material controls,
including financial, operational and compliance controls
and risk management systems. The Board considered the
weaknesses identified and reviewed the developing
actions, plans and programmes that it considered
necessary. The Board confirms that no significant
weaknesses or failings were identified as a result of the
review of effectiveness.

n
t
e
r
n
a

a
u
d
i
t
o
r

D Remuneration

The Board has established a
Remuneration Committee,
chaired by Jill Easterbrook
and comprised entirely of
Independent Non-Executive
Directors. The work of the
Committee is described on
pages 64 to 74.

Impact of the 2018 Corporate Governance Code
The Board has assessed the impact of the changes to the 2018 Corporate Governance Code and
has already adopted updated Terms of Reference for the Remuneration Committee that incorporate
some of these changes.

The Remuneration Committee has already decided to introduce a post-employment shareholding
guideline in line with best practice and the requirements of the 2018 Code. Further details are set
out on page 67. After this change, our Remuneration Policy will comply with the other expanded
requirements of the 2018 Code – our pension provision for Executive Directors is aligned with our
broader employee population, we operate a post-vesting holding period for the PSP and malus
and clawback provisions apply.

Annual General Meeting
The AGM of the Company will take place at 10.00 am on Thursday
19 September 2019 at the Company’s registered office at 4th Floor, 1
Tony Wilson Place, Manchester, M15 4FN. All shareholders have the
opportunity to attend and vote, in person or by proxy, at the AGM.

All proxy votes received in respect of each resolution at the AGM are
counted and the balance for and against, and any votes withheld, are
indicated. At the meeting itself, voting on all the proposed resolutions
is conducted on a poll rather than a show of hands, in line with
recommended best practice. The Chairman, the Chair of each of the
Committees and the Executive Directors are present at the AGM and
available to answer shareholders’ questions.

The Notice of the AGM can be found in a booklet which is being
mailed out at the same time as this Annual Report. The Notice of the
AGM sets out the business of the meeting and an explanatory note on
all resolutions. Separate resolutions are proposed in respect of each
substantive issue. Results of resolutions proposed at the AGM will be
published on the Company’s website: plc.autotrader.co.uk/
investors following the AGM.

E Relations with shareholders

The Board has a comprehensive investor relations programme to
ensure that existing and potential investors understand the
Company’s strategy and performance. As part of this programme,
the Executive Directors give formal presentations to investors and
analysts on the half-year and full-year results in November and June
respectively. These updates are webcast live and then posted on
the Group’s website and are available to all shareholders.

The results presentations are followed by formal investor roadshows
in the UK and overseas.

There is also an ongoing programme of attendance at conferences,
one-to-one meetings and group meetings with institutional investors,
fund managers and analysts. These meetings cover a wide range of
issues, including strategy, performance and governance, but care is
exercised to ensure that any price-sensitive information is released
to all shareholders, institutional and private, at the same time.
Meetings which relate to governance are attended by the Chairman
or another Non-Executive Director as appropriate. Private
shareholders are encouraged to give feedback and communicate
with the Board through ir@autotrader.co.uk.

The Board receives regular reports on issues relating to share price,
trading activity and movements in institutional investor
shareholdings. The Board is also provided with current analyst
opinions, forecasts and feedback from its joint corporate brokers,
Bank of America and Numis, on the views of institutional investors on
a non-attributed and attributed basis, and on the views of analysts
from its financial PR agency, Powerscourt. Any major shareholders’
concerns are communicated to the Board by the Executive Directors.

The Chairman, the Senior Independent Director and other
Non-Executive Directors are available to meet with shareholders and
arrangements can be made through the Company Secretary.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 57

Strategic reportGovernanceFinancial statementsReport of the Nomination Committee

Dear shareholders,

I present the Report of the Nomination Committee for 2019.

Role of the Committee
The Committee reviews the structure, size and composition of the
Board and its Committees, and makes recommendations to the Board
for appointments to the Board. The Committee is responsible for
ensuring that there are formal and orderly succession plans in place for
the members of the Board.

The Committee oversees diversity and inclusion across the whole
Group and monitors succession planning and talent development
below Board level.

How the Committee operates
All members of the Committee are independent Non-Executive
Directors. The Chairman of the Board chairs all meetings of the
Committee unless they relate to the appointment of his successor or
such other matters in which he may have a potential conflict of interest.
For those meetings, the Senior Independent Director (‘SID’) is invited to
take the Chair unless the SID is in contention for the role or also has a
potential conflict of interest.

The Committee meets at least twice a year, and on an ad hoc basis as
required. Only members of the Committee have the right to attend
meetings; however, the Chief Executive Officer attends for all or part
of meetings so that the Committee can understand his views,
particularly on key talent within the business.

Succession planning
The Committee believes that effective succession planning is critical
to the Company’s long-term success. We have a continual formal
succession planning process to ensure orderly succession for the
Board and senior management. This was put into practice in April 2019
when Trevor Mather informed the Board of his intention to retire as
CEO. Our long-term succession plan meant that we had already
identified Nathan Coe as a natural successor to Trevor. Catherine Faiers
was promoted to the Board as Chief Operating Officer with effect from
1 May 2019, and Jamie Warner was promoted to CFO-designate, with the
intention that he will join the Board on or before the date that Trevor
retires in March 2020.

In the coming year, the Committee will update and develop our formal
succession plan for the new Board, taking into account future skills
required in the context of the Group’s strategy, as well as recognising
the importance of growing and developing our internal talent.

Policy on appointments to the Board
A priority for the Committee has been, and will continue to be, ensuring
that members of the Board collectively possess the broad range of
skills, expertise and industry knowledge, and business and other
experience necessary for the effective oversight of the Group.

Appointments are made on merit, against objective criteria and with
due regard to the benefits of diversity on the Board. The Committee
takes account of a variety of factors before recommending any new
appointments to the Board, including relevant skills to perform the
role, experience, knowledge and diversity, including gender and
ethnic diversity.

Taking into consideration the recommendations of the
Hampton-Alexander review, we have revised our target for women
representation on our Board to 33%. We already exceed this target, as
three of our seven Board members are women. Our longer-term goal,
as it is for the organisation as a whole, is to achieve an equal number of
men and women. We acknowledge the recommendations of the Parker
review, but have not at this stage set a target, and do not currently meet
the recommendations.

Ed Williams
Chairman of the Nomination Committee

Composed of the Chairman and three independent
Non-Executive Directors.

At least one meeting held per year.

Meetings are attended by the Chief Executive Officer and
other relevant attendees by invitation.

For more information on the Committee’s Terms of Reference
visit plc.autotrader.co.uk/investors

Three meetings were held during the year:

Ed Williams (Chairman)

David Keens

Jill Easterbrook

Jeni Mundy

Meetings attended/
total meetings held

Percentage of
meetings attended

3/3

100%

Our progress in 2019:
— Renewal of additional three-year term for two Non-Executive

Directors.

— Follow up on the recommendations of the 2018 external

Board evaluation, and review the results of the 2019
internal evaluation

— Continued monitoring of succession planning for the

Board and senior management and, in April 2019, putting
this into practice

— Adopted the recommendations of the Hampton-Alexander
review and increased the target for women on our Board
to 33%

In 2020 we will:
— Continue to monitor Board and senior management

succession in the context of the Company’s long-term
strategy.

— Support management and the Board in promoting diversity

in senior management and across the workforce.

58 | Auto Trader Group plc Annual Report and Financial Statements 2019

Board composition
As at 31 March 2019

As at 6 June 2019

Chairman
Independent Non-Executive Directors
Executive Directors

Gender diversity
As at 31 March 2019

As at 6 June 2019

Board evaluation
We carried out an internal Board evaluation during the year, which
included following up on the recommendations of the 2018 externally
facilitated Board evaluation. This is described in detail on page 54 of
the corporate governance statement. Our next external Board
evaluation will be in 2021.

Election and re-election of Directors
In accordance with the UK Corporate Governance Code, all Directors
will retire and offer themselves for election or re-election to the
Board. The Directors who have been in post throughout the year have
been subject to a formal evaluation process, and both the Committee
and the Board are satisfied that all Directors continue to be effective
in, and demonstrate commitment to, their respective roles on the
Board and that each makes a valuable contribution to the leadership
of the Company.

The Board therefore recommends that shareholders approve the
resolutions to be proposed at the 2019 AGM relating to the election
and re-election of the Directors.

I will be available at the AGM to answer any questions on the work of
the Committee.

Ed Williams
Chairman of the Nomination Committee
6 June 2019

Impact of the 2018 Corporate Governance Code
The 2018 UK Corporate Governance Code applies to us from 1 April
2019. The new Code contains a provision that the Chairman should
not remain in post beyond nine years from the date of their first
appointment to the Board.

Ed Williams joined the Auto Trader business as a Non-Executive
Director in November 2010 when it was under private ownership.
He joined the Auto Trader Group plc Board in February 2015 and
the Company listed on the London Stock Exchange in March 2015.

The Committee, led by David Keens as Senior Independent Director,
has considered this change in the Code and has consulted with the
FRC. The understanding of the Committee and the Board is that the
nine year period commences on the date that Auto Trader listed on
the London Stock Exchange. The nine year period for Ed Williams
therefore runs to March 2024. However, it should be noted that
these comments are made in reference to the maximum term
stipulated in the new Code and do not commit the Company or
Ed Williams to him remaining as Chairman until 2024.

% of women on Board 33%

% of women on Board 43%

Men

Women

Board tenure*
As at 31 March 2019

As at 6 June 2019

0-3 years

3-6 years

*Refers to period since appointment to the PLC Board

Diversity and inclusion
The Nomination Committee’s Terms of Reference include the
responsibility to oversee diversity and inclusion across the whole
Group, not just at Board and senior management level.

The Company has established a Diversity and Inclusion Guild, with
representation from across all parts of the business and led by
members of our Operational Leadership Team. This guild is
responsible for developing and driving our strategy to create a
diverse, inclusive and conscious Auto Trader, and reports to the
Nomination Committee on its activities and progress.

Diversity at Auto Trader means respect for and appreciation of
differences in: gender, age, sexual orientation, disability, race and
ethnic origin, religion and faith, marital status, social, educational
background, and way of thinking. We do not set targets but we do
aim for our employee workforce to be reflective of the communities
in which we operate.

We are committed to more women at senior management level and
throughout the organisation, particularly in parts of the business
where women are currently underrepresented, such as technology.
Throughout most of the year, 50% of our Operational Leadership Team
(‘OLT’) were women, and we were delighted to be able to promote
Le Etta Pearce to Chief Executive Officer of our new joint venture with
Cox Automotive UK, which meant that she leaves our OLT to take up this
opportunity. At the end of our financial year, 42% of the OLT were women,
and 36% of the OLT’s direct reports were women, which means that we
have already met the Hampton-Alexander Review recommendations.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 59

Strategic reportGovernanceFinancial statements

Dear shareholders,

I am pleased to introduce the Audit Committee report for 2019.

The Committee is comprised entirely of independent Non-Executive
Directors. I fulfil the requirement for a Committee member to have
recent and relevant financial experience, and all members (and
therefore the Committee as a whole) have competence in consumer
and digital businesses.

The Board has adopted defined Terms of Reference for the
Committee to assist the Board in discharging many of its
responsibilities. This includes monitoring the integrity of the Group’s
financial reporting; the effectiveness of the internal control and risk
management framework; the internal audit function; and the
independence and effectiveness of the external auditors.

The Committee met three times during the year, arranged around our
external reporting and external and internal audit cycle. Our external
auditors, KPMG and internal auditors, Deloitte regularly attend
meetings, as does the CFO/COO and other members of management
attend by invitation.

During the year, the Company adopted new accounting standards
IFRS 9, IFRS 15 and IFRS 16. The Committee reviewed the impact of
these changes and other significant accounting matters with an
appropriate level of challenge and debate. The Committee has
reviewed the content in the Annual Report and we believe that this
clearly explains progress against our strategic objectives and is fair,
balanced and understandable.

The Committee plays a key role in ensuring that we continue to have
a robust internal control and risk management process. Our internal
audit function is outsourced to Deloitte LLP, who continue to
provide us with specialist expertise in delivering a risk-based rolling
review programme.

At the 2018 AGM, shareholders approved the Board’s
recommendation to re-appoint KPMG LLP as our external auditors.
The Committee has carried out a review of the effectiveness and
independence of KPMG and has recommended to the Board that
they are re-appointed at the 2019 AGM.

David Keens
Chairman of the Audit Committee
6 June 2019

Report of the Audit Committee

David Keens
Chairman of the Audit Committee

Composed of three independent Non-Executive Directors.

David Keens is considered by the Board to have recent and
relevant experience. All members have significant commercial
and operating experience in consumer and digital businesses.

At least three meetings held per year.

Meetings are attended by the Chief Financial Officer and Chief
Operating Officer, Chief Executive Officer, internal auditors and
external auditors by invitation.

For more information on the Committee’s Terms of Reference
visit plc.autotrader.co.uk/investors

Three meetings were held during the year:

David Keens (Chairman)

Jill Easterbrook

Jeni Mundy

Meetings attended/
total meetings held

Percentage of
meetings attended

3/3

100%

Our progress in 2019:
— Focus on key areas of judgement, including joint venture

accounting for Dealer Auction.

— Review the impact of changes to accounting policies for

IFRS 9, IFRS 15 and IFRS 16.

— Review of effectiveness of internal audit function, internal

controls and risk management framework.

— Evaluate effectiveness and independence of external audit.

In 2020 we will:
— Agree with KPMG any changes for their 2020 audit.

60 | Auto Trader Group plc Annual Report and Financial Statements 2019

Financial reporting
The primary role of the Committee in relation to financial reporting is to review and monitor the integrity of the financial statements, including
annual and half-year reports, result announcements, dividend proposals and any other formal announcement relating to the Group’s financial
performance.

The Committee assessed the quality and appropriateness of the accounting principles and policies adopted, and whether management had
made appropriate underlying estimates and judgements. In doing so, the Committee reviewed management reports in respect of the main
financial reporting issues and judgements made, together with reports prepared by the external auditor on the 2019 half-year statement and
2019 Annual Report.

The Committee, with assistance from management and KPMG, identified areas of financial statement risk and judgement as described below.

Description of focus area

Revenue recognition

Revenue recognition for the Group’s revenue streams is not complex.
However, this remained an area of focus for KPMG due to the large
volume of transactions and as revenue is the most material figure in
the financial statements.

KPMG carried out a review of our revenue recognition policies;
performed detailed analytical procedures; tested completeness and
existence of revenue by matching sales information from sales
systems to the financial systems and to cash receipts; reviewed
customer contracts; tested revenue cut-off and assessment of
deferred and accrued revenue; and carried out other
computer-assisted audit techniques.

KPMG also reviewed the impact of IFRS 15 which was adopted from
1 April 2018 (see below).

Adoption of new accounting standards

The Group has adopted IFRS 9 (Financial Instruments), IFRS 15
(Revenue) and IFRS 16 (Leases) with effect from 1 April 2018. The
adoption of these new standards involves the use of judgements
and assumptions and requires significant changes to disclosures.

Share-based payments

The Company has a number of share-based payment arrangements,
accounted for under IFRS 2, including a new Single Incentive Plan.
These require the use of valuation models and certain assumptions in
determining their fair value at grant and in the recognition of charges
and, as such, this is an area of judgement for management.

Joint venture accounting

The Group has entered into a joint venture agreement with Cox
Automotive UK during the year. This was a material transaction;
however the accounting treatment is not deemed to be complex
or involve a high degree of management judgement.

Going concern and viability statement

The Directors must satisfy themselves as to the Group’s viability
and confirm that they have a reasonable expectation that it will
continue to operate and meet its liabilities as they fall due. The
period over which the Directors have determined it is appropriate to
assess the prospects of the Group has been defined as three years.
In addition, the Directors must consider if the going concern
assumption is appropriate.

Audit Committee action

The Committee was satisfied with the explanations provided and
conclusions reached.

The Committee has reviewed the key assumptions and impact of
the adoption of the new accounting standards and is satisfied that
these are appropriate. The Committee has also reviewed the
disclosures, and has received reports from KPMG which include
technical review of the new disclosures, and is satisfied that these
are in accordance with accounting standards.

The Committee reviewed the assumptions made by management,
particularly in relation to profit forecasts that determine the
proportion of shares granted under the PSP, DABP and new Single
Incentive Plan. The Committee reviewed the comments within
KPMG’s report into the calculation of the charge and satisfied itself
that the share-based payment accounting is appropriate and in
accordance with accounting standards.

The Committee has reviewed the accounting treatment and
disclosure for the new joint venture and is satisfied that this is
appropriate and in accordance with accounting standards.

The Committee reviewed management’s schedules supporting the
going concern assessment and viability statements. These included
the Group’s medium-term plan and cash flow forecasts for the
period to March 2022. The Committee discussed with management
the appropriateness of the three-year period, and discussed the
correlation with the Group’s principal risks and uncertainties as
disclosed on pages 30-33. The feasibility of mitigating actions and
the potential speed of implementation to achieve any flexibility
required were discussed. The Committee evaluated the
conclusions over going concern and viability and the proposed
disclosures in the financial statements and satisfied itself that the
financial statements appropriately reflect the conclusions.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 61

Strategic reportGovernanceFinancial statementsReport of the Audit Committee continued

Fair, balanced and understandable
At the request of the Board, the Committee has reviewed the content of the 2019 Annual Report and considered whether, taken as a whole, in
its opinion it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position,
performance, business model and strategy. The Committee was provided with an early draft of the Annual Report, and provided feedback on areas
where further clarity or information was required in order to provide a complete picture of the Group’s performance. The final draft was then
presented to the Audit Committee for review before being recommended for approval by the Board. When forming its opinion, the Committee
reflected on discussions held during the year and reports received from the external auditor and considered the following main areas:

Is the report fair?

— Is a complete picture presented and has any sensitive material been omitted that should have been included?

— Are key messages in the narrative aligned with the KPIs and are they reflected in the financial reporting?

— Are the revenue streams described in the narrative consistent with those used for financial reporting in the financial

statements?

Is the report
balanced?

— Is there a good level of consistency between the reports in the front and the reporting in the back of the Annual Report?

— Do you get the same messages when reading the front end and the back end independently?

— Is there an appropriate balance between statutory and adjusted measures and are any adjustments explained clearly

with appropriate prominence?

— Are the key judgements referred to in the narrative reporting and significant issues reported in the Report of the Audit
Committee consistent with disclosures of key estimation uncertainties and critical judgements set out in the financial
statements?

Is the report
understandable?

— How do these compare with the risks that KPMG are planning to include in their report?

— Is there a clear and cohesive framework for the Annual Report?

— Are the important messages highlighted and appropriately themed throughout the document?

— Is the report written in accessible language and are the messages clearly drawn out?

Following the Committee’s review, the Directors confirm that, in their opinion, the 2019 Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business
model and strategy.

Risk management and internal control
The Committee’s responsibilities include a review of the risk management systems and internal controls to ensure that they remain effective
and that any identified weaknesses are properly dealt with. The Committee:

— reviews annually the effectiveness of the Group’s internal control framework;

— receives reports from the Group’s outsourced internal audit function and ensures recommendations are implemented where appropriate; and

— reviews reports from the external auditors on any issues identified in the course of their work, including any internal control reports received

on control weaknesses, and ensures that there is an appropriate response from management.

The Group has internal controls and risk management systems in place in relation to its financial reporting processes and preparation of
consolidated accounts. These systems include policies and procedures to ensure that adequate accounting records are maintained and
transactions are recorded accurately and fairly to permit the preparation of financial statements in accordance with IFRS. The internal control
systems include the elements described below.

Element

Approach and basis for assurance

Risk
management

Whilst risk management is a matter for the Board as a whole, the day-to-day management of the Group’s key risks resides with
the Operational Leadership Team (‘OLT’) and is documented in a risk register. A review and update of the risk register is
undertaken twice a year and reviewed by the Board. The management of identified risks is delegated to the OLT, and regular
updates are given to executive management at quarterly steering group meetings.

Financial
reporting

Group consolidation is performed on a monthly basis with a month-end pack produced that includes an income statement,
balance sheet, cash flow statement and detailed analysis. The month-end pack also includes KPIs and these are reviewed each
month by the OLT and the Board. Results are compared against the Plan or Reforecast and narrative provided by management to
explain significant variances.

Budgeting and
reforecasting

An annual Plan is produced and monthly results are reported against this. A half-year Reforecast is produced. The Plan and
the Reforecast are prepared using a bottom up approach, informed by a high-level assessment of market and economic
conditions. Reviews are performed by the OLT and the Board whilst the Plan is also compared to the top down Medium Term
Plan (‘MTP’) as a sense check. The Plan is approved by the OLT and the Board, and the Reforecast is approved by the OLT and
reported to the Board.

Delegation of
authority and
approval limits

A documented structure of delegated authorities and approval for transactions is maintained beyond the Board’s Terms of
Reference. This is reviewed regularly by management to ensure it remains appropriate for the business.

Segregation
of duties

Procedures are defined to segregate duties over significant transactions, including procurement, payments to suppliers, payroll
and discounts/refunds. Key reconciliations are prepared and reviewed on a monthly basis to ensure accurate reporting.

62 | Auto Trader Group plc Annual Report and Financial Statements 2019

Non-audit service

Policy

Considered to be approved by
the Committee up to a level of
£100,000 for each individual
engagement, and to a maximum
aggregate in any financial year of
the higher of £200,000 and 70%
of the average audit fees paid to
the audit firm in the last three
consecutive years.

Any engagement of the external
auditor to provide permitted
services over these limits is
subject to the specific approval in
advance by the Audit Committee.

Prohibited, with the exception of
certain services which are
subject to derogation if certain
conditions are met, in
accordance with the EU Audit
Reform.

Audit-related services directly
related to the audit
For example, the review of interim
financial statements, compliance
certificates and reports to
regulators.

Acceptable non-audit services
Including, but not limited to: work
related to mergers, acquisitions,
disposals, joint ventures or
circulars; benchmarking services;
and corporate governance
advice.

Prohibited services
In line with the EU Audit Reform,
services where the auditor’s
objectivity and independence
may be compromised by the
threat of self-interest, self-review,
management, advocacy,
familiarity or intimidation – for
example, tax services, accounting
services, internal audit services,
valuation services and financial
systems consultancy.

Refer to plc.autotrader.co.uk/investors for full details of the policy.
During the year, KPMG charged the Group £34,396 for audit-related
assurance services.

The Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014 – statement of compliance
As a competitive tender was carried out in 2016, and KPMG LLP were
first appointed as statutory auditors in the financial year to March
2017, we have complied with the requirement that the external audit
contract is tendered within the 10 years prescribed by EU and UK
legislation and the Code’s recommendation. The Company confirms
that it complied with the provisions of the Competition and Markets
Authority’s Order for the financial year under review.

David Keens
Chairman of the Audit Committee
6 June 2019

Internal audit
Deloitte has been appointed as the Group’s outsourced internal audit
function. They are accountable to the Audit Committee and use a risk-
based approach to provide independent assurance over the
adequacy and effectiveness of the control environment. The internal
audit work plan for 2019 was approved by the Audit Committee and
covers a broad range of core financial and operational processes and
controls, focusing on specific risk areas, including:

— Tax governance

— Cyber resilience and application security

— GDPR operating effectiveness

— Review of FCA regulated activity

Management actions that are recommended following the audits are
tracked to completion and reviewed by the Committee to ensure that
identified risks are mitigated appropriately.

The Committee met with representatives from Deloitte without
management present and with management without representatives
of Deloitte present. There were no issues of significance raised
during these meetings.

Whistleblowing
A whistleblowing policy has been adopted which includes access
to a whistleblowing telephone service run by an independent
organisation, allowing employees to raise concerns on an entirely
confidential basis. The Committee receives regular reports on the
use of the service, any significant reports that have been received,
the investigations carried out and any actions arising as a result.

External auditors
One of the Committee’s roles is to oversee the relationship with the
external auditor, KPMG, and to evaluate the effectiveness of the
service provided and their ongoing independence. The Committee
has carried out a review based on discussion of audit scope and
plans, materiality assessments, review of auditors’ reports and
feedback from management on the effectiveness of the audit
process, and has concluded that the external auditor remains
effective and independent.

During the year the Committee reviewed KPMG’s findings of the
external auditor in respect of their review of the half-yearly report
for the six-month period ending 30 September 2018, and in respect of
the audit of the financial statements for the year ended 31 March 2019.
The Committee met with representatives from KPMG without
management present and with management without representatives
of KPMG present, to ensure that there were no issues in the
relationship between management and the external auditor which it
should address. There were none.

The Committee has reviewed, and is satisfied with, the
independence of KPMG as the external auditor.

Non-audit services provided by the external auditor
The external auditor is primarily engaged to carry out statutory audit
work. There may be other services where the external auditor is
considered to be the most suitable supplier by reference to their
skills and experience. It is the Group’s practice that it will seek quotes
from several firms, which may include KPMG, before engagements
for non-audit projects are awarded. Contracts are awarded based on
individual merits. A policy is in place for the provision of non-audit
services by the external auditor, to ensure that the provision of such
services does not impair the external auditor’s independence or
objectivity, in accordance with the EU Audit Reform.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 63

Strategic reportGovernanceFinancial statementsDirectors’ remuneration report
Annual statement
by the Chairman of the Remuneration Committee

Dear shareholders,

I am pleased to present, on behalf of the Board, the Report of the
Remuneration Committee (the ‘Committee’) for the year ended
31 March 2019.

Board changes
On 29 April 2019 we announced that Trevor Mather had notified the
Board of his intention to retire as CEO and that he will step down
from his role and as a Director on 31 March 2020. At the same time
we announced that Nathan Coe has been promoted to CEO-designate
and that Catherine Faiers will join the Board in the role of Chief
Operating Officer "COO" from 1 May 2019. Details of their remuneration
arrangements are provided below and in the remainder of this report.

Remuneration Policy and approach for 2020
During 2018 the Committee undertook a review of our Directors’
Remuneration Policy. No changes were made to the remuneration
framework as it was considered that it had been successful in driving
performance and that it continued to be appropriate for the
Executive Directors. The Committee, however, made some
modifications to the structure and assessment of performance
measures for the PSP to better align performance measures with our
strategy as well as to simplify and increase the transparency of the
approach to assessing performance and setting targets. I am pleased
that our revised Policy was approved by 95% of shareholders at the
2018 AGM. Thank you to our shareholders for the time you took to
consult with us in the development of this Policy.

The Remuneration Committee continues to believe the Policy is
appropriate and our approach to Executive Directors remuneration is
unchanged for 2020. The maximum opportunity will continue to be
150% of base salary for the CEO and the CFO & CEO-designate. The
COO’s maximum bonus opportunity will be 130% of base salary.
Annual bonuses will continue to be based 75% on Operating profit and
25% on strategic objectives. For 2020 the strategic measures will be
based on stock on site, and adoption of our new car proposition. The
new car measure has been introduced for 2020 reflecting our
strategic focus on generating value through this market offering.

PSP awards will be granted in June 2019 and these will continue to be
based 75% on Operating profit growth and 25% on total Group revenue
growth. The CFO & CEO-designate will receive an award of 200% of
salary and the COO will receive an award of 150% of salary. In light of
his announced retirement the CEO will not receive a PSP award in
June 2019.

Salaries for the CEO and CFO & CEO-designate were increased by c.2%
with effect from 1 April 2019 in line with the general increase received
for other senior employees across the Group. Pension and benefits are
unchanged for 2019. The COO’s salary was set at £350,000 from the
date of her appointment to the Board (1 May 2019).

The CFO & CEO-designate’s remuneration arrangements remain
unchanged at present but will be reviewed in advance of him being
appointed to the role of CEO with effect from 1 April 2020.

Performance and reward in 2019
2019 has been another good year, with revenue growth of 8% and
Operating profit growth of 10%. We have also continued to make good
progress against our purpose to lead the future of UK’s digital
automotive marketplace and have delivered excellent returns for
shareholders through dividends and share buybacks.

Further details can be found on pages 24 to 29 of the Strategic report.

Jill Easterbrook
Chairman of the Remuneration Committee

Composed of three independent Non-Executive Directors.

The Company Chairman, Chief Executive Officer, the Chief
Financial Officer and Chief Operating Officer and other relevant
individuals are invited to attend the meetings – no person is
present during any discussion relating to their own
remuneration.

The Company Secretary acts as secretary to the Committee.

For more information on the Committee’s Terms of Reference
visit plc.autotrader.co.uk/investors

Six meetings were held during the year:

Meetings attended/
total meetings held

Percentage of
meetings attended

Jill Easterbrook (Chairman)

David Keens

Jeni Mundy

6/6

100%

In addition, Ed Williams was in attendance at all six meetings by
invitation.

Key highlights for 2019:
— Shareholder approval received for our revised Directors’

Remuneration Policy at the 2018 AGM and pay was
implemented in line with this policy during the year.

— The Committee reviewed developments in UK corporate
governance and shareholder guidance and considered its
approach to the 2018 Code.

— The Committee considered and agreed remuneration

arrangements for the CEO in respect of his retirement and
other changes to the Board announced on 29 April 2019.

In 2020 we will:
— Continue to monitor Remuneration Policy to ensure it is

aligned with strategy and the creation of suitable long-term
value creation and that it is appropriate in the context of
evolving shareholder guidance and corporate governance.

64 | Auto Trader Group plc Annual Report and Financial Statements 2019

Retirement arrangements for Trevor Mather
Trevor will continue to receive his normal base salary, pension and
benefits until his retirement and he will remain eligible for an annual
bonus in respect of FY20. The Committee has determined that Trevor
will be treated as a ‘good leaver’ in respect of outstanding share
incentives. Trevor Mather has undertaken to retain shares equivalent
to 200% of his salary for a minimum of two years post leaving when he
retires from the Board on 31 March 2020. Further details are provided
on page 72.

I look forward to receiving your support on the Directors’
remuneration report at the 2019 AGM where I shall be available to
answer any specific questions that you may have.

Jill Easterbrook
Chairman of the Remuneration Committee
6 June 2019

Annual bonus
The annual bonus for 2019 was based 75% on Operating profit and 25%
on strategic targets (average live car stock and average full page
advert views). As outlined on page 70, the total bonus for 2018/19 was
therefore 76.75% of maximum, resulting in payments of £641,401 for
the CEO and £425,963 for the CFO & CEO-designate. Half of this
bonus will be deferred into shares for a two-year period.

Performance Share Plan (‘PSP’)
PSP awards granted in June 2016 will vest in June 2019 based on
performance over the three years to 31 March 2019. The award was
based 75% on Cumulative Underlying operating profit performance
and 25% on Total Shareholder Return (‘TSR’) relative to the FTSE 250
(excluding investment trusts). As detailed on page 70, actual
performance resulted in a payout of 41.7% of the maximum 75% in
respect of Cumulative Underlying operating profit performance, and
9.5% of the maximum 25% in respect of TSR, giving an overall total
performance of 51.2%. The net value of vested awards is subject to a
two-year holding period.

The Committee carefully considered the level of payout and
concluded that annual bonus plan payouts and the level of PSP award
vesting appropriately reflected the underlying performance of the
Company and the strategic progress and therefore it was not
necessary to exercise discretion to adjust payouts.

UK Corporate Governance Code and amended disclosure
requirements
During the year, the Committee has monitored developments in the
2018 UK Corporate Governance Code and emerging guidance from
investors. The Committee has decided to introduce a
post-employment shareholding guideline in line with best practice
and the requirements of the 2018 Code. Any Executive Director who
leaves from 1 April 2019 will be expected to retain an interest in shares
with a value of 200% of salary (or their actual shareholding if lower) for
a period of two years following departure. Further details are set out
on page 67. Our Remuneration Policy already complies with the other
expanded requirements of the 2018 Code – our pension provision for
Executive Directors is aligned with our broader employee population,
we operate a post-vesting holding period for the PSP and malus and
clawback provisions apply.

In line with best practice we have also disclosed our CEO pay ratio a
year in advance of being required to under the regulations. Our
median all employee to CEO pay ratio is 42:1, which the Committee
considers is within a reasonable range taking into account the
structure and nature of our business.

The Committee will undertake a review of the practices in place in the
coming year to ensure that they are aligned with the new Code and
reporting regulations.

In light of the new Code, the Committee has also updated its Terms of
Reference to formalise many of the Committee’s existing practices to
align with the expanded requirements of the Code. The updated
Terms of Reference can be found plc.autotrader.co.uk/investors.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 65

Strategic reportGovernanceFinancial statementsDirectors’ remuneration report continued
Annual remuneration report

This report has been prepared in accordance with the Companies Act 2006, Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended in 2013) and the UKLA’s Listing Rules. This report is subject to an advisory
shareholder vote at the AGM on 19 September 2019.

Summary of Directors’ Remuneration Policy (Policy) and implementation for 2020
Our Policy was put to shareholders for approval at the AGM on 20 September 2018 and applies to payments made from this date. The following
provides a summary of the Policy along with details of how the Policy will be implemented during 2020. For full details of the Policy approved
by shareholders please refer to the 2018 Annual Report and Accounts which can be found at plc.autotrader.co.uk/investors.

Element

Salary

Overview of operation

Maximum opportunity

Performance conditions

Implementation for 2020

Salaries are normally reviewed
annually with changes effective
from 1 April.

N/A

No maximum salary level or
salary increase; however,
any base salary increases
will normally be in line with
the percentage increases
awarded to other
employees of the Group.

The Executive Directors’ salaries
were increased by c.2% from
1 April 2019 to:

— CEO – £568,000

(2018/19: £557,134)

— CFO & CEO-designate – £377,000

(2018/19: £370,000)

The increase for the CEO and CFO
& CEO-designate is in line with the
general increase received for
other senior employees across the
Group, and lower than the average
increase in salary across the wider
employee population of around
3.75% (reflecting both general
market, promotions and individual
rewards for performance).

The COO’s salary was set at
£350,000 from the date of her
appointment to the Board
(1 May 2019).

The CEO-designate’s remuneration
arrangements will be reviewed
in advance of him being appointed
to the role of CEO with effect
from 1 April 2020 to ensure they
appropriately reflect the size
and scope of the role.

No changes.

Our pension policy is in line with
the wider workforce and therefore
we already comply with the 2018
Code in this area.

For 2020 the Committee has
replaced the audience (average
full pay adverts views) measure
with a new car measure.

The Committee considered it was
appropriate to introduce a new car
measure reflecting our strategic
focus on generating value through
this market offering.

While a focus on audience remains
fundamental to everything we
do at Auto Trader, given the
challenges of consistently
measuring performance year on
year the Committee considered
that it was no longer appropriate
that full page advert views is
included as a performance
measure in the annual bonus.

Benefits

Pension

Annual bonus

Benefits include private medical
cover, life assurance and income
protection insurance.

Directors are eligible to receive
employer contributions to the
Company’s defined contribution
pension plan, a salary supplement
in lieu of pension benefits (or
combination of the above).

Based on the achievement
of performance over the
financial year.

Half of the bonus is paid in cash
with half deferred into shares for
two years under the Deferred
Annual Bonus Plan (‘DABP’) subject
to continued employment only.

Dividend equivalents accrue on
deferred shares.

Recovery and withholding
provisions apply, as described
below.

The value of benefits is not
capped as it is determined
by the cost to the Company,
which may vary.

Maximum contribution in
line with the contribution of
other employees in the
Group, currently 5% of
salary.

N/A

Maximum of 150% of salary.

Performance measures for the
year ended 31 March 2020 are as
follows:

— 75% based on Operating profit

— 25% based on strategic measures

Strategic measures are based on
stock (average live car stock) and
new cars (live retailers paying for
our new car package) (12.5%
weighting each).

See below for further details on
performance measures.

The targets are considered to be
commercially sensitive, but the
Committee intends to disclose
them in the next Annual Report
provided they are no longer
considered to be commercially
sensitive.

66 | Auto Trader Group plc Annual Report and Financial Statements 2019

Element

Overview of operation

Maximum opportunity

Performance conditions

Implementation for 2020

There will be no changes to the
structure of the award; the targets
have been raised to reflect the
impact of the joint venture.

Performance
Share Plan (‘PSP’)

Awards vest after three years
subject to performance conditions
and continued employment.

Awards are normally in the form
of nil-cost options.

Executive Directors are required
to retain vested shares for at least
two years from the point of
vesting.

A dividend equivalent accrues
on awards.

Recovery and withholding
provisions apply, as described
below.

A dividend equivalent provision
applies, as described below.

Normal circumstances:
maximum of 200% of salary.

For 2020, performance measures
and targets will be as follows:

Exceptional circumstances:
maximum of 300% of salary.

The CFO & CEO-designate
will receive an award of
200% of salary in June 2019.
The COO will receive an
award of 150% of salary.

In light of his announced
retirement the CEO will not
receive a PSP award in 2019.

Operating
profit
(75%
weighting)

Total
Group
revenue
(25%
weighting)

Threshold
(25%
vesting)

Stretch
(100%
vesting)

6.5%p.a.

11% p.a.

5% p.a.

8% p.a.

Vesting is on a straight-line basis
between threshold and stretch.

Performance will be assessed
based on the compound annual
growth rate for the three years
ending 31 March 2022.

See below for further details on
performance measures.

All-employee
Share Plans –
SIP & SAYE

Share ownership
guidelines

The Company operates two
all-employee tax-advantaged
plans, namely a Save As You Earn
(‘SAYE’) and a Share Incentive Plan
(‘SIP’) for the benefit of Group
employees.

Executive Directors will be eligible
to participate on the same basis as
other employees.

Executive Directors are expected
to build and maintain a holding of
shares in the Company. This is
expected to be built through
retaining a minimum of 50% of the
net of tax vested PSP and DABP
shares, until the guideline level
is met.

Maximum permitted based
on HMRC limits from time
to time.

N/A

No changes.

The minimum share
ownership guideline is 200%
of salary for current
Executive Directors.

N/A

The Committee has decided to
introduce a post-employment
shareholding guideline in line with
best practice and the requirements
of the 2018 Code.

Any Executive Director who leaves
from 1 April 2019 will normally be
expected to retain an interest in
shares with a value of 200% of
salary (or their actual shareholding
if lower) for a period of two years
following departure.

This guideline will apply to any
shares acquired from incentive
plans from 1 April 2019 and may
include the net value of outstanding
DABP awards and PSP awards
subject only to a holding period.

The Committee will have
discretion to operate the policy
flexibly and may waive part or all of
the requirement where considered
appropriate, for example in
compassionate circumstances.

Trevor Mather has undertaken to
retain shares equivalent to 200%
of his salary for a minimum of two
years post leaving when he retires
from the Board on 31 March 2020.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 67

Strategic reportGovernanceFinancial statementsDirectors’ remuneration report continued

Additional information
Recovery and withholding provisions
Recovery and withholding provisions apply to variable pay, to enable the Company to recover amounts paid under the annual bonus and PSP in
the event of the following negative events occurring within three years of the payment of a cash bonus, the grant date of an award under the
DABP or the vesting date of PSP awards:

— a material misstatement of or restatement to the audited financial statements or other data;

— an error in calculation leading to over-payment of bonus; or

— individual gross misconduct.

Should such an event be suspected, there will be a further two years in which the Committee may investigate the event. The amount to be
recovered would generally be the excess payment over the amount which would otherwise be paid, and recovery may be satisfied in a variety of
ways, including through the reduction of outstanding deferred awards, reduction of the net bonus or PSP vesting and seeking a cash repayment.

Selection of performance measures
Annual bonus
Operating profit is a key performance indicator of the business and the Board believes continuing to deliver Operating profit performance will
generate long-term value for shareholders. For the Operating profit measure, for achievement of the threshold target, 20% of this part of the
bonus opportunity becomes payable with the maximum becoming payable for outperforming the 2019 business plan.

The Committee believes that it is important to incentivise executives to deliver key strategic objectives to ensure that the business is well
positioned to deliver profit growth and shareholder value in future. The strategic targets selected for 2020 of stock (average live car stock)
and new cars (live retailers paying for the new car package) are aligned with our Group KPIs and are the key metrics that underpin our core
business. The strategic objectives are equally weighted, accounting for 12.5% of the bonus each. A financial underpin will apply to the strategic
targets, such that no bonus will be payable unless a threshold level of Operating profit is exceeded.

The Committee sets targets taking into account internal and external expectations of performance and organic growth of the business.
The Committee believes that these targets are appropriately stretching.

PSP
Revenue growth is a key performance indicator of the business and the Committee believes that incentivising management to continue to
grow revenue performance through our three business lines – Trade, Consumer Services and Manufacturer and Agency – will support
long-term profit growth and shareholder value creation. To ensure revenue performance is aligned with long-term value creation the vesting
for the revenue portion of the award is to an ‘underpin’ whereby the Operating profit measure must be at least at threshold levels of
performance for any portion of the total Group revenue element to pay out.

Continuing to drive Operating profit is a key strategic objective of the business. Though EPS is widely used by other companies, we believe that
the method by which the Company returns cash to shareholders should not affect executive compensation, and therefore for Auto Trader the
Committee believes that Operating profit is a more appropriate performance measure.

The Committee set Operating profit and total Group revenue growth targets taking into account internal and external expectations of
performance and organic growth of the business. The Committee believes that these targets are appropriately stretching.

Differences in Remuneration Policy between Executive Directors and other employees
Whilst the Policy described above applies specifically to the Company’s Executive Directors, the Policy principles are designed with due
regard to employees across the Group.

— Pay increases for Executive Directors are in line with the general increase received for other senior employees across the Group, and lower
than the average increase in salary across the wider employee population of around 3.75% (reflecting both general market, promotions and
individual rewards for performance).

— Pension contributions for Executive Directors are also in line with the wider workforce.The Executive Directors have the same access to

benefits as all other members of the workforce.

However, there are some differences.

— ‘At risk, performance-linked pay’ is restricted to the most senior employees in the Company, as it is this group that is most influential in

driving corporate performance.

— The Committee is committed to promoting a culture of widespread share ownership across all levels of the organisation. At senior levels this
will predominantly be achieved through participation in performance-based incentive plans, whilst across the rest of the workforce it will
be supported via all-employee share plans.

Service contracts and policy for payments on loss of office
The service contracts for the Executive Directors are terminable by either the Company or the Executive Director on 12 months’ notice and
make provision for early termination by way of payment of a cash sum equal to 12 months’ salary and pension. The Company may continue to
provide benefits until the end of the notice period or may make a payment to the value of 12 months’ contractual benefits.

Payment in lieu of notice can be paid either as a lump sum or in equal monthly instalments over the notice period and will normally be subject to
mitigation. The Committee will consider the particular circumstances of each leaver and retains flexibility as to at what point, and the extent to
which, payments are reduced.

The Executive Directors are subject to annual re-election at the AGM. Service contracts are available for inspection at the Company’s
registered office. The CEO’s service contract date is 6 March 2015 and the CFO & CEO-designate’s service contract date is 1 April 2016.
The COO’s service contract date is 1 May 2019.

68 | Auto Trader Group plc Annual Report and Financial Statements 2019

Remuneration Policy for the Chairman and Non-Executive Directors

Element

Fees

Overview of operation

Implementation for 2020

Both the Chairman and the Non-Executive Directors
are paid annual fees and do not participate in any of
the Company’s incentive arrangements, or receive
any pension provision or other benefits.

The Chairman receives a single fee covering all of his
duties.

The Non-Executive Directors receive a basic Board
fee, with additional fees payable for chairing the Audit
and Remuneration Committees and for performing
the Senior Independent Director role.

Fees were reviewed and increased by c.2% with effect from 1 April 2019.

Base fees
— Chairman – £184,013 (2019: £180,405)

— Non-Executive Directors – £56,827 (2019: £55,713)

Additional fees
— SID – £9,742 (2019: £9,551)

— Audit Committee Chairman – £9,742 (2019: £9,551)

— Remuneration Committee Chairman – £9,742 (2019: £9,551)

There is no additional fee payable to the Chairman of the Nomination Committee.
The Company Chairman is currently Chair of the Nomination Committee.

Letters of appointment
All Non-Executive Directors have letters of appointment with the Company for an initial period of three years, subject to annual
re-appointment at the AGM. Appointment is terminable on six months’ written notice. The appointment letters for the Non-Executive
Directors provide that no compensation is payable upon termination of employment. The letters of appointment are available for inspection
at the Company’s registered office. Details of the appointment terms of the Non-Executive Directors are as follows:

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Start of
current term

Expiry of
current term

6 March 2018

5 March 2021

1 May 2018

30 April 2021

1 July 2018

30 June 2021

1 March 2019 28 February 2022

Single figure of remuneration for the year ended 31 March 2019 (Audited)
The table below shows the aggregate emoluments earned by the Directors of the Company in the year ended 31 March 2019.

£’000

Executive

Trevor Mather

Nathan Coe

Non-Executive

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Salary and fees

Benefits

Annual bonus

Long-term
Incentives1

Pension

Total

557

370

180

–

641

426

–

683

292

–

1,910

1,109

180

1 51.2% of PSP awards granted in 2016 will vest in June 2019. For the purpose of the single figure the vested shares have been valued based on the three-month average share price to
31 March 2019 of 467.88p. Dividend equivalents to the value of £23,778 for Trevor Mather and £10,176 for Nathan Coe have also been included. 17% of the vested value is due to share
price growth of 20% since the date of award.

The following table shows the aggregate emoluments earned in the year ended 31 March 2018.

£’000

Executive

Trevor Mather

Nathan Coe

Non-Executive

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Salary and fees

Benefits

Annual bonus

Long-term
incentives 2

Pension

Total

546

350

176

–

412

229

–

1,943

833

–

2,929

1,431

176

100% of PSP awards granted in 2015 vested in June 2018 for performance over the three-year period to 31 March 2018. In last year's report, for the purpose of the single figure the
vested shares were valued based on the three-month average share price to 31 March 2018 of 359.58p giving a value of £1,644k for Trevor Mather and £705k for Nathan Coe including
dividend equivalents. The amounts disclosed in the table have been revalued based on the share price on the date of vesting of 424.90p.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 69

Strategic reportGovernanceFinancial statementsDirectors’ remuneration report continued

Additional information to support the single figure
Benefits
Benefits include: private healthcare, life assurance and income protection insurance.

Pension
Employer’s pension contributions of 5% of salary were paid in respect of Executive Directors in line with those received for the wider UK
employee population.

Annual bonus for the year ended 31 March 2019
The performance measures, targets and actual outcomes for the annual bonus for the year ended 31 March 2019 are shown in the following table:

Performance measures

Weighting

Threshold

Financial

Operating profit

Strategic targets

Stock – average live car stock

Audience – average full page
advert views

Total

75%

12.5%

100%

£228m

438,000

Target

£233m

441,000

Stretch

£248m

456,000

Actual
performance

Payout
(as a % of maximum)

£243.7m

64.2% of the 75%

462,000

12.5% of the 12.5%

246m

248m

253m

<246m

0% of the 12.5%

76.75% of the 100%

Payout for performance between threshold and stretch is calculated on a pro-rata basis. The payout at threshold is 20% of maximum, and the
payout at target is 50% of maximum.

Whilst average full page advert views showed a modest decline, our strong audience position was maintained during the year in comparison to
the market as a whole.

This level of performance resulted in a bonus payout of £641,401 for Trevor Mather (CEO) and of £425,963 for Nathan Coe (CFO & COO).
Half of the bonus earned will be payable in shares, deferred for two years under the DABP in line with the Policy.

The Committee considered the underlying financial performance during the year as well as the progress achieved against strategic objectives
and considered the level of annual bonus payout to be appropriate.

Performance Share Plan vesting for year ended 31 March 2019
The PSP award granted in 2016 and will vest in June 2019 based on performance to 31 March 2019. The performance conditions this award was
based on, the targets and performance delivered are set out in the table below:

Measure

Cumulative Underlying operating profit

TSR compared to the FTSE 250 Index
(excluding investment trusts)1

Total vesting

Weighting

75%

25%

Threshold
(25% vesting)

Stretch
(100% vesting)

Actual performance

Payout
(as a percentage
of maximum)

£660m

Equal to or above £710m

£680.4m

41.7% of the 75%

Equal to Index TSR Equal to Index TSR plus 25% or above

Index TSR plus 4%

9.5% of the 25%

51.2% of the 100%

1 TSR performance is calculated based on a three-month average to the beginning and end of the performance period.

For performance between the threshold and stretch targets, vesting is calculated on a pro-rata basis.

Executive Directors will be required to retain vested shares delivered under this PSP for at least two years from the point of vesting, subject
to the terms of the PSP holding period.

The Committee considered the underlying financial performance over the past three years as well as the progress achieved against strategic
objectives and considered the level of annual bonus payout to be appropriate.

Scheme interests awarded during the year (Audited)
Awards granted in the year under the DABP and PSP are shown below.

Executive Director

DABP awards1

Trevor Mather

Nathan Coe

Awards are granted as nil-cost options.

Number of shares awarded

Face/maximum value of awards at grant date 2

46,004

25,548

£205,914

£114,353

1 DABP awards were granted in respect of the annual bonus for the year to 31 March 2018. The awards will normally be eligible to vest two years from grant (17 August 2020) based on

continuous employment.

2 Face/maximum value was calculated based on the closing share price on the day before grant date (17 August 2018) of £4.476.

70 | Auto Trader Group plc Annual Report and Financial Statements 2019

Executive Director

PSP awards3

Trevor Mather

Nathan Coe

Number of
shares awarded

Multiple of salary

Face/maximum value
of awards at grant date 4

% award vesting
at threshold (% maximum)

Performance period 2

248,942

165,326

200%

£1,114,264

£738,999

25%

1 April 2018 to
31 March 2021

Awards are granted as nil-cost options.

3 PSP awards will normally be eligible to vest three years from grant (17 August 2021) based on performance over the three years to 31 March 2021 and continuous employment.
4 Face/maximum value was calculated based on the closing share price on the day before grant date (17 August 2018) of £4.476.

The performance conditions applying to the 2018 PSP awards shown in the table above are set out below. Each element will be assessed
independently.

Measure

Operating profit

Total Group revenue

Weighting

75%

Operating profit compound annual growth rate
for the three years ended 31 March 2021

25% Total Group revenue compound annual growth rate
for the three years ended 31 March 2021

Basis

Threshold (25% vesting)

Stretch (100% vesting)

6% p.a.

Equal to or above 10% p.a.

5% p.a.

Equal to or above 8% p.a.

For performance between the threshold and stretch targets, vesting will be calculated on a pro-rata basis. There is no vesting below threshold
performance.

Executive Directors will ordinarily be required to retain their net of tax number of vested shares delivered under the PSP for at least two years
from the point of vesting.

Directors’ shareholding and share interests (Audited)
Executive Directors are required to maintain shareholding in the Company equivalent in value to 200% of salary. If an Executive Director does
not meet the guideline, they will be expected to retain at least half of the net shares vesting under the Company’s discretionary share-based
employee incentive schemes until the guideline is met. Both Executive Directors currently hold well in excess of this limit. Non-Executive
Directors do not have shareholding guidelines.

The table below sets out the number of shares held or potentially held by Directors (including their connected persons where relevant) as at
31 March 2019.

Director

Executive Directors

Trevor Mather

Nathan Coe

Non-Executive Directors

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Beneficially
owned shares 1

Number of awards
held under the
PSP conditional on
performance

Number of vested
but unexercised
nil cost options

Number of awards
held under the
DABP conditional on
continued employment

Target shareholding
guideline
(as a % of salary)

Percentage of salary
held in shares as
at 31 March 20192

11,594,704

2,910,340

6,875,444

25,000

–

797,572

414,668

446,808

191,489

98,066

51,331

–

200%

N/A

11,274%

4,373%

N/A

Includes shares owned by connected persons and shares vesting under the PSP subject to a holding period. Only beneficially owned shares count towards the shareholding guideline.

1
2 Based on the Director’s salary and the mid-market price at close of business on 31 March 2019 of 521.6p.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 71

Strategic reportGovernanceFinancial statementsDirectors’ remuneration report continued

Trevor Mather

Scheme

PSP1

PSP2

PSP3

PSP4

DABP

Total

Nathan Coe

Scheme

PSP1

PSP2

PSP3

PSP4

DABP

Total

No. of shares/
options at
31 March 2018

Shares/options
granted in
the year

Shares/options
lapsed in
the year

Options
exercised in
the year

No. of shares/
options at
31 March 2019

446,808

275,321

273,309

–

101,221

52,062

–

1,148,721

–

248,942

2,2365

–

46,004

317,307

–

103,457

–

446,808

275,321

273,309

248,942

52,062

46,004

103,457

1,342,446

No. of shares/
options at
31 March 2018

Shares/options
granted in
the year

Shares/options
lapsed in
the year

Options
exercised in
the year

No. of shares/
options at
31 March 2019

191,489

117,994

131,348

–

50,128

25,783

–

516,742

–

165,326

1,107

–

25,548

191,981

–

51,235

–

51,235

191,489

117,994

131,348

165,326

25,783

25,548

657,488

Date of grant

19/6/2015

17/6/2016

16/6/2017

17/8/2018

17/6/2016

16/6/2017

17/8/2018

Date of grant

19/6/2015

17/6/2016

16/6/2017

17/8/2018

17/6/2016

16/6/2017

17/8/2018

Date
from which
exercisable

19/6/2018

17/6/2019

16/6/2020

17/8/2021

17/6/2018

16/6/2019

17/8/2021

Date
from which
exercisable

19/6/2018

17/6/2019

16/6/2020

17/8/2021

17/6/2018

16/6/2019

17/8/2021

Expiry date

19/6/2025

17/6/2026

16/6/2027

17/8/2028

17/6/2026

16/6/2027

17/8/2028

Expiry date

19/6/2025

17/6/2026

16/6/2027

17/8/2028

17/6/2026

16/6/2027

17/8/2028

100% of the PSP award granted in 2015 vested in June 2018 based on Cumulative Underlying operating profit and relative TSR performance compared to the FTSE 250 (excluding
investment trusts) to 31 March 2018.

2 51.2% of the PSP award granted in 2016 will vest in June 2019 based on Cumulative Underlying operating profit and relative TSR performance compared to the FTSE 250 (excluding

investment trusts) to 31 March 2019.

3 2017 PSP awards are subject 75% to Cumulative Underlying operating profit and 25% to relative TSR performance compared to the FTSE 250 (excluding investment trusts) over the

three-year period to 31 March 2020. For the Cumulative Underlying operating profit portion, 25% will vest if Cumulative Underlying operating profit is £690m or greater. 100% will vest
if Cumulative Underlying operating profit is £750m or above. For performance between these points, vesting will be calculated on a pro-rata basis. For the Relative TSR portion, 25%
will vest if Auto Trader’s TSR performance is equal to the FTSE 250 Index (excluding investment trusts). 100% will vest if Auto Trader’s TSR performance exceeds the FTSE 250 Index
(excluding investment trusts) by 25% or more. For performance between these points, vesting will be calculated on a pro-rata basis.

4 Performance measures for the 2018 PSP awards are set out on page 67.
5 Dividend equivalents have been added on vesting.

Payments to former Directors (Audited)
There were no payments made to former Directors during the year.

Retirement arrangements for Trevor Mather
Trevor Mather will step down as CEO and from the Board on 31 March 2020. Trevor will continue to receive his normal base salary, pension and
benefits until his retirement on 31 March 2020. He will not receive any payment in lieu of notice under his contract as he will work substantially
all of his notice.

On the recommendation of the Remuneration Committee, the Board has determined that Trevor will be treated as a “good leaver” in respect of
the Annual Bonus, the Company’s Performance Share Plan (PSP) and the Deferred Annual Bonus Plan (DABP).

In accordance with the scheme rules, outstanding PSP awards will vest to the extent that targets are met. They will be pro-rated for time
elapsed since grant and will vest on the normal vesting dates. By mutual agreement, Trevor has asked to waive any entitlement to receive
further awards under the PSP and will not therefore receive a PSP award in June 2019. Outstanding DABP awards will vest in full on the normal
vesting dates.

Trevor will eligible to receive an Annual Bonus in relation to the financial year ending on 31 March 2020, payable to the extent that targets set out
in the bonus plan are met and paid on the date when paid to other members of the bonus scheme. He will not be required to convert part of the
2020 bonus into shares in the Company, as specified in the scheme. However, Trevor has voluntarily undertaken to retain shares equivalent to
200% of his salary, for a minimum of two years post leaving, in line with the newly adopted post employment shareholding guidelines.

72 | Auto Trader Group plc Annual Report and Financial Statements 2019

Performance graph and CEO remuneration table
The graph below illustrates the Company’s TSR performance relative to the FTSE 250 Index (excluding investment trusts) of which the
Company is a constituent, from the start of conditional share dealing on 18 March 2015. The graph shows the performance of a hypothetical
£100 invested and its performance over that period.

Total Shareholder Return

)
£
(
n
r
u
t
e
R
r
e
d
o
h
e
r
a
h
S

)

d
e
s
a
b
e
r
(

a
t
o
T

250

200

150

100

Wed 18 March
2015

Tues 31 March
2015

Thurs 31 March
2016

Fri 31 March
2017

Sat 31 March
2018

Sun 31 March
2019

Auto Trader Group plc

FTSE 250 (excluding investment trusts)

Source: Datastream (Thomson Reuters).

CEO remuneration
The table below sets out the CEO’s single figure of total remuneration together with the percentage of maximum annual bonus awarded over
the same period.

CEO total remuneration (£’000)

Annual bonus (% of maximum)

PSP vesting (% of maximum)

2019

1,910

76.75

51.2%

2018

2,929

50.3%

100%

2017

980

51.8%

N/A 3

2016

1,339

100%

N/A3

2015 1

N/A2

N/A3

1 From the date of Admission in March 2015.
2 Private company when bonus plan implemented in 2015.
3 No awards were eligible to vest in respect of long-term performance ending in 2015, 2016 or 2017.

Percentage increase in the remuneration of the CEO
The table below shows the average increase in each component between the CEO and the average employee in the Company from 2018 to 2019.

Component

Salary

Benefits 1

Bonus 2

CEO

+2%

-7%

56%

Change in remuneration levels
Average employee

3.3%

-6%

n/a%

1 The average value of benefits has decreased due to a reduction in the cost of private medical insurance.
2 There are no employees participating in the Annual Bonus scheme other than the CEO and COO & CFO as all other employee variable pay schemes are now settled in shares.

CEO pay ratio
In line with best practice we have also disclosed our CEO pay ratio a year in advance of being required to under the regulations. The table below
shows the ratio between the CEO’s total single figure calculated as set out above on page 69 and the median, lower and upper quartile total
remuneration for our UK based workforce. Our median all employee to CEO pay ratio is 42:1 which the Committee considers is within a
reasonable range taking into account the structure and nature of our business.

A significant proportion of the CEO’s pay is in the form of variable pay through the annual bonus and the PSP. CEO pay will therefore vary year on
year based on Company and share price performance. The CEO to all-employee pay ratio will therefore also fluctuate taking this into account.

Year

2019

Method

25th percentile pay ratio

Median pay ratio

75th percentile pay ratio

59.4:1

42.0:1

30.3:1

Notes:
– Method A has been used to determine the relevant employees on the basis that this approach is in line with the approach used to calculate the single total figure for the CEO and

therefore is the most robust.

– The salary for the P25 employee was £30,000 and total remuneration was £32,180. The salary for the P50 employee was £38,340 and total remuneration was £45,440. The salary for

the P75 employee was £53,570 and total remuneration was £62,940.

– The P25, P50 and P75 employees were determined as at 31 March 2019 based on full-time equivalent remuneration. Only employees who were employed as at the end of the financial year

were included; salaries were annualised, taking account of mid-year increases. The total remuneration includes salary, allowances, taxable benefits, pension contributions and
share-based payments. Taxable benefits are based on the previous tax year (2018) with estimates used for those employees who joined part way through the year. Options under the SAYE
scheme are included as at the date of grant, based on the difference between the market value at grant date and the exercise price. Options under discretionary plans (PSP and Single
Incentive Plan) are based on the date that the performance conditions were achieved, and valued using the three-month average share price to 31 March 2019 of 467.88p.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 73

Strategic reportGovernanceFinancial statements

Directors’ remuneration report continued

Relative importance of the spend on pay
The following table shows the Group’s actual spend on pay for all employees compared to distributions to shareholders. The average number
of employees has also been included for context. Revenue and Operating profit have also been disclosed as these are two key measures of
Group performance.

Employee costs (see note 7 to the consolidated financial statements)

Average number of employees (see note 6 to the consolidated financial statements)

Revenue (see Consolidated income statement)

Operating profit

Dividends paid and proposed and share buybacks (see notes 26 and 27 to the
consolidated financial statements)

2019
£m

56.0

802

355.1

243.7

156.4

Restated 2018
£m

% change

54.5

822

330.1

221.3

152.81

10%

1 2018 comparatives have been restated to reflect the adoption of IFRS 9, IFRS 15 and IFRS 16, and to include share buybacks.

Funding of equity awards
Share awards may be funded by a combination of newly issued shares, treasury shares and shares purchased in the market. Where shares are
newly issued or from treasury, the Company complies with Investment Association dilution guidelines on their issue. The current dilution
usage of all share plans is c. 0.74% of shares in issue.

Where shares are purchased in the market, these will be held by a trust, in which case the voting rights relating to the shares are exercisable by
the Trustees in accordance with their fiduciary duties. At 31 March 2019 the Trust held 565,555 shares in respect of the Share Incentive Plan.

External directorships
Auto Trader recognises that its Executive Directors may be invited to become non-executive directors of other companies. Such
non-executive duties can broaden a Director’s experience and knowledge which can benefit Auto Trader. The Company Chairman would
approve any such directorships in advance to ensure that there was no conflict of interest. Trevor Mather was appointed as a director on the
board of Matches Fashion Limited, a fashion retail business, on 9 September 2018. From the period from appointment until 31 March 2019, fees
of £35k were payable to Trevor for this appointment, and which he was entitled to retain. The Board approved the appointment and confirmed
that it was satisfied that there was no conflict of interest arising.

Membership of the Committee
Jill Easterbrook is the Committee Chairman, and its other members are David Keens and Jeni Mundy. Refer to pages 47 and 64 for further
details of the membership of the Committee, the Terms of Reference, the meetings held and activities during the year.

External advisors
During the year the Committee received advice from Deloitte who were appointed in October 2017 following a competitive tender process.
Deloitte are founding members of the Remuneration Consultants Code of Conduct and adhere to this Code in their dealings with the
Committee. The Committee is satisfied that the advice provided by Deloitte is objective and independent. The Committee is comfortable
that the Deloitte engagement partner and team that provide remuneration advice to the Committee do not have connections with the
Company that may impair their independence. The Committee reviewed the potential for conflicts of interest and judged that there were
appropriate safeguards against such conflicts.

Fees are charged on a time and materials basis. During the year Deloitte was paid £23,200 for advice provided to the Committee. Deloitte
provided additional services to the Company in relation to internal audit and tax services.

Statement of shareholder voting
Shareholder voting in relation to recent AGM resolutions is as follows:

2018 AGM: Remuneration Policy (binding)

2018 AGM: Annual Report on Remuneration (advisory)

746,257,288

758,354,603

94.93%

96.47%

39,870,834

27,773,520

5.07%

3.53%

Votes
for

% of votes cast
for

Votes
against

% of votes cast
against

Abstentions

152,057

Approval
This Directors’ remuneration report has been approved by the Board of Directors.

Signed on behalf of the Board of Directors.

Jill Easterbrook
Chairman of the Remuneration Committee
6 June 2019

74 | Auto Trader Group plc Annual Report and Financial Statements 2019

Directors‘ report

The Directors have pleasure in
submitting their Report and the
audited financial statements
of Auto Trader Group plc
(the ‘Company’) and its subsidiaries
(together the ‘Group’) for the
financial year to 31 March 2019.

Statutory information
Information required to be part of the Directors’ report can be found
elsewhere in this document, as indicated in the table below, and is
incorporated into this Report by reference:

Section of Annual Report

Page reference

Employee involvement

Employees with disabilities

Strategic report; Corporate social
responsibility (page 36)

Strategic report; Corporate social
responsibility (page 38)

Financial instruments

Note 2 to the consolidated financial statements

Future developments
of the business

Greenhouse gas emissions

Non-financial reporting

Strategic report (pages 15 to 17)

Strategic report; Corporate social responsibility
(page 41)

Strategic report: Corporate social responsibility
(pages 35 to 45)

Information required by LR 9.8
Information required to be included in the Annual Report by LR 9.8 can
be found in this document as indicated in the table below:

Section of Annual Report

Page reference

Allotment of shares during
the year

Note 25 to the consolidated financial
statements

Directors’ interests

Remuneration report (page 71)

Significant shareholders

Directors’ report (page 77)

Going concern

Principal risks and uncertainties (page 34)

Long-term incentive
schemes

Powers for the Company
to buy back its shares

Directors’ remuneration report (pages 66 to 74)

Directors’ report (page 76)

Significant contracts

Directors’ report (page 76)

Significant related party
agreements

Directors’ report (page 77)

Statement of corporate
governance

Corporate governance statement
(pages 50 to 74)

Management report
This Directors’ report, on pages 75 to 78, together with the Strategic
report on pages 1 to 45, form the Management Report for the
purposes of DTR 4.1.5R.

Strategic report
The Strategic report, which can be found on pages 1 to 45, sets out the
Group’s strategy, objectives and business model; the development,
performance and position of the Group’s business (including
financial and operating key performance indicators); a description of
the principal risks and uncertainties; and the main trends and factors
likely to affect the future development, performance and position of
the Group’s business.

UK Corporate Governance Code
The Company’s statement on corporate governance can be found in
the Corporate governance statement, the Report of the Nomination
Committee, the Report of the Audit Committee and the Directors’
remuneration report on pages 50 to 74, all of which form part of this
Directors’ report and are incorporated into it by reference.

2019 Annual General Meeting
The Annual General Meeting (‘AGM’) will be held at 10.00 am on
19 September 2019 at the Company’s registered office at 4th Floor,
1 Tony Wilson Place, Manchester, M15 4FN. The Notice of Meeting sets
out the resolutions to be proposed and specifies the deadlines for
exercising voting rights and appointing a proxy or proxies to vote in
relation to resolutions to be passed at the AGM. All proxy votes will
be counted and the numbers for, against or withheld in relation to
each resolution will be announced at the AGM and published on the
Company’s website.

Board of Directors
The following individuals were Directors of the Company for the
whole of the financial year ending 31 March 2019, and to the date of
approving this report unless otherwise stated:

— Ed Williams

— Trevor Mather

— Nathan Coe

— David Keens

— Jill Easterbrook

— Jeni Mundy

— Catherine Faiers (appointed 1 May 2019)

All Directors will stand for election or re-election at the 2019 AGM in
line with the recommendations of the Code.

Appointment and replacement of Directors
At each AGM each Director then in office shall retire from office with
effect from the conclusion of the meeting. When a Director retires at
an AGM in accordance with the Articles of Association of the
Company, the Company may, by ordinary resolution at the meeting,
fill the office being vacated by re-electing the retiring Director. In the
absence of such a resolution, the retiring Director shall nevertheless
be deemed to have been re-elected, except in the cases identified by
the Articles.

Results and dividends
The Group’s and Company’s audited financial statements for the year
are set out on pages 83 to 136.

The Company declared an interim dividend on 8 November 2018 of
2.1 pence per share which was paid on 25 January 2019.

The Directors recommend payment of a final dividend of 4.6 pence
per share (2018: 4.0 pence per share) to be paid on 27 September 2019
to shareholders on the register of members at 30 August 2019, subject
to approval at the 2019 AGM.

Amendment of the Articles
The Company’s Articles of Association may only be amended
by a special resolution at a general meeting of shareholders.
No amendments are proposed to be made to the existing Articles
of Association at the forthcoming AGM.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 75

Strategic reportGovernanceFinancial statementsVoting rights
Each ordinary share entitles the holder to vote at general meetings of
the Company. A resolution put to the vote of the meeting shall be
decided on a show of hands unless a poll is demanded. On a show of
hands, every member who is present in person or by proxy at a
general meeting of the Company shall have one vote. On a poll, every
member who is present in person or by proxy shall have one vote for
every share of which they are a holder. The Articles provide a deadline
for submission of proxy forms of not less than 48 hours before the
time appointed for the holding of the meeting or adjourned meeting.
No member shall be entitled to vote at any general meeting either in
person or by proxy, in respect of any share held by him, unless all
amounts presently payable by him in respect of that share have been
paid. Save as noted, there are no restrictions on voting rights nor any
agreement that may result in such restrictions.

Restrictions on transfer of securities
The Articles do not contain any restrictions on the transfer of ordinary
shares in the Company other than the usual restrictions applicable
where any amount is unpaid on a share. Certain restrictions are also
imposed by laws and regulations (such as insider trading and
marketing requirements relating to close periods) and requirements
of the Company’s share dealing code whereby Directors and certain
employees of the Company require approval to deal in the
Company’s securities.

Change of control
Save in respect of a provision of the Company’s share schemes which
may cause options and awards granted to employees under such
schemes to vest on takeover, there are no agreements between the
Company and its Directors or employees providing for compensation
for loss of office or employment (whether through resignation,
purported redundancy or otherwise) because of a takeover bid.

Significant contracts
The only significant agreement to which the Company is a party that
takes effect, alters or terminates upon a change of control of the
Company following a takeover bid, and the effect thereof, is the
Revolving Credit Facility agreement, which contains customary
prepayment, cancellation and default provisions including, if
required by a lender, mandatory prepayment of all utilisations
provided by that lender upon the sale of all or substantially all of the
business and assets of the Group or a change of control.

Directors‘ report continued

Authority to allot shares
Under the 2006 Act, the Directors may only allot shares if authorised
to do so by shareholders in a general meeting. The authority
conferred on the Directors at the 2018 AGM under section 551 of the
2006 Act expires on the date of the forthcoming AGM, and ordinary
resolution 13 seeks a new authority to allow the Directors to allot
ordinary shares up to a maximum nominal amount of £6,195,082
(619,508,165 shares, representing approximately two thirds of the
Company’s existing share capital at 6 June 2019), of which 309,707,622
shares (representing approximately one third of the Company’s
issued ordinary share capital) can only be allotted pursuant to a rights
issue. The Directors have no present intention of exercising this
authority which will expire at the conclusion of the AGM in 2019 or
19 December 2019 if earlier.

Authority to purchase own shares
The Company’s share buyback programme continued during the year.
By resolutions passed at the 2018 AGM the Company was authorised
to make market purchases of up to 94,802,631 of its ordinary shares,
subject to minimum and maximum price restrictions. A total of
20,229,881 ordinary shares of £0.01 each were purchased in the year to
31 March 2019, being 2.15% of the shares in issue at the time the
authority was granted. The average price paid per share was 461.48p
with a total consideration paid (inclusive of all costs) of £94.0 million.
1,266,000 shares were purchased for treasury, and the remaining
18,963,881 shares were purchased to be immediately cancelled. The
Directors will seek authority from shareholders at the forthcoming
AGM for the Company to purchase, in the market, up to a maximum of
10% of its own ordinary shares (excluding shares held in treasury)
either to be cancelled or retained as treasury shares.

Share capital and control
The Company’s issued share capital comprises ordinary shares of
£0.01 each which are listed on the London Stock Exchange (LSE:
AUTO.L). The ISIN of the shares is GB00BVYVFW23.

The issued share capital of the Company as at 31 March 2019 and
6 June 2019 comprises 933,197,563 of £0.01 each. 3,996,041 shares were
held in treasury at 31 March 2019. Further information regarding the
Company’s issued share capital and details of the movements in
issued share capital during the year are provided in note 25 to the
Group’s financial statements. All the information detailed in note 25
forms part of this Directors’ report and is incorporated into it by
reference.

Details of employee share schemes are provided in note 29 to the
Group financial statements.

Rights attaching to shares
All shares have the same rights (including voting and dividend rights
and rights on a return of capital) and restrictions as set out in the
Articles, described below. Except in relation to dividends which have
been declared and rights on a liquidation of the Company, the
shareholders have no rights to share in the profits of the Company.
The Company’s shares are not redeemable. However, following any
grant of authority from shareholders, the Company may purchase or
contract to purchase any of the shares on or off market, subject to
the Companies Act 2006 and the requirements of the Listing Rules.

No shareholder holds shares in the Company which carry special
rights with regard to control of the Company. There are no shares
relating to an employee share scheme which have rights with regard
to control of the Company that are not exercisable directly and solely
by the employees, other than in the case of the Auto Trader Group
Share Incentive Plan, where share interests of a participant in such
scheme can be exercised by the personal representatives of a
deceased participant in accordance with the Scheme rules.

76 | Auto Trader Group plc Annual Report and Financial Statements 2019

Interests in voting rights
At the year end the Company had been notified, in accordance with Chapter 5 of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, of the following significant interests in the issued ordinary share capital of the Company:

Shareholder

BlackRock Inc.

Kayne Anderson Rudnick Investment Management LLC

Baillie Gifford & Co.

At 31 March 2019

At 6 June 2019

Number of ordinary
shares/voting rights
notified

Percentage of voting
rights over ordinary
shares of £0.01 each

Number of ordinary
shares/voting rights
notified

Percentage of voting
rights over ordinary
shares of £0.01 each

93,700,025

76,198,852

47,482,549

10.01%

8.03%

5.01%

93,700,025

76,198,852

47,482,549

10.01%

8.03%

5.01%

Transactions with related parties
As described in note 28, during the year, the Group transacted with
Burns Sheehan Limited, a third party in which a Director holds a
shareholding. This company is deemed to be a related party. Costs
incurred were in respect of recruitment consultancy services which
amounted to £1,250 (2018: £35k). There were no amounts outstanding
at the year end. All transactions were completed at an arm’s
length basis.

Post balance sheet events
On 5 June 2019, the Group extended the term for £316.5m of the
Syndicated revolving credit facility for one year. The facility will now
terminate in two tranches: £316.5m will mature in June 2024; and
£83.5m will mature at the original termination date of June 2023.
There is no change to the interest rate payable and there is no
requirement to settle all, or part, of the debt earlier than the
termination dates stated.

Compensation paid to Directors and Key Management is as disclosed
in note 8 to the Group financial statements.

Research and development
Innovation, specifically in software, is a critical element of
Auto Trader’s strategy and therefore of the future success of the
Group. Accordingly, the majority of the Group’s research and
development expenditure is predominantly related to this area. Since
30 September 2013, the Group has changed its approach to
technology development such that the Group now develops its core
infrastructure through small-scale, maintenance-like incremental
improvements, and as a result the amount of capitalised
development costs has decreased as less expenditure meets the
requirements of IAS 38 Intangible assets.

Indemnities and insurance
The Company maintains appropriate insurance to cover Directors’
and officers’ liability for itself and its subsidiaries and such insurance
was in force for the whole of the financial year ending 31 March 2019.
The Company also indemnifies the Directors under a qualifying
indemnity for the purposes of section 236 of the Companies Act
2006: in the case of the Non-Executive Directors in their respective
letters of appointment and in the case of the Executive Directors in a
separate deed of indemnity. Such indemnities contain provisions that
are permitted by the Director Liability provisions of the Companies
Act and the Company’s Articles.

Environmental
Information on the Group’s greenhouse gas emissions is set out in the
Corporate social responsibility section on page 41 and forms part of
this Report by reference.

Political donations
There were no political donations made during the year or the
previous year.

External branches
The Group had no active registered external branches during the
reporting period.

Financial instruments
Details of the financial risk management objectives and policies of
the Group, including hedging policies and exposure of the entity to
price risk, credit risk, liquidity risk and cash flow risk, are given in note
31 to the consolidated financial statements.

Disclosure of information to auditors
Each of the Directors has confirmed that:

— so far as the Director is aware, there is no relevant audit information

of which the Company’s auditors are unaware; and

— the Director has taken all the steps that he/she ought to have taken

as a Director to make him/herself aware of any relevant audit
information and to establish that the Company’s auditor is aware of
that information.

This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.

Statement of Directors’ responsibilities in respect of the Annual
Report and Financial Statements
The Directors are responsible for preparing the Annual Report and
the Group and parent company financial statements in accordance
with applicable law and regulations.

Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that law
they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union (‘IFRSs as adopted by the EU’) and
applicable law, and have elected to prepare the parent company
financial statements in accordance with UK Accounting Standards,
including FRS 102 ‘The Financial Reporting Standard Applicable in the
UK and Republic of Ireland’.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 77

Strategic reportGovernanceFinancial statementsResponsibility statement of the Directors in respect of the
annual financial report
We confirm, to the best of our knowledge:

— the financial statements, prepared in accordance with the

applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken
as a whole; and

— the Strategic report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.

We consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.

Approval of Annual Report
The Strategic report and the Corporate governance report were
approved by the Board on 6 June 2019.

Approved by the Board and signed on its behalf.

Claire Baty
Company Secretary
6 June 2019

Directors‘ report continued

Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent company and of their
profit or loss for that period. In preparing each of the Group and
parent company financial statements, the Directors are required to:

— select suitable accounting policies and then apply them

consistently;

— make judgements and accounting estimates that are reasonable,

relevant, reliable and prudent;

— for the Group financial statements, state whether they have been

prepared in accordance with IFRSs as adopted by the EU;

— for the parent company financial statements, state whether

applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the parent
Company financial statements;

— assess the Group and parent company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going
concern; and

— use the going concern basis of accounting unless they either intend

to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.

78 | Auto Trader Group plc Annual Report and Financial Statements 2019

Independent auditors’ report to the members
of Auto Trader Group plc only

1. Our opinion is unmodified
We have audited the financial statements of Auto Trader Group plc
for the year ended 31 March 2019 which comprise the Group
Consolidated Balance Sheet and Parent Company Balance Sheet, the
Group Consolidated Income Statement and Group Statement of
Comprehensive Income, the Group Consolidated Statement of Cash
Flows, the Group and Parent Company’s Statement of Changes in
Equity, and the related notes, including the accounting policies in
note 1.

In our opinion:
— the financial statements give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as at 31 March 2019 and
of the Group’s profit for the year then ended;

Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
are described below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion. Our
audit opinion is consistent with our report to the Audit Committee.

We were first appointed as auditor by the shareholders on
22 September 2016. The period of total uninterrupted engagement is
for the three financial years ended 31 March 2019. We have fulfilled
our ethical responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements including the FRC
Ethical Standard as applied to listed public interest entities. No
non-audit services prohibited by that standard were provided.

— the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;

— the parent Company financial statements have been properly

prepared in accordance with UK accounting standards, including
FRS 102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland; and

— the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.

Overview

Materiality:
Group financial
statements as a whole

£9.6m (2018: £8.0m)
4.0% (2018: 3.7%) of Group profit before tax

Coverage

100% (2018: 100%) of Group profit before tax

Risks of material misstatement

vs 2018

Recurring risks

Revenue recognition

Recoverability of Parent Company’s
investment in subsidiary

2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
We summarise below the key audit matters, in arriving at our audit opinion above, together with our key audit procedures to address those
matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in
forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.

The risk

Our response

Revenue recognition
(£355.1 million;
2018: £330.1 million)
Refer to page 60 (Audit
Committee Report), page
90 (accounting policy) and
page 102 (financial
disclosures)

Data processing
Revenue primarily consists of
fees for advertising on the
Group’s website. There are a
large volume of transactions, a
wide variety of packages
available and retailers have the
ability to bespoke the
combination of products they
receive over time. On the basis
that the packages available
within the SingleView revenue
stream are updated manually by
Auto Trader personnel over time,
we consider a significant risk
exists in relation to revenue
recognition both in respect of
fraud and error.

Our procedures included:
– Data comparisons: Using computer assisted audit techniques to match sales

information from the billing system to the accounting records;

– Tests of details: Using computer assisted audit techniques to match entire

population of billings to cash received during the year and trade debtors outstanding
at the year end. Selecting a sample of trade debtors and assessing their recoverability
with reference to post year end cash receipts;

– Expectation vs outcome: For customers with bespoke contracts, obtaining these

contracts and forming an expectation of the revenue to be recognised in the period,
comparing this to the actual;

– Tests of details: Selecting a sample of transactions recorded within a month before
and after the period end and assessing whether revenue has been recognised in the
correct period with reference to supporting invoices and cash receipts;

– Tests of details: Assessing the appropriateness of accrued income at the year end

with reference to post year end billings and cash receipts. Assessing the
appropriateness of deferred income at the year end with reference to the prior year
and our knowledge of the billing pattern of each revenue stream;

– Tests of details: Performing a review of credit notes raised in the year and post year

end to assess the adequacy of the credit note provision and that revenue is not
overstated; and

– Analytic sampling: Obtaining all journals posted to revenue and, using computer

assisted audit techniques, analysing these to identify those with unusual attributes or
those with corresponding postings to unexpected accounts. Agreeing any journals
identified back to relevant supporting documentation.

Our results:
– We found the amount of revenue recognised to be acceptable (2018: acceptable).

Auto Trader Group plc Annual Report and Financial Statements 2019 | 79

Strategic reportGovernanceFinancial statements
Independent auditors’ report to the members
of Auto Trader Group plc only continued

The risk

Our response

Recoverability of parent
company’s investment
in subsidiary
(£1,216.0 million ; 2018:
£1,212.9 million)
Refer to page 60 (Audit
Committee Report), page
132 (accounting policy) and
page 135 (financial
disclosures).

Low risk, high value:
The carrying amount of the
parent company’s investment in
subsidiary represents 95% (2018:
73%) of the company’s total
assets. Its recoverability is not at
a high risk of significant
misstatement or subject to
significant judgement. However,
due to its materiality in the
context of the parent company
financial statements, this is
considered to be the area that
had the greatest effect on our
overall parent company audit.

Our procedures included:
– Comparing valuations: comparing the carrying amount of the investment to the
market capitalisation of the Group, as all of the Group’s trading operations are
contained within the subsidiary and its subgroup.

Our results :
– We found the Parent Company’s assessment of the recoverability of the investment

in subsidiary to be acceptable (2018 result: acceptable).

3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £9.6m (2018: £8.0m), determined with reference to a benchmark of Group
profit before tax of £242.2m (2018: £210.7m), of which it represents 4.0% (2018: 3.8%).

The materiality of the Parent Company financial statements as a whole was set at £5.0m (2018: £5.0m), determined with reference to a
benchmark of Parent Company net assets, of which it represents 0.4% (2018: 0.4%).

We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.5m (2018: £0.4m), in addition to
other identified misstatements that warranted reporting on qualitative grounds.

Of the Group’s 4 (2018: 4) reporting components, we subjected 4 (2018: 4) to full scope audits for Group purposes, all of which were performed
by the Group audit team.

The components within the scope of our work accounted for the percentages illustrated below.

Proﬁt before tax
£242.2m (2018: £210.7m)

Group materiality
£9.6m (2018: £8m)

Group revenue
%

Group proﬁt before tax
%

Proﬁt before tax
Group materiality

100%
100%

(2018: 100%)

£9.6m
Whole ﬁnancial statements
materiality (2018: £8m)

£9.1m
Range of materiality at 4
components (£9.1m-£0.2m)
(2018: £7.5m to £0.2m)

£0.5m
Misstatements reported to the
Audit Committee (2018: £0.4m)

Group total assets
%

100%
100%

(2018: 100%)

Full scope for Group audit purposes 2019

Full scope for Group audit purposes 2018

80 | Auto Trader Group plc Annual Report and Financial Statements 2019

4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that
the Company’s and the Group’s financial position means that this is
realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).

Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in this
auditor's report is not a guarantee that the Group and the Company
will continue in operation.

In our evaluation of the Directors’ conclusions, we considered the
inherent risks to the Group’s and Company’s business model, and
analysed how those risks might affect the Group’s and Company’s
financial resources or ability to continue operations over the going
concern period.

We evaluated those risks and concluded that they were not
significant enough to require us to perform additional audit
procedures.

Based on this work, we are required to report to you if:

— we have anything material to add or draw attention to in relation to
the Directors’ statement in note 1 to the financial statements on the
use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group and
Company’s use of that basis for a period of at least 12 months from
the date of approval of the financial statements; or

Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.

Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements
audit, we have nothing material to add or draw attention to in relation
to:
— the Directors’ confirmation within the Viability statement page 34

that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business
model, future performance, solvency and liquidity;

— the Principal Risks disclosures describing these risks and explaining

how they are being managed and mitigated; and

— the Directors’ explanation in the Viability statement of how they

have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.

Under the Listing Rules we are required to review the Viability
statement. We have nothing to report in this respect.

Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.

Corporate governance disclosures
We are required to report to you if:

— the related statement under the Listing Rules set out on page 77 is

— we have identified material inconsistencies between the

knowledge we acquired during our financial statements audit and
the Directors’ statement that they consider that the annual report
and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy; or

— the section of the annual report describing the work of the Audit

Committee does not appropriately address matters
communicated by us to the Audit Committee.

— We are required to report to you if the Corporate Governance

Statement does not properly disclose a departure from the eleven
provisions of the UK Corporate Governance Code specified by the
Listing Rules for our review.

We have nothing to report in these respects.

materially inconsistent with our audit knowledge.

We have nothing to report in these respects, and we did not identify
going concern as a key audit matter.

5. We have nothing to report on the other information
in the Annual Report
The Directors are responsible for the other information presented in
the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion
thereon.

Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the other
information.

Strategic Report and Directors’ Report
Based solely on our work on the other information:
— we have not identified material misstatements in the strategic

report and the directors’ report;

— in our opinion the information given in those reports for the

financial year is consistent with the financial statements; and

— in our opinion those reports have been prepared in accordance

with the Companies Act 2006.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 81

Strategic reportGovernanceFinancial statementsIndependent auditors’ report to the members
of Auto Trader Group plc only continued

6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in
our opinion:

— adequate accounting records have not been kept by the parent

Company, or returns adequate for our audit have not been received
from branches not visited by us; or

— the parent Company financial statements and the part of the

Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or

— certain disclosures of Directors’ remuneration specified by law are

not made; or

— we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 77, the
Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and using
the going concern basis of accounting unless they either intend to
liquidate the Group or the parent Company or to cease operations, or
have no realistic alternative but to do so.

Auditors’ responsibilities
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and
to issue our opinion in an auditors’ report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detect
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and
to issue our opinion in an auditors’ report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from
our general commercial and sector experience , through discussion
with the Directors (as required by auditing standards), and discussed
with the Directors the policies and procedures regarding compliance
with laws and regulations. We communicated identified laws and
regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit.

The potential effect of these laws and regulations on the financial
statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation, and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.

Whilst the Group is subject to many other laws and regulations, we did
not identify any others where the consequences of non-compliance
alone could have a material effect on amounts or disclosures in the
financial statements.

Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements in
the financial statements, even though we have properly planned and
performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and
regulations (irregularities) is from the events and transactions
reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of
non-detection of irregularities, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of
internal controls. We are not responsible for preventing
non-compliance and cannot be expected to detect non-compliance
with all laws and regulations.

8. The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members,
as a body, for our audit work, for this report, or for the opinions we
have formed.

Mick Davies (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 St Peter’s Square
Manchester
M2 3AE
6 June 2019

82 | Auto Trader Group plc Annual Report and Financial Statements 2019

Consolidated income statement
For the year ended 31 March 2019

Revenue

Administrative expenses

Share of profit from joint ventures

Operating profit

Finance costs

Profit on the sale of subsidiary

Profit before taxation

Taxation

Profit for the year attributable to equity holders of the parent

Basic earnings per share

From profit for the year (pence per share)

Diluted earnings per share

From profit for the year (pence per share)

Note

2019
£m

355.1

(112.3)

0.9

243.7

(10.2)

8.7

242.2

(44.5)

197.7

(Restated)1
2018
£m

330.1

(108.8)

–

221.3

(10.6)

–

210.7

(39.6)

171.1

21.00

17.74

20.94

17.68

1 The Group has adopted IFRS 9 ‘Financial Instruments’, IFRS 15 ‘Revenue from Contracts with Customers’, and IFRS 16 ‘Leases’ from 1 April 2018. The year ended 31
March 2018 has been restated for IFRS 16 which was implemented using the fully retrospective method. For further information on the impact of the change in
accounting policies, see note 2 of these consolidated financial statements.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 83

Strategic reportGovernanceFinancial statementsConsolidated statement of comprehensive income
For the year ended 31 March 2019

Profit for the year

Other comprehensive income

Items that may be subsequently reclassified to profit or loss

Exchange differences on translation of foreign operations

Items that will not be reclassified to profit or loss

Remeasurements of post-employment benefit obligations

Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable to equity holders of the parent

Note

2019
£m

197.7

(Restated)1
2018
£m

171.1

(0.1)

0.2

0.1

197.8

–

0.2

171.3

84 | Auto Trader Group plc Annual Report and Financial Statements 2019

Consolidated balance sheet
At 31 March 2019

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Deferred taxation assets

Net investments in joint ventures

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

Equity and liabilities

Equity attributable to equity holders of the parent

Share capital

Retained earnings

Capital reorganisation reserve

Own shares held

Capital redemption reserve

Other reserves

Total equity

Liabilities

Non-current liabilities

Borrowings

Deferred taxation liabilities

Retirement benefit obligations

Provisions for other liabilities and charges

Lease liabilities

Current liabilities

Trade and other payables

Current income tax liabilities

Lease liabilities

Provisions for other liabilities and charges

Total liabilities

Total equity and liabilities

Note

2019
£m

317.5

16.7

6.2

49.0

389.4

56.1

5.9

62.0

451.4

9.3

1,095.8

(1,060.8)

(16.5)

0.7

30.5

59.0

310.3

0.5

–

1.0

14.3

326.1

41.8

22.4

1.8

0.3

66.3

392.4

451.4

(Restated)1
2018
£m

329.8

19.7

5.3

–

354.8

54.9

4.3

59.2

414.0

9.5

1,042.7

(1,060.8)

(16.9)

0.5

30.6

5.6

340.8

0.7

–

16.0

357.5

28.5

19.9

2.2

0.3

50.9

408.4

414.0

The financial statements were approved by the Board of Directors on 6 June 2019 and authorised for issue.

Nathan Coe
Chief Financial Officer and Chief Executive Officer-designate
Auto Trader Group plc

Registered number 09439967

Auto Trader Group plc Annual Report and Financial Statements 2019 | 85

Strategic reportGovernanceFinancial statements
Consolidated statement of changes in equity
For the year ended 31 March 2019

Share
capital
£m

Retained
earnings
£m

Own shares
held
£m

Note

Capital
reorganisation
reserve
£m

Capital
redemption
reserve
£m

Other
reserves
£m

Balance at March 2017 as previously
reported

Impact in change of accounting policy

Restated balance at 31 March 2017

Profit for the year (restated)

Other comprehensive income:

Currency translation differences

Total comprehensive income, net of tax

Transactions with owners

Employee share schemes – value of
employee services

Deferred tax on share-based payments

Cancellation of shares

Dividends paid

Total transactions with owners,
recognised directly in equity

Balance at March 2018 (restated)1
Profit for the year

Other comprehensive income:

Currency translation differences

Remeasurements of post-employment
benefit obligations

Total comprehensive income, net of tax

Transactions with owners

Employee share schemes – value of
employee services

Exercise of employee share schemes

Transfer of shares from ESOT

Tax impact of employee share schemes

Cancellation of shares

Acquisition of treasury shares

Dividends paid

Total transactions with owners,
recognised directly in equity

9.8

–

9.8

–

(0.3)

–

(0.3)

9.5

–

(0.2)

–

1,015.9

1.2

1,017.1

171.1

–

171.1

3.3

0.1

(96.7)

(52.2)

(145.5)

1,042.7

197.7

–

0.2

197.9

4.7

(3.7)

(0.6)

0.6

(88.2)

–

(57.6)

(0.2)

(144.8)

(16.9)

(1,060.8)

–

(16.9)

(1,060.8)

–

(16.9)

(1,060.8)

–

5.6

0.6

–

(5.8)

–

0.4

–

Balance at March 2019

9.3

1,095.8

(16.5)

(1,060.8)

0.2

–

0.2

–

0.3

–

0.3

0.5

–

0.2

–

0.2

0.7

Total
equity
£m

(21.4)

1.2

(20.2)

171.1

0.2

171.3

3.3

0.1

(96.7)

(52.2)

(145.5)

5.6

197.7

(0.1)

0.2

197.8

4.7

1.9

–

0.6

(88.2)

(5.8)

(57.6)

(144.4)

30.4

–

30.4

–

0.2

–

30.6

–

(0.1)

–

(0.1)

–

30.5

59.0

86 | Auto Trader Group plc Annual Report and Financial Statements 2019

Consolidated statement of cash flows
For the year ended 31 March 2019

Cash flows from operating activities

Cash generated from operations

Income taxes paid

Net cash generated from operating activities

Cash flows from investing activities

Purchases of intangible assets – financial systems

Purchases of intangible assets – other

Purchases of property, plant and equipment

Payment for acquisition of shares in joint ventures

Payment for acquisition of subsidiary, net of cash acquired

Net cash used in investing activities

Cash flows from financing activities

Dividends paid to Company’s shareholders

Repayment of Syndicated Term Loan

Drawdown of Syndicated revolving credit facility

Repayment of Syndicated revolving credit facility

Payment of refinancing fees

Payment of interest on borrowings

Payment of lease liabilities

Purchase of own shares for cancellation

Purchase of own shares for treasury

Payment of fees on repurchase of own shares

Proceeds from exercise of share-based incentives

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Note

2019
£m

258.5

(42.2)

216.3

(0.3)

(1.7)

(19.7)

–

(22.0)

(57.6)

(343.0)

447.1

(134.1)

(3.3)

(6.6)

(3.1)

(87.7)

(5.8)

(0.5)

1.9

(192.7)

1.6

4.3

5.9

(Restated)1
2018
£m

228.4

(39.4)

189.0

(0.3)

(2.3)

–

(11.9)

(14.8)

(52.2)

(20.0)

–

(6.7)

(2.3)

(96.2)

–

(0.5)

–

(177.9)

(3.7)

8.0

4.3

Auto Trader Group plc Annual Report and Financial Statements 2019 | 87

Strategic reportGovernanceFinancial statementsNotes to the consolidated financial statements

1. General information

Auto Trader Group plc is a public limited company which is listed on the London Stock Exchange and is domiciled and incorporated in the
United Kingdom under the Companies Act 2006. The consolidated financial statements of the Company as at and for the year ended 31 March
2019 comprise the Company and its interest in subsidiaries (together referred to as the Group).

The consolidated financial statements of the Group as at and for the year ended 31 March 2019 are available upon request to the Company
Secretary from the Company’s registered office at 4th floor, 1 Tony Wilson Place, Manchester, M15 4FN or are available on the corporate
website at plc.autotrader.co.uk.

Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted
by the European Union (‘EU’), IFRS Interpretation Committee (‘IFRS IC’), certain interpretations as adopted by the EU, and the Companies Act
2006 applicable to companies reporting under IFRS.

This is the first set of the Group’s full financial statements where IFRS 9, IFRS 15 and IFRS 16 have been applied. Changes to significant
accounting policies are described in note 2.

The consolidated financial statements have been prepared on the going concern basis and under the historical cost convention.

Basis of consolidation
Subsidiaries are all entities over which the Group has control. Control exists when the Group has existing rights that give it the ability to direct
the relevant activities of an entity and has the ability to affect the returns the Group will receive as a result of its involvement with the entity. In
assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs
directly attributable to the acquisition are expensed. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling
interest. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair
value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the
total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the
net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Intercompany transactions and balances between Group companies are eliminated on consolidation.

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Where significant influence is not demonstrated but the shareholding is between 20% and 50% the Group
would account for its interest as an investment. All investments are initially recognised at cost and the carrying value is reviewed for
impairment.

During the year the Group disposed of a subsidiary (Auto Trader Auto Stock Ltd) as part consideration for the interest in the joint venture
(Dealer Auction (Holdings) Ltd). As part of this transaction, the Group has elected to apply the IAS 28 approach. Under this approach, the gain
or loss is eliminated to the extent of the retained interest in the former subsidiary.

Going concern
Throughout the year ended 31 March 2019 the Group has continued to generate significant cash and has an overall positive net asset position.
The Group had cash balances of £5.9m at 31 March 2019 (2018: £4.3m). During the year £151.1m (2018: £148.4m) of cash was returned to
shareholders via dividends and discretionary share buybacks.

During the year the Group entered into a five-year Syndicated revolving credit facility and repaid the former Syndicated Term Loan. The facility
has total commitments of £400.0m and a termination date of June 2023. At 31 March 2019 the Group had £313.0m of the facility drawn (2018:
£343.0m under Syndicated Term Loan).

The Directors, after making enquiries and on the basis of current financial projections and facilities available, believe that the Group has
adequate financial resources to continue in operation for a period not less than 12 months from the date of this report. For this reason, they
continue to adopt the going concern basis in preparing the financial statements.

88 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued1. General information continued

Accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the use of certain accounting estimates and assumptions. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances.

There are no accounting estimates or judgements which are critical to the reporting of results of operations and financial position.

The accounting estimates believed to require the most difficult, subjective or complex judgements are as follows:

– carrying values of goodwill; and

– share-based payments.

The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated within note 2. The
recoverable amounts of cash-generating units have been determined based on value-in-use calculations, which require the use of estimates
(note 13).

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are
accounted for as equity-settled share-based payment transactions. The fair value of services received in return for share options is
calculated with reference to the fair value of the award on the date of grant. Black-Scholes and Monte Carlo models have been used where
appropriate to calculate the fair value and the Directors have therefore made estimates with regard to the inputs to that model and the period
over which the share award is expected to vest (note 29).

2. Significant accounting policies

Changes in significant accounting policies
(a) New and amended standards adopted by the Group
The following new standards, and amendments to standards, have been adopted by the Group for the first time for the financial year
beginning on 1 April 2018:

– IFRS 9, Financial Instruments;

– IFRS 15, Revenue from Contracts with Customers;

– IFRS 16, Leases;

– Classification and Measurement of Share-Based Payment Transactions – Amendments to IFRS 2;

– Annual Improvements to IFRS Standards 2014-2016 Cycle; and

– Interpretation 22, Foreign Currency Transactions and Advance Consideration.

The impacts of adopting IFRS 9, IFRS 15 and IFRS 16 have been detailed in section (c) below. The adoption of the remaining standards have had
no material effect on the Group’s consolidated financial statements.

(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted
by the Group

Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2019 reporting periods and
have not been early adopted by the Group:

– IFRIC 23, Uncertainty over income tax treatments was issued in June 2017. IFRIC 23 explains how to recognise and measure deferred and
current income tax assets and liabilities where there is uncertainty over a tax treatment. The Group has not adopted IFRIC 23 before its
mandatory date which is for financial years commencing on or after 1 January 2019. This standard is not expected to have a significant effect
on the Group’s financial statements.

IFRS 15 Revenue from contracts with customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18
Revenue and related interpretations. The Group has adopted IFRS 15 using the retrospective method and therefore the effect of applying IFRS
15 to the comparative period has been considered.

Under IAS 18 revenue was recognised either over time where there was continuing service provided by the Group to the customer or at the
point in time when the risks and rewards of ownership transferred to the customer. Under IFRS 15 revenue is recognised when performance
obligations are satisfied. For the Group the transfer of control under IFRS 15 and satisfaction of performance obligations remains consistent
with the transfer of risks and rewards to the customer under IAS 18. Consequently, there were no profit or loss impacting adjustments required
on application of IFRS 15.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 89

Strategic reportGovernanceFinancial statements2. Significant accounting policies continued

Accounting policy for revenue
Revenue is measured based on the consideration specified in a contract with a customer and is recognised when a customer obtains control
of the services. Revenue is stated net of discounts, rebates, refunds and value-added tax.

Revenue principally represents the amounts receivable from customers for advertising on the Group’s platforms but also includes non-
advertising services such as data services. The different types of products and services offered to customers along with the nature and
timing of satisfaction of performance obligations are set out below:

(i) Trade revenue
Trade revenue comprises fees from Retailers, Home Traders and logistics customers for advertising on the Group’s platforms and utilising the
Group’s services.

Retailer revenue

Retailer customers pay a monthly subscription fee to advertise their stock on the Group’s platforms. Control is obtained by customers
across the life of the contract as their stock is continually listed. Contracts for these services are agreed at a retailer or retailer group level
and are ongoing subject to a 30-day notice period.

Retailers have the option to enhance their presence on the platform through additional products, each of which has a distinct performance
obligation. For products that provide enhanced exposure across the life of the product, control is passed to the customer over time.
Revenue is only recognised at a point in time for additional advertising products where the customer does not receive the benefit until they
choose to apply the product. Additional advertising products are principally billed on a monthly subscription basis in line with their core
advertising package, however certain products are billed on an individual charge basis.

The Group also generates revenue from retailers for data and valuation services under a variety of contractual arrangements, with each
service being a separate performance obligation. Control is obtained by customers either across the life of the contract where customers
are licensed to use the Group’s services or at a point in time when a one-off data service is provided.

Contract modifications occur on a regular basis as customers change their stock levels or add or remove additional advertising products
from their contracts. Following a contract modification, the customer is billed in line with the delivery of the remaining performance
obligations. A receivable is recognised only when the Group’s right to consideration is only conditional on the passage of time.

Home Trader revenue

Home Trader customers pay a fee in advance to advertise a vehicle on the Group’s platform for a specified period of time. Revenue is
deferred until the customer obtains control over the services. Control is obtained by customers across the life of the contract as their
vehicle is continually listed. Contracts for these services are entered into for a period of between two and three weeks.

Logistics revenue

Logistics customers pay a monthly subscription fee for access to the Group’s Motor Trade Delivery platform. Control is obtained by
customers across the life of the contract as their access is continuous. Contracts for these services are agreed at a customer level and are
ongoing subject to a 30-day notice period.

Logistics customers have the option to bid on vehicle moves advertised by retailers on the platform. The logistics customer pays a fee if
they are successful in obtaining business from retailers through the Group’s marketplace. Revenue is recognised at the point in time when
the vehicle move has been completed. A receivable is recognised only when the Group’s right to consideration is only conditional on the
passage of time.

(ii) Consumer Services revenue
Consumer Services comprises fees from private sellers for vehicle advertisements on the Group’s websites, and third-party partners who
provide services to consumers relating to their motoring needs, such as insurance and loan finance. Private customers pay a fee in advance to
advertise a vehicle on the Group’s platform for a specified period of time. Control is obtained by customers across the life of the contract as
their stock is continually listed. Contracts for these services are entered into for a period of between two and six weeks. Revenue is generated
from third-party partners who utilise the Group’s platforms to advertise their products under a variety of contractual arrangements, with each
service being a separate performance obligation. Control is obtained by customers at a point in time when the service is provided.

(iii) Manufacturer and Agency revenue
Revenue is generated from manufacturers and their advertising agencies for placing display advertising for their brand or vehicle on the
Group’s websites under a variety of contractual arrangements, with each service being a separate performance obligation. Control is
obtained by customers across the life of the contract as their advertising is displayed on the different platforms. A receivable is recognised
only when the Group’s right to consideration is only conditional on the passage of time.

90 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedIFRS 16 Leases
IFRS 16 Leases was issued in January 2016, and was endorsed by the EU in 2017. IFRS 16 replaces existing leases guidance including IAS 17 Leases,
IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease. The standard is effective for annual periods beginning on or after 1 January 2019. The Group
has elected to early adopt IFRS 16, with a date of initial application of 1 April 2018, using the fully retrospective approach. Comparative
information has therefore been restated.

The adoption of IFRS 16 had a material impact on the Group’s financial statements with the recognition of new right of use assets and lease
liabilities on the Group’s Consolidated balance sheet. The nature of expenses related to those leases has also changed as the straight-line
operating lease expense has been replaced with a depreciation charge for right of use assets and interest expense on lease liabilities.

Accounting policy for leases
At inception of a contract, the Group assesses whether or not a contract is, or contains, a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When a lease is recognised in a
contract the Group recognises a right of use asset and a lease liability at the lease commencement date.

The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease prepayments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right of use asset is
subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right
of use asset or the end of the lease term. The estimated useful lives of right of use assets are determined on the same basis as those of
property, plant and equipment. In addition, the right of use asset is periodically reduced by impairment losses, if any, and adjusted for certain
re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. The weighted
average incremental borrowing rate used to measure the lease liability at initial application was 4.9%.

The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease
payments arising from a change in an index or rate, or if the Group changes its assessment of whether it will exercise a purchase, extension or
termination option.

The Group presents right of use assets in property, plant and equipment and leased liabilities in lease liabilities in the balance sheet.

The Group has applied the recognition exemption of low value leases. For these leases, the lease payments are charged to the income
statement on a straight-line basis over the term of the lease.

Adopting this standard using the retrospective approach resulted in a £0.7m credit to Operating profit for the year ended 31 March 2019 (2018:
£0.7m credit to Operating profit).

IFRS 9 Financial instruments
IFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial
items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 is effective for annual periods beginning on
or after 1 January 2018 and simplifies the classification of financial assets for measurement purposes. Comparative information has not been
restated and continues to be reported under IAS 39.

The Group has applied IFRS 9 from 1 April 2018 with the measurement of financial assets, and in particular the provision for trade receivables,
being considered. There has been no impact on the income statement or balance sheet following the adoption of IFRS 9.

Accounting policy for financial instruments
IFRS 9 eliminates the previous IAS 39 category for financial assets of loans and receivables. Under IFRS 9, on initial recognition, a financial asset
is classified as measured at: amortised cost, fair value through profit or loss or fair value though other comprehensive income.

A financial asset is measured at amortised cost if it meets both of the following conditions: it is held within a business model whose objective
is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.

Under IFRS 9, trade receivables, without a significant financing component, are classified and held at amortised cost, being initially measured
at the transaction price and subsequently measured at amortised cost less any impairment loss.

IFRS 9 introduces an ‘expected credit loss’ model (‘ECL’) for recognising impairment of financial assets held at amortised cost. The Group has
elected to measure loss allowances for trade receivables at an amount equal to lifetime ECLs. Credit losses are measured as the present value
of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the
Group expects to receive).

Auto Trader Group plc Annual Report and Financial Statements 2019 | 91

Strategic reportGovernanceFinancial statements2. Significant accounting policies continued

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Group assesses
whether a financial asset is in default on a case by case basis when it becomes probable that the customer is unlikely to pay its credit
obligations. The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a
financial asset in its entirety or a portion thereof. For all customers, the Group individually makes an assessment with respect to the timing and
amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the
amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the
Group’s procedures for recovery of amounts due.

At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is
‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have
occurred.

The following table provides information about the exposure to credit risk and expected credit losses for trade receivables as at 1 April 2018.

Current

Past due 1–30 days

Past due 31–60 days

Past due 61–90 days

More than 91 days past due

Loss rate %

0.5%

0.8%

2.5%

35.0%

97.1%

Gross

22.0

2.9

0.5

–

3.4

28.8

Loss

0.1

–

3.3

3.4

Net

21.9

2.9

0.5

–

0.1

25.4

The adoption of IFRS 9 has not had a significant effect on the Group’s accounting policies related to financial liabilities.

Accounting policy for financial instruments in 2018
The Group classifies its financial assets in the categories of loans and receivables and at fair value through profit or loss. The classification
depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at
initial recognition. The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group
of financial assets is impaired. A financial asset is impaired only if there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset and that this event has an impact on the estimated future cash flows of the financial
asset that can be reliably estimated. The amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced and the amount of the loss is recognised in the income statement. If, in a subsequent period, the amount of the impairment
loss decreased and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the
previously recognised impairment loss is credited to the income statement.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current
assets. The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the balance sheet.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms of the receivables.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method. Trade payables are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at
least 12 months after the reporting date.

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

Impact of adoption of IFRS 9, 15 and 16 on the financial statements
The following statements summarise the impacts of adopting IFRS 16 on the Group’s Consolidated statement of comprehensive Income,
Consolidated balance sheet and its Consolidated statement of cash flows as at and for the year ended 31 March 2019 and the comparative
year. The adoption of IFRS 9 and IFRS 15 have had no material effect on the Group’s Consolidated statement of comprehensive income,
Consolidated balance sheet and its Consolidated statement of cash flows.

92 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedImpact on the Consolidated statement of comprehensive income

Revenue

Administrative expenses

Share of profit from joint ventures

Operating profit

Finance costs

Profit on disposal of subsidiary, net of tax

Profit before taxation

Taxation

Profit for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable
to equity holders of the parent

2019
£m

2018
£m

Under
previous
policy
£m

IFRS 16
adjustments
£m

2019
Reported
£m

As
previously
reported
£m

IFRS 16
adjustments
£m

2018
Restated
£m

Note

355.1

(113.0)

0.9

243.0

(9.3)

8.7

242.4

(44.5)

197.9

0.1

–

0.7

–

0.7

(0.9)

–

(0.2)

–

(0.2)

–

355.1

(112.3)

0.9

243.7

(10.2)

8.7

242.2

(44.5)

197.7

0.1

330.1

(109.5)

–

220.6

(9.8)

–

210.8

(39.5)

171.3

0.2

–

0.7

–

0.7

(0.8)

–

(0.1)

(0.2)

–

330.1

(108.8)

–

221.3

(10.6)

–

210.7

(39.6)

171.1

0.2

198.0

(0.2)

197.8

171.5

(0.2)

171.3

Basic earnings per share

Diluted earnings per share

21.02

20.96

(0.02)

21.00

20.94

17.76

17.70

(0.02)

17.74

17.68

Auto Trader Group plc Annual Report and Financial Statements 2019 | 93

Strategic reportGovernanceFinancial statements2. Significant accounting policies continued

Impact on the Consolidated balance sheet

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Deferred taxation assets

Net investments in joint ventures

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

Equity and liabilities

Equity attributable to equity holders of the parent

Share capital

Retained earnings

Capital reorganisation reserve

Own shares held

Capital redemption reserve

Other reserves

Total equity

Liabilities

Non-current liabilities

Borrowings

Deferred taxation liabilities

Retirement benefit obligations

Provisions for other liabilities and charges

Lease liabilities

Current liabilities

Trade and other payables

Current income tax liabilities

Lease liabilities

Provisions for other liabilities and charges

Total liabilities

Total equity and liabilities

2019
£m

2018
£m

Under
previous
policy
£m

IFRS 16
adjustments
£m

2019
Reported
£m

As
previously
reported
£m

IFRS 16
adjustments
£m

2018
Restated
£m

Note

317.5

4.8

5.9

49.0

377.2

56.7

5.9

62.6

439.8

9.3

1,094.9

(1,060.8)

(16.5)

0.7

30.5

58.1

310.3

0.5

–

1.1

–

311.9

47.1

22.4

–

0.3

69.8

381.7

439.8

–

11.9

0.3

–

12.2

(0.6)

–

(0.6)

11.6

–

0.9

–

0.9

–

(0.1)

14.3

14.2

(5.3)

–

1.8

–

(3.5)

10.7

11.6

317.5

16.7

6.2

49.0

389.4

56.1

5.9

62.0

451.4

329.8

6.0

5.1

–

340.9

55.5

4.3

59.8

400.7

9.3

1,095.8

9.5

1,041.7

(1,060.8)

(16.5)

0.7

30.5

59.0

310.3

0.5

–

1.0

14.3

326.1

41.8

22.4

1.8

0.3

66.3

(16.9)

0.5

30.6

4.6

340.8

0.7

–

1.1

–

342.6

33.3

19.9

–

0.3

53.5

392.4

451.4

396.1

400.7

–

13.7

0.2

–

13.9

(0.6)

–

(0.6)

13.3

–

1.0

–

1.0

–

(1.1)

16.0

14.9

(4.8)

–

2.2

–

(2.6)

12.3

13.3

329.8

19.7

5.3

–

354.8

54.9

4.3

59.2

414.0

9.5

1,042.7

(1,060.8)

(16.9)

0.5

30.6

5.6

340.8

0.7

–

16.0

357.5

28.5

19.9

2.2

0.3

50.9

408.4

414.0

94 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedImpact on the Consolidated statement of cash flows

Profit for the year

Adjustments for:

Depreciation

Amortisation

Share-based payments charge (excluding associated NI)

Share of profit in joint ventures

Profit on sale of fixed assets

Difference between pension charge and cash contributions

Finance costs

Profit on disposal of subsidiary

Changes in working capital (excluding the effects of
exchange differences on consolidation):

Trade and other receivables

Trade and other payables

Provisions

Cash generated from operations

Tax paid

Net cash generated from operating activities

Cash flows from investing activities

Purchases of intangible assets – financial systems

Purchases of intangible assets – other

Purchases of property, plant and equipment

Payment for acquisition of shares in joint ventures

Payment for acquisition of subsidiary, net of cash acquired

Net cash used in investing activities

Cash flows from financing activities

Dividends paid to Company’s shareholders

Repayment of Syndicated Term Loan

Drawdown of Syndicated revolving credit facility

Repayment of Syndicated revolving credit facility

Payment of refinancing fees

Payment of interest on borrowings

Payment of lease liabilities

Purchase of own shares for cancellation

Purchase of own shares for treasury

Payment of fees on repurchase of own shares

Proceeds from exercise of share-based payments

Net cash used in financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

2019
£m

2018
£m

Note

Under
previous
policy
£m

242.4

IFRS 16
adjustments
£m

2019
Reported
£m

As
previously
reported
£m

IFRS 16
adjustments
£m

2018
Restated
£m

(0.2)

242.2

210.8

(0.1)

210.7

2.9

4.0

4.7

(0.9)

0.1

0.3

9.3

(8.7)

(1.5)

1.8

1.0

255.4

(42.2)

213.2

(0.3)

(1.7)

(19.7)

–

(22.0)

(57.6)

(343.0)

447.1

(134.1)

(3.3)

(6.6)

–

(87.7)

(5.8)

(0.5)

1.9

2.0

–

0.9

–

0.4

–

3.1

–

3.1

–

(3.1)

–

4.9

4.0

4.7

(0.9)

0.1

0.3

10.2

(8.7)

(1.5)

2.2

1.0

258.5

(42.2)

216.3

(0.3)

(1.7)

(19.7)

–

(22.0)

(57.6)

(343.0)

447.1

(134.1)

(3.3)

(6.6)

(3.1)

(87.7)

(5.8)

(0.5)

1.9

3.0

4.1

3.3

–

9.8

–

(3.5)

(1.5)

0.1

226.1

(39.4)

186.7

(0.3)

(2.3)

–

(11.9)

(14.8)

(52.2)

(20.0)

–

(6.7)

–

(96.2)

–

(0.5)

–

1.9

–

0.8

–

0.6

(0.8)

(0.1)

2.3

–

2.3

–

(2.3)

–

4.9

4.1

3.3

–

10.6

–

(2.9)

(2.3)

–

228.4

(39.4)

189.0

(0.3)

(2.3)

–

(11.9)

(14.8)

(52.2)

(20.0)

–

(6.7)

(2.3)

(96.2)

–

(0.5)

–

(189.6)

(3.1)

(192.7)

(175.6)

(2.3)

(177.9)

1.6

4.3

5.9

–

1.6

4.3

5.9

(3.7)

8.0

4.3

–

(3.7)

8.0

4.3

Auto Trader Group plc Annual Report and Financial Statements 2019 | 95

Strategic reportGovernanceFinancial statements2. Significant accounting policies continued

The following accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group
in its consolidated financial statements as at and for the year ended 31 March 2018.

Intangible assets
a) Goodwill
Goodwill represents the excess cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired
subsidiary at the date of acquisition. Goodwill is tested annually for impairment and is carried at cost less accumulated impairment losses.
Impairment losses are charged to the income statement and are not reversed. The gain or loss on the disposal of an entity includes the carrying
amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The
allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

b) Trademarks, trade names, technology, non-compete agreements and customer relationships
Separately acquired trademarks, trade names, technology and customer relationships are recognised at historical cost. They have a finite
useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost
over their estimated useful lives of between one and 15 years. Trademarks, trade names, technology, non-compete agreements and customer
relationships acquired in a business combination are recognised at fair value at the acquisition date and subsequently amortised.

c) Software
Acquired computer software is capitalised at cost, including any costs to bring it into use, and is carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost over the estimated useful life of three to five years.

d) Software and website development costs and financial systems
Development costs that are directly attributable to the design and testing of identifiable and unique software products, websites and
systems controlled by the Group are recognised as intangible assets when the following criteria are met:

– it is technically feasible to complete the software product or website so that it will be available for use;

– management intends to complete the software product or website and use or sell it;

– there is an ability to use or sell the software product or website;

– it can be demonstrated how the software product or website will generate probable future economic benefits;

– adequate technical, financial and other resources to complete the development and to use or sell the software product or website are

available; and

– the expenditure attributable to the software product or website during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product, website or system include employee and contractor costs.
Other development expenditures that do not meet these criteria, as well as ongoing maintenance and costs associated with routine upgrades
and enhancements, are recognised as an expense as incurred. Development costs for software, websites and systems are carried at cost less
accumulated amortisation and are amortised over their useful lives (not exceeding five years) at the point in which they come into use.

Property, plant and equipment
All property, plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost comprises
the purchase price of the asset and expenditure directly attributable to the acquisition of the item.

Freehold land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost less their
estimated residual values over the estimated useful lives as follows:

Land, buildings and leasehold improvements:

– Leasehold land and buildings

– Leasehold improvements

– Plant and equipment

life of lease

3–10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. The carrying value of assets
is reviewed for impairment if events or changes in circumstances suggest that the carrying value may not be recoverable. Assets will be
written down to their recoverable amount if lower than the carrying value, and any impairment is charged to the income statement.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income
statement within administrative expenses.

96 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedImpairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation and depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Non-financial assets other than goodwill that have suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated
to the cash-generating unit (or group of units) and then to reduce the carrying amount of other assets in the unit (or group of units) on a pro-rata
basis.

Interests in joint ventures
Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights
and obligations of each investor. Auto Trader Group plc has assessed the nature of its joint arrangements and determined them to be joint
ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are
initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses, movements in
other comprehensive income and dividends received.

Cash and cash equivalents
Cash and cash equivalents include cash in hand, short-term deposits held on call with banks and bank overdrafts. Bank overdrafts are shown
within borrowings in current liabilities on the balance sheet.

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred, and are subsequently carried at amortised cost, with any
difference between the proceeds (net of transaction costs) and the redemption value being recognised in the income statement over the
period of the borrowings using the effective interest method.

Finance and issue costs associated with the borrowings are charged to the income statement using the effective interest rate method from
the date of issue over the estimated life of the borrowings to which the costs relate.

Borrowings are derecognised when the obligation under the liability is discharged, cancelled or expired. Where an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, such that the difference
in respective carrying amounts together with any costs or fees incurred are recognised in the income statement.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.

Provisions
A provision is recognised when a present legal or constructive obligation exists at the balance sheet date as a result of a past event, it is
probable that an outflow of resources will be required to settle the obligation and a reliable estimate of that obligation can be made. Where
there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of
obligations as a whole. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligation.

Contingent liabilities are not recognised but are disclosed unless an outflow of resources is remote. Contingent assets are not recognised but
are disclosed where an inflow of economic benefits is probable.

Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Operational Leadership Team that makes strategic decisions (note 4).

Auto Trader Group plc Annual Report and Financial Statements 2019 | 97

Strategic reportGovernanceFinancial statements2. Significant accounting policies continued

Employee benefits
The Group operates several pension schemes and all except one are defined contribution schemes. Within the UK all pension schemes set up
prior to 2001 have been closed to new members and only one defined contribution scheme is now open to new employees.

a) Defined contribution scheme
The assets of the defined contribution scheme are held separately from those of the Group in independently administered funds. The costs in
respect of this scheme are charged to the income statement as incurred.

b) Defined benefit scheme
The Group operates one defined benefit pension scheme that is closed to new members. The asset or liability recognised in the balance sheet
in respect of the defined benefit scheme is the present value of the defined benefit obligation at the balance sheet date less the fair value of
the scheme’s assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating those of the related pension liability. Remeasurement gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Any scheme surplus
(to the extent it can be recovered) or deficit is recognised in full on the balance sheet.

c) Share-based payments
Equity-settled awards are valued at the grant date, and the fair value is charged as an expense in the income statement spread over the vesting
period. Fair value of the awards are measured using Black-Scholes and Monte Carlo pricing models. The credit side of the entry is recorded in
equity. Cash-settled awards are revalued at each reporting date with the fair value of the award charged to the profit and loss account over the
vesting period and the credit side of the entry recognised as a liability.

Research and development
Research and development expenditure is charged against profits in the year in which it is incurred, unless it meets the criteria for
capitalisation set out in IAS 38, Intangible Assets.

Operating profit
Operating profit is the profit of the Group (including the Group’s share of profit from joint ventures) before finance income, finance costs,
profit on disposal of subsidiaries which do not meet the definition of a discontinued operation, and taxation.

Finance income and costs
Finance income is earned on bank deposits and finance costs are incurred on bank borrowings. Both are recognised in the income statement
in the period in which they are incurred.

Taxation
The tax expense for the period comprises current and deferred taxation. Tax is recognised in the income statement, except to the extent that
it relates to items recognised in ‘other comprehensive income’ or directly in equity. In this case the tax is also recognised in other
comprehensive income or directly in equity, respectively. Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.

Current taxation is provided at amounts expected to be paid (or recovered) calculated using the rates of tax and laws that have been enacted
or substantively enacted at the balance sheet date in the countries where the Group operates and generates taxable income.

Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities
and their carrying amounts in the consolidated financial statements. Deferred taxation is determined using tax rates and laws that have been
enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the
deferred tax liability is settled.

Deferred taxation assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.

Deferred taxation is provided on temporary differences arising on investments in subsidiaries and interests in joint ventures, except where the
timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse
in the foreseeable future.

Deferred taxation assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred taxation assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity
or different taxable entities where there is an intention to settle the balance on a net basis.

98 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedShare capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction
from the proceeds.

Where the Group purchases its own equity share capital, the consideration paid is deducted from equity attributable to the Group’s
shareholders. Where such shares are subsequently cancelled, the nominal value of the shares repurchased is deducted from share capital and
transferred to a capital redemption reserve. Where the Group purchases its own equity share capital to hold in Treasury, the consideration
paid for the shares is shown as own shares held within equity.

Shares held by the Employee Share Option Trust
The Employee Share Option Trust (‘ESOT’) provides for the issue of shares to Group employees principally under share option schemes.
The Group has control of the ESOT and therefore consolidates the ESOT in the Group financial statements. Accordingly, shares in the Company
held by the ESOT are included in the balance sheet at cost as a deduction from equity.

Share premium
The amount subscribed for the ordinary shares in excess of the nominal value of these new shares is recorded in share premium. Costs that
directly relate to the issue of ordinary shares are deducted from share premium net of corporation tax.

Capital reorganisation reserve
The capital reorganisation reserve arose on consolidation as a result of the share-for-share exchange on 24 March 2015. It represents the
difference between the nominal value of shares issued by Auto Trader Group plc in this transaction and the share capital and reserves of
Auto Trader Holding Limited.

Capital redemption reserve
The capital redemption reserve arises from the purchase and subsequent cancellation of the Group’s own equity share capital.

Other reserves
Other reserves comprise the currency translation reserve on the consolidation of entities whose functional currency is other than sterling.

Earnings per share
The Group presents basic and diluted earnings per share (‘EPS’) for its ordinary shares. Basic EPS is calculated by dividing the profit
attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. For diluted EPS, the
weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares.

Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which
the dividend is approved by the Company’s shareholders in the case of final dividends, or the date at which they are paid in the case of
interim dividends.

Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates. The consolidated financial statements are presented in sterling (£), which is the Group’s
presentation currency, and rounded to the nearest hundred thousand (£0.1m) except when otherwise indicated.

b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the period end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within administrative
expenses.

c) Group companies
The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional
currency other than sterling are translated into sterling as follows:

– assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; and

– income and expenses for each income statement are translated at average exchange rates.

On the disposal of a foreign operation, the cumulative exchange differences that were recorded in equity are recognised in the income
statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 99

Strategic reportGovernanceFinancial statements3. Risk and capital management

Overview
In the course of its business the Group is exposed to market risk, credit risk and liquidity risk from its use of financial instruments. This note
presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and
managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial
statements.

The Group’s overall risk management strategy is to minimise potential adverse effects on the financial performance and net assets of the
Group. These policies are set and reviewed by senior finance management and all significant financing transactions are authorised by the
Board of Directors.

Market risk
i. Foreign exchange risk
The Group has no significant foreign exchange risk as 99% of the Group’s revenue and 97% of costs are sterling-denominated. As the amounts
are not significant, no sensitivity analysis has been presented.

The Group operates in Ireland. Foreign currency-denominated net assets of overseas operations are not hedged as they represent a relatively
small proportion of the Group’s net assets. The Group operates a dividend policy, ensuring any surplus cash is remitted to the UK and
translated into sterling, thereby minimising the impact of exchange rate volatility.

ii. Interest rate risk
The Group’s interest rate risk arises from long-term borrowings under the Syndicated revolving credit facility with floating rates of interest
linked to LIBOR. The Group monitors interest rates on an ongoing basis but does not currently hedge interest rate risk. The variation in the
interest rate of floating rate financial liabilities (with all other variables held constant) required to increase or decrease post-tax profit for the
year by £1.0 million is 39 basis points (2018: 36 basis points).

Credit risk
Credit risk is the risk of financial loss to the Group if a customer or banking institution fails to meet its contractual obligations.

i. Trade receivables
Credit risk relating to trade receivables is managed centrally and the credit risk for new customers is analysed before standard payment terms
and conditions are offered. Policies and procedures exist to ensure that existing customers have an appropriate credit history and a
significant number of balances are prepaid or collected via direct debit. More than 82.0% (2018: 80.0%) of the Group’s Retailer customers pay
via monthly direct debit, minimising the risk of non-payment.

Sales to private customers are primarily settled using major debit or credit cards which reduces the risk in this area.

The Group establishes an expected credit loss that represents its estimate of losses in respect of trade and other receivables. Further details
of these are given in note 31. Overall, the Group considers that it is not exposed to a significant amount of either customer credit or bad debt
risk, due to the diversified and fragmented nature of the customer base.

ii. Cash and cash equivalents
As at 31 March 2019, the Group held cash and cash equivalents of £5.9m (2018: £4.3m). The cash and cash equivalents are held with bank and
financial institution counterparties, which are rated between P-1 and P-2 based on Moody’s ratings. The Group’s treasury policy is to monitor
cash, and when applicable deposit balances, on a daily basis and to manage counterparty risk and to ensure efficient management of the
Group’s Syndicated revolving credit facility.

Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financial liabilities that are
settled by delivering cash. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.

Cash flow forecasting is performed centrally by the Group treasury manager. Rolling forecasts of the Group’s liquidity requirements are
monitored to ensure it has sufficient cash to meet operational needs. The Group’s revenue model is largely subscription-based, which results
in a regular level of cash conversion allowing it to service working capital requirements.

During the year the Group entered into a five-year, £400.0m Syndicated revolving credit facility with a termination date of June 2023. The
facility allows the Group access to cash at one working day’s notice. At 31 March 2019, £313.0m was drawn under the Syndicated revolving
credit facility.

On occasion, surplus cash held by operating entities over and above the balance required for working capital management is invested
centrally in interest-bearing current accounts and money market deposits with appropriate maturities or sufficient liquidity as required by the
above-mentioned forecasts.

100 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedCapital management
The Group considers capital to be net debt plus total equity. Net debt is calculated as total bank debt and lease financing, less unamortised
debt fees and cash and cash equivalents as shown in note 32. Total equity is as shown in the Consolidated balance sheet.

The calculation of total capital is shown in the table below:

Total net debt

Total equity

Total capital

2019
£m

321.0

59.0

380.0

(Restated)
2018
£m

355.2

5.6

360.8

Following the application of IFRS 16, total capital for the year ended 31 March 2018 has been restated (note 2).

The objectives for managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an efficient capital structure to optimise the cost of capital. In order to
maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or take other steps to increase share capital and reduce or increase debt facilities.

As at 31 March 2019, the Group had borrowings of £313.0m (2018: £343.0m) through its Syndicated revolving credit facility (2018: Syndicated
Term Loan). Interest is payable on this facility at a rate of LIBOR plus a margin of between 1.2% and 2.1% depending on the consolidated leverage
ratio of Auto Trader Group plc and its subsidiaries, which is calculated and reviewed on a biannual basis. The Group remains in compliance with
its banking covenants.

4. 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 is only one operating
segment, being the Group, as the information reported includes operating results at a consolidated Group level only. This reflects the nature
of the business, where the major cost is to support the IT platforms upon which all of the Group’s customers are serviced. These costs are
borne centrally and are not attributable to any specific customer type or revenue stream. There is also considered to be only one reporting
segment, which is the Group, the results of which are shown in the Consolidated income statement.

Management has determined that there is one operating and reporting segment based on the reports reviewed by the Operational Leadership
Team (‘OLT’) which is the chief operating decision-maker (‘CODM’). The OLT is made up of the Executive Directors and Key Management and is
responsible for the strategic decision-making of the Group.

The OLT primarily uses the statutory measures of Revenue and Operating profit to assess the performance of the one operating segment. To
assist in the analysis of the Group’s revenue-generating trends, the OLT reviews revenue at a disaggregated level as detailed within note 5. The
revenue from external parties reported to the OLT is measured in a manner consistent with that in the income statement.

A reconciliation of the one segment’s Operating profit to Profit before tax is shown below.

Total segment Revenue

Total segment Operating profit

Finance costs – net

Profit on the sale of subsidiary

Profit before tax

Following the application of IFRS 16, profit before tax for the year ended 31 March 2018 has been restated (note 2).

2019
£m

355.1

243.7

(10.2)

8.7

242.2

(Restated)
2018
£m

330.1

221.3

(10.6)

–

210.7

Auto Trader Group plc Annual Report and Financial Statements 2019 | 101

Strategic reportGovernanceFinancial statements4. Segmental information continued

Geographic information
The Group is domiciled in the UK and the following tables detail external revenue by location of customers, trade receivables and non-current
assets (excluding deferred tax) by geographic area:

Revenue

Ireland

Total revenue

Trade receivables

Ireland

Total net trade receivables

Non-current assets
(excluding deferred tax)

Ireland

Total non-current assets (excluding deferred tax)

2019
£m

349.9

5.2

355.1

2019
£m

24.5

0.4

24.9

2019
£m

376.6

6.6

383.2

2018
£m

324.9

5.2

330.1

2018
£m

24.9

0.5

25.4

(Restated)
2018
£m

342.6

6.9

349.5

Due to the large number of customers the Group serves, there are no individual customers whose revenue is greater than 10% of the Group’s
total revenue in all periods presented in these financial statements.

5. Revenue

The Group’s operations and main revenue streams are those described in these annual financial statements. The Group’s revenue is derived
from contracts with customers. The nature and effect of initially applying IFRS 15 on the Group’s financial statements is disclosed in note 2.

Disaggregation of revenue
In the following table the Group’s revenue is disaggregated by customer type. This level of disaggregation is consistent with that used by the
OLT to assist in the analysis of the Group’s revenue-generating trends.

Revenue

Retailer

Home Traders

Other

Trade

Consumer Services

Manufacturer and Agency

Total revenue

2019
£m

293.0

10.2

1.4

304.6

28.0

22.5

355.1

Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

Receivables, which are included in trade and other receivables

Accrued income

Deferred income

2019
£m

27.0

28.0

(13.2)

2018
£m

268.7

11.4

1.1

281.2

29.8

19.1

330.1

2018
£m

28.8

26.7

(1.8)

Accrued income relates to the Group’s rights to consideration for services provided but not invoiced at the reporting date. Accrued income is
transferred to receivables when invoiced.

Deferred income relates to advanced consideration received for which revenue is recognised as or when services are provided. Included within
deferred income is £11.2m (2018: £nil) relating to consideration received from Auto Trader Auto Stock Limited (which forms part of the Group’s joint
venture) for the provision of data services (note 16). Revenue relating to this service is recognised on a straight-line basis over a period of 20 years.

102 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued6. Operating profit

The Group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed
separately here to provide a better understanding of the financial performance of the Group:

Staff costs

Contractor costs

Depreciation of property, plant and equipment

Amortisation of intangible assets

Profit on sale of property, plant and equipment

Note

2019
£m

(56.0)

(0.4)

(4.9)

(4.0)

0.1

(Restated)
2018
£m

(54.5)

(0.4)

(4.9)

(4.1)

–

Following the application of IFRS 16, depreciation of property, plant and equipment has been restated for the year ended 31 March 2018
(note 2).

Services provided by the Company’s auditors
During the year, the Group (including overseas subsidiaries) obtained the following services from the operating company’s auditors:

Fees payable for the audit of the Company and consolidated financial statements

Fees payable for other services:

– the audit of the subsidiary undertakings pursuant to legislation

Total

2019
£m

0.1

0.2

0.3

2018
£m

0.1

0.2

7. Employee numbers and costs

The average monthly number of employees (including Executive Directors but excluding third-party contractors) employed by the Group was
as follows:

Customer operations

Product and technology

Corporate

Total

The aggregate payroll costs of these persons were as follows:

Wages and salaries

Social security costs

Defined contribution pension costs (note 24)

Share-based payments and associated NI (note 29)

Total

2019
Number

2018
Number

370

317

115

802

2019
£m

43.2

4.7

2.2

50.1

5.9

56.0

380

312

130

822

2018
£m

44.1

4.8

1.9

50.8

3.7

54.5

Wages and salaries include £17.3m (2018: £18.1m) relating to the product and technology teams; these teams spend a significant proportion of
their time on research and development activities, including innovation of our product proposition and enhancements to the Group’s platforms.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 103

Strategic reportGovernanceFinancial statements8. Directors and Key Management remuneration

The remuneration of Directors is disclosed in the Directors’ remuneration report on pages 64 to 74:

Key Management compensation
During the year to 31 March 2019, Key Management comprised the members of the OLT and the Non-Executive Directors (2018: OLT and the
Non-Executive Directors). The remuneration of all Key Management (including Directors) was as follows:

Short-term employee benefits

Share-based payments

Termination benefits

Pension contributions

Total

9. Finance costs

On bank loans and overdrafts

Amortisation of debt issue costs

Interest unwind on lease liabilities

Total

2019
£m

5.3

3.5

–

0.2

9.0

2019
£m

6.5

2.8

0.9

10.2

2018
£m

4.9

2.6

0.1

0.2

7.8

(Restated)
2018
£m

6.8

3.0

0.8

10.6

Following the application of IFRS 16, finance costs for the year ended 31 March 2018 have been restated (note 2).

Amortisation of debt issue costs includes £0.6m relating to costs incurred for the Syndicated revolving credit facility and £2.2m relating to
costs incurred for the former Senior Facilities Agreement. Debt issue costs incurred on the former Senior Facilities Agreement were
accelerated in the year with an additional £2.0m recognised in the Consolidated income statement (2018: additional charge of £1.1m).

10. Disposal of a subsidiary

On 31 December 2018, the Group disposed of a subsidiary undertaking, Auto Trader Auto Stock Limited, as part of the consideration for shares
in Dealer Auction (Holdings) Limited, a newly formed joint venture (note 16).

Auto Trader Auto Stock Limited was a subsidiary incorporated on 3 August 2018 by another Group subsidiary, Auto Trader Limited. The trade
and assets of Auto Trader Limited’s ‘Smart Buying’ product line, its retailer-to-retailer marketplace, were transferred to Auto Trader Auto Stock
Limited on 1 November 2018.

Revenue generated from the Smart Buying product in the nine-month period to 31 December 2018 was £1.3m (year ended 31 March 2018: £2.0m).
The disposal of the Smart Buying product line does not represent a discontinued operation under IFRS 5 as the product was not either a
separate major line of business or geographical area of operations.

A profit on disposal has been recognised in the Group’s Consolidated income statement:

Proceeds from disposals

Intangible assets – Goodwill

Intangible assets – Licence agreement

Profit on sale of subsidiary

104 | Auto Trader Group plc Annual Report and Financial Statements 2019

£m

28.4

(8.4)

(11.3)

8.7

Notes to the consolidated financial statements continued11. Taxation

Current taxation

UK corporation taxation

Foreign taxation

Adjustments in respect of prior years

Total current taxation

Deferred taxation

Origination and reversal of temporary differences

Adjustments in respect of prior years

Total deferred taxation

Total taxation charge

2019
£m

44.9

0.2

(0.1)

45.0

(0.6)

0.1

(0.5)

44.5

(Restated)
2018
£m

40.7

0.2

(0.9)

40.0

(0.2)

(0.4)

39.6

The taxation charge for the year is lower than (2018: the same as) the effective rate of corporation tax in the UK of 19% (2018: 19%).
The differences are explained below:

Profit before taxation

Tax on profit on ordinary activities at the standard UK corporation tax rate of 19% (2018: 19%)

Expenses not deductible for taxation purposes

Income not taxable

Adjustments in respect of foreign tax rates

Adjustments in respect of prior years

Total taxation charge

2019
£m

242.2

46.0

0.3

(1.7)

(0.1)

–

44.5

(Restated)
2018
£m

210.7

40.0

0.8

–

(0.1)

(1.1)

39.6

Taxation on items taken directly to equity was a credit of £0.6m (2018: £0.1m) relating to tax on share-based payments.

The tax charge for the year is based on the standard rate of UK corporation tax for the period of 19% (2018: 19%). Deferred income taxes have
been measured at the tax rate expected to be applicable at the date the deferred income tax assets and liabilities are realised. Management
has performed an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred
income tax assets and liabilities are forecast to be realised, which has resulted in an average deferred income tax rate of 17% being used to
measure all deferred tax balances as at 31 March 2019 (2018: 17%).

12. Earnings per share

Basic earnings per share is calculated using the weighted average number of ordinary shares in issue during the year, excluding those held by
the Employee Share Option Trust (‘ESOT’), based on the profit for the year attributable to shareholders.

Year ended 31 March 2019

Basic EPS

Diluted EPS

Year ended 31 March 2018 (restated)

Basic EPS

Diluted EPS

Weighted
average number
of ordinary
shares

941,506,424

944,254,998

964,516,212

967,912,689

Total
earnings
£m

Pence
per share

197.7

171.1

21.00

20.94

17.74

17.68

Auto Trader Group plc Annual Report and Financial Statements 2019 | 105

Strategic reportGovernanceFinancial statements12. Earnings per share continued

Following the application of IFRS 16, total earnings for the year ended 31 March 2018 has been restated (note 2).

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:

Year ended 31 March 2019

Issued ordinary shares at 31 March 2018

Weighted effect of ordinary shares purchased for cancellation

Weighted effect of ordinary shares held in treasury

Weighted effect of shares held by the ESOT

Weighted average number of shares for basic EPS

Dilutive impact of share options outstanding

Weighted average number of shares for diluted EPS

Weighted
average
number of
shares

952,161,444

(6,001,643)

(4,009,411)

(643,966)

941,506,424

2,748,574

944,254,998

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially
dilutive ordinary shares. The Group has potentially dilutive ordinary shares arising from share options granted to employees. Options are
dilutive under the Sharesave scheme where the exercise price together with the future IFRS 2 charge is less than the average market price of
the ordinary shares during the year. Options under the Performance Share Plan, Single Incentive Plan Award, the Deferred Annual Bonus Plan
and the Share Incentive Plan are contingently issuable shares and are therefore only included within the calculation of diluted EPS if the
performance conditions are satisfied.

The average market value of 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.

13. Intangible assets

Cost

At 31 March 2017

Acquired through a business combination

Additions

Exchange differences

At 31 March 2018

Additions

Disposals

Exchange differences

At 31 March 2019

Accumulated amortisation and impairments

At 31 March 2017

Amortisation charge

At 31 March 2018

Amortisation charge

Disposals

Exchange differences

At 31 March 2019

Net book value at 31 March 2019

Net book value at 31 March 2018

Net book value at 31 March 2017

106 | Auto Trader Group plc Annual Report and Financial Statements 2019

Software
and website
development
costs
£m

Goodwill
£m

Financial
systems
£m

Other
£m

434.1

8.5

–

0.2

442.8

–

(12.4)

(0.1)

430.3

120.8

–

120.8

–

(3.9)

0.1

117.0

313.3

322.0

313.3

54.6

0.4

0.3

–

55.3

0.3

(42.4)

–

13.2

53.8

0.6

54.4

0.6

(42.2)

–

12.8

0.4

0.9

0.8

12.3

–

0.3

–

12.6

0.3

–

12.9

6.5

2.4

8.9

2.4

–

11.3

1.6

3.7

5.8

13.3

3.8

–

17.1

–

(1.3)

–

15.8

12.8

1.1

13.9

1.0

(1.3)

–

13.6

2.2

3.2

0.5

Total
£m

514.3

12.7

0.6

0.2

527.8

0.6

(56.1)

(0.1)

472.2

193.9

4.1

198.0

4.0

(47.4)

0.1

154.7

317.5

329.8

320.4

Notes to the consolidated financial statements continuedOther intangibles include customer relationships, technology, trade names, trademarks and non-compete agreements. Intangible assets
which have a finite useful life are carried at cost less accumulated amortisation. Amortisation of these intangible assets is calculated using the
straight-line method to allocate the cost of the assets over their estimated useful lives (three to fifteen years). The longest estimated useful
life remaining at 31 March 2019 is five years.

For the year to 31 March 2019, the amortisation charge of £4.0m (2018: £4.1m) has been charged to administrative expenses in the income
statement. At 31 March 2019, £0.1m (2018: £0.1m) of software and website development costs represented assets under construction.
Amortisation of these assets will commence when they are brought into use.

In accordance with International Financial Reporting Standards, goodwill is not amortised, but instead is tested annually for impairment, or
more frequently if there are indicators of impairment. Goodwill is carried at cost less accumulated impairment losses.

Impairment test for goodwill
Goodwill is allocated to the appropriate cash-generating unit (‘CGU’) based on the smallest identifiable group of assets that generates cash
inflows independently in relation to the specific goodwill. The recoverable amount of the CGU is determined from value-in-use calculations
that use cash flow projections from the latest three-year plan. The carrying value of CGUs is the sum of goodwill, property, plant and
equipment and intangibles and is as follows:

Digital

Webzone

Total

2019
£m

327.6

6.6

334.2

(Restated)
2018
£m

342.6

6.9

349.5

Income and costs within the budget are derived on a detailed ‘bottom up’ basis – all income streams and cost lines are considered and
appropriate growth, or decline, rates are assumed. Income and cost growth forecasts are risk adjusted to reflect specific risks facing each
CGU and take into account the markets in which they operate. Key assumptions include revenue growth rates, associated levels of marketing
support and directly associated overheads. All assumptions are based on past performance and management’s expectation of market
development. Cash flows beyond the budgeted period are extrapolated using the estimated growth rate stated into perpetuity which is
consistent with industry reports. Other than as included in the financial budgets, it is assumed that there are no material adverse changes in
legislation that would affect the forecast cash flows.

The pre-tax discount rate used within the recoverable amount calculations was 8.5% (2018: 8.0%) and is based upon the weighted average cost
of capital reflecting specific principal risks and uncertainties. The discount rate takes into account the risk-free rate of return, the market risk
premium and beta factor reflecting the average beta for the Group and comparator companies which are used in deriving the cost of equity.

The same discount rate has been applied to both CGUs as the principal risks and uncertainties associated with the Group, as highlighted on
pages 30 to 33, would also impact each CGU in a similar manner. The Board acknowledges that there are additional factors that could impact
the risk profile of each CGU, which have been considered by way of sensitivity analysis performed as part of the annual impairment tests.

Key drivers to future growth rates are dependent on the Group’s ability to maintain and grow income streams whilst effectively managing
operating costs. The level of headroom may change if different growth rate assumptions or a different pre-tax discount rate were used in the
cash flow projections. Where the value-in-use calculations suggest an impairment, the Board would consider alternative use values prior to
realising any impairment, being the fair value less costs to dispose.

The key assumptions used for value-in-use calculations are as follows:

Annual growth rate (after plan period)

Risk free rate of return

Market risk premium

Beta factor

Cost of debt

2019

3.0%

5.0%

0.83

3.3%

2018

3.0%

4.9%

0.79

3.3%

Having completed the 2019 impairment review, no impairment has been recognised in relation to the CGUs (2018: no impairment). Sensitivity
analysis has been performed in assessing the recoverable amounts of goodwill. There are no changes to the key assumptions of growth rate or
discount rate that are considered by the Directors to be reasonably possible, which give rise to an impairment of goodwill relating to the CGUs.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 107

Strategic reportGovernanceFinancial statements14. Property, plant and equipment

Cost

At 31 March 2017 (restated)

Additions

Disposals

At 31 March 2018 (restated)

Additions

Disposals

At 31 March 2019

Accumulated depreciation

At 31 March 2017 (restated)

Charge for the year

Disposals

At 31 March 2018 (restated)

Charge for the year

Disposals

At 31 March 2019

Net book value at 31 March 2019

Net book value at 31 March 2018 (restated)

Net book value at 31 March 2017 (restated)

Land, buildings
and leasehold
improvements
£m

Office
equipment
£m

Motor
vehicles
£m

18.3

–

18.3

0.8

(1.3)

17.8

1.4

1.7

–

3.1

2.5

(1.3)

4.3

13.5

15.2

16.9

20.5

2.3

(6.0)

16.8

0.9

(3.7)

14.0

16.2

2.7

(6.0)

12.9

1.9

(3.7)

11.1

2.9

3.9

4.3

1.1

–

1.1

0.2

(0.1)

1.2

–

0.5

–

0.5

(0.1)

0.9

0.3

0.6

1.1

Total
£m

39.9

2.3

(6.0)

36.2

1.9

(5.1)

33.0

17.6

4.9

(6.0)

16.5

4.9

(5.1)

16.3

16.7

19.7

22.3

Included within property, plant and equipment are £11.9m (2018: £13.7m) of assets recognised as leases under IFRS 16. Further details of these
leases are disclosed in note 15. The depreciation expense of £4.9m for the year to 31 March 2019 (2018 restated: £4.9m) has been recorded in
administrative expenses.

During the year, £5.1m (2018: £6.0m) worth of property, plant and equipment with £nil net book values were disposed of.

108 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued15. Leases

The Group leases assets including land and buildings and motor vehicles that are held within property, plant and equipment. Information about
leases for which the Group is a lessee is presented below.

Net book value property, plant and equipment owned

Net book value right of use assets

Net book value of right of use assets

Balance at 1 April 2017 (restated)

Depreciation charge

Balance at 31 March 2018 (restated)

Additions

Depreciation charge

At 31 March 2019

Lease liabilities in the balance sheet at 31 March

Current

Non-current

Total

A maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented within note 31.

Amounts charged in the income statement

Depreciation charge of right-of-use assets

Interest on lease liabilities

Total amounts charged in the income statement

Cash outflow

Total cash outflow for leases

2019
£m

4.8

11.9

16.7

Land, buildings
and leasehold
improvements
£m

Office
equipment
£m

Motor
vehicles
£m

14.4

(1.4)

13.0

–

(1.5)

11.5

0.1

–

0.1

–

0.1

(Restated)
2018
£m

6.0

13.7

19.7

Total
£m

15.6

(1.9)

13.7

0.2

(2.0)

11.9

(Restated)
2018
£m

2.2

16.0

18.2

(Restated)
2018
£m

1.9

0.8

2.7

(Restated)
2018
£m

2.3

1.1

(0.5)

0.6

0.2

(0.5)

0.3

2019
£m

1.8

14.3

16.1

2019
£m

2.0

0.9

2.9

2019
£m

3.1

Auto Trader Group plc Annual Report and Financial Statements 2019 | 109

Strategic reportGovernanceFinancial statements16. Net investments in joint ventures

Joint ventures are contractual arrangements over which the Group exercises joint control with partners and where the parties have rights to
the net assets of the arrangement, irrespective of the Group’s shareholding in the entity.

On 31 December 2018, the Group acquired 49% of the ordinary share capital of Dealer Auction (Holdings) Limited for consideration of £48.1m.
Consideration consisted of:

Cash consideration

100% of the share capital of Auto Trader Auto Stock Limited (note 10)

Total consideration

£m

19.7

28.4

48.1

Net investments in joint ventures at the reporting date include the Group’s equity investment in joint ventures and the Group’s share of the
joint ventures’ post acquisition net assets. The table below reconciles the movement in the Group’s net investment in joint ventures in the
year:

Carrying value

At 1 April 2017 and 31 March 2018

Investment in joint venture

Share of result for the year taken to the income statement

As at 31 March 2019

Equity
investment in
joint ventures
£m

Group’s share
of net assets
£m

Net
investments in
joint ventures
£m

–

48.1

–

48.1

–

0.9

–

48.1

0.9

49.0

Set out below is the summarised financial information for the consolidated Dealer Auction ventures, including Dealer Auction (Holdings)
Limited, Dealer Auction Limited, Auto Trader Auto Stock Limited and Dealer Auction Services Limited, which are accounted for using the equity
method:

Non-current assets

Current assets

Cash and cash equivalents

Other current assets

Total assets

Liabilities

Current liabilities

Total liabilities

Net assets

Revenues

Profit for the year

Total comprehensive income

2019
£m

98.9

0.2

6.9

106.0

5.5

100.5

2019
£m

3.5

1.8

The above information reflects the amounts presented in the Financial Statements of the joint venture and not the Group’s share of those
amounts. They have been amended for differences in accounting policies between the Group and the joint venture.

A list of the investments in joint ventures, including the name, country of incorporation and proportion of ownership interest, is given in note 35.

110 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued17. Other investments

Shares in other undertakings

Investment in IAUTOS Company Limited

At 31 March 2019 and 31 March 2018

£m

–

At April 2018, the Group designated the investment in IAUTOS Company Limited as an equity security at FVOCI as the Group intends to hold the
shares for long-term strategic purposes. IAUTOS Company Limited is an intermediate holding company through which trading companies
incorporated in the People’s Republic of China are held. The fair value of the investment has been valued at £nil since 2014 as the Chinese
trading companies are loss-making with forecast future cash outflows.

18. Trade and other receivables

Trade receivables

Less: provision for impairment of trade receivables

Net trade receivables

Accrued income

Prepayments

Other receivables

Total

2019
£m

27.0

(2.1)

24.9

28.0

2.9

0.3

56.1

(Restated)
2018
£m

28.8

(3.4)

25.4

26.7

2.7

0.1

54.9

Following the application of IFRS 16, trade and other receivables have been restated (note 2).

Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are generally due for
settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration
that is unconditional and has been invoiced at the reporting date. The Group holds the trade receivables with the objective to collect the
contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method.

Accrued income relates to the Group’s rights to consideration for services provided but not invoiced at the reporting date. Accrued income is
transferred to receivables when invoiced. Other receivables include £0.1m due from Auto Trader Auto Stock Limited, a related party (note 34).

Exposure credit risk and expected credit losses relating to trade and other receivables are disclosed in note 31.

19. Cash and cash equivalents

Cash at bank and in hand is denominated in the following currencies:

Sterling

Euro

Cash at bank and in hand

2019
£m

5.8

0.1

5.9

2018
£m

4.1

0.2

4.3

Cash balances with an original maturity of less than three months were held in current accounts during the year and attracted interest at a
weighted average rate of 0.3% (2018: 0.3%).

Auto Trader Group plc Annual Report and Financial Statements 2019 | 111

Strategic reportGovernanceFinancial statements20. Trade and other payables

Trade payables

Accruals

Other taxes and social security

Deferred income

Other payables

Accrued interest payable

Total

2019
£m

4.3

10.5

13.0

13.2

0.3

0.5

41.8

(Restated)
2018
£m

3.7

9.8

11.8

1.8

0.9

0.5

28.5

Following the application of IFRS 16, trade and other payables for the year ended 31 March 2018 have been restated (note 2).

Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are
considered to be the same as their fair values, due to their short-term nature.

21. Borrowings

Non-current

Syndicated RCF gross of unamortised debt issue costs

Unamortised debt issue costs on Syndicated RCF

Former Syndicated Term Loan gross of unamortised debt issue costs

Unamortised debt issue costs on former Syndicated Term Loan

Total

The Syndicated RCF (2018: Syndicated Term Loan) is repayable as follows:

One to two years

Two to five years

Total

2019
£m

313.0

(2.7)

–

310.3

2019
£m

–

313.0

2018
£m

–

343.0

(2.2)

340.8

2018
£m

343.0

–

343.0

The carrying amounts of borrowings approximate their fair values.

Syndicated revolving credit facility (‘Syndicated RCF’)
On 6 June 2018, the Company and a subsidiary undertaking, Auto Trader Holding Limited, signed a new Syndicated revolving credit facility (the
‘Syndicated RCF’) to replace the former Syndicated Term Loan and former revolving credit facility. The Syndicated RCF, which is unsecured,
has total commitments of £400.0m and a termination date of June 2023. There is no requirement to settle all or part of the facility before the
termination date of June 2023.

The associated debt transaction costs were £3.3m.

Individual tranches are drawn down, in sterling, for periods of up to six months at LIBOR rates 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 first utilisation was made on 8 June 2018 when £303.1m was drawn.

The Syndicated revolving credit facility has financial covenants linked to interest cover and the consolidated leverage ratio of the Group. All
financial covenants of the facility have been complied with through the year.

112 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedSenior Facilities Agreement (‘former Syndicated Term Loan’ and ‘Former revolving credit facility’)
On 24 March 2015, the Company and a subsidiary undertaking, Auto Trader Holding Limited, entered into a £550.0m Senior Facilities
Agreement. Interest on the former Syndicated Term Loan was charged at LIBOR plus a margin of between 1.5% and 3.25% depending on
the consolidated leverage ratio of the Group. Under the agreement, the lenders had also made available to the Group a £30.0m revolving
credit facility.

Cash drawings under the RCF incurred interest at LIBOR plus a margin of between 1.25% and 3.0% depending on the consolidated leverage of
the Group. A commitment fee of 35% of the margin applicable to the former revolving credit facility was payable quarterly in arrears on the
unutilised amounts of the former revolving credit facility.

On 6 June 2018, the Group refinanced the Senior Facilities Agreement which included the former Syndicated Term Loan and Former revolving
credit facility. On 8 June 2018 the Group repaid the outstanding amount drawn of £343.0m, together with accrued interest and other costs
payable under the terms of the Senior Facilities Agreement.

The former Senior Facilities Agreement had financial covenants linked to the consolidated leverage ratio of the Group. All financial covenants
of the facility have been complied with through the year ended 31 March 2019 and 31 March 2018.

Exposure to interest rate changes
The exposure of the Group’s borrowings (excluding debt issue costs) to LIBOR rate changes and the contractual repricing dates at the balance
sheet date are as follows:

One month or less

Total

22. Provisions for other liabilities and charges

At 31 March 2018 (restated)

Charged to the income statement

Utilised in the year

At 31 March 2019

Current

Non-current

Total

2019
£m

313.0

Dilapidations
provision
£m

Holiday pay
provision
£m

–

1.0

–

1.0

0.3

(0.3)

0.3

2019
£m

0.3

1.0

1.3

2018
£m

343.0

Total
£m

0.3

1.3

(0.3)

1.3

(Restated)
2018
£m

0.3

–

0.3

Following the application of IFRS 16, the dilapidations provision has been restated (note 2).

The holiday pay provision relates to liabilities for holiday pay in relation to the UK and Ireland operations for leave days accrued and not yet
taken at the end of the financial year, and is expected to be fully utilised in the year to 31 March 2020.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 113

Strategic reportGovernanceFinancial statements23. Deferred taxation

The movement in deferred taxation assets and liabilities during the year, without taking into consideration the offsetting of balances within
the same tax jurisdiction, is as follows:

Deferred taxation assets

At 31 March 2017 (restated)

Credited to the income statement

Credited directly to equity

At 31 March 2018 (restated)

Credited to the income statement

Credited directly to equity

At 31 March 2019

Deferred taxation liabilities

At 31 March 2017 (restated)

Acquired in business combination

Credited to the income statement

At 31 March 2018 (restated)

Credited to the income statement

At 31 March 2019

Share-based
payments
£m

Accelerated
capital
allowances
£m

Other
temporary
differences
£m

0.9

0.2

0.1

1.2

0.7

0.3

2.2

3.8

0.1

–

3.9

(0.2)

–

3.7

0.2

–

0.2

0.1

–

0.3

Share-based
payments
£m

Accelerated
capital
allowances
£m

Other
temporary
differences
£m

–

0.2

0.7

(0.2)

0.7

(0.2)

0.5

Total
£m

4.9

0.3

0.1

5.3

0.6

0.3

6.2

Total
£m

0.2

0.7

(0.2)

0.7

(0.2)

0.5

Following the application of IFRS 16, deferred tax assets in relation to accelerated capital allowances have been restated (note 2).

The Group has estimated that £1.1m (2018: £0.8m) of the Group’s net deferred income tax asset will be realised in the next 12 months. This is
management’s current best estimate and may not reflect the actual outcome in the next 12 months.

24. Retirement benefit obligations

(i) Defined contribution scheme
Across the UK and Ireland the Group operates a number of defined contribution schemes. In the year to 31 March 2019 the pension
contributions to the Group’s defined contribution schemes amounted to £2.2m (2018: £1.9m). At 31 March 2019, there were £0.3m (31 March
2018: £0.3m) of pension contributions outstanding relating to the Group’s defined contribution schemes.

(ii) Defined benefit scheme
The Company sponsors a funded defined benefit pension scheme for qualifying UK employees, the Wiltshire (Bristol) Limited Retirement
Benefits Scheme (‘the Scheme’). The Scheme is administered by a separate board of Trustees, which is legally separate from the Company.
The Trustees are composed of representatives of both the Company and members. The Trustees are required by law to act in the interest of all
relevant beneficiaries and are responsible for the investment policy for the assets and the day-to-day administration of the benefits.

The Scheme has been closed to future members since 30 April 2006 and there are no remaining active members within the Scheme. No other
post-retirement benefits are provided to these employees.

Profile of the scheme
As at 31 March 2019, approximately 60% of the Defined Benefit Obligation (DBO) is attributable to former employees who have yet to reach
retirement (2018: 65%) and 40% to current pensioners (2018: 35%). The Scheme duration is an indicator of the weighted-average time until benefit
payments are made. For the Scheme as a whole, the duration is approximately 21 years.

114 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedRisks associated with the scheme
The Scheme exposes the Company to some risks, the most significant of which are:

Asset volatility

Inflation risk

Change in bond yields

Life expectancy

The liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets
underperform this yield, this will create a deficit. The Scheme holds a significant proportion of growth assets
(equities, diversified growth fund and global absolute return fund) which, though expected to outperform
corporate bonds in the long term, create volatility and risk in the short term. The allocation to growth assets is
monitored to ensure it remains appropriate given the Scheme’s long-term objectives.

A proportion of the Scheme’s benefit obligations are linked to inflation, and higher inflation leads to higher
liabilities (although, in most cases, caps on the level of inflationary increases are in place to protect against
extreme inflation).
The majority of the assets are either unaffected by or only loosely correlated with inflation, meaning that an
increase in inflation will also increase the deficit.

A decrease in corporate bond yields will increase the value placed on the Scheme’s liabilities for accounting
purposes, although this will be partially offset by an increase in the value of the Scheme’s bond holdings.

The majority of the Scheme’s obligations are to provide benefits for the lifetime of the member, so increases
in life expectancy will result in an increase in the liabilities.

Funding requirements
UK legislation requires that pension schemes are funded prudently. The ongoing funding valuation of the Scheme was carried out by a
qualified actuary as at 30 April 2018 and showed a deficit of £0.2m. The Company paid deficit contributions of £70,000 for the year ending
31 March 2019 (2018: £70,000), and has committed to contribute £140,000 per annum from 1 April 2019, which is expected to make good this
shortfall by 31 March 2020. The next funding valuation is due no later than 30 April 2021, at which progress towards full-funding will be
reviewed. The Company also pays expenses and PPF levies incurred by the Scheme.

Assumptions used
The last triennial actuarial valuation of the Scheme was performed by an independent professional actuary at 30 April 2018 using the projected
unit method of valuation. For the purposes of IAS 19 (revised) the actuarial valuation as at 30 April 2018 has been updated on an approximate
basis to 31 March 2019. There have been no changes in the valuation methodology adopted for this year’s disclosures compared to the prior
year’s disclosures.

The principal financial assumptions used to calculate the liabilities under IAS 19 (revised) are as follows:

Discount rate for scheme liabilities

CPI inflation

RPI inflation

Pension increases

Pre 1988 GMP

Post 1988 GMP

Pre 2004 non GMP

Post 2004

2019
%

2.45

2.35

3.45

–

2.10

5.00

3.35

2018
%

2.60

2.25

3.35

–

2.10

5.00

3.25

The financial assumptions reflect the nature and term of the Scheme’s liabilities.

The Group has assumed that mortality will be in line with nationally published mortality table S2NA with CMI 2018 projections related to
members’ years of birth with long-term rate of improvement of 1.5% per annum. These tables translate into an average life expectancy for a
pensioner retiring at age 65 as follows:

Member aged 65 (current life expectancy)

Member aged 45 (life expectancy at age 65)

2019

Men
Years

86.8

88.5

Women
Years

88.9

90.7

2018

Men
Years

87.3

89.0

Women
Years

89.3

91.1

It is assumed that 50% of non-retired members of the Scheme will commute the maximum amount of cash at retirement (2018: 50% of
non-retired members of the Scheme will commute the maximum amount of cash at retirement).

Auto Trader Group plc Annual Report and Financial Statements 2019 | 115

Strategic reportGovernanceFinancial statements24. Retirement benefit obligations continued

Post-employment benefit obligations disclosures
The amounts charged to the Consolidated income statement are set out below:

Past service cost

Total amounts charged to the Consolidated income statement

2019
£m

0.4

2018
£m

–

On 26 October 2018, the High Court handed down a judgment involving the Lloyds Banking Group’s defined benefit pension schemes. The
judgment concluded the schemes should be amended to equalise pension benefits for men and women in relation to guaranteed minimum
pension (GMP) benefits for the effect of unequal GMPs accrued between 1990 and 1997. The issues determined by the judgment affect many
other UK defined benefit pension schemes. We are working with the trustee of our pension scheme, and our actuarial and legal advisors, to
understand the extent to which the judgment crystallises additional liabilities for the pension scheme.

The true impact of GMP equalisation on the Scheme will not be known until members’ benefits have been rectified, which could take over a
year. However, we understand that it is necessary under the relevant accounting standard to make allowance for the estimated impact of GMP
equalisation as at the date of the judgment.

The estimated impact of the equalisation of GMP benefits has been recognised in the income statement as a past service cost. This amounted
to an increase in liabilities of £0.4m as at 26 October 2018 which has been included in the pension scheme liability at 31 March 2019.

Current service costs and past service costs are charged to the income statement in arriving at Operating profit. Interest income on Scheme
assets and the interest cost on Scheme liabilities are included within finance costs.

In addition, the following amounts have been recognised in the Consolidated statement of comprehensive income:

Return on Scheme assets (in excess of) / below that recognised in net interest

Actuarial losses / (gains) losses due to changes in assumptions

Actuarial (gains) / losses due to liability experience

Effect of the surplus cap

Total amounts recognised within Consolidated statement of comprehensive income

Amounts recognised in the balance sheet are as follows:

Present value of funded obligations

Fair value of plan assets

Effect of surplus cap

Net asset recognised in the Consolidated balance sheet

2019
£m

(0.9)

0.3

(0.5)

0.9

(0.2)

2019
£m

20.0

(22.2)

2.2

–

The surplus of £2.2m (2018: £1.3m) has not been recognised as an asset as it is not deemed to be recoverable by the Group.

Movements in the fair value of Scheme assets were as follows:

Fair value of Scheme assets at the beginning of the year

Interest income on Scheme assets

Remeasurement gains on Scheme assets

Contributions by the employer

Net benefits paid

Fair value of Scheme assets at the end of the year

116 | Auto Trader Group plc Annual Report and Financial Statements 2019

2019
£m

21.0

0.5

1.0

0.1

(0.4)

22.2

2018
£m

–

(1.0)

0.1

0.9

–

2018
£m

19.7

(21.0)

1.3

–

2018
£m

21.4

0.5

–

0.1

(1.0)

21.0

Notes to the consolidated financial statements continuedMovements in the fair value of Scheme liabilities were as follows:

Fair value of Scheme liabilities at the beginning of the year
Past service cost
Interest expense
Actuarial (gains) / losses on Scheme liabilities arising from changes in assumptions
Actuarial (gains)/losses on Scheme liabilities arising from experience
Net benefits paid

Fair value of scheme liabilities at the end of the year

Movements in post-employment benefit obligations were as follows:

Opening post-employment benefit obligation
Past service cost
Interest
Contributions by the employer
Remeasurement and experience gains
Effect of surplus cap

Closing post-retirement benefit obligation

Plan assets are comprised as follows:

Equities
Bonds
Real estate

Total

All plan assets have a quoted market price.

2019
£m

19.7
0.4
0.5
0.3
(0.5)
(0.4)

20.0

2019
£m

–
0.4
–
(0.1)
(1.2)
0.9

–

2018

£m

11.4
8.5
1.1

21.0

2018
£m

21.0
–
0.5
(0.9)
0.1
(1.0)

19.7

2018
£m

–
–
–
(0.1)
(0.8)
0.9

–

54.3
40.5
5.2

100.0

2019

£m

12.2
8.9
1.1

22.2

55.0
40.0
5.0

100.0

Sensitivity to key assumptions
The table below gives an approximation of the impact on the IAS 19 (revised) pension scheme liabilities to changes in assumptions and
experience. Note that all figures are before allowing for any deferred tax. The sensitivity information shown has been prepared using the same
method used to adjust the results of the latest funding valuation to the balance sheet date.

Following a 0.25% increase in the discount rate

Assets of the Scheme at 31 March 2019
Defined benefit obligation at 31 March 2019

Surplus at 31 March 2019

Following a 0.25% increase in the inflation assumption

Assets of the Scheme at 31 March 2019
Defined benefit obligation at 31 March 2019

Surplus at 31 March 2019

Following a 1 year increase in life expectancy

Assets of the Scheme at 31 March 2019
Defined benefit obligation at 31 March 2019

Surplus at 31 March 2019

Change
£m

New value
£m

–
1.0

1.0

22.2
(19.0)

3.2

Change
£m

New value
£m

–
(0.4)

(0.4)

22.2
(20.4)

1.8

Change
£m

New value
£m

–
(1.0)

(1.0)

22.2
(21.0)

1.2

Auto Trader Group plc Annual Report and Financial Statements 2019 | 117

Strategic reportGovernanceFinancial statements25. Share capital

Share capital

Allotted, called-up and fully paid ordinary shares of 1p each

At 1 April

Purchase and cancellation of own shares

Total

2019

2018

Number
’000

Amount
£m

Number
’000

Amount
£m

952,161

(18,963)

933,198

9.5

(0.2)

9.3

978,971

(26,810)

952,161

9.8

(0.3)

9.5

In the year ended 31 March 2017, the Company commenced a share buyback programme. By resolutions passed at the 2018 AGM, the Company
was authorised to make market purchases of up to 94,802,631 of its ordinary shares, subject to minimum and maximum price restrictions.

A total of 20,229,881 ordinary shares of £0.01 were purchased in the year (2018: 26,809,702). The average price paid per share was 461.5p
(2018: 358.5p), with a total consideration paid (inclusive of all costs) of £94.0m (2018: £96.7m). 1,266,000 shares were purchased to be held in
treasury (2018: nil), with 18,963,881 being cancelled.

Included within shares in issue at 31 March 2019 are 565,555 (2018: 932,761) shares held by the ESOT and 3,996,041 (2018: 4,194,989) shares held in
treasury, as detailed in note 26.

ESOT shares
reserve
£m

(1.4)

0.6

–

(0.8)

Treasury
shares
£m

(15.5)

–

(5.8)

5.6

(15.7)

Total
£m

(16.9)

0.6

(5.8)

5.6

(16.5)

ESOT shares
reserve
Number of
shares

948,924

(16,163)

–

Treasury
shares
Number of
shares

4,203,277

–

(8,288)

Total
number of
own shares
held

5,152,201

(16,163)

(8,288)

932,761

4,194,989

5,127,750

932,761

(367,206)

4,194,989

–

5,127,750

(367,206)

–

1,266,000

(1,464,948)

565,555

3,996,041

4,561,596

26. Own shares held

Own shares held – £m

Own shares held as at 1 April 2017 and 31 March 2018

Own shares held as at 1 April 2018

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives

Own shares held as at 31 March 2019

Own shares held – number

Own shares held as at 1 April 2017

Transfer of shares from ESOT

Share-based incentives exercised in the year

Own shares held as at 31 March 2018

Own shares held as at 1 April 2018

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives exercised in the year

Own shares held as at 31 March 2019

118 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued27. Dividends

Dividends declared and paid by the Company were as follows:

2017 final dividend paid

2018 interim dividend paid

2018 final dividend paid

2019 interim dividend paid

2019

Pence
per share

–

4.0

2.1

6.1

2018

Pence
per share

3.5

1.9

–

5.4

£m

–

37.9

19.7

57.6

£m

34.0

18.2

–

52.2

The proposed final dividend for the year ended 31 March 2019 of 4.6p per share, totalling £42.7m, is subject to approval by shareholders at the
Annual General Meeting (‘AGM’) and hence has not been included as a liability in the financial statements.

The 2019 interim dividend paid on 25 January 2019 was £19.7m. The 2018 final dividend paid on 28 September 2018 was £37.9m.

The Directors’ policy with regard to future dividends is set out in the Strategic report on page 28.

28. Cash generated from operations

Profit before taxation

Adjustments for:

Depreciation

Amortisation

Share-based payments charge (excluding associated NI)

Share of profit from joint ventures

Profit on sale of property, plant and equipment

Difference between pension charge and cash contributions

Finance costs

Profit on disposal of subsidiary

Changes in working capital (excluding the effects of exchange differences on consolidation):

Trade and other receivables

Trade and other payables

Provisions

Cash generated from operations

29. Share-based payments

2019
£m

242.2

4.9

4.0

4.7

(0.9)

0.1

0.3

10.2

(8.7)

(1.5)

2.2

1.0

258.5

(Restated)
2018
£m

210.7

4.9

4.1

3.3

–

10.6

–

(2.9)

(2.3)

–

228.4

The Group currently operates four share plans: the Performance Share Plan, Deferred Annual Bonus and Single Incentive Plan, Share Incentive
Plan 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. The estimate of the fair value of the share-based incentives is measured using either the Monte Carlo or Black-Scholes
pricing model as is most appropriate for each scheme.

The total charge in the year relating to the four schemes was £5.9m (2018: £3.7m) with a Company charge of £2.3m (2018: £1.0m). This included
associated national insurance (‘NI’) at 13.8%, which management expects to be the prevailing rate when the awards are exercised, and
apprenticeship levy at 0.5%, based on the share price at the reporting date.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 119

Strategic reportGovernanceFinancial statements29. Share-based payments continued

Share Incentive Plan (‘SIP’)

Sharesave scheme (‘SAYE’)

Performance Share Plan (‘PSP’)

Deferred Annual Bonus and Single Incentive Plan

Total share-based payment charge

NI and apprenticeship levy on applicable schemes

Total charge

Group

2019
£m

–

0.3

2.1

2.3

4.7

1.2

5.9

2018
£m

0.8

0.3

1.8

0.4

3.3

0.4

3.7

Company

2019
£m

–

1.3

0.4

1.7

0.6

2.3

2018
£m

–

0.7

0.2

0.9

0.1

1.0

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 is being spread evenly over the Vesting Period.

UK SIP

Outstanding at 1 April

Dividend shares awarded

Forfeited

Released

Outstanding at 31 March

Vested and outstanding at 31 March

2019
Number

690,791

4,518

(9,275)

(365,162)

320,872

2018
Number

776,045

9,778

(75,986)

(19,046)

690,791

–

The weighted average market value per ordinary share for SIP awards released in 2019 was 386.1p (2018: 372.0p). The SIP shares outstanding at
31 March 2018 have fully vested (2018: had a weighted average remaining vesting period of 0.1 years). Shares released prior to the vesting date
relate to those attributable to good leavers as defined by the scheme rules.

Irish SIP

Outstanding at 1 April

Dividend shares awarded

Forfeited

Exercised

Outstanding at 31 March

Vested and outstanding at 31 March

2019
Number

35,922

–

(30,506)

5,416

2018
Number

44,431

788

(7,950)

(1,347)

35,922

–

The weighted average market value per ordinary share for Irish SIP options exercised in 2019 was 350.0p (2018: 387.5p). The SIP shares
outstanding at 31 March 2018 have fully vested (2018: had a weighted average remaining vesting period of 0.1 years). Options exercised prior to
the vesting date relate to those attributable to good leavers as defined by the scheme rules.

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 17 August 2018, the Group awarded 452,695 nil cost options under the PSP scheme. For the 2018 awards, the Group’s performance is measured
by reference to the growth in Operating profit (75% of the award) and growth in Revenue (25% of the award) over the three-year period April 2018
– March 2021. For previous awards, the Group’s performance had been measured by reference to the cumulative profit measure (Underlying
operating profit for 2015 and 2016 awards, and Operating profit for 2017 awards) and total shareholder return relative to the FTSE 250 share index.

120 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedThe fair value of the 2018 award was determined using a Black-Scholes pricing model. The PSP awards granted prior to 2018 have been valued
using the Monte Carlo model for the TSR element and the Black-Scholes model for the Operating profit and Underlying operating profit
element. The resulting share-based payments charge is being spread evenly over the period between the grant date and the vesting date.

PSP award holders are entitled to receive dividends accruing between the grant date and the vesting date and this value will be delivered in
shares. The assumptions used in the measurement of the fair value at grant date of the PSP awards are as follows:

Grant date

Condition

19 June 2015

17 June 2016

16 June 2017

TSR dependent

UOP dependent

TSR dependent

UOP dependent

TSR dependent

OP dependent

30 August 2017

TSR dependent

30 August 2017

OP dependent

17 August 2018

OP dependent

17 August 2018

Revenue dependent

Share price
at grant date
£

Exercise
price
£

Expected
volatility
%

Option
life
years

Risk-free
rate
%

Dividend
yield
%

Non-
vesting
condition
%

Fair value
per option
£

3.06

3.89

4.00

3.42

4.48

Nil

n/a

3.0

0.9

0.4

0.2

0.7

0.0

0.4

0.0

1.7

0.0

2.08

3.06

2.16

3.89

2.17

4.00

2.17

3.42

4.48

Expected volatility is estimated by considering historic average share price volatility at the grant date.

The number of options outstanding and exercisable as at 31 March was as follows:

Outstanding at 1 April

Options granted in the year

Dividend shares awarded

Options forfeited in the year
Options exercised in the year

Outstanding at 31 March

Exercisable at 31 March

2019
Number

3,104,563

452,695

9,749

(105,213)

(483,316)

2.978,478

721,269

2018
Number

2,682,738

1,188,149

–

(766,324)

–

3,104,563

–

The weighted average market value per ordinary share for PSP options exercised in 2019 was 445.0p (2018: n/a). The PSP awards outstanding at
31 March 2019 have a weighted average remaining vesting period of 0.8 years (2018: 1.2 years) and a weighted average contractual life of 7.6
years (2018: 8.2 years).

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

Deferred Annual Bonus
The Group operates a Deferred Annual scheme (‘DABP’) for Executive Directors and certain key senior executives. Awards under the plan are
contingent on the satisfaction of pre-set internal targets relating to financial and operational objectives. Awards have a vesting period of two
years from the date of the award (the ‘Vesting Period’) and are potentially forfeitable during that period should the employee leave
employment. The DABP awards have been valued using the Black-Scholes method 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 16 June 2018, the Group awarded 71,552 nil cost options under the DABP scheme. The assumptions used in the measurement of the fair value
at grant date of the DABP awards are as follows:

Grant date

17 June 2016

16 June 2017

17 August 2018

Share price at
grant date
£

Exercise
price
£

3.89

4.00

4.48

Nil

Option
life
years

2.0

Risk-free
rate
%

Dividend
yield
%

Non-vesting
condition
%

Fair value
per option
£

0.4

0.2

0.7

0.4

0.0

1.7

0.0

3.89

4.00

4.48

Auto Trader Group plc Annual Report and Financial Statements 2019 | 121

Strategic reportGovernanceFinancial statements29. Share-based payments continued

The number of options outstanding and exercisable as at 31 March was as follows:

Outstanding at 1 April

Options granted in the year

Dividend shares awarded

Options forfeited in the year
Options exercised in the year

Outstanding at 31 March

Exercisable at 31 March

2019
Number

303,880

71,552

3,343

–

(229,378)

149,397

–

2018
Number

248,263

127,691

1,306

(73,380)

–

303,880

74,686

The weighted average market value per ordinary share for DABP options exercised in 2019 was 438.1p (2018: n/a). The DABP awards outstanding
at 31 March 2018 have a weighted average remaining vesting period of 0.8 years (2018: 1.2 years) and a weighted average contractual life of 8.8
years (2018: 9.2 years). The charge for the year includes an estimate of the awards to be granted after the balance sheet date in respect of
achievement of 2019 targets.

Single Incentive Plan Award
During the period, the Group introduced a new Single Incentive Plan Award (‘SIPA’) for the Operating Leadership Team and certain key
employees. The scheme replaces the Performance Share Plan and the annual cash bonus scheme for all new awards for those individuals. 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 17 August 2018, the Group awarded 974,106 nil cost options under the SIPA scheme. For the 2018 awards, the Group’s performance is
measured by reference to Operating profit (75% of the award), live car stock advertised on autotrader.co.uk (12.5% of the award) and the
average number of full page advert views (12.5% of the award). The fair value of the 2018 award was determined to be £4.48 per option using a
Black-Scholes pricing model. 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.

The assumptions used in the measurement of the fair value at grant date of the PSP awards are as follows:

Grant date

17 August 2018

Share price
at grant date
£

Exercise
price
£

Expected
volatility
%

4.48

Nil

n/a

Option
life
years

3.0

Risk-free
rate
%

Dividend
yield
%

Non-
vesting
condition
%

Fair value
per option
£

0.7

1.7

0.0

4.48

Expected volatility is estimated by considering historic average share price volatility at the grant date.

The number of options outstanding and exercisable as at 31 March was as follows:

Outstanding at 1 April

Options granted in the year

Options forfeited in the year

Outstanding at 31 March

Exercisable at 31 March

2019
Number

–

974,106

(51,054)

923,052

–

2018
Number

–

122 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedSharesave 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. The
assumptions used in the measurement of the fair value at grant date of the Sharesave plan are as follows:

Grant date

25 September 2015

13 December 2017

14 December 2018

Share price
at grant date
£

Exercise
price
£

Expected
volatility
%

Option
life
years

Risk-free
rate
%

Dividend
yield
%

Non-
vesting
condition
%

Fair value
per option
£

3.28

3.48

4.48

2.64

2.59

3.49

3.0

1.0

0.6

0.7

0.0

1.3

1.7

0.96

1.12

1.29

Expected volatility is estimated by considering historic average share price volatility at the grant date. The requirement that an employee has
to save in order to purchase shares under the Sharesave plan is a non-vesting condition. This feature has been incorporated into the fair value
at grant date by applying a discount to the valuation obtained from the Black-Scholes pricing model.

Outstanding at 1 April

Options granted in the year

Options exercised in the year

Options lapsed in the year

Outstanding at 31 March

Exercisable at 31 March

2019

2018

Number
of share
options

1,530,852

699,528

(721,748)

(160,934)

1,347,698

34,731

Weighted
average
exercise price
£

2.61

3.49

2.64

2.70

3.05

2.64

Number
of share
options

919,281

728,520

(6,941)

(110,008)

1,530,852

–

Weighted
average
exercise price
£

2.64

2.59

2.64

2.63

2.61

–

The weighted average market value per ordinary share for Sharesave options exercised in 2019 was 424.8p (2018: 372.5p). The Sharesave
options outstanding at 31 March 2019 have a weighted average remaining vesting period of 2.3 years (2018: 1.7 years) and a weighted average
contractual life of 2.8 years (2018: 2.2 years).

30. Business combinations

On 25 April 2017, Auto Trader Limited, a subsidiary of Auto Trader Group plc, acquired the entire share capital of Motor Trade Delivery Limited
(‘MTD’), an online real-time marketplace for the trade delivery of vehicles across the UK. Through the platform, car dealerships and rental
companies list ‘jobs’ – vehicles that need moving to another retailer site or a customer – and logistics providers bid for the jobs via a live
auction process. This acquisition is an extension of Auto Trader’s overall strategy of using digital technology to improve efficiencies for
retailer customers.

The total cash consideration paid of £12.2 million excludes acquisition costs of £0.2 million which were recognised within administrative
expenses in the Consolidated income statement.

The following table provides a reconciliation of the amounts included in the Consolidated statement of cash flows:

Cash paid for subsidiary

Less: cash acquired

Net cash outflow

From the period from acquisition to 31 March 2018, MTD contributed revenue of £1.1 million, and a loss of £0.5 million (after an amortisation
charge of £1.0 million) to the Group’s results.

2018
£m

12.2

(0.3)

11.9

Auto Trader Group plc Annual Report and Financial Statements 2019 | 123

Strategic reportGovernanceFinancial statements30. Business combinations continued

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 no material adjustments from book value were made to existing assets and liabilities. The period in which
measurement adjustments could be made has now closed on this acquisition and the final goodwill calculation is summarised below:

Intangible assets recognised on acquisition:

Customer relationships

Non-compete agreement

Website

Deferred tax liability arising on intangible assets

Intangible assets and related deferred tax

Current assets

Trade and other receivables

Cash and cash equivalents

Current assets

Current liabilities

Total net assets acquired

Goodwill on acquisition

Total assets acquired

Cash consideration

Fair value
£m

3.2

0.6

0.4

(0.7)

3.5

0.7

0.3

1.0

(0.8)

3.7

8.5

12.2

The goodwill recognised on acquisition relates to value arising from intangible assets that are not separately identifiable under IFRS 3. This
represents synergies expected to arise from combining with the existing business of Auto Trader Limited. None of the acquired intangible
assets or goodwill is expected to be deductible for tax purposes.

In addition to the goodwill recognised, the customer relationships, non-compete agreement and website obtained through the acquisition
met the requirements to be separately identifiable under IFRS 3.

31. Financial instruments

Financial assets

Net trade receivables

Accrued income

Other receivables

Cash and cash equivalents

Total

Note

2019
£m

24.9

28.0

0.3

5.9

59.1

2018
£m

25.4

26.7

0.1

4.3

56.5

Credit risk
The carrying amount of financial assets, previously recognised as loans and receivables under IAS 39 now classified as amortised cost under
IFRS 9, represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2019 was £59.1m (2018: £56.5m).

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:

Ireland

Total

Note

2019
£m

24.5

0.4

24.9

2018
£m

24.9

0.5

25.4

124 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continuedThe maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:

Retailers

Manufacturer and Agency

Other

Total

2019
£m

20.4

3.2

1.3

24.9

2018
£m

21.7

3.0

0.7

25.4

The Group’s most significant customer accounts for £0.5m (2018: £0.6m) of net trade receivables as at 31 March 2019.

Expected credit loss assessment
Expected credit losses are measured using a provisioning matrix based on the reason the trade receivable is past due. The provision matrix
rates are based on actual credit loss experience over the past three years and adjusted, when required, to take into account current macro-
economic factors. For certain customers the Group applies experienced credit judgement that is determined to be predictive of the risk of
loss to assess the expected credit loss, taking into account external ratings, financial statements and other available information. The
following table provides information about the exposure to credit risk and expected credit losses for trade receivables from individual
customers as at 31 March 2019.

Weighted-
average loss
rate

Gross carrying
amount
£m

Loss
allowance
£m

Credit-
impaired

Current

Past due 1–30 days

Past due 31–60 days

Past due 61–90 days

More than 91 days past due

0.4%

0.7%

8.5%

43.7%

97.0%

21.5

2.9

0.4

0.2

2.0

27.0

Comparative information under IAS 39
The ageing of trade receivables at 31 March 2018 under IAS 39 was as follows:

Current

Past due 1–30 days

Past due 31–60 days

Past due 61–90 days

More than 91 days past due

(0.1)

–

(0.1)

(1.9)

(2.1)

Gross
£m

22.0

2.9

0.5

–

3.4

28.8

Impairment
£m

(0.1)

–

(3.3)

(3.4)

The movement in the allowance for impairment in respect of trade receivables during the year was as follows. Comparative amounts for 2018
represent the allowance account for impairment losses under IAS 39:

At 1 April

Charged during the year

Utilised during the year

At 31 March

Note

2019
£m

3.4

0.8

(2.1)

2.1

2018
£m

3.1

2.0

(1.7)

3.4

The Group has identified specific balances for which it has provided an impairment allowance on a line by line basis across all ledgers, in
both years. The allowance accounts in respect of trade receivables are used to record impairment losses unless the Group is satisfied
that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written off against the financial
asset directly.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 125

Strategic reportGovernanceFinancial statements31. Financial instruments continued

Cash and cash equivalents
Cash balances are held with the Group’s principal bankers, Royal Bank of Scotland, and are used for working capital purposes. The Directors do
not consider deposits at this institution to be at risk.

Financial liabilities

2019

2018 (restated)

As per
balance sheet
£m

Future
interest cost
£m

Total
cash flows
£m

As per
balance sheet
£m

Future
interest cost
£m

Total
cash flows
£m

Trade and other payables

Borrowings (gross of debt issue costs)

Leases

Total

15.6

313.0

16.1

344.7

–

3.6

15.6

313.0

19.7

348.3

14.9

343.0

18.2

376.1

–

4.6

14.9

343.0

22.8

380.7

Trade and other payables are as disclosed within note 20, excluding other taxation and social security liabilities and deferred income.

IFRS 7 requires the contractual future interest cost of a financial liability to be included within the above table. As disclosed in note 21 of these
consolidated financial statements, all borrowings are currently drawn under a syndicated debt arrangement and repayments can be made at
any time without penalty. As such there is no contractual future interest cost. Interest is payable on borrowings’ drawn amounts at a rate of
LIBOR prevailing at the time of drawdown plus the applicable margin, which ranges from 1.2% and 2.1%. Interest paid in the year in relation to
borrowings amounted to £6.6 million.

The Company had no derivative financial liabilities in either year. It is not expected that the cash flows included in the maturity analysis could
occur earlier or at significantly different amounts.

Liquidity risk
The maturity of financial liabilities based on contracted cash flows is shown in the table below. This table has been drawn up using the
undiscounted cash flows of financial liabilities based on the earliest date on which the Group is obliged to pay. The table includes both interest
and principal cash flows. Floating rate interest payments have been calculated using the relevant interest rates prevailing at the year end,
where applicable.

As at 31 March 2019

Due within one year

Due within one to two years

Due within two to five years

Due after more than five years

Total

As at 31 March 2018 (restated)

Due within one year

Due within one to two years

Due within two to five years

Due after more than five years

Total

Trade and
other payables
£m

Borrowings
£m

Leases
£m

15.6

–

15.6

–

313.0

–

313.0

2.7

7.5

6.8

19.7

Trade and
other payables
£m

Borrowings
£m

Leases
£m

14.9

–

343.0

–

14.9

343.0

3.1

2.7

7.8

9.2

22.8

Total
£m

18.3

2.7

320.5

6.8

348.3

Total
£m

18.0

345.7

7.8

9.2

380.7

Fair values
The fair values of all financial instruments in both years are equal to the carrying values.

126 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued32. Net debt

Analysis of net debt
Net debt is calculated as total borrowings net of unamortised bank facility fees, less cash and cash equivalents. Non-cash changes represent
the effects of the recognition and subsequent amortisation of fees relating to the bank facility, changing maturity profiles, and new leases
entered into during the year.

March 2019

Debt due after more than one year

Accrued interest

Lease liabilities

Total debt and lease financing

Cash and cash equivalents

Net debt

March 2018 (restated)

Debt due after more than one year

Accrued interest

Lease liabilities

Total debt and lease financing

Cash and cash equivalents

Net debt

At
1 April 2018
£m

Cash flow
£m

Non-cash
changes
£m

At
31 March 2019
£m

340.8

0.5

18.2

359.5

(4.3)

355.2

(30.0)

(6.6)

(3.1)

(39.7)

(1.6)

(41.3)

(0.5)

6.6

1.0

7.1

–

7.1

310.3

0.5

16.1

326.9

(5.9)

321.0

At
1 April 2017
£m

Cash flow
£m

Non-cash
changes
£m

At
31 March 2018
£m

357.8

0.5

19.7

378.0

(8.0)

370.0

(20.0)

(6.7)

(2.3)

(29.0)

3.7

(25.3)

3.0

6.7

0.8

10.5

–

10.5

340.8

0.5

18.2

359.5

(4.3)

355.2

Total

365.1

(57.6)

(343.0)

447.1

(134.1)

(3.3)

(6.6)

(3.1)

(87.7)

(5.8)

(0.5)

1.9

Reconciliation of movements in liabilities to cash flows arising from financing activities

Balance as of 1 April 2018

Changes from financing cash flows

Dividends paid to Company’s shareholders

Repayment of Syndicated Term Loan

Drawdown of Syndicated revolving credit facility

Repayment of Syndicated revolving credit facility

Payment of refinancing fees

Payment of interest on borrowings

Payment of lease liabilities

Purchase of own shares for cancellation

Purchase of own shares for treasury

Payment of fees on repurchase of own shares

Proceeds from exercise of share-based incentives

Liabilities

Equity

Borrowings
and accrued
interest

Finance
lease
liabilities

Share
capital

Retained
earnings

Own shares
held

Other
reserves

341.3

18.2

9.5

1,042.7

(16.9)

(1,029.7)

–

(343.0)

447.1

(134.1)

(3.3)

(6.6)

–

(3.1)

–

(0.2)

–

(57.6)

–

(87.7)

–

(0.5)

1.9

–

(5.8)

–

0.2

–

Total changes from financing cash flows

(39.9)

(3.1)

(0.2)

(143.9)

(5.8)

0.2

(192.7)

Other changes - liability related

Interest expense

Other

Total liability related other changes

Total equity related other changes

Balance as of 31 March 2019

9.3

0.1

9.4

–

310.8

0.9

–

0.9

–

16.0

–

197.0

6.2

–

(0.1)

9.3

1,095.8

(16.5)

(1,029.6)

10.2

0.1

10.3

203.1

385.8

Auto Trader Group plc Annual Report and Financial Statements 2019 | 127

Strategic reportGovernanceFinancial statements32. Net debt continued

Balance as of 1 April 2017

Changes from financing cash flows

Dividends paid to Company’s shareholders

Repayment of Syndicated Term Loan

Payment of interest on borrowings

Payment of lease liabilities

Purchase of own shares for cancellation

Payment of fees on repurchase of own shares

Other changes - liability related

Interest expense

Other

Total liability related other changes

Total equity related other changes

Balance as of 31 March 2018

33. Contingent liabilities

Liabilities

Equity

Borrowings

Finance
lease
liabilities

Share
capital /
premium

Retained
earnings

Own shares
held

Other
reserves

358.3

19.7

9.8

1,017.1

(16.9)

(1,030.2)

–

(20.0)

(6.7)

–

(2.3)

–

9.8

(0.1)

9.7

–

0.8

–

(0.3)

–

(0.3)

–

(52.2)

–

(96.2)

(0.5)

(148.9)

–

174.5

–

0.3

–

0.3

–

0.2

341.3

18.2

9.5

1,042.7

(16.9)

(1,029.7)

Total

357.8

(52.2)

(20.0)

(6.7)

(2.3)

(96.2)

(0.5)

(177.9)
’

10.6

(0.1)

10.5

174.7

365.1

Total changes from financing cash flows

(26.7)

(2.3)

The Group previously reported a contingent liability in respect of the rate of VAT applicable to our insurance intermediary revenue within
Consumer Services, dating back from 2013 onwards. In July 2018 HMRC confirmed the Group’s treatment of insurance intermediary revenue for
VAT purposes was appropriate. The Group did not incur any liability and the enquiry in respect of this matter is now closed.

34. Related party transactions

Auto Trader Auto Stock Limited
The following related party transactions were entered into by subsidiary companies during the year under the terms of a joint venture agreement
with Cox Automotive UK Limited.

At 31 March 2019 the outstanding other receivable balance from Auto Trader Auto Stock Limited was £0.1m (2018: £nil). The receivable relates to
staff costs paid on behalf of Auto Trader Auto Stock Limited.

At 31 March 2019 the outstanding other creditor balance with Auto Trader Auto Stock Limited was £0.2m. The creditor relates to amounts invoiced
to customers on behalf of Auto Trader Auto Stock Limited.

All balances will be settled in cash. There were no provisions for doubtful related party receivables at 31 March 2019 (2018: £nil) and no charge to
the income statement in respect of doubtful related party receivables (2018: £nil).

During the year a subsidiary company provided data services to Auto Trader Auto Stock Limited under a licence agreement. The value of services
provided was £0.1m (2018: £nil). At 31 March 2019, deferred income outstanding in relation to the licence agreement was £11.2m (2018: £nil).

Other related party transactions
During the year, the Group transacted with Burns Sheehan Limited, a third party in which a Director holds a shareholding. This company is
deemed to be a related party. Costs incurred were in respect of recruitment consultancy services which amounted to £1,250 (2018: £34,737).
There were no amounts outstanding at the year end. All transactions were completed on an arm’s length basis.

Key Management personnel compensation has been disclosed in note 8.

128 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the consolidated financial statements continued35. Subsidiaries and joint ventures

Subsidiaries
At 31 March 2019 the Group’s subsidiaries were:

Subsidiary undertakings

Country of
registration or
incorporation

Principal activity

Auto Trader Holding Limited 1

England and Wales

Financing company

Auto Trader Limited 1

England and Wales

Online marketplace

Trader Licensing Limited 1

England and Wales

Dormant company

Webzone Limited 2

Republic of Ireland

Online marketplace

Motor Trade Delivery Limited 3

England and Wales

Non-trading

Class of
shares held

Ordinary

Percentage
owned by the
parent

Percentage
owned by the
Group

100%

–

100%

’

1 Registered office address is 4th floor, 1 Tony Wilson Place, Manchester, M15 4FN.
2 Registered office address is Paramount Court, Corrig Road, Sandyford Industrial Estate, Dublin 18, D18 R9C7.
3 Registered office address is Hill House, 1 Little New Street, London, EC4A 3TR.

A guarantee exists in respect of the wholly owned subsidiary that is incorporated in the Republic of Ireland and consolidated within these
financial statements. They have availed themselves of an exemption from filing their individual financial statements in accordance with
Section 357 of the Companies (Amendment) Act, 2014, Ireland.

All subsidiaries have a year end of 31 March.

Joint ventures
At 31 March 2019 the Group’s interests in joint ventures were:

Joint ventures

Country of
registration or
incorporation

Principal activity

Dealer Auction (Holdings) Limited 1

England and Wales

Holding company

Dealer Auction Limited 1

England and Wales

Online marketplace

Auto Trader Autostock Limited 1

England and Wales

Online marketplace

Dealer Auction Services Limited 1

Republic of Ireland

Online marketplace

Class of
shares held

Ordinary

Percentage
owned by the
parent

Percentage
owned by the
Group

–

49%

1 Registered office address is Central House, Leeds Road, Rothwell, Leeds, West Yorkshire, England, LS26 0JE.

All joint ventures have a year end of 31 December which is consistent with the year end of the majority shareholder.

36. Post balance sheet event

On 5 June 2019, the Group extended the term for £316.5m of the Syndicated revolving credit facility for one year. The Syndicated revolving
credit facility will now terminate in two tranches:

– £316.5m will mature in June 2024; and

– £83.5m will mature at the original termination date of June 2023.

There is no change to the interest rate payable and there is no requirement to settle all, or part, of the debt earlier than the termination dates
stated.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 129

Strategic reportGovernanceFinancial statementsCompany balance sheet
At 31 March 2019

Fixed assets

Investments

Current assets

Debtors

Cash and cash equivalents

Creditors: amounts falling due within one year

Net current assets

Net assets

Capital and reserves

Called-up share capital

Own shares held

Capital redemption reserve

Retained earnings

Total equity

Note

2019
£m

1,216.0

415.9

–

415.9

2018
£m

1,212.9

440.7

0.2

440.9

(411.4)

(288.4)

4.5

152.5

1,220.5

1,365.4

9.3

(16.5)

0.7

1,227.0

1,220.5

9.5

(16.9)

0.5

1,372.3

1,365.4

The financial statements were approved by the Board of Directors on 6 June 2019 and authorised for issue.

Nathan Coe
Chief Financial Officer and Chief Operating Officer-designate
6 June 2019

Auto Trader Group plc

Registered number 09439967

130 | Auto Trader Group plc Annual Report and Financial Statements 2019

Company statement of changes in equity
For the year ended 31 March 2019

Balance at March 2017

Loss for the year

Total comprehensive expense, net of tax

Transactions with owners:

Purchase and cancellation of own shares

Dividends paid

Share-based payments

Deferred tax on share-based payments

Total transactions with owners recognised directly in equity

(0.3)

Balance at March 2018

Loss for the year

Total comprehensive expense, net of tax

Transactions with owners:

Purchase and cancellation of own shares

Dividends paid

Share-based payments

Exercise of employee share schemes

Transfer of shares from ESOT

Acquisition of treasury shares

Tax on share-based payments

Total transactions with owners recognised directly in equity

Balance at March 2019

9.5

–

(0.2)

–

(0.2)

9.3

Share
capital
£m

9.8

Own shares
held
£m

(16.9)

–

(0.3)

–

Capital
redemption
reserve
£m

0.2

–

0.3

–

0.3

0.5

–

0.2

–

0.2

0.7

Retained
earnings
£m

1,519.1

(1.4)

(96.7)

(52.2)

3.3

0.2

(145.4)

Total
equity
£m

1,512.2

(1.4)

(96.7)

(52.2)

3.3

0.2

(145.4)

1,372.3

1,365.4

(0.2)

(88.2)

(57.6)

4.7

(3.7)

(0.6)

–

0.3

(145.1)

(0.2)

(88.2)

(57.6)

4.7

1.9

–

(5.8)

0.3

(144.7)

1,227.0

1,220.5

–

(16.9)

–

5.6

0.6

(5.8)

–

0.4

(16.5)

Auto Trader Group plc Annual Report and Financial Statements 2019 | 131

Strategic reportGovernanceFinancial statementsNotes to the Company financial statements

1. Accounting policies

Auto Trader Group plc is a public limited company which is listed on the London Stock Exchange and is domiciled and incorporated in the
United Kingdom under the Companies Act 2006. The Company was incorporated on 13 February 2015 and adopted FRS 102 from that date.

Statement of compliance and basis of preparation
The Company financial statements of Auto Trader Group plc have been prepared in compliance with United Kingdom Accounting Standards,
including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’
(‘FRS 102’) and the Companies Act 2006. The Company financial statements have been prepared under the historic cost convention, as
modified for the revaluation of certain financial assets and liabilities through profit or loss. The current year financial information presented is
at and for the year ended 31 March 2019. The comparative financial information presented is at and for the year ended 31 March 2018.

The Directors have used the going concern principle on the basis that the current profitable financial projections and facilities of the
consolidated Group will continue in operation for a period not less than 12 months from the date of this report.

The Company financial statements have been prepared in sterling (£), which is the functional and presentational currency of the Company, and
have been rounded to the nearest hundred thousand (£0.1m) except where otherwise indicated.

As permitted by Section 408 of the Companies Act 2006, an entity profit and loss account is not included as part of the published consolidated
financial statements of Auto Trader Group plc. The loss for the financial period dealt with in the financial statements of the parent Company
was £0.2m (2018: loss of £1.4m).

As the Company is included in the consolidated financial statements and is considered to be a qualifying entity under FRS 102 paragraphs 1.8 to
1.12, the following exemptions have been applied:

– no separate parent Company statement of comprehensive income with related notes has been included;

– no separate parent Company cash flow statement with related notes has been included; and

– Key Management personnel compensation has not been included a second time.

Amounts paid to the Company’s auditors in respect of the statutory audit were £58,350 (2018: £56,650). The charge was borne by a subsidiary
company and not recharged.

Estimation techniques
The preparation of financial statements in conformity with FRS 102 requires the use of certain critical accounting estimates. It also requires
management to exercise their judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are:

– share-based payments; and

– carrying value of investments.

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are
accounted for as equity-settled share-based payment transactions. The accounting policies of such arrangements are disclosed in note 1 of
the Group accounts. The fair value of services received in return for share options is calculated with reference to the fair value of the award on
the date of grant. Black-Scholes and Monte Carlo models have been used where appropriate to calculate the fair value and the Directors have
therefore made estimates with regard to the inputs to that model and the period over which the share award is expected to vest (note 29 of the
consolidated Group financial statements).

Where equity-settled share-based payments are granted to the employees of subsidiary companies, the fair value of the award is treated as
a capital contribution by the Company and the investments in subsidiaries are adjusted to reflect this capital contribution.

The Group considers annually whether the carrying value of investments has suffered any impairment in accordance with the accounting
policy stated. The recoverable amounts of investments have been determined based on value-in-use calculations, which require the use of
estimates.

Investments in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. Annually, the Directors consider whether any events or
circumstances have occurred that could indicate that the carrying amount of fixed asset investments may not be recoverable. If such
circumstances do exist, a full impairment review is undertaken to establish whether the carrying amount exceeds the higher of net realisable
value or value in use. If this is the case, an impairment charge is recorded to reduce the carrying value of the related investment.

Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction
from the proceeds.

132 | Auto Trader Group plc Annual Report and Financial Statements 2019

Shares held by the Employee Share Option Trust
Shares in the Company held by the Employee Share Option Trust (‘ESOT’) are included in the balance sheet at cost as a deduction from equity.

Taxation
UK corporation tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred on the
balance sheet date.

A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all evidence available, it can be
regarded as more likely than not that there will be suitable taxable profits against which to recover carried-forward tax losses and from which
the future reversal of underlying timing differences can be deducted.

Deferred tax is measured at the average rates that are expected to apply in the periods in which the timing differences are expected to reverse
based on the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on an
undiscounted basis.

Financial instruments
The Company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

a) Financial assets
Basic financial assets, including trade and other receivables, cash and bank balances and investments in commercial paper, are initially
recognised at transaction price (unless the arrangement constitutes a financing transaction) and are subsequently carried at amortised cost
using the effective interest method.

Financial assets which constitute a financing transaction are measured at the present value of the future receipts discounted at a market
rate of interest. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that
investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost
less impairment.

At the end of each reporting period financial assets measured at amortised cost are assessed for objective evidence of impairment. If an
asset is impaired the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows
discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed.
The reversal is such that the current carrying amount does not exceed what the carrying amount would have been had the impairment not
previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised when (a) the contractual rights to the cash flows from the asset expire or are settled, or (b) substantially all
the risks and rewards of the ownership of the asset are transferred to another party or (c) despite having retained some significant risks and
rewards of ownership, control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an
unrelated third party without imposing additional restrictions.

b) Financial liabilities
Basic financial liabilities, including trade and other payables, bank loans, loans from fellow Group companies and preference shares that are
classified as debt, are initially recognised at transaction price, unless the arrangement constitutes a financing transaction, where the debt
instrument is measured at the present value of the future receipts discounted at a market rate of interest. Debt instruments are subsequently
carried at amortised cost, using the effective interest rate method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all
of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the
period of the facility to which it relates.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current
liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective
interest method.

Dividend distribution
Dividends to the Company’s shareholders are recognised as a liability in the Company’s financial statements in the period in which the
dividends are approved by the Company’s shareholders in the case of final dividends. In respect of interim dividends, these are recognised
once paid.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 133

Strategic reportGovernanceFinancial statements2. Directors’ emoluments

The Company has no employees other than the Directors. Full details of the Directors’ remuneration and interests are set out in the Directors’
remuneration report on pages 64 to 74.

3. Investments in subsidiaries

At beginning of the period

Additions

At end of the period

2019
£m

1,212.9

3.1

1,216.0

2018
£m

1,210.5

2.4

1,212.9

The additions in the year and prior year relate to equity-settled share-based payments granted to the employees of subsidiary companies.

Subsidiary undertakings are disclosed within note 35 to the consolidated financial statements.

4. Debtors

Amounts owed by Group undertakings

Deferred tax asset

Total

Amounts owed by Group undertakings are non-interest-bearing, unsecured and have no fixed date of repayment.

5. Cash and cash equivalents

Cash at bank and in hand

6. Creditors: amounts falling due within one year

Amounts owed to Group undertakings

Accruals and deferred income

Total

2019
£m

414.7

1.2

415.9

2019
£m

–

2019
£m

409.7

1.7

411.4

2018
£m

439.9

0.8

440.7

2018
£m

0.2

2018
£m

287.3

1.1

288.4

Amounts owed to Group undertakings are non-interest-bearing, unsecured and have no fixed date of repayment.

7. Financial instruments

Financial instruments utilised by the Company during the year ended 31 March 2019 and the year ended 31 March 2018 may be analysed as follows:

Financial assets

Financial assets measured at amortised cost

Financial liabilities

Financial liabilities measured at amortised cost

2019
£m

414.7

2019
£m

411.4

2018
£m

439.9

2018
£m

288.4

Current assets and liabilities
Financial instruments included within current assets and liabilities (excluding cash and borrowings) are generally short term in nature and
accordingly their fair values approximate to their book values.

134 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the Company financial statements continued8. Dividends

Dividends declared and paid by the Company were as follows:

2017 final dividend paid

2018 interim dividend paid

2018 final dividend paid

2019 interim dividend paid

2019

Pence
per share

–

4.0

2.1

6.1

2018

Pence
per share

3.5

1.9

–

5.4

£m

–

37.9

19.7

57.6

£m

34.0

18.2

–

52.2

The 2019 interim dividend paid on 25 January 2019 was £19.7m. The 2018 final dividend paid on 28 September 2018 was £37.9m.

The Directors’ policy with regard to future dividends is set out in the Strategic report on page 29.

9. Called-up share capital

Share capital

Allotted, called-up and fully paid ordinary shares of 1p each

At 1 April

Purchase and cancellation of own shares

Total

Number
’000

952,161

(18,963)

933,198

2019

Amount
£m

9.5

(0.2)

9.3

Number
’000

978,971

(26,810)

952,161

2018

Amount
£m

9.8

(0.3)

9.5

Included within shares in issue at 31 March 2019 are 565,555 (2018: 932,761) shares held by the ESOT and 3,996,041 (2018: 4,194,989) shares held in
treasury, as detailed in note 10.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 135

Strategic reportGovernanceFinancial statements10. Own shares held

Own shares held – £m

Own shares held as at 1 April 2017 and 31 March 2018

Own shares held at 1 April 2018

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives

Own shares held as at 31 March 2019

Own shares held – number

Own shares held as at 1 April 2017

Transfer of shares from ESOT

Share-based incentives

Own shares held at 31 March 2018

Own shares held at 1 April 2018

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives

Own shares held as at 31 March 2019

11. Related parties

ESOT shares
reserve
£m

(1.4)

0.6

–

(0.8)

Treasury
shares
£m

(15.5)

–

(5.8)

5.6

(15.7)

Total
£m

(16.9)

0.6

(5.8)

5.6

(16.5)

ESOT shares
reserve
Number of
shares

948,924

(16,163)

–

Treasury
shares
Number of
shares

4,203,277

–

(8,288)

Total
number of
own shares
held

5,152,201

(16,163)

(8,288)

932,761

4,194,989

5,127,750

932,761

(367,206)

4,194,989

–

5,127,750

(367,206)

–

1,266,000

(1,464,948)

565,555

3,996,041

4,561,596

During the year, a management charge of £4.6m (2018: £2.1m) was received from Auto Trader Limited in respect of services rendered.

At the year end, balances outstanding with other Group undertakings were £414.7m and £409.7m respectively for debtors and creditors
(2018: £439.9m and £287.3m) as set out in notes 4 and 6.

12. Post balance sheet event

On 5 June 2019, a Group entity extended £316.5m of the Syndicated revolving credit facility by an additional year. The facility will now terminate
in two tranches:

– £316.5.0m in June 2024; and

– £83.5m at the original termination date of June 2023.

There is no change to the interest rate payable and there is no requirement to settle all, or part, of the debt earlier than the termination dates
stated. The Company will continue to be a guarantor for the facility.

136 | Auto Trader Group plc Annual Report and Financial Statements 2019

Notes to the Company financial statements continuedShareholder information

Registered office and headquarters
Auto Trader Group plc
4th Floor, 1 Tony Wilson Place
Manchester
M15 4FN
United Kingdom
Registered number: 09439967
Tel: +44 (0) 161 669 9888
Web: autotrader.co.uk
Web: plc.autotrader.co.uk
Investor relations: ir@autotrader.co.uk

Company Secretary
Claire Baty

Joint stockbrokers
Bank of America Merrill Lynch
2 King Edward Street
London
EC1A 1HQ

Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT

Independent auditors
KPMG LLP
1 St. Peter’s Square
Manchester
M2 3AE

Registrar
Link Asset Services
34 Beckenham Road
Beckenham
BR3 4TU

Tel UK: +44 (0) 871 664 0300
(calls cost 12p per minute plus network extras;
lines are open 9.00am to 5.30pm Monday to Friday,
excluding public holidays in England and Wales)

Tel international: +44 (0) 371 664 0300
(charged at the appropriate international rate)

Web: linkassetservices.com
Email: enquiries@linkgroup.co.uk

Financial calendar 2019–2020
Annual General Meeting
2020 Half-year results
2020 Full-year results

19 September 2019
7 November 2019
4 June 2020

Shareholder enquiries
Our registrars will be pleased to deal with any questions
regarding your shareholdings (see contact details in the opposite
column). Alternatively, if you have internet access, you can access
www.autotradershares.co.uk where you can view and manage all
aspects of your shareholding securely including electronic
communications, account enquiries or amendment to address.

Investor relations website
The investor relations section of our website, plc.autotrader.co.uk/
investors, provides further information for anyone interested in
Auto Trader. In addition to the Annual Report and Financial
Statements and share price, Company announcements including the
full-year results announcements and associated presentations are
also published there.

Cautionary note regarding forward-looking statements
Certain statements made in this Report are forward-looking
statements. Such statements are based on current expectations and
assumptions and are subject to a number of risks and uncertainties
that could cause actual events or results to differ materially from any
expected future events or results expressed or implied in these
forward-looking statements. They appear in a number of places
throughout this Report and include statements regarding the
intentions, beliefs or current expectations of the Directors
concerning, amongst other things, the Group’s results of operations,
financial condition, liquidity, prospects, growth, strategies and the
business. Persons receiving this Report should not place undue
reliance on forward-looking statements. Unless otherwise required
by applicable law, regulation or accounting standard, Auto Trader
Group plc does not undertake to update or revise any
forward-looking statements, whether as a result of new information,
future developments or otherwise.

Auto Trader Group plc Annual Report and Financial Statements 2019 | 137

Strategic reportGovernanceFinancial statementsNotes

138 | Auto Trader Group plc Annual Report and Financial Statements 2019

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Manchester
Auto Trader Group plc
4th Floor, 1 Tony Wilson Place
Manchester
M15 4FN
United Kingdom

+44 (0) 161 669 9888

London
Auto Trader Group plc
3rd Floor, 2 Pancras Square
London
N1C 4AG
United Kingdom

+44 (0) 20 3747 7100

autotrader.co.uk
plc.autotrader.co.uk