AutoWeb Annual Report 2020

FY2020 Annual Report · AutoWeb

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Leaders in our market

AUTO TRADER GROUP PLC
Annual Report and Financial Statements 2020

WHO WE ARE
Auto Trader Group plc is the UK’s largest
digital automotive marketplace.

WHAT WE DO
There are 10 million transactions in the
automotive market 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 alike.

GOVERNANCE
60 Governance overview
62 Board of Directors
64 Corporate governance statement
70
73 Report of the Audit Committee
77 Directors’ remuneration report
90 Directors’ report

Report of the Nomination Committee

Business at a glance
Assessing the impact of COVID-19
Chairman’s statement
Chief Executive Officer’s statement

STRATEGIC REPORT
2
4
8
12
14 How we create value
16 Market overview
20 Our strategy
22 Our strategy in action
28 How we engage with our stakeholders
30 Key performance indicators
34 Operational review
36 Financial review
40 Making a difference
52 How we manage risk
54 Principal risks and uncertainties

plc.autotrader.co.uk

Auto Trader Insight

@ATInsight

FINANCIAL STATEMENTS
94

Independent auditor’s report to the
members of Auto Trader Group plc
100 Consolidated income statement
Consolidated statement of
101
comprehensive income
102 Consolidated balance sheet
103

Consolidated statement of changes
in equity
Consolidated statement of cash flows
Notes to the consolidated financial
statements

104
105

143 Company balance sheet
144

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

145

150 Unaudited five-year record
151 Shareholder information

What does it mean
to be a leader?

To us, leading the way is all about improving
tomorrow’s car market to ensure it’s a fair and
transparent one. One that’s digital and easy
to navigate for everybody.

That can only be achieved if it’s based on a
foundation of trust. Auto Trader prides itself on
being the most trusted automotive marketplace.
It is the go-to destination for car buyers and has
been for the past 40 years.

This core belief sits at the heart of our business
and defines our purpose.

Turn over to read more

Evolving the full page advert
We have continued to improve the
design and the information we show
in our full page adverts to ensure
buyers get transparent, helpful
information about the price, mileage
and the specifications of a vehicle.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020BUSINESS AT A GLANCE

Our purpose
To improve car buying in the
UK, whilst also evolving the
wider automotive ecosystem.

Our mission
To lead the future of the UK’s digital
automotive marketplace and become
the UK’s most admired digital business.

Our strategy
In order to achieve our purpose and mission, our strategy focuses on three
growth horizons:

Core

Adjacent

Future

We aim to significantly improve
UK car buying focused around
our core marketplace

• Evolve our search experience

and enable customers to
increase their prominence
• Embed our data and insight
with retailers and car buyers

• Migrate our platform to

the cloud

We’ve identified adjacent market
opportunities which leverage
either our large consumer audience
or our relationships with retailers
and manufacturers

• Grow engagement in our new

car marketplace

• Develop a more efficient

way to source, dispose and
move vehicles

We believe future opportunities
exist in creating an online transaction
journey for car buyers

• Facilitate the full transaction
online including facilitating
a part-exchange and the finance
on the vehicle

Read more P60

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020

Strategic highlights

Financial highlights

Operational highlights

NEW CAR
We successfully monetised our new car
proposition, with over 1,000 retailers paying
to advertise new cars on our marketplace by
the end of the year. Through the year there
was an average of over 31,000 physical new
cars advertised on our platforms.

LAUNCH OF RETAILER PRODUCTS
As part of our annual pricing event we
launched two new products to retailers:
Text Chat and our Vehicle Check product
that we run in partnership with Experian.
These products provide benefit for both
consumers and retailers, helping to build
trust between the two.

UPSELL OF PACKAGES
We are pleased to see that stock penetration
of our Advanced and Premium packages
continues to increase, reaching 23% (2019: 19%)
as retailers continue to see the benefits of
paying more to appear with a greater level
of prominence on site.

KEERESOURCES ACQUISITION
We acquired KeeResources, a trusted
provider of software, data, and digital
solutions to the automotive industry;
securing the vehicle data which underpins
much of our core platform.

DEALER AUCTION
Dealer Auction, our joint venture with Cox
Automotive, completed the re-platforming
and integration of the three component
businesses in early 2020. Moving on to
Auto Trader’s platform sets the business
up to leverage the scale of both Auto Trader
and Cox Automotive.

Revenue
£m

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

£368.9m
+4%

50.8m
+3%

2020

2019

2018

£368.9m

2020

£355.1m

£330.1m

2019

2018

50.8m

49.1m

48.7m

Operating profit
£m

£258.9m
+6%

Advert views
Average number per month (millions)

234.8m
-2%

2020

Margin 70%

2019

Margin 69%

2018

Margin 67%

£258.9m

2020

£243.7m

£221.3m

2019

2018

Live car stock
Average number per month

478,000
+4%

22.19p

2020

21.00p

17.74p

2019

2018

Basic EPS
pence per share

22.19p
+6%

2020

2019

2018

KPIs P30

234.8m

238.8m

245.8m

478,000

461,000

453,000

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTASSESSING THE IMPACT OF COVID-19

Supporting
our industry

As might be expected we start with an assessment of how our
business has been impacted by COVID-19. This section describes the
measures we have put in place to support our industry through this
period of uncertainty. It also details the actions taken to ensure we
have the liquidity to maintain the long-term viability of the Group.

Since the beginning of the global pandemic our priorities have been to:
protect our people; support our customers; ensure we are able
to emerge from lockdown quickly; and continue to make progress
against our long-term strategic goals. Much to the credit of our
people, we have continued to operate all aspects of our business
to a high standard and believe we are well placed to prosper
coming out of the other side of the pandemic.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Supporting our customers
Between 24 March 2020 and various points in June depending
on location, our customers, who are predominantly vehicle
retailers, were required to close their showrooms. Those
customers ranged from large multi-site groups through to
small independent retailers and sole traders. Our platforms
are also used by private sellers, for whom selling a car is likely
to have fallen lower in their priorities, and manufacturers,
who have lowered their advertising spend due to distribution
channels being closed.

During this time, we took the decision to stop charging
our customers for an advertising service from which they
could not immediately benefit, as their showrooms were
required to close. We therefore went ‘free’ for all retailers
from 1 April throughout the period which they were unable to
open. At the time of taking this decision, ahead of Government
announcements, it seemed simple, clear and appropriate
given our intention to support our customers, many of whom
run small businesses, and to be where the UK public looks to
find their next car for the next 40 years, just as we have for
the last 40 years.

In addition to not charging our retailer customers during
the lockdown, we also extended payment terms for March
services by 60 days. This ensured Auto Trader would not be
a cash burden on its customers’ businesses during this time.

On top of this financial support, just prior to the lockdown
taking place, we implemented a stock offer so that retailers
could advertise more of their vehicles on our platform at
no additional cost. This resulted in up to 80,000 more cars
on Auto Trader. We also gave retailers access to our new
Market Insight product earlier than anticipated and created
ways for retailers to advertise their vehicles even more
effectively through the crisis with the creation of home
delivery and live video flags. Finally, from 25 March 2020
we have hosted weekly webinars, with over 3,000 unique
attendees engaging, to update the industry on what we are
seeing on our platforms and hearing from industry bodies
to help guide them through this turbulent period.

Home Trader customers and private individuals who advertise
their vehicles on the Group’s platforms were also impacted
by the lockdown restrictions. To support these customers,
we extended the tenure of all adverts that were live on 23
March 2020 to run through the lockdown period for free.

We do not believe that any other online advertising service,
of any significance, has responded more promptly, clearly
and definitively to the crisis. Our measures were well
received by customers and we hope it will help us further
deepen our relationships in the months and years ahead.

80,000

extra cars on Auto Trader as a result
of our stock offer to retailers

On 25 May 2020 the UK Government announced a lessening
of the lockdown restrictions in England, allowing retailer
forecourts to re-open from 1 June 2020. We announced on
27 May 2020 that we would provide those customers with
support as they resume trading by implementing a 25% discount
for the month of June 2020. England has subsequently been
followed by Northern Ireland (8 June 2020) and Wales (22 June
2020), while showrooms in Scotland will open on 29 June 2020.

Looking after our people
Since 17 March 2020 our employees have been working from
home. The transition to working remotely has been almost
seamless and is a testament to our systems, technology
and the can-do attitude of our employees.

We do acknowledge though that for many, working from
home will have brought additional strains and stresses. The
health and wellbeing of our employees and their families is
always front of mind, and so we offered increased support
to our people through this difficult time. Whether it be
through our counselling and employee support services,
AT active fitness classes, all company webinars or offering
increased flexibility for those who need it – we have been
finding ways in which to help the mental and physical
wellbeing of staff and keep morale high.

Whilst our customers were closed through the lockdown
period, there were still requests to be processed and
reassurance to be given, albeit at reduced levels, all
of which were met by our customer-facing teams. Our
systems, interfaces and data processing have also
been maintained to a high standard and have faced
higher demands due to the increased volume of stock
on our platform.

The Board would like to express its great appreciation
for the dedication of all our employees during this
challenging period. We hope we have been able to
provide sufficient support during this difficult time
and will continue to focus on doing so.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTASSESSING THE IMPACT OF COVID-19 CONTINUED

640

releases a week continue to be delivered
by our product and technology teams

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Supporting our partners and suppliers
Our product and technology teams have been working
throughout the lockdown period to continually develop and
innovate products alongside our partners. Whilst we are
strong believers that software is best built in an environment
when people are together and able to effortlessly collaborate,
our product and technology teams continue to deliver around
640 releases a week; only marginally lower than those levels
achieved in pre-COVID-19 times, which is a huge credit to the
teams involved.

We recognise that many of our suppliers are facing
challenging times. Therefore we have continued to pay
our suppliers as we normally would and have not delayed
any payments unless agreed with the individual supplier
in advance of payment falling due.

Controlling costs
Throughout the period that our retailer customers were
closed and our core services were free, we made the
responsible decision to reduce costs.

Our largest expense relates to our people. The level of activity
for some of our teams reduced through the lockdown period
and so we used the Coronavirus Job Retention Scheme
(‘CJRS’) and furloughed just over 25% of our employees. For
those who were placed on furlough, we supplemented the
level of support provided by the Government, such that the
large majority remained fully paid.

Towards the end of May 2020, when we had some level of
confidence in our ability to return to charging and moving
from a position of loss to making profit, our people returned
to work and we ended the reliance on this Government
support. The Government support was taken at a time when
the Group faced great uncertainty. As the crisis passes it is
the intention of the Group to repay amounts claimed through
the CJRS. We have not made any redundancies as a result
of the crisis.

Our Executive Directors have foregone 50% of their salary
during this period of uncertainty and have agreed to
forego annual bonuses earned in relation to the year
ended 31 March 2020. The remainder of the Board have
waived their fees by 50% or more for the duration of this
crisis. With a return to higher levels of revenue, salaries
and fees will return to normal levels in July 2020.

Our discretionary spend, which is primarily for marketing our
own brand and products, has been significantly reduced
through this period.

Strengthening the balance sheet
Securing finance sources
We entered the crisis with a strong balance sheet. At
31 March 2020, Net bank debt (defined as Net debt before
amortised debt fees and excluding accrued interest and
amounts owed under lease arrangements) was £275.4m.
The Group had £37.6m of cash and cash equivalents and
£313.0m of gross debt drawn under the Group’s revolving
credit facility (‘RCF’). The RCF has total commitments of
£400.0m and is available until at least June 2023.

The RCF has covenants attached to it relating to debt
cover and interest cover which are tested twice a year
and look at a 12 month rolling period:

• The Net bank debt to Consolidated EBITDA ratio must
not exceed 3.5:1. At 31 March 2020 this ratio was 1:1.

• The Consolidated EBITDA to Net Interest Payable ratio must

not be less than 3:1. At 31 March 2020 this ratio was 41:1.

Equity placing
On 1 April 2020 we raised £183.2m net of fees through
an equity placing. The number of shares placed was
46.5 million, compared to the 84.8 million shares bought
since we initiated our share buyback programme in 2016.

The equity placing has enabled us to run the Group
through the crisis in the long-term interests of our
shareholders, customers and people and, in the face of
huge uncertainty, provides an insurance policy against
a protracted lockdown or series of lockdowns.

The raise also ensures that the Group avoids constraints
that might otherwise be imposed in the medium term in
order to take advantage of strategic opportunities whilst
still meeting debt covenants. It should also allow us an
early return to our previous capital return policy at a time
when many other companies may be labouring under
increased levels of indebtedness as a result of the
COVID-19 crisis.

Other measures to conserve cash
In order to conserve cash we have taken a number of
measures including:

• Suspending our share buyback programme (year ended

31 March 2020: £62.0m inclusive of costs).

• Suspending dividend payments (year ended 31 March

2020: £64.7m).

• Deferring VAT payments (£18.4m as at June 2020).

Impact on the financial year ended 31 March 2020
On 17 March 2020, social distancing measures relating to
COVID-19 came into effect. As a result, some of the Group’s
revenue lines were adversely affected. Home Trader and
Consumer Services revenue suffered a significant drop off
in volumes after these measures were implemented, and
Manufacturer and Agency display campaigns were also
reduced. The impact on Retailer revenue in March 2020 was
limited, although a number of half price stock units were
converted into free slots as we effectively re-instated our
stock offer. Costs remained largely unimpacted, however
we took a more prudent approach to the recoverability
of receivables which resulted in an increased bad debt
charge. We also reduced marketing spend in March. We
estimate that the net effect was to reduce profit for the
month of March by approximately £3m.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTCHAIRMAN’S STATEMENT

We have a strong pipeline of new products
and services that we plan to introduce over
the coming years.

While the impact of broader changes to the
automotive industry has yet to play out, we are
committed to taking a leadership position to
bring the benefits of new technologies to car
retailers and the car buying public.

People, culture, diversity and inclusion
The business and the Board are focused
on making Auto Trader a great place to
work, a place that reflects the composition
of the community in which we work, and
a place that offers all our employees the
opportunity to realise their full potential.

In many respects I have great pride in the
progress we have made in recent years,
even though the numbers reported here
are disappointing. However, in other
respects there remains much to be done.
Let me highlight examples of each.

In the year of becoming Chairman, 37%
of employees were women. Of all the job
offers we have made in the last year 43%
have been to women. Only our high rate
of staff retention holds us back from
achieving our goal of employing equal
numbers of women and men, a goal we
have achieved at the Board level for the
first time this year.

During the last year our gender pay
gap has widened. This is disappointing,
though much of the cause is an unintended
consequence of women representing a far
higher proportion of our new hires and also
the departure of a senior woman who was
promoted to the post of CEO of our joint
venture with Cox Automotive.

An area where there is much to be done
is ensuring that members of the BAME
community are able to contribute to all
levels of our business but especially at
senior levels and on the Board.

Environment
For the past few years, we have had a clear
and focused ESG strategy, which we call
‘Make a Difference’. This strategy, which
has traditionally been employee-driven
and Board agreed, focuses on our people,
our communities and how we do business.
However, our strategy hasn’t really
focused much on the wider environment.
To begin to address this we have begun
to report our Scope 3 emissions and are in
the process of developing wider initiatives
to ensure we play our part to safeguard
our planet. One such initiative is helping
consumers to make more environmentally
conscious vehicle decisions by improving
our onsite buying experience with more
relevant search filters and information
about electric vehicles.

ED WILLIAMS
CHAIRMAN

The business and the Board are
focused on making Auto Trader
a great place to work, a place
that reflects the composition
of the community.

Overview
The last 12 months have been a challenging
period for our customers, with significant
uncertainty in the automotive market, even
before the COVID-19 pandemic. Some of
this uncertainty has arisen from Brexit
factors, some from regulation and some
from the initial impact of what we believe
will be significant environmental and
technology-driven changes to the
automotive industry.

In this context, it is a tribute to the business
and our people that Auto Trader has been
able to deliver the results set out here.
The effects of COVID-19 were only felt
significantly in the last two weeks of the
financial year, although our accounts do
contain more cautious provisions for bad
debt than we have made in prior years.
We have achieved these results while making
continued investments in our strategic
priority areas of new car, car finance and
enabling greater efficiency in business-to-
business used car transactions. These
investments have continued even during
the COVID-19 crisis with our technology
and product teams working from home.

As a Board, we take into
account the impact of our
decisions on a wider group
of stakeholders.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
ESG IN FOCUS

Striving for greater gender balance
across our organisation

Gender diversity

As at 31 March 2019

As at 31 March 2020

% of women on the Board: 33%

% of women on the Board: 50%

Men

Women

50%

of women on the Board
as at 31 March 2020

We strive to create gender
parity across our business, and
have made some good progress
across the organisation. In the
year, we are pleased to report

that we welcomed more women
to Auto Trader; entering the
business in predominantly
early career roles or across
our technology cohorts.

Women also now make up 50%
of our Board, one of only seven
FTSE100 companies to have
gender parity as at 31 March 2020.

Board of Directors P62

Basic EPS

22.19p
+6%
(2019: 21.00p)

Dividend and capital structure
We are not recommending a final dividend,
bringing the total dividend for the year to
2.4 pence per share, an interim dividend
which was paid in January 2020.

Our long-term capital allocation policy remains
unchanged. We aim to distribute around one
third of net income as dividends and use the
majority of the remaining surplus cash to buy
back shares, while also reducing debt.

In June we returned to charging customers but
continue to monitor the ongoing environment
around COVID-19. Subject to that monitoring,
we are hopeful of an early return to our capital
allocation policy with the declaration of an
interim dividend in November.

Board changes
Trevor Mather, our CEO, retired from the
Company and stepped down from the
Board on 29 February 2020. The Board
would like to thank him for his huge
contribution to the business and wish him
well in retirement. We have devoted the
following two pages to a quantitative
and qualitative illustration of some of the
achievements and the changes over his
seven years as CEO. Trevor would be the
first to point out that these achievements
and changes are the result of the effort of
very many people.

Foremost among them is Nathan Coe,
who became our new CEO on 1 March 2020.
Nathan joined Auto Trader in 2007, making
him the Board member with the longest
service at Auto Trader. He has played a
leading role in many areas of the business,
including in recent years as Chief Operating
Officer and Chief Financial Officer. Jamie
Warner joined the Board on 1 March 2020
as Chief Financial Officer. Jamie has been
with the business since 2012, playing a
central role in preparing Auto Trader for
being a public company, developing our
finance function, as well as playing an active
operational role across our business. It goes
without saying that their first weeks have
seen huge challenges. Their performance
has vindicated the Board’s decision to
appoint them and reflects the benefits of
making appointments of people with many
years of experience within the business.

Sigga Sigurdardottir joined the Board
on 1 November 2019 as a Non-Executive
Director. With Sigga’s appointment this
year and that of Catherine Faiers, our
Chief Operating Officer, in May 2019,
half of our Board members are women.

Governance
A new Corporate Governance Code
applied to us for the first time this year.
One of the main changes was about
how we as a Board take into account the
impact of our decisions on a wider group
of stakeholders. For us, this was not just a
box-ticking exercise as we have a genuine
desire to act in a responsible way and to
consider the wider implications of our
actions. This was brought to life in a very
real way during the early stages of the
COVID-19 pandemic, when we made the
decisions outlined in the 'Assessing the
impact of COVID-19' section on pages 4
to 7, to support our customers and the
wider automotive industry. The situation
also required us to be as agile in our
governance arrangements as we are
in all other aspects of our businesses,
as we needed to make fast, decisive
actions in order to respond to the
rapidly changing environment.

Annual General Meeting
Our Annual General Meeting (‘AGM’) will be
held at 10:00am on Wednesday 16 September
2020 at 4th Floor, 1 Tony Wilson Place,
Manchester, M15 4FN. In light of the current
restrictions over public gatherings due to
COVID-19, the AGM will be run as a closed
meeting. Myself and other Directors will
join the meeting by telephone. We strongly
encourage all shareholders to cast their votes
by proxy, and to send any questions in respect
of AGM business to ir@autotrader.co.uk.

Ed Williams
Chairman
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

CHAIRMAN’S STATEMENT CONTINUED

A look back at the key achievements
of our former CEO Trevor Mather.

From privately owned
print magazine...

37.3m

Monthly average
cross platform visits

£218.9m

Revenue

£109.1m

Operating profit

25%

Of women on the Board

Establishing culture & values fit
for a leading digital business

Established a culture shaped by our
values, and one which is customer-
centric and data-driven with a focus
on an agile approach to change – and
importantly underpinned by a diverse
and inclusive workforce.

Our values
Be determined
Be reliable
Be inspirational

Be humble
Be curious

2013

2015

2014

New offices open
We created new working
areas by moving staff to
state-of-the-art offices in
central Manchester and
King’s Cross, London.

A fresh look
We enjoyed enormous brand
awareness but our logo was
ageing by the day. We created
a modern logo that’s still
recognisably Auto Trader.

The presses go quiet
The last ever issue of the
magazine is published
in June 2013.

Having worked in
the business for over
a decade, we wouldn't
be where we are
today without Trevor's
leadership. He can be
particularly proud of the
unique and passionate
culture and values he has
instilled throughout all
levels of the business.

EMPLOYEE SINCE 2009

2016

Successfully transitioning
to the London Stock Exchange

On 24 March, the London Stock
Exchange welcomed Auto Trader
Group plc to open the market on the
first day of dealings in the Company’s
shares on the Main Market following
its successful IPO.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
On behalf of everyone at Auto Trader, I would like to acknowledge
the seven years of exceptional leadership of our outgoing
Chief Executive Officer Trevor Mather.

As a fitting tribute, we take a look back at some of Trevor’s achievements
and the role he played in taking the Company from a chequered history
of private owners, to the independence and responsibility that goes
with being a leading digital FTSE100 business.

...to a leading digital
FTSE100 business

97% CEO approval
rating on Glassdoor

With an overall Glassdoor
company rating of 4.7/5,
Culture and Values rating of
4.7/5 and a very high 97% of
staff saying they’d recommend
the Company to a friend, it's
clear that the culture of the
business was thriving.

Retail Accelerator
i-Control became Retail
Accelerator, our most
powerful tool yet, which
helps retailers manage
their forecourts using
unrivalled data and insight.

2017

2019

2018

Search by monthly payment
We launched our search by
monthly payment product in
2018 as more consumers were
looking to finance their next
vehicle. This gave consumers
an easy way to find out what
they could afford and retailers
a way to advertise their own
finance rates.

Evolving our values further
Ensuring our values
fully reflect our 'Make a
Difference' strategic focus,
we updated them in 2018 –
changing 'inspirational' to
'courageous' as well as
adding 'community-minded'.

Creating trust in
the marketplace

We increased the level
of transparency in the
marketplace by adding
dealer reviews. We also
used our view of the current
marketplace to determine
if the advertised price of a
car represented a good or
a great deal, and showed
this to consumers through
the introduction of price
indicator flags.

Delivering our new
car proposition

We launched our brand
new car proposition, to
make us as synonymous
with new cars as we
are with used.

50.8m

Monthly average
cross platform visits
+36%
£368.9m
Revenue
+69%
£258.9m
Operating profit
+137%
50%
Of women on the Board
+100%

2020

Now fully digital
Reaching 50.8m monthly
average cross platform visits.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTCHIEF EXECUTIVE OFFICER’S STATEMENT

NATHAN COE
CHIEF EXECUTIVE OFFICER

Our culture is shaped by our values.
We constantly look at ways we can
improve and always put people at
the heart of everything we do.

Overview
I formally took on the Chief Executive
Officer role on 1 March this year. We very
quickly found ourselves in perhaps the
most challenging circumstances that
the Company has ever faced due to the
global COVID-19 pandemic. Our approach
generally, and especially in a crisis, is to
prepare for the worst and act decisively
and quickly. This was made possible by
the people of Auto Trader. I could not be
prouder of how our people have responded
to the COVID-19 crisis and supported both
our business and our customers every
single step of the way. Having been with
Auto Trader since 2007, it is a great privilege
to now lead the Company. While we face
challenging times at the moment, we have
many opportunities that lie ahead of us.

I also wanted to thank my predecessor
Trevor on behalf of everyone at Auto Trader
and wish him a well earned retirement.
Our culture, our customer relationships, our
technology, our software engineering, and
our competitive position – all of these are in
as good a shape as they have ever been.

Revenue

£368.9m
+4%
(2019: £355.1m)

Operating profit

£258.9m
+6%
(2019: £243.7m)

Our purpose and strategic focus
Our purpose is to improve car buying
in the UK, whilst also evolving the wider
automotive ecosystem. At the heart of this
is empowering consumers to do as much of
the purchasing process as they would like
online, whilst enabling retailers to reduce
inefficiencies and therefore costs. We
evolved our strategy two years ago to focus
on making the ecosystem more efficient
and whilst we have accomplished much of
what we set out, it has only made us realise
how much more there is to be done.

The areas of focus we outlined at the time,
and have made progress against, include:
• continuing to develop and grow our core

marketplace business, including the
availability of new cars which are now
discoverable to millions of consumers
within their online car buying journey;
• enhancing the level of data and insight

which has significantly improved the way
retailers price their vehicles;

• increasing the transparency and

promotion of finance much further up the
car buying funnel, such that consumers
are much better informed about the
availability of finance when they arrive
on the forecourt; and

• the use of technology to digitise and

make more efficient the elements of the
automotive ecosystem that sit alongside
the activities of our core business, including
the establishment of Dealer Auction to
change the way retailers source cars.

All of these objectives sit under the
broad goal of moving more of the vehicle
transaction online. Whilst the physical
showroom will continue to play a large role
in the car buying process for some time to
come, we believe many of the processes
that take place can also be done from the
comfort of the consumer's home. This
will provide a greater level of convenience
for consumers, and for retailers and
manufacturers it will enable them to
improve their businesses through both
a lower cost structure and better data
capture and insight.

Summary of operating performance
Even prior to the COVID-19 situation, this
year had proven to be a tough year for
retailers due to a difficult new car market
and a lack of used car stock. Despite this,
the business showed its resilience with
revenue growing by 4% to £368.9m.
Operating profit grew by 6% and our
Operating profit margin improved to 70%.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Operating profit margin

70%
+1%
(2019: 69%)

89%

of employees surveyed
stated they are proud to
work for Auto Trader

Key deliverables
We grew our market leading position as
defined by both the size and engagement
of our consumer audience and we remain
the UK’s largest digital automotive
marketplace by some distance. In April 2019,
we executed our annual retailer pricing
event successfully, which included the
introduction of two new products, Text
Chat, and Vehicle Check. These products
help build trust between consumers and
retailers and improve the buying journey.
The penetration of our Advanced and
Premium advertising packages also
continued to gain traction, and we
successfully monetised our new car
proposition in the second half of the year.

The market
The industry has had to contend with
the political and economic turmoil driven
by Brexit, and a huge level of regulatory
change concerned with lowering fuel
emissions, all before the global health
pandemic. These factors hampered new
and used car sales in the year, however the
size of the overall UK car parc continued
to grow, which over time is supportive
given our stock-based business model.
Predictions before the global pandemic
suggested another year of moderate
decline for the new car market and a
moderate increase in the used car market.
Disruption caused to the economy since
March 2020 will undoubtedly impact this.
We will continue to do what we can to
support our customers and help them
sell as many vehicles as possible.

ESG
We remain committed to creating a more
diverse and inclusive business, one that
truly reflects the society that we serve. We
will continue to look at the make up of every
level of the organisation to ensure gender
balance and also a balance of those that
identify as BAME, disabled, neurodiverse or
as part of the LGBT+ community. Although
our gender pay gap went up in the year, we
are confident that the initiatives we are
putting in place will readdress the balance
in the years to come.

FOCUS FOR THE YEAR AHEAD

Whilst much focus has recently been on managing the
situation relating to COVID-19, we must ensure that we
continue to progress against our strategic goals within
this current financial year. Our priorities are as follows:

Core

Adjacent

• We have recently launched a new

• Our new car marketplace has

Market Insight product, increasing
the availability of Auto Trader’s
data and insight to our customers.
We aim to embed its use across our
customer base and will continually
improve the user experience to
meet this goal.

• Our search experience has

continually evolved over time
and there is a growing desire from
our customer base to have more
added value products to increase
their prominence on Auto Trader,
particularly in relation to selling
outside their local market. We also
aim to increase the understanding
and transparency around
electric vehicles.

• The migration of our platform,
applications and services to
the cloud will be continually
progressed such that the
performance and strength of our
infrastructure are much improved.

Our strategy P20

the largest choice of stock and is
showing signs of the network effect.
We must continue to grow both
retailers and consumers, as we
influence ever growing numbers of
new car registrations. This will be
supplemented by leasing deals
displayed on Auto Trader.

• Vehicle deliveries will increase
after COVID-19. We currently
facilitate over 10,000 moves
a month through our MTD
marketplace and aim to grow
this through 2021.

Future

• How a consumer sells their car is a
pain point. We want to facilitate an
easy way for consumers to sell a
vehicle through part-exchange.
• We aim to enable consumers to
receive a quote and apply for
finance on Auto Trader.

• Ultimately, we are aiming to

facilitate a full online transaction
on Auto Trader.

It’s fair to say that most of our ESG strategy
has been focused on our people, our local
communities and charities, as well as how
we behave as a responsible business.
And we have done some brilliant things;
specifically leading the charge on diversity
and inclusion through our highly engaged
group of employee guilds and networks.
However, we recognise the need to expand
our strategy to incorporate more of an
environmental focus given the industry in
which we operate.

I am proud that we were the first FTSE100
company to have achieved silver accreditation
from the Carbon Literacy Trust after more than
15% of our Auto Trader employees completed
Carbon Literacy training.

Our people
We are proud of the values-led, principles
driven culture that we have and will continue
to build on this strength. It is our culture that
underpins our ability to adapt to change in
all circumstances. We care about our
people, and our people care about our
business, which is shown in our employee
engagement survey, where 89% stated that
they were proud to work at Auto Trader.

Finally, I would like to thank our people,
our customers, our shareholders and other
stakeholders for their support this year and
in the year ahead. These are challenging
times, but we feel well placed to carry on
pursuing the opportunity ahead of us in a
way that is both ambitious and responsible.

We will continue to build our knowledge
and initiatives to ensure we continue to
act in a sustainable way.

Nathan Coe
Chief Executive Officer
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
HOW WE CREATE VALUE

How we operate to deliver our mission of leading the future
of the UK’s digital automotive marketplace and becoming
the UK’s most admired digital business.

VALUE INPUTS

OUR CORE ACTIVITIES

The resources and relationships
that fuel our core activities

What we do to create value

Trusted brand
Auto Trader has operated
as a trusted source for UK
car buyers and sellers for
over 40 years.

Data at scale
Auto Trader’s volume of
vehicle observations and
consumer interactions
generate significant
quantities of quality data.

Scalable technology
platform
We operate a technology
platform that serves our core
classified marketplace and is
capable of supporting new
growth opportunities and
third parties.

Auto Trader prompted
awareness

89%

of consumers were aware of
Auto Trader when mentioning
new or used cars

Volume of searches
on Auto Trader

145m

average volume of searches
per month on Auto Trader by
consumers of new or used cars

Software releases

36,900

in 2020

People and culture
Our values-led culture
underpins a fast-moving,
collaborative and community
minded environment which
allows us to quickly respond
to market changes and
opportunities.

Number of full-time
equivalent employees
(including contractors)

853

on average in 2020

Cash generation
The highly cash generative
nature of the business allows
us to invest in long-term
growth drivers of the business.

Cash generated from operations

£265.5m

in 2020

The network effect
Our leading digital automotive marketplace benefits
from a network effect model whereby the largest and
most engaged consumer audience generates the
most effective response for our customers, who in
turn provide consumers with the most extensive
choice of trusted stock. We use the large volume of
data we collect to enhance the car buying experience
and create efficiencies for customers.

Largest and most engaged audience
The scale of our consumer audience means we are
the most effective sales platform for anyone who is
wanting to sell a vehicle.

50.8m

monthly average cross platform visits

Extensive choice of trusted stock
Our marketplace provides our audience with an
unrivalled choice of both new and used cars to
cater for all consumers’ needs.

478,000

live car stock

Data driven products
We invest in our products to provide the best possible
experience for the consumer and the most valuable
insight for retailers.

2.7m

vehicle checks performed on behalf of retailers in 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020OUR CORE ACTIVITIES

Acting responsibly
We believe acting responsibly will be fundamental to our
long-term success. This goes beyond just environmental,
social and governance (‘ESG’) and applies to every
decision we make.

t a n d m o st engaged audien

L a r g

B
e
st c

a
r
b
u
y
n
g
e
x
p

e
c
t
i

v
e
s
a
l
e
s c
h
a
n
n
el

Data driven
products

xtensive choice of t r u s t e d s

Risk management and
corporate governance
Our rigorous framework ensures that stakeholders’
interests are upheld at all times.

Our strategy P20

VALUE OUTPUTS

What the value we create results
in for our stakeholders

For consumers
Our trusted marketplace gives
consumers one place to view an
extensive choice of vehicles for
sale and we provide transparency
to allow them to make the most
informed decision.

9.8m

car transactions
in the UK in 2020

For customers
Our largest and most highly engaged
audience results in the most effective
sales channel for our customers.

13,345

average retailer
forecourts in 2020

For partners & suppliers
We work collaboratively on
innovations, increasing revenue
from shared opportunities whilst
ensuring we have fair trading and
terms and conditions.

1.3m

insurance quotes
through Compare
the Market in 2020

89%

of our people feel proud
to work for Auto Trader

641

volunteering days were
completed across our
offices in 2020

£126.4m

cash returned to
shareholders in 2020

For employees
Our environment has been created
to ensure everyone gets the
chance to be the best that they can
be and develop their careers. We
offer competitive packages to all
of our employees.

For the community
& the environment
We support each other and think
of others before ourselves. We
respect diversity and advocate
inclusion, and make a difference
to the communities around us.

For investors
We continually invest in our
marketplace to create a long-term
sustainable business. A high
proportion of our profit is converted
into cash, which is largely returned
to shareholders through dividends
and share buybacks.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

MARKET OVERVIEW

We continually evolve to meet the needs of
consumers and customers, which means we
remain the UK’s largest digital automotive
marketplace for new and used cars.

The ecosystem
we operate in

The automotive market is
complex and often inefficient.
There are multiple participants
and unsurprisingly consumers
can find the process of buying
or selling a car overwhelming.

Through Auto Trader products,
services and partnerships,
we aim to significantly improve
the car buying experience, as
well as leverage our existing
relationships to improve further
parts of the value chain.

2.1m

Number of new car registrations
in the 12 months to March 2020

7.7m

Number of used car transactions
in the 12 months to March 2020

35.2m

Size of UK car parc as at 31 Dec 2019

1.8m
SCRAPPED

2.2m
C2C TRANSACTIONS

0.4m

1.4m
DEFLEET

t i o n hou

Au c

ar b u

i ng ser

v
i

F l eet

1.2m

CONTRACT HIRE DEALS

u f actur

M a

0.9m

Consumers
Insurance, warranty
and ﬁnance

0.9m
NEW CAR SALES

3.7m
PART-EXCHANGE

t ailers

R e

5.5m
TRADE USED CAR SALES

1.0m

2.8m

Sources: New car registrations – SMMT; DVLA used car transactions, Auto Trader research, SMMT car parc.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
UK economy
Our industry has remained resilient despite
challenging macro-economic conditions.
For much of the year there was a great deal
of uncertainty around the progress of Brexit
negotiations and the terms on which the UK
would leave the European Union. At the end of
the calendar year 2019 this was compounded by
the announcement of a snap general election.

Over the calendar year 2019, UK GDP increased
by 1.4%. This reflects a slight pickup from the
previous year, although it is one of the slowest
rates since the financial crisis of 2008 and
2009. UK GDP was particularly volatile
throughout the year, in part reflecting changes
in the timing of activity related to the UK’s
original planned exit dates from the EU.

Consumer price inflation declined to 1.7%
despite the rate of unemployment reducing,
averaging 3.8% through 2019.

The uncertainty around the country’s
political position had an undoubted effect
on our industry. Consumer confidence was
suppressed through calendar year 2019 as
buyers delayed their purchase of larger items
which included vehicles. Manufacturers were
also affected by unfavourable exchange rates
which acted as a catalyst for many OEMs to
focus production on other EU territories.

The clear election result in December coupled
with the UK’s exit from the EU on 31 January
2020 was positive for the industry through
January and February 2020. However, in March
that recovery was impacted by the spread
of COVID-19.

Government measures were introduced
in March 2020 to protect people from
COVID-19. From 23 March 2020, those
measures included the closure of car
retailers. No date of reopening was set
causing an unprecedented level of
uncertainty, although there has subsequently
been some lessening of restrictions.

The Chancellor unveiled a number of
fiscal packages to support businesses
and individuals through the pandemic. In
addition, the Bank of England cut interest
rates to a record low of 0.1% on 19 March
2020 and announced that it would restart
its quantitative easing programme.

While the short-term outlook for the UK
economy is hugely uncertain, numerous
Auto Trader datasets show that as retailer
showrooms reopen, consumers are ready
to revisit their car buying plans.

Brexit negotiations
The UK left the EU on 31 January 2020 and is now
operating under a transitional agreement.
That agreement ends on 31 December 2020
and so a new trade deal between the UK and
the EU is currently being negotiated.

12-MONTH ROLLING NEW CAR REGISTRATIONS

FY18

FY19

FY20

Number of new car registrations

Year-on-year price growth for the month

12-MONTH ROLLING USED CAR TRANSACTIONS

10m

30%

20%

10%

-10%

-20%

-30%

-40%

-50%

10%

-5%

-10%

-15%

-20%

-25%

-30%

-35%

-40%

FY18

FY19

FY20

Number of used car transactions

Year-on-year price growth for the month

We do not foresee any issues with Brexit
affecting our ability to provide our services,
and we do not anticipate that it will
materially change our cost base. As we
have said previously, the form of any Brexit
trade negotiation is likely to affect Auto
Trader only as much as it impacts on both
general levels of consumer confidence and
the supply of new cars into the UK market.
If the average price of a car increases and
consumer confidence levels decrease,
there is a potential impact on the number
of car transactions. This would likely impact
our retailers’ profitability and their ability to
spend on our marketplace.

New and used car transactions
The total number of transactions for
the 12 months ended March 2020 declined
by 4.3% to 9.8m (2019: 10.2m). New car
registrations declined 10.9% to 2.1m in the
12 months to March 2020, although a large
proportion of this decline was due to
retailer showrooms closing in March 2020.
March is usually the highest month for
new car registrations and in 2020 it saw
a decline of 44.4% on the previous year.
In the 11 months to February 2020 new car
registrations declined 2.8% on the previous
year and used car transactions increased
0.5% on the previous year.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTMARKET OVERVIEW CONTINUED

We sit at the heart of the
automotive ecosystem
and remain the primary
source for consumers on
their car buying journey.

79%

share of minutes spent across
automotive classified sites in 2020

50.8m

monthly average cross platform
visits in 2020

Scrappage rates remain stable at 1.8m
transactions meaning the total number of
cars in the UK increased to 35.2m (2019: 34.9m).

There were 7.7m used car transactions in the
12 months to March 2020, a decrease of 2.3% on
the year before. The number of used car sales
is less volatile than new car registrations, as
a growing car parc underpins the number of
possible transactions. The average length of
ownership marginally increased to 3.5 years.

Consumer buying behaviour
Buying a car remains a cumbersome process;
our 2019 Auto Trader Car Buyers Report found
that there are more than 25 jobs consumers
need to complete in the purchase journey. Car
buyers remain open-minded when they start
their car search, considering both new or
used cars, and multiple fuel types, all of which
adds to the research phase of their purchase.

Our report also found that rather than
these jobs being done in a cohesive linear,
journey-style fashion, the jobs are done in
a chaotic, non-linear way. One thing does
remain constant though: consumers want
to research and find their next car online.

Some retailers are responding to this by
introducing online payment options, home
delivery services, and virtual test drives.
The digitisation of car buying and selling
is a trend that is set to increase.

Growing number of consumers
adopting greener vehicles
Consumers are becoming more conscious
of their environmental footprint, which
is starting to be reflected in the sales
of alternative fuel vehicles (‘AFVs’),
particularly electric vehicles (‘EVs’).
The SMMT reported that in the 12 months to
March 2020, new car transactions of AFVs
increased by 38.5% on the prior year. This is
reflected in Auto Trader data too, with full
page adverts of AFVs and EVs up 25% and 53%
respectively compared to the previous year.

However, the availability of supply coupled
with the higher purchase price of these
vehicles compared to petrol and diesel
alternatives, mean that AFVs and EVs only
account for 10% of total new car sales.

AUTO TRADER RETAIL PRICE INDEX

Retail Price Index
The average price of a used car advertised
on Auto Trader for the 12 months ending
March 2020 was £13,045.

The Auto Trader Retail Price Index tracks
the average retail price of a used car on a
like-for-like basis, stripping out the impact
of changes in the mix of cars being sold.
It showed that prices declined across the
market, decreasing over the 12-month
period to March 2020 by 0.5%.

Petrol and alternative fuel vehicles
increased by 0.1% and 3.8% respectively,
and diesel decreased by 1.4%. Uncertainty
around trade valuations and volatility
in the supply of vehicles has impacted
auction markets, which has fed into the
retail market.

£15,000

£12,000

£9,000

£6,000

£3,000

£0

FY18

FY19

FY20

Average price of a trade car for the month

Year-on-year price growth for the month

Year-on-year mix growth for the month

10%

-2%

-4%

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020ESG IN FOCUS

At present consideration for
AFVs far outstrips sales

Our survey of in-market and recent car
buyers shows that there is demand for
AFVs. Of those considering a new car,
50% of consumers will consider an AFV.
Demand for used AFVs increased to
2.9% of total demand on Auto Trader
in 2020, a 27% increase from 2019.

50%

of consumers will consider an alternative
fuel vehicle (‘AFV’)

Strengthening our competitive position
We remain the UK’s largest digital automotive
marketplace, with 51 million cross platform visits
per month on average in 2020, up 3% on 2019.

This resulted in a strengthening of our
competitive position, with over 75% of minutes
spent on automotive marketplaces now spent
on Auto Trader. We believe that this is testament
to the strength and heritage of our brand.

We believe when the industry faces times
of uncertainty, retailers engage even
more with our platforms and the largest
audience of car buyers.

Our audience remains largely organic, with
91% of our traffic coming either direct or
through organic search. Our prompted
awareness remains very high at 84% for
used cars and 70% for new cars – meaning
we are typically the first place consumers
turn to when looking for their next car.

This position is, we believe, as a result of the
trust that we have built up with consumers.
We continue to improve our onsite experience,
which during the year included: improving
price indicators which appear on full page
adverts with the addition of ‘fair’ and ‘higher’
price flags; the introduction of vehicle
provenance history checks; a change in the

VIEWS FROM AROUND THE INDUSTRY

UK online retail is growing at
a rate of three times the rate
of offline and, within just five
years, online retail is likely to be
over 50% of all UK retail sales.

PETER VARDY
CEO, PETER VARDY

Drivers no longer want to go
to different places to buy a
car, insure it, service it and
then sell it on, all the while
taking the depreciation and
major repair risk.

JOY DAVIDSON
ASSOCIATE PARTNER, OC&C
STRATEGY CONSULTANTS

Research showed us that 10%
of UK car buyers would buy
a car online and we felt this
was only set to grow.

CHRISTOPHER KILLEN
CO-FOUNDER, ECARS247

Technology-driven trends
will revolutionize how industry
players respond to changing
consumer behaviour, develop
partnerships, and drive
transformational change.

PAUL GAO
MCKINSEY & CO

Go online

See more thoughts and insights from around the industry in our Market Reports, published
biannually on our website: plc.autotrader.co.uk/press-centre.

search sort order; a Text Chat functionality;
and an increase in the number of dealer
reviews on site, which reached almost one
million at the end of the year.

Future
Continued growth in EVs
Interest in EVs is growing, bolstered by the
Government’s announcement to ban the
sale of new petrol, diesel and hybrid cars
by 2035 or earlier. There’s added pressure
for the manufacturers to sell EVs since the
introduction of the new CAFE regulations
which will see them fined for selling higher
emitting cars.

Whilst consumer interest is there, and the
product is starting to flow through into the
UK market, sales aren’t yet matching that
interest. However, as barriers to adoption
reduce, price and infrastructure namely, we
can expect sales to start meeting demand.

Omni-channel
There is currently a mismatch between
where consumers are spending their time –
c.70% of which is online, vs. where retailers
are spending on costs – c.85% of which is
offline. Consumers are ready for a digital
transition, although most people value
human interaction of some kind during the
car buying process. There is no getting
away from the important offline elements
of the journey, and so retailers will remain
crucial for the car buying process. There
needs to be a seamless omni-channel
experience for consumers so they can
choose the journey that is right for them –
be it online or offline, or any combination
of the two. We aim to create an experience
that’s flexible enough and 'blended' enough
between digital and physical to cater to
everybody’s needs.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

OUR STRATEGY

We define our strategy with reference
to three growth horizons.

Our purpose
To improve car buying in the UK,
whilst also evolving the wider
automotive ecosystem.

Our mission
To lead the future of the UK’s digital
automotive marketplace and become
the UK’s most admired digital business.

GROWTH HORIZONS

FOCUS AREAS

Core

The largest and most engaged consumer audience 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.

It is vitally important we maintain our leadership position across
different stock profiles, including: age, price, make, model and
region, across both new and used vehicles. All our stock is
underpinned by our extensive vehicle taxonomy.

Adjacent

Our proposition gives franchise retailers the ability to advertise
physical new cars on Auto Trader; this informs consumers which
new cars are immediately available to buy, and includes their
associated discount.

A consistent pain point for retailers is how they currently source
vehicles outside of consumer part-exchanges. Disposing of
and moving vehicles in a cost effective manner can also be
challenging, with many retailers wedded to one supplier.

Future

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.

1 Maintain the best consumer experience

for buying and selling vehicles

2 Continually innovate to create value

for our customers

3 Improve vehicle stock choice, volumes

and accuracy

4 Become to new cars what we are in used

5 Develop a more efficient way to source,

dispose and move vehicles

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

All supported by our values-led culture and our underlying
focus on sustainability, risk management & governance.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20202020 PROGRESS

HOW WE MEASURE PROGRESS

ASSOCIATED RISKS

We expanded the number of price indicator
categories, and now present the consumer with
our market valuation giving further transparency to
consumers over advertised prices. We also now order
vehicles in search using a relevance algorithm which
makes it easier for the consumer to find their next car.

• Number of listings on site
• Retailer forecourts
• Share of minutes
• Cross platform visits
• Full page advert views
• Basic EPS
• Cash generated from operations

We launched two new retailer products, Vehicle
Check and Text Chat, which have seen high levels
of engagement. The acquisition of KeeResources
allows us the opportunity to further develop our
vehicle taxonomy to improve accuracy.

On average there were over 31,000 physical new cars
advertised on our platform during the year. Those
listings generated 50 million advert views for our
customers. By the end of the year we had over 1,000
dealers paying to advertise new cars on our platform
after converting our trial period.

• New car listings
• New car retailer forecourts
• JV income
• Basic EPS
• Cash generated from operations

• COVID-19
• Economy, market &

business environment

• Brand
• Increased competition
• Failure to innovate: disruptive
technologies and changing
consumer behaviours

• IT systems and cyber securities
• Reliance on third parties

• COVID-19
• Economy, market &

business environment

• Brand
• Increased competition
• Failure to innovate: disruptive
technologies and changing
consumer behaviours
• Reliance on third parties

Dealer Auction completed a re-platforming of its
systems and now runs entirely on Auto Trader’s
infrastructure. This move will enable Dealer Auction
to fully utilise the data that Auto Trader generates.

We now show consumers vehicle checks on retailer
full page advert views, giving the consumers more
trust in the car that they are buying.

• Revenue
• Operating profit
• Operating profit margin
• Average Revenue per

Retailer (‘ARPR’)
• Retailer forecourts
• Basic EPS
• Cash generated from operations

• Brand
• Increased competition
• Failure to innovate: disruptive
technologies and changing
consumer behaviours
• Reliance on third parties

Making a difference P40

How we manage risk P52

Governance P60

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOUR STRATEGY IN ACTION

Core

Our core marketplace continues to offer
a strong runway for growth, underpinned
by continuous improvement of the car
buying experience.

Maintain the best consumer experience for buying
and selling vehicles

WHAT WE HAVE DONE

OPPORTUNITIES

Price Indicator
Price Indicator flags
provide car buyers with a
visual indicator showing
how competitively cars
are priced in the market.
We have expanded the
number of categories
and grown our marketing
valuation to consumers
on each advert, creating
more trust in the price of
the car they are buying.

Reviews
We are the number one
dealer review site in the
UK with over 927,000
reviews across 8,700
retailers. This provides
retailers the opportunity to
differentiate themselves
on the marketplace and
builds consumer trust.

Sort order
We have moved away
from a low-to-high price
search to a relevance-
based sort order. We use
an algorithm to promote
the most relevant and
highest quality adverts
to consumers, making it
easier for them to find
their next car.

Private advertising
We have extended our
C2C product offering.
We have created new
products allowing
private sellers to gain
prominence in search
and advertise their
car for longer.

Electric
Electric vehicles are
becoming more desirable
and traditional fuel types
are becoming relatively
more expensive as
regulation changes. We
have the opportunity to
provide clear information
to consumers, such as
total cost of ownership
data, to help them in their
purchasing decision.

79%

Share of minutes as
measured by Comscore

927k

Reviews across 8,700
retailers at the end
of March 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20202

Continually innovate to create value for our customers

76%

Of independent dealers
using Vehicle Check at
the end of March 2020

WHAT WE HAVE DONE

Vehicle Check
We launched a vehicle check
product which allows retailers to
check the provenance of vehicles
they might be looking to source.

Text Chat
Text Chat gives buyers the ability
to text retailers directly from
adverts, connecting dealers
with buyers anytime, anywhere.

OPPORTUNITIES

Retail Check & Retail Accelerator
Increase penetration of Retail
Check, helping retailers make
the most of our valuations to
stay on top of market changes.

AT Analytics
AT Analytics will help retailers
measure, track and improve advert
performance along with providing
an understanding of the market.

Improve vehicle stock choice,
volumes and accuracy

WHAT WE HAVE DONE

Kee taxonomy data
We have acquired
KeeResources who own the
unique vehicle taxonomy
data which underpins much
of the Auto Trader platform.

Bargain package
We launched a new product
offering that makes it more
attractive for dealers who
sell cars under £1,500 on
Auto Trader.

OPPORTUNITIES

Home delivery
Improve stock choice for
consumers by allowing
retailers who can offer
national home delivery to
appear within their local
search listings.

Vehicle data
Continue to build on our
vehicle data set to enhance
the quality of listings, to
provide the most accurate
valuations and commercialise
this data set.

4.7m

Total number of unique vehicles
seen on Auto Trader in 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOUR STRATEGY IN ACTION CONTINUED

Adjacent

Identification of adjacent
opportunities in new car sales
and the way in which our
customers source vehicles.

Become to new cars what we are in used

WHAT WE HAVE DONE

Our new car proposition gives
franchise retailers the ability to
advertise new cars on Auto Trader.
These physical new cars are
immediately available and often
offered at a discount, making
them attractive for consumers.

Consumers have the option to
compare both new and used cars
within the same search results.

OPPORTUNITIES

Allow consumers to perform
monthly price searches for new
cars like they can in used by
adding monthly finance quotes.

71%

Of car buyers
wanted to compare
new and used cars in
the same place

8.8m

Unique users viewing
a new car in 2020

autotrader.co.uk/new-cars

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20205

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

WHAT WE HAVE DONE

OPPORTUNITIES

Dealer Auction re-platform
Dealer Auction is a joint
venture between Cox
Automotive and Auto Trader.
By working together, we can
combine our expertise to
create the largest and most
intuitive trade digital auction
marketplace.

This joint venture provides
vendors with a huge buyer
base, whilst empowering
buyers with data-driven
prioritisation of the stock
that best suits them. All
for significantly less than
the fees they pay at
physical auctions.

MTD
Our Motor Trade Delivery
platform connects retailers
wanting to move a vehicle
with logistics companies
who can provide that
service. Retailers always
get the best possible price
for the vehicle movement,
while logistics companies
save time and money by
getting access to greater
volumes of work and only
taking work that is
convenient for them
and at the right price.

Guaranteed price
We are developing a way
for consumers to obtain a
guaranteed price for their
vehicle through Auto Trader.
Our objectives are to
provide a hassle free
disposal service for
consumers while providing
retailers with a more
efficient way of sourcing
their stock.

c.110k

Vehicles transacted via
Dealer Auction in 2020

c.120k

MTD vehicle moves
in 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOUR STRATEGY IN ACTION CONTINUED

Future

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

FUTURE OPPORTUNITIES

There’s no doubt that the future is going to be increasingly digitised. While the options available to a consumer
as they move through the car buying process will remain largely unchanged, how they interact with retailers
and the technology through which they engage will evolve. As more of the car buying journey takes place
online, there is more opportunity for retailers to increase their efficiency and reduce their cost base.

Today
Predominantly ofﬂine, consumers ﬁnd buying a car difﬁcult, frustrating and time consuming.

ONLINE

OFFLINE

Consumer
interest in a
new vehicle

ONLINE

OFFLINE

How do I ﬁnd
my next car?

• Used cars

• New cars

How do I
dispose of my
old car?

• Part-exchange

• Private sale

• Car buying
service

How do I pay
for it?

• Finance

• Cash

• Lease

How do I
insure and
maintain it?

How do I get
my hands on it?

• Home delivery

• Gap insurance

• Tyre insurance

• Dealership

pick up

• Motor

insurance

Tomorrow
Car retailing will be faster, with more end-to-end online transactions.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20206

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

WHAT WE HAVE DONE

Vehicle Check
We now show consumers vehicle checks on retailer full page
advert views, giving the consumers more trust in the car
they are buying.

Guaranteed trade in
One of the ways we are
helping consumers is by
developing a part-exchange
proposition. By moving the
process online, we are looking
to make the process more
convenient, and eliminating
the need to haggle with
retailers, which we know
is a key pain point.

OPPORTUNITIES

Finance
The industry remains behind
the digital curve when it
comes to the finance options
available to car buyers.

All available finance options
along with transparent pricing
need to be clear so that car
buyers can choose the best
way to pay for a car, complete
all the paperwork and finalise
the deal from the comfort of
their home. This will make the
entire transaction more
efficient for both customers
and retailers across the UK.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTHOW WE ENGAGE WITH OUR STAKEHOLDERS

Section 172(1) statement
Directors are required to act in the way they consider,
in good faith, would most likely promote the success
of the company for the benefit of its members as a
whole, whilst also having regard to the factors listed
in Section 172 of the Companies Act 2006.

Consumers
Their needs
• Ease of buying or selling a vehicle
• Choice of vehicle, i.e. new or used,

body type or fuel type

• Clear and accurate information
• Transparency about the vehicle,

about the seller and about finance

Customers
(retailers, manufacturers and other customers)

Their needs
• Making the car selling process more efficient
• Increasing exposure to consumers
and receiving high quality leads

• Receiving value for money from Auto Trader
• Sourcing vehicles

Employees
Their needs
• Diversity and inclusion
• Training and career development
• Reward and benefits
• Working conditions, environment

and wellbeing

How we engage
• We speak to consumers for our
biennial Car Buyers Report, and
biannual Market Reports to gauge
views on the car market

• Consumer onsite survey which provides

How we engage
• Annual retailer research aimed at

evaluating value

• Regular thought leadership, insight-driven
reports, such as the biennial Car Buyers
Report, and the biannual Market Reports

How we engage
• New Board Engagement Guild to engage

directly with the Board

• Annual employee conference, regular
employee CEO breakfasts, business
updates and newsletters

• Annual benefits roadshow, salary

constant feedback

• Hosting industry insight events, dealer

workshops and share scheme pulse survey

• Consumer user testing of new products,

masterclasses, webinars and conferences

services and brand designs on our website

• Workshops with people who are

• Sales team "on the ground"
• Voice of the Customer emails circulated

neurodiverse and potentially vulnerable
consumers, which feeds into our
consumer facing products (including
how we display finance)

• Complaints and customer security

teams operate 7 days a week

• We measure consumer brand sentiment

and engagement scores

• Consumer research is provided to

the Board

How this engagement influenced Board
discussions and decision-making
As discussed with the Board, a number
of the changes we have made to our
products are in response to consumer
needs. In making their decisions, the
Board pays regard to the need to balance
consumer needs with customer and
commercial outcomes. Some examples
of the product changes include:

• Vehicle checks which give consumers

more trust in the car that they are buying

• Given more detailed price indicator

flags and Auto Trader market valuation
on each advert which creates more
trust in the price of the car consumers
are buying

• Redesigned full page advert to give

more information about the seller and
about finance options

to the Board

• Business partnering by OLT and other

senior management

• Visits by Board Directors to customer sites
• Customer updates provided to the Board

How this engagement influenced Board
discussions and decision-making
Following Board decisions, we launched
a number of products which were aimed
at meeting the needs of customers:
• Vehicle Check: we launched a vehicle

check product which allows retailers to
check the provenance of vehicles they
might be looking to source

• Text Chat: this gives buyers the ability
to text retailers directly from adverts,
connecting dealers with buyers
anytime, anywhere

Our response to COVID-19 was informed
by our engagement with customers.
We decided to extend credit terms for
our March 2020 advertising, and announced
a period of free advertising for April and May
2020, and a further 25% discount in June 2020.
This decision was made in order to support our
retailer customers in a time when they were
unable to trade, and was for the long-term
benefit of the industry.

• Save as you earn share schemes
• D&I guilds with networks for BAME, Women,
LGBT+, Neurodiversity and Disability with
OLT sponsors. Including specific OLT
reverse mentoring by BAME employees

• Employee experience survey
• Health and safety assessments
• Wellbeing forums
• Whistleblowing service

How this engagement influenced Board
discussions and decision-making
The Board focused its annual strategy
offsite on people, culture and values. This
included discussions on the evolution of our
culture over time and how this may need to
adapt in the future as the business enters
new areas of opportunity. It also included
specific initiatives including the introduction
of more family friendly policies and flexible
working arrangements, considerations of
our working environment and initiatives to
improve the diversity of the organisation.

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

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020As a marketplace, we have a diverse set of stakeholders and need
to balance their needs and outcomes, for example, balancing
those of our consumers (users of the website) with those of our
customers (retailers, manufacturers and other customers). We
acknowledge that not every decision we make will necessarily
result in a positive outcome for all of our stakeholders.

By understanding our stakeholders, and by considering their
diverse needs, we factor into boardroom discussions the
potential impact of our decisions on each stakeholder group.

The table below sets out how we engage with our key
stakeholders. Not all information is reported directly to the
Board and not all engagement takes place directly with the
Board. However, the output of this engagement informs
business-level decisions, with an overview of developments
and relevant feedback being reported to the Board and/or
a Board Committee.

Partners & suppliers
Their needs
• Working collaboratively on innovations
• Increasing revenue from shared

opportunities

• Fair trading and terms and conditions

How we engage
• Regular engagement with suppliers
and partners, including through our
Strategic Partnerships Director and
other OLT members

• Supplier/procurement processes

engage at the time of appointment
and during the relationship

• Regular monitoring and reviews of
financial and operating resilience
• Reporting on payment of suppliers
• Application of our Ethical Procurement
Policy which helps us to take a holistic
view based on cultural alignment when
deciding which suppliers and partners
we should work with

How this engagement influenced Board
discussions and decision-making
The Board reviews and approves material
contracts with suppliers and partners, joint
ventures and acquisitions.

In reaching its final approval decisions for
material contracts and the acquisition of
KeeResources which we made during the
year, the Board has regard to a number of
factors including: the business case and
financial returns; the impact on our suppliers
and customers; risk management; and the
long-term reputation of the Company.

The community
& the environment
Their needs
• Energy usage and carbon emissions
• The move to electric vehicles
• Giving back to the community
• Environmental, social and governance

(‘ESG’) factors

How we engage
• Sustainability Guild
• Engagement with Office of Low Emission

Vehicles (‘OLEV’), Carbon Literacy
Training and Participation in Carbon
Disclosure Project (‘CDP’)
• ‘Make a Difference’ strategy
• Volunteering days with local charities
• Supporting organisations such as

Manchester Digital, and the Automotive
30% club, and involvement with local
schools and colleges though STEM
ambassadors

• Consumer research and user testing to
understand what information is most
helpful when buying an electric vehicle

How this engagement influenced Board
discussions and decision-making
The Board debated our focus on ESG and
agreed on a more formal strategy and
governance framework, to include more
metrics including Scope 3 GHGs emissions
reporting. We are also evolving our product
offering to help consumers when they are
considering purchasing an electric vehicle.

The Board received a presentation in respect
of the Company’s charity and community
activities. The Board decided to amend its
Schedule of Matters Reserved for the Board
to delegate authority to management,
through the Make a Difference Guild, to make
charitable donations without further Board
approval (previously, any donations over
£5,000 had to be approved by the Board).

Investors
Their needs
• A balanced and fair representation of
financial results and future prospects

• High governance standards
• Reasonable remuneration practices
• Share price and return

How we engage
• Comprehensive investor relations

programme including formal presentations
to investors and analysts on the half-year
and full-year results; formal investor
roadshows in the UK and overseas; and
an ongoing programme of attendance
at conferences, one-to-one meetings
and group meetings with institutional
investors, fund managers and analysts
• Meetings which relate to governance are
attended by the Chairman or another
Non-Executive Director

• Private shareholders encouraged to

communicate with the Board through
ir@autotrader.co.uk

• Regular review of feedback from analysts

and investors from results roadshows

• Annual Report and Annual General Meeting
• Corporate website and market

announcements

• Share relevant industry related reports

and Retail Price Index data with analysts

• Engagement with proxy advisors and

other agencies

• Active consultation on remuneration

framework and policies

How this engagement influenced Board
discussions and decision-making
The Remuneration Committee consulted
with major investors and corporate
governance advisory agencies before
making the changes to the implementation
of remuneration policy for FY21 to reflect the
challenges posed by COVID-19.

The Board reviews the Group’s capital
allocation on an annual basis to ensure it
remains appropriate. The policy in place at
the start of FY20 was to return around one
third of net income to shareholders in the
form of dividends, and use any surplus cash
to continue our share buyback programme
and to steadily reduce gross indebtedness.
However, following the outbreak of the
COVID-19 pandemic, the Board has suspended
share buybacks, and is not recommending
a final dividend for the year. In making this
decision, the Board considered this to be in
the long-term interest of shareholders.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTKEY PERFORMANCE INDICATORS

We measure our performance
through a defined set of financial
and operational KPIs.

FINANCIAL

Revenue
£m

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

Operating profit
£m

£368.9m
+4%

£1,949
+6%

£258.9m
+6%

2020

2019

2018

Relevant focus areas
2 3 4 6

Definition

£368.9m

£355.1m

£330.1m

2020

2019

2018

£1,949

£1,844

£1,695

2020

Margin 70%

2019

Margin 69%

2018

Margin 67%

£258.9m

£243.7m

£221.3m

Relevant focus areas
2 3 4 6

Definition

Relevant focus areas
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.

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.

Operating profit is as reported in the
Consolidated income statement on
page 100. 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.

Progress

Revenue increased 4% year-on-year,
with the main driver of growth being
Retailer revenue, supported by growth in
Consumer Services through both Private
and Motoring Services. This was slightly
offset by a decrease in Manufacturer
and Agency & Home Trader. There was
a £2.4m incremental contribution from
KeeResources following the acquisition
on 1 October 2019.

Growth in the year came from price and
product. Growth in the product lever
resulted from: increase in customers
paying for the new Vehicle Check product;
further upsell to our higher-level packages;
monetisation of our New Car product; and
growth in the volume of customers paying
for one of our data products. These
increases were partially offset by a
decline in stock and a reduction in revenue
from products transferred to our joint
venture in January 2019.

Operating profit increased by 6%
reflecting top line revenue growth of
4% and well managed costs. Operating
profit also benefitted year-on-year from
three quarters of profit, contributed
through our joint venture, Dealer Auction.
Additionally both revenue and costs were
impacted through our recent acquisition
of KeeResources for the second half of
the year. Operating profit margin saw
improvement, growing by a further one
percentage point to 70%.

Relevant risks

• COVID-19
• Economy, market & business environment
• Brand
• Increased competition
• Failure to innovate: disruptive technologies

and changing consumer behaviours

• IT systems and cyber securities
• Reliance on third parties

• IT systems and cyber securities
• Employee retention
• Reliance on third parties

Linked to remuneration?

Yes

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020FINANCIAL

Basic EPS
pence per share

22.19p
+6%

2020

2019

2018

Relevant focus areas
2 3 4 5 6

Definition

Cash generated from operations
£m

£265.5m
3%

22.19p

21.00p

17.74p

2020

2019

2018

£265.5m

£258.5m

£228.4m

Relevant focus areas
2 3 4 6

Definition

Cash generated from operations is as
reported in the Consolidated statement
of cash flows on page 104. 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.

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.

Progress

Basic EPS growth was 6%, demonstrating
the Group’s high operational gearing.
Much of the growth is from an increase in
net income, with Basic EPS 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.

Cash generated from operations
increased by 3% to £265.5m in the year.
This represented a high proportion of
profit converted into cash, which was
largely returned to shareholders through
dividends and share buybacks.

Relevant risks

• COVID-19
• Economy, market & business environment
• Brand
• Increased competition
• Failure to innovate: disruptive technologies

and changing consumer behaviours

• IT systems and cyber securities
• Employee retention
• Reliance on third parties

Linked to remuneration?

Directors’ remuneration report P77

OUR GROWTH HORIZONS
AND RELEVANT FOCUS AREAS

Core

1 Maintain the best consumer experience

for buying and selling vehicles

2 Continually innovate to create value

for our customers

3 Improve vehicle stock choice, volumes

and accuracy

Adjacent

4 Become to new cars what we are in used

5 Develop a more efficient way to source,

dispose and move vehicles

Future

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

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTKEY PERFORMANCE INDICATORS CONTINUED

Directors’ remuneration report P77

OUR GROWTH HORIZONS
AND RELEVANT FOCUS AREAS

OPERATIONAL

Core

1 Maintain the best consumer experience

for buying and selling vehicles

2 Continually innovate to create value

for our customers

3 Improve vehicle stock choice, volumes

and accuracy

Adjacent

4 Become to new cars what we are in used

5 Develop a more efficient way to source,

dispose and move vehicles

Future

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

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

Advert views
Average number per month (millions)

50.8m
+3%

2020

2019

2018

Relevant focus areas
1 6

Definition

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

234.8m
-2%

50.8m

49.1m

48.7m

2020

2019

2018

234.8m

238.8m

245.8m

Relevant focus areas
1 4 6

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

Cross platform visits increased 3%
year-on-year which is an improvement
over prior years which have largely
remained consistent. We continue the
measure with Comscore for comparison
to competitors where we retained our
55% share of visits and increased our
share of minutes to over 75% across
automotive classified sites.

2020 advert views have declined by 2%
to 235 million adverts a month following
changes we made to the car buying
experience. This remains a considerable
volume of engagement for our
customers’ adverts.

Relevant risks

• COVID-19
• Economy, market & business environment
• Brand
• Increased competition
• Failure to innovate: disruptive technologies

and changing consumer behaviours

• IT systems and cyber securities
• Reliance on third parties

Linked to remuneration?

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020OPERATIONAL

Number of retailer forecourts
Average number per month

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

853
+6%

13,345

13,240

13,213

2020

2019

2018

13,345
+1%

2020

2019

2018

Relevant focus areas
2 3 4 6

Definition

The average number of retailer forecourts
per month that subscribe to an Auto
Trader advertising package over the
financial year.

Live car stock
Average number per month

478,000
+4%

853

804

824

2020

2019

2018

478,000

461,000

453,000

Relevant focus areas
1 2 4 5 6

Definition

Relevant focus areas
3 4 5

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.

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. We charge our
retailer customers on a cost per advertised
slot basis for their advertising package,
meaning the stock on our website is closely
correlated to our Retailer revenue.

Progress

The average number of retailer forecourts
in the year has increased by 1%. Much of the
growth came from small customers with
lower priced cars which have subsequently
migrated from Home Trader.

FTEs have increased by 6% year-on-year.
The acquisition of KeeResources resulted
in an additional 64 people being employed
by the Group. As the acquisition occurred
on 1 October, this increase has resulted in
an additional 32 FTEs being counted in
this year’s average.

There were also increases across
the organisation to support product
development and supporting services.

Live car stock on site increased by
4%. Growth came from new cars,
which averaged over 31,000 in the year
(2019: 12,000). Growth also came from
our Private advertising stock through a
new package where stock is on site for
longer. Underlying used car stock was
marginally down 1% in the year, which is
mainly from a decline in stock from our
franchise customers.

Relevant risks

• COVID-19
• Economy, market & business environment
• Brand
• Increased competition
• Failure to innovate: disruptive technologies

and changing consumer behaviours

• IT systems and cyber securities
• Reliance on third parties

• COVID-19
• Economy, market & business environment
• Brand
• Increased competition
• IT systems and cyber securities
• Employee retention
• Reliance on third parties

• COVID-19
• Economy, market & business environment
• Brand
• Increased competition
• Failure to innovate: disruptive technologies

and changing consumer behaviours

• IT systems and cyber securities
• Reliance on third parties

Linked to remuneration?

Yes

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTOPERATIONAL REVIEW

CATHERINE FAIERS
CHIEF OPERATING OFFICER

We have made further progress in
new cars, launching a stock-based
product allowing retailers to upload
physically available new cars at
current retail prices.

70%

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

84%

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

706,000

sessions since the launch
of Text Chat

Introduction
The business has had a good year, despite
the challenges that both the withdrawal
from the EU and the industry-specific
legislative changes have posed. We
have continued to invest in both our
products and services, and our consumer
experience, ensuring that we’re continually
adding value to our consumers, retailers
and manufacturers.

Largest automotive marketplace
Auto Trader continues to be the primary
place where consumers go to buy and sell
cars and we have more listings than any
other classified site, which when combined
with our significant audience means we
are by some way the UK’s largest and most
engaged digital automotive marketplace.

Audience performance has been strong
over the year, with cross platform visits up
3%, at an average of 50.8 million per month
(2019: 49.1 million). Our competitive position
has strengthened with over 75% of all
minutes spent on automotive marketplaces
now spent on Auto Trader (2019: 73%).

This is in part due to the strong organic
audience that we enjoy, with 91% of our
traffic coming either direct or through
organic search.

This increase in audience in turn boosted
the volume of searches consumers
conducted on Auto Trader; we now see
an average volume of 145m searches per
month looking for a new or used car (2019:
139m). However, the number of full page
advert views decreased slightly in the year
by 2% to an average of 234.8m per month
(2019: 238.8m).

The level of live stock on our site increased
by 4% in the year, as the average number of
cars on our marketplace rose to 478,000
(2019: 461,000). The growth was driven by
our recently launched New Car product,
offset by a slight decline in used car
volumes, which were impacted by supply
side constraints. The average number of
retailer forecourts using our marketplace
increased slightly to 13,345 (2019: 13,240).

During the year we continued to invest in
marketing to keep our brand front of mind
with consumers by promoting our products
and services. We launched a large-scale
advertising campaign in June to promote
our new car offering which boosted our
prompted brand awareness scores. For
new and used cars our score has remained
high at 70% and 84% respectively – meaning
we are typically the first place consumers
turn to when looking for their next car.

Enhancing the car buying experience
Independent brand tracking data revealed
that 58% of consumers thought of Auto Trader
as the most trusted site to buy their next car.
In order that we maintain this trust, we strive
to make the industry more transparent and
efficient. Part of the way we do this is by
continuing to develop our onsite consumer
experience. We moved away from a
low-to-high price search listing order to
a relevance-based sort order. We use an
algorithm to promote the most relevant
and highest quality adverts to consumers,
making it easier for them to find their next car.

Trust and confidence are critical to car
buyers, so this year we launched a
provenance vehicle check tool, in partnership
with Experian, which gives consumers a free
and comprehensive assessment of the
vehicle they are interested in. We also now
have almost 1 million reviews of dealers on
our marketplace. Perhaps most significantly,
we updated our price indicators with the
addition of ‘fair’ and ‘higher’ price flags and
put an Auto Trader valuation on each full
page advert, helping to give consumers
confidence in the price of the car.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
Following year end we removed standard
format display advertising from search,
making retailer adverts larger. This change
was made despite standard format display
advertising contributing £4.9m to revenue in
2020. We also altered search on mobile
devices, increasing the size of each advert by
40% with imagery being 90% larger than before.

Penetration of our Advanced and
Premium advertising packages continues
to increase with stock penetration now
at 23% (2019: 19%). These higher yielding
packages allow retailers to pay for
greater prominence on our marketplace,
driving a higher volume of advert views,
enabling those cars to sell faster.

Dealer Auction, our joint venture with Cox
Automotive, completed the re-platforming
and integration of the three component
businesses in early 2020, moving on to Auto
Trader’s platform setting the business up
to leverage the scale of both Auto Trader
and Cox Automotive. This move will enable
Dealer Auction to fully utilise the data that
Auto Trader generates.

In October 2019, we acquired KeeResources,
a trusted provider of software, data, and
digital solutions to the automotive industry,
including a detailed vehicle dataset for
new and used cars which Auto Trader uses
to power its platform. KeeResources has
been an integral supplier to Auto Trader, as
its unique vehicle data underpins much of
our core platform. It also provides data and
services to fleet providers, a growing area
of focus for us in the overall ecosystem.
Strategically we believe it is important
to own such a valuable data source.

Investing in our infrastructure
We have made further changes to our
technology infrastructure to ensure our
systems and software can effectively
support our product development, as well
as our core platform. A fundamental change
in the year was the decision to start moving
our data centres over to the public cloud so
we could take advantage of the benefits
provided by cloud platforms, including:
enhanced security; improved product
performance; a quicker product release
platform; and cost optimisations. As a result
of moving more of our applications over to
the cloud, including the main website, we
made over 36,000 software releases – over
double the number of the previous year.

Catherine Faiers
Chief Operating Officer
25 June 2020

Our 2019 Car Buyers Report revealed that
71% of consumers surveyed want to be able
to look at a new or a used car on the same
platform. Having launched our new car
proposition last year, we started to
monetise it in the second half of the year
and had over 1,000 retailers paying to
advertise their new cars on our marketplace
at the end of March 2020. We now have an
average of over 31,000 physical new cars on
our site per month. We believe there’s still
room for growth as we estimate that there
are an additional 100,000 of these new cars
that are available but that are not actively
being advertised anywhere.

Products to improve customer efficiency
At a time when the industry was facing
unprecedented challenges, we chose to
launch a powerful new data tool called
Market Insight. It is designed to help
retailers identify and adapt to market
trends as they happen. The tool wasn’t
scheduled for launch until later in the spring
of 2020. However, due to the conditions
facing retailers as a result of the COVID-19
pandemic, and our belief that market
intelligence can help retailers better
navigate these challenges, we made it
available to all customers ahead of
schedule. The product is included in all
retailer customers' advertising packages.

Traditionally, to assess how market
conditions may affect their business, retailers
have had to rely on historical sales data or
their own intuition, but our new insight tool
allows a retailer to see vehicle supply and
consumer demand data in both their local
market and the national marketplace,
alongside pricing and predicted speed of
sale trends. With year-on-year comparison
of market health (supply versus demand)
each week and trended over time.

We have seen increased penetration of
our Managing products during the year, with
the number of retailers now subscribing to
either Retail Accelerator (formerly i-Control)
or Retail Check in 2020 reaching 3,600
(2019: 3,200) at 31 March 2020. This growth
has largely been driven by an increase in
the usage of our entry level product, Retail
Check, which gives retailers the most
accurate view of the live retail market to help
ensure that they buy the right stock at the
right price and sell it profitably. Subsequently,
Retail Check was made available to
independent customers as part of their
advertising package from 1 April 2020.

ESG IN FOCUS

Investing in our culture to
ensure we attract and retain
a diverse workforce

Ensuring Auto Trader is a diverse and
inclusive employer that contributes
positively to the communities in which
we operate is a key strategic priority
for our business. We celebrate diversity
in all its forms. Only with a mix of
different ideas and perspectives can
we come up with the most exciting new
ideas and create the best experience
for our consumers.

We were therefore pleased to be
named a Disability Confident Leader in
July, the highest level of accreditation
given by the Department for Work and
Pensions, which runs the scheme.

86%

of employees would recommend
Auto Trader as a place to work

Making a difference P40

Text Chat
Text Chat gives buyers the
ability to text retailers directly
from adverts, through their
text messaging app.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
FINANCIAL REVIEW

JAMIE WARNER
CHIEF FINANCIAL OFFICER

In a tough market, we achieved
good revenue growth in the year,
increasing by 4% to £368.9m
(2019: £355.1m).

OUR REVENUE STREAMS

88%

Revenue

£368.9m
+4%
(2019: £355.1m)

Operating profit

£258.9m
+6%
(2019: £243.7m)

Trade

£324.3m
A 6% YoY increase (2019: £304.6m)

Consumer Services

£28.3m
A 1% YoY increase (2019: £28.0m)

Manufacturer and Agency

£16.3m

A 28% YoY decrease (2019: £22.5m)

Cash generated from operations

£265.5m
+3%
(2019: £258.5m)

Cash returned to shareholders

£126.4m
-16%
(2019: £151.1m)

Revenue
Trade revenue, which comprises Retailer,
Home Trader and Other revenue, increased
by 6% to £324.3m (2019: £304.6m). Retailer
revenue grew 7% to £312.1m (2019: £293.0m),
as a result of an increase both in the average
number of retailer forecourts, which grew
by 1% to 13,345 (2019: 13,240), and the Average
Revenue Per Retailer (‘ARPR’). ARPR increased
by 6% to £1,949 per month (2019: £1,844).

ARPR growth of £105 per month can be
broken down into three levers of growth:
price, stock and product.

• Price: Our price lever contributed £53
(2019: £50) of total ARPR growth. We
executed our annual event for the majority
of customers on 1 April 2019 which included
a like-for-like price increase. This price
increase equates to a 2.9% increase on
the previous year’s ARPR.

• Stock: Through the financial year, the retailer
market experienced challenges relating to
the supply of stock. A lack of supply in the
auction markets combined with a lack of
confidence over trade valuations led to
lower volumes of inventory being held by
some of our customers. The number of cars
advertised on autotrader.co.uk increased
by 4% to 478,000 (2019: 461,000). However,
excluding new car, Private and Home Trader
listings, the stock lever declined by £30
(2019: decline of £22).

• Product: Our product lever contributed
£82 (2019: £121) of total ARPR growth. Our
annual event involved the introduction
of two new products which were well
received by retailers: Vehicle Check and
Text Chat. In addition, there has been
growth in our higher yielding Advanced
and Premium advertising packages as
retailers continue to recognise the value
of receiving greater prominence within
our search listings. At the end of March
2020, 23% of retailer stock was advertised
on Advanced or Premium package levels
(March 2019: 19%). During the second half
of the year we monetised our new car
advertising product following a trial
period, and at the end of March 2020 we
had over 1,000 paying retailers. There was
a small headwind to product growth as
we passed revenue across into our joint
venture, Dealer Auction, as part of the
transaction completed in January 2019.

Home Trader declined 19% to £8.3m (2019:
£10.2m) as we saw some customers move to
take up subscription advertising packages.
A reduced number of transactions of older
vehicles has also had some impact in this area.

Other revenue increased by £2.5m to £3.9m
(2019: £1.4m) mainly through the acquisition
of KeeResources which contributed £2.0m
to this revenue line.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
Change

ESG IN FOCUS

2020
£m

312.1

8.3

3.9

324.3

28.3

16.3

368.9

2019
£m

293.0

10.2

1.4

304.6

28.0

22.5

355.1

(19%)

179%

(28%)

Revenue

Retailer

Home Trader

Other

Trade

Consumer Services

Manufacturer and Agency

Total

ARPR LEVERS (£)

121

(22)

(30)

Price

Stock

Product

2018

2019

2020

Consumer Services revenue increased 1% in
the year to £28.3m (2019: £28.0m). Private
revenue, generated from individual sellers
who pay to advertise their vehicle on the
Group’s platforms, was £20.1m (2019: £20.1m).
The total volume of private adverts listed
continues to decrease year-on-year as the
market remains under structural pressure.
However, changes to our product offering,
including the introduction of a new higher
yielding ‘hold until sold’ package, has allowed
us to upsell customers effectively. Motoring
Services revenue increased 4% to £8.2m (2019:
£7.9m), with strong growth from our partner
finance offering partially offset by a decline
in Vehicle Check as a result of the product
being included in our retailer packages.

Manufacturer and Agency revenue declined
28% to £16.3m (2019: £22.5m). Market pressures
driven by Brexit uncertainty coupled with
regulatory changes resulted in lower
marketing spend throughout the year.

Administrative expenses
Operating costs continue to be well
controlled, with administrative expenses
increasing by 1% to £113.2m (2019: £112.3m).

People costs, which comprise all staff costs
including third-party contractor costs,

Costs

People costs

Marketing

Other costs

Depreciation and amortisation

Total administrative expenses

decreased by 1% in the year to £55.8m (2019:
£56.4m). The average number of full-time
equivalent employees (‘FTEs’) (including
contractors) increased by 6% to 853 (2019:
804) as we invested in our people to support
the growth of the core business, and as a
result of the acquisition of KeeResources
on 1 October 2019, which contributed an
additional 32 to the total average number.
Although FTEs increased, this cost was
offset by a saving in share-based payments,
including applicable national insurance
costs, which reduced by 39% to £3.6m (2019:
£5.9m). Part of this saving resulted from the
decision made by the Executive Directors to
forego their bonuses earned in relation to
FY20 as part of measures to mitigate the
impact of COVID-19.

Marketing spend remained consistent
year-on-year at £17.3m (2019: £17.6m). We
continue to have a market leading audience
position in terms of both visits and engagement,
as measured by cross platform minutes, and
acquire just 9% of our traffic from paid sources.

Other costs, which include data services,
property related costs and other overheads,
increased by 14% to £33.6m (2019: £29.4m).
The increase comes from our Retail Accelerator
product and Experian costs associated with
our new Vehicle Check product. There were also
higher costs as a result of the Group’s ongoing
migration to cloud-based services which will
reduce the need for capital expenditure in
physical onsite assets over time. Finally, the
uncertainty caused by the COVID-19 outbreak
resulted in a £2.1m increase in our expected
credit loss provision for receivables.

Depreciation and amortisation significantly
decreased by 27% to £6.5m (2019: £8.9m)
with the reduction coming primarily from
the Group’s self-developed billing system
assets becoming fully amortised.

2020
£m

55.8

17.3

33.6

6.5

113.2

2019
£m

56.4

17.6

29.4

8.9

112.3

Change

(1%)

(2%)

14%

(27%)

Investing in IT and security
infrastructure to ensure our
systems remain robust

We’re moving our systems from our
physical data centres to the public cloud
to take advantage of several benefits.

This enhances security, by continuously
improving the performance of our
products due to the increased visibility
into their health, which enables us to get
products and features to market faster.
All while doing this more safely and
improving our ability to optimise our
costs and to be more sustainable.

employees in our dedicated customer
& platform security teams

How we manage risk P52

Administrative expenses

£113.2m
+1%
(2019: £112.3m)

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

FINANCIAL REVIEW CONTINUED

Operating profit
Operating profit grew 6% to £258.9m
(2019: £243.7m) in the year. Operating profit
margin increased by one percentage point
to 70% (2019: 69%).

Our share of the profit generated by Dealer
Auction, the Group’s joint venture, increased
to £3.2m (2019: £0.9m). This was the first full
year of trading for the venture following its
formation on 1 January 2019.

Profit before taxation
Profit before taxation increased by 4%
to £251.5m (2019: £242.2m). This increase results
from the Operating profit performance,
further increased by a reduction in finance
costs but offset by the prior year one-off profit
on disposal of a subsidiary of £8.7m as we
transferred our Smart Buying business to the
joint venture, Dealer Auction.

The Group has a £400m Syndicated
revolving credit facility which is used
to manage cash flows. Interest costs
on the Group’s RCF totalled £6.3m
(2019: £6.5m). The decrease reflects a
reduced average drawn level through
the period. Amortisation of debt costs
amounted to £0.7m (2019: £2.8m) with the
prior year impacted by accelerated issue
costs relating to our previous facility.
Interest costs relating to leases totalled
£0.4m (2019: £0.9m).

Taxation
The Group tax charge of £46.4m
(2019: £44.5m) represents an effective
tax rate of 18% (2019: 18%). After removing
the impact of Dealer Auction, which is
consolidated post-tax, this is in line with
the average standard UK rate.

Our total tax contribution is a measure of the
taxes that we pay on all of our activities, as
well as the taxes that we collect on behalf
of tax authorities. In 2020, our total tax
contribution was £153m. Taxes borne by

2020
£m

2019

£m Change

368.9

355.1

(113.2)

(112.3)

(1%)

the Group totalled £76m and consist of
corporation tax, employer’s NICs and stamp
duty. Taxes collected by the Group totalled
£77m and consist mainly of PAYE deductions,
employees’ NICs and net VAT collected.

Operating profit

Revenue

Administrative
expenses

Share of profits
from joint
ventures

3.2

0.9

256%

Operating profit

258.9

243.7

Share of profits from joint ventures

£3.2m

(2019: £0.9m)

Basic earnings per share

22.19p

(2019: 21.00p)

Earnings per share
Basic earnings per share rose by 6% to
22.19 pence (2019: 21.00 pence) based on a
weighted average number of ordinary shares
in issue of 924,499,320 (2019: 941,506,424).
Diluted earnings per share of 22.08 pence
(2019: 20.94 pence) increased by 5%, based on
929,247,835 shares (2019: 944,254,998), which
takes into account the dilutive impact of
outstanding share awards.

Cash flow and net debt
Cash generated from operations increased
by 3% to £265.5m (2019: £258.5m) and was
achieved primarily from Operating profit
growth coupled with a strong level of cash
conversion. Corporation tax payments
totalled £69.8m (2019: £42.2m) with the
increase due to the change in timing of tax
paid following a change in HMRC’s payment
profile. Net cash generated from operating
activities was £195.7m (2019: £216.3m).

As at 31 March 2020 the Group had net debt of
£282.4m (31 March 2019: £321.0m), representing
a net reduction of £38.6m. Net bank debt, which
is Net debt before amortised debt fees and
excluding accrued interest and amounts owed
under lease arrangements, was £275.4m (2019:
£307.1m). At the year end, the Group had drawn
£313.0m of the Syndicated revolving credit
facility (31 March 2019: £313.0m) and held cash
and cash equivalents of £37.6m (2019: £5.9m).

Leverage, defined as the ratio of Net bank debt
to EBITDA, decreased to 1.0x (2019: 1.2x). Interest
paid on these financing arrangements was
£6.4m (2019: £6.6m).

Acquisition of KeeResources
On 1 October 2019, the Group acquired
KeeResources Limited for consideration,
net of cash acquired, of £25.3m. The assets
and liabilities acquired have been
accounted for at fair value in accordance
with IFRS 3, with the remaining value of
£13.9m being allocated to goodwill.

During the six month period post acquisition,
KeeResources contributed £2.4m of revenue
and £2.6m of costs (excluding amortisation
of acquired intangible assets) to the
consolidated results of the Group.

Capital structure and dividends
During the year, a total of 11.4m shares
(2019: 20.2m) were repurchased for a total
consideration of £61.7m (2019: £93.5m) before
transaction costs of £0.3m (2019: £0.5m).
A further £64.7m (2019: £57.6m) was paid in
dividends, giving a total of £126.4m (2019:
£151.1m) in cash returned to shareholders.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
The Directors are not recommending a final
dividend for the year. The total dividend for the
year is therefore 2.4p (2019: 6.7p), an interim
dividend which was paid in January 2020.

The Group’s long-term 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 over time to reduce debt.

The Group has returned to charging
customers but will continue to monitor the
ongoing environment around COVID-19.
Subject to that monitoring, we are hopeful
of an early return to our capital allocation
policy with the declaration of an interim
dividend in November.

At the 2019 AGM, the Company’s
shareholders generally authorised the
Company to make market purchases of up
to 92,936,538 of its ordinary shares, subject
to minimum and maximum price restrictions.
This authority will expire at the conclusion
of the 2020 AGM and the Directors intend
to seek a similar general authority from
shareholders at the 2020 AGM. The share
buyback programme will be ongoing, and
any purchases of its shares made by the
Company under the programme will be
effected 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.

Post balance sheet events
COVID-19
The COVID-19 outbreak developed rapidly
in 2020, with a significant number of
infections across many countries. The
conditions that existed at the balance sheet
date were that, a disease was present in a
number of countries globally. The novel
Coronavirus that had been present in China
was spreading rapidly. On 11 March 2020 the
World Health Organization declared the virus
a global pandemic. On 16 March 2020 the UK
Government introduced social distancing
measures to safeguard the public alongside
a number of fiscal measures that included
Government backed loans.

On 23 March 2020 the Government
instructed the British public that they must
remain at home unless for very limited
purposes (‘lockdown’). These instructions
resulted in retailers closing their forecourts
to comply with the new rules with
immediate effect. The restrictions came
into force on 24 March 2020 and would last
indefinitely, with the first review being no
earlier than 13 April 2020.

Conditions were present regarding the
pandemic including the social distancing
measures at the balance sheet date. Given
the circumstances, management made
judgements relating to revenue recognition
and recoverability of assets, in particular
accrued income and trade receivables.
These judgements have been disclosed
in note 1.

The social distancing measures were
extended on 13 April 2020 and 7 May 2020.
Retailers in England were able to reopen
their forecourts from 1 June 2020. England
has subsequently been followed by
Northern Ireland (8 June 2020) and Wales
(22 June 2020), while showrooms in Scotland
will open on 29 June 2020. Management
have assessed these extensions to the
lockdown period as adjusting post balance
sheet events given that they provide
evidence of conditions that were present
at the balance sheet date. Management
have therefore reflected the impact of
these events in the estimates made.

Equity placing
On 1 April 2020 the Company announced
its intention to conduct a non-pre-emptive
placing of up to 5% of its issued share capital.
On 3 April 2020 the placing was completed,
and a total of 46,468,300 new ordinary
shares were allotted for a consideration of
400.00 pence per Placing Share, a discount
of 8.9% to the closing share price of 439.1
pence on 31 March 2020. The placing raised
gross proceeds of £185.9m for the Company,
or £183.2m net of fees incurred.

The Placing Shares rank pari passu in all
respects with the existing ordinary shares
in the Company, including the right to
receive all dividends and other distributions
declared, made or paid after the date of
issue. Immediately following Admission,
the total number of shares in issue in the
Company was 969,008,774. Auto Trader
held 4,090,996 shares in treasury, and,
therefore, the total number of voting shares
in Auto Trader in issue was 964,917,778.

Debt extension
On 1 June 2020, the Group extended the term
for £316.5m of the Syndicated RCF for one
year, incurring additional associated debt
transaction costs of £0.5m. The facility will
terminate in two tranches: £316.5m will now
mature in June 2025; 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.

Jamie Warner
Chief Financial Officer
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTMAKING A DIFFERENCE

We take our environmental, social and governance responsibilities
seriously and are constantly looking at what we can improve on;
we aim to ‘Make a Difference’ to our people, our communities
and the wider environment, whilst ensuring we act at all times
as a responsible business.

Non-Financial Information Statement
We aim to comply with all areas of the UK’s Non-Financial Reporting Directive. The table below sets
out where stakeholders can find further information for each area within this Annual Report:

Non-financial risk

Environmental

Our people

Social and community

Human rights

Policies, procedures and employee guilds

Section within this Annual Report

• Sustainability Guild

• Environmental impact: pages 47 and 48

• Code of Conduct
• Stakeholder engagement
• More Good Days AT Work
• Wellbeing Guild
• Board Engagement Guild
• Whistleblowing Policy

• Ethical Procurement Policy
• Customer Charter
• Volunteering days
• Diversity and Inclusion Guild
• Make a Difference Guild

• Modern Slavery Policy
• Privacy Policy

• Our people and culture: pages 42 to 45
• Section 172(1) Statement: pages 28 and 29

• Our people and culture: pages 42 to 45
• Our communities and the wider environment: pages 46 to 49

• Being a responsible business: pages 50 and 51

Anti-bribery and anti-corruption •

Anti-bribery, Gifts and Hospitality Policy • Being a responsible business: pages 50 and 51

Business model

Principal risks

Non-financial key performance
indicators

• How we create value: pages 14 and 15

• Principal risks and uncertainties: pages 54 to 57

• Operational key performance indicators: pages 32 and 33

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Our people and culture
Our people and culture

We have built a digital culture that is values-led,
customer-centric and data-driven, underpinned
by a diverse and inclusive team. Our ESG strategy
is focused on ‘Make a Difference’ and we focus
our efforts on the following:

Overview
We focus on ensuring we create a
highly collaborative culture where
people feel motivated, valued
and supported. We strive to be a
business that’s diverse in its make
up and as inclusive as possible, as
we believe diverse views will lead
to better outcomes.

Responsibility
• The Board
• Remuneration Committee
• Nomination Committee
• Head of People

Read more P77

Go online

plc.autotrader. co.uk/investors

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
BOARD OF DIRECTORS

ED WILLIAMS – CHAIRMAN

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.

Appointed to PLC Board
February 2015

Independent on appointment
Yes

External appointments
Idealista S.A.

Committee memberships
• Nomination (Chair)

NATHAN COE – CHIEF EXECUTIVE OFFICER

Biography
Nathan was first appointed to the
Board as Chief Operating Officer
(‘COO’) in April 2017 and as Chief
Financial Officer (‘CFO’) in July
2017. Nathan was appointed
Chief Executive Officer (‘CEO’)
in March 2020, following the
announcement of former CEO
Trevor Mather’s retirement.

Nathan joined Auto Trader in
2007 to oversee the transition
from a magazine business to a
pure digital company. 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).

Appointed to PLC Board
April 2017

Independent on appointment
N/A

External appointments
None

Committee memberships
• Disclosure

CATHERINE FAIERS – CHIEF OPERATING OFFICER

JAMIE WARNER – CHIEF FINANCIAL OFFICER

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
May 2019

Independent on appointment
N/A

External appointments
None

Committee memberships
• None

Jamie graduated from
Bristol University with a BSc in
economics and economic history
and is a qualified Chartered
Management Accountant.

Appointed to PLC Board
March 2020

Independent on appointment
N/A

External appointments
None

Committee memberships
• Disclosure

Biography
Jamie was appointed CFO in
March 2020. Prior to this he was
Auto Trader’s CFO-Designate
and Deputy CFO. During his
seven years at Auto Trader,
Jamie has worked in a variety
of different roles across finance,
covering commercial finance,
financial reporting, pricing and
investor relations.

Jamie initially worked as a freight
derivatives broker for inter-dealer
broker GFI. Jamie left to join a
start-up company, Swapit,
developing a children’s online
swapping and trading community,
that was subsequently acquired
by Superawesome. He then joined
Auto Trader in 2012.

Biography
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 before that a Director at
Close Brothers Corporate Finance.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020The 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 refers to the Group’s previous parent company, Auto Trader Holding Limited.

DAVID KEENS – SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR

JILL EASTERBROOK – INDEPENDENT NON-EXECUTIVE DIRECTOR

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

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.

Appointed to PLC Board
May 2015

Independent on appointment
Yes

External appointments
J Sainsbury plc

Committee memberships
• Audit (Chair)
• Nomination
• Remuneration

Biography
Jill was appointed as a
Non-Executive Director to
the Board on 1 July 2015. Jill is
currently also a Non-Executive
Director of Ashtead Group plc,
the FTSE100 international
equipment rental company.

Previously, Jill was a member
of the Executive Committee
at Tesco Plc where she held a
variety of senior roles, and was
the Chief Executive Officer of
JP Boden & Co.

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

Appointed to PLC Board
July 2015

Independent on appointment
Yes

External appointments
Ashtead Group plc

Committee memberships
• Remuneration (Chair)
• Audit
• Nomination

JENI MUNDY – INDEPENDENT NON-EXECUTIVE DIRECTOR

SIGGA SIGURDARDOTTIR – INDEPENDENT NON-EXECUTIVE DIRECTOR

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

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

She was previously at Vodafone
Plc (1998 to 2017). She held Group
Director roles across product
management and sales, as well
as serving as Chief Technology
Officer on the UK and New
Zealand Executive Boards.

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

Appointed to PLC Board
March 2016

Independent on appointment
Yes

External appointments
UK Finance Board

Committee memberships
• Audit
• Nomination
• Remuneration

Biography
Sigga was appointed as a
Non-Executive Director to the
Board effective 1 November 2019.

Sigga joined Tesco Bank as
Chief Customer Officer in
November 2019.

Sigga has worked in the financial
services industry for 18 years,
pioneering digital transformation
at both American Express and
Santander UK. Most recently,
she was responsible for the
development and launch of Asto,
a Santander Fintech business,
providing innovative cash-flow
solutions to small businesses.

Sigga holds a doctorate in
leadership and innovation from
Manchester Business School,
an MBA from IESE Business
School as well as a BS degree in
Marketing from the University
of South Carolina.

Appointed to PLC Board
November 2019

Independent on appointment
Yes

External appointments
Tesco Bank

Committee memberships
• Audit
• Nomination
• Remuneration

CLAIRE BATY – COMPANY SECRETARY

Biography
Claire joined Auto Trader in July
2015 and is Company Secretary
and Director of Governance.
She is responsible for corporate
governance; legal services;
regulatory compliance; customer
security; procurement; and
risk management.

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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE 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 2018
by the Financial Reporting Council.

The Board plays an important role in ensuring
that our culture remains aligned with our
long-term strategy.

As well as the Guild 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.

Engagement 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 investor relations 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 topics, 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.

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 2018 Code
The Company has complied in full with all provisions of the
2018 Corporate Governance Code during the year. This report
is structured to follow each of the sections of the Code:

Board leadership and company purpose

Strategy
The Board is responsible for setting the Group’s purpose,
for determining the basis on which the Group generates value
over the long term and developing a strategy for delivering
the objectives of the Group. The Strategic report, which can
be found on pages 2 to 59, sets out the Group’s purpose, strategy,
objectives and business model.

Culture
Auto Trader has a distinctive culture that is values-oriented
and underpinned by a diverse and inclusive workforce. The
Board plays an important role in ensuring that this culture
remains aligned with our long-term strategy, in setting values,
demonstrating behaviours consistent with these values, and
in monitoring the culture and behaviours of the organisation.

Recognising the importance of our values-led culture, the Board
focused its annual strategy offsite on people, culture and values.
This included discussions on the evolution of the culture over time
and how this may need to adapt in the future as the business enters
new areas of opportunity. It also included specific initiatives including
the introduction of more family friendly policies and flexible working
arrangements; considerations of our working environment; and
initiatives to improve the diversity of the organisation.

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

Workforce engagement
A Board Engagement Guild has been established as the core
mechanism by which the Board engages with the workforce.
The Board has decided that it is not appropriate to designate
a specific NED to carry out this role and instead shares this
role across all NEDs. The Guild meets with the Chairman and
Non-Executive Directors without Executive Directors or any
members of senior management present and has met twice
during the year, covering topics such as the CEO succession, BAME
and LGBT+ representation, climate change and sustainability.

The Board Engagement Guild comprises members from across
different parts of the business and canvases views and opinions
from their colleagues to share with the Board. They are all active
members of the Company’s other existing guilds, which cover areas
such as family & wellbeing, diversity & inclusion and sustainability.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Annual General Meeting
At the 2019 Annual General Meeting, all resolutions were passed
with votes in support ranging from 90.25% to 100%.

The 2020 AGM will take place at 10:00am on Wednesday 16
September 2020 at the Company’s registered office at 4th Floor,
1 Tony Wilson Place, Manchester, M15 4FN. In light of the current
restrictions over public gatherings due to COVID-19, the AGM will
be run as a closed meeting. We strongly encourage all shareholders
to cast their votes by proxy, and to send any questions in respect of
AGM business to ir@autotrader.co.uk.

Results of resolutions proposed at the AGM will be published on the
Company’s website: plc.autotrader.co.uk/investors following the AGM.

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.
Reports are directed to the Audit Committee Chair and the Company
Secretary. The Audit 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.

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 will join the 2020
AGM by telephone. Shareholders are strongly encouraged to send
any questions in respect of the AGM by email to ir@autotrader.co.uk.
Following the meeting, responses to questions will be published on
the website at plc.autotrader.co.uk/investors.

Conflicts of interest
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.

Any external appointments or other significant commitments of the
Directors require the prior approval of the Board. None of the Executive
Directors 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 create any conflict of interest.

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.

Concerns over operation of the Board
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.

Division of responsibilities

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.

Board and Committee 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 and is
reviewed at least annually.

Each Committee has formally approved
Terms of Reference which are reviewed
and approved at least annually, or more
frequently as circumstances require.

Details are published on our website at
plc.autotrader.co.uk/investors.

CHAIRMAN

• Leadership and governance of the Board.
• Creating and managing constructive relationships between the Executive and Non-

Executive Directors.

• 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, 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 of management.
• Constructively challenge the Executive Directors.
• Monitor the integrity of financial information, financial controls and systems of risk management.

SENIOR INDEPENDENT DIRECTOR

• Acts as a sounding board for the Chairman.
• 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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTCORPORATE GOVERNANCE STATEMENT CONTINUED

Composition, succession and evaluation

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

Ed Williams was considered to be independent on appointment.
All of the Non-Executive Directors (David Keens, Jill Easterbrook,
Jeni Mundy and Sigga Sigurdardottir) are considered to be
independent in character and judgement, and free of any
business or other relationship which could materially influence
their judgement. The Chairman’s fees and the Non-Executive
Directors’ fees are disclosed on pages 84 and 85, and they
received no additional remuneration from the Company during
the year. Therefore, at 31 March 2020 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.

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

Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Number of scheduled
meetings held

Director

Ed Williams

Trevor Mather 1

Nathan Coe

Catherine Faiers2

Jamie Warner3

David Keens

Jill Easterbrook

Jeni Mundy

Sigga Sigurdardottir4

9/9

8/8

9/9

8/8

1/1

9/9

4/4

1. Retired from the Board on 29 February 2020.
2. Appointed to the Board on 1 May 2019.
3. Appointed to the Board on 1 March 2020.
4. Appointed to the Board on 1 November 2019.

n/a

4/4

2/2

n/a

7/7

4/4

3/3

n/a

3/3

2/2

Note: In addition to the scheduled Board meetings detailed above, regular weekly
Board calls relating to COVID-19 took place during March 2020.

The Board makes decisions in order to ensure
the long-term success of the Group whilst
taking into consideration the interests of
wider stakeholders.

Time commitment
Any external appointments or other significant commitments
of the Directors require the prior approval of the Board. None
of the Executive Directors 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.

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. This was refreshed in response to the Board evaluation in
2019, and was utilised, tailored as appropriate, for the appointment
of new Non-Executive and Executive Directors during the year.

The majority of Board meetings contain 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 on page 67.

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 regular
newsletters 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.

Board and Committee activities in 2020
The Board makes decisions in order to ensure the long-term
success of the Group whilst taking into consideration the interests
of wider stakeholders, such as employees, consumers, customers
and suppliers, and other factors as required of it under s172 of the
Companies Act 2006. Board meetings are one of the mechanisms
through which the Board discharges this duty, and in order to
formalise this process, a stakeholder framework has been
established which is applied to all Board papers and discussions.
Further information about engagement with the Group’s
stakeholders is included in the table on pages 28 and 29.

The Board’s activities are structured through the year to develop
and monitor the delivery of the Group’s strategy and financial results;
to receive feedback from and engage with stakeholder groups such
as employees, customers and suppliers; and to maintain a robust
governance and risk management framework. The table below sets
out some of the Board’s key activities during the year.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020S
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STRATEGY

OPERATIONAL

FINANCIAL

PEOPLE AND CULTURE

SHAREHOLDERS

RISK AND GOVERNANCE

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

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

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

Quarterly Culture
Scorecard monitoring.

• Focus area: Become
to new cars what we
are in used.

• CEO departure and

succession planning.

Regular feedback from
investor meetings.

Quarterly shareholder
analysis.

Approval of material
contracts.

Governance and
regulatory updates.

• Tenure of Chair

discussion. Update
Board Schedule of
Matters to give
more authority
to management
for charitable
donations.

• Review and
approval
of the mid-term
financial plan.

• Focus area: Improve
vehicle stock choice,
volumes and
accuracy.

• Approval of

Annual Report
and Preliminary
Results.

• Approval of 2019
Bonus out-turn.
• PSP and Single
Incentive Plan
targets and grants.

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

• Review and approval
of Group risk register.
• Review and approval
of viability statement.

final dividend.

• Review of progress
on Dealer Auction
(joint venture with
Cox Automotive).

• Acquisition of
KeeResources
Limited.

• Review: Private
advertising and
Instant Offer.

• Focus area: Develop
a more efficient way
to source, dispose
and move vehicles.

• Focus area:

Continually innovate
to create value for
our customers.

• Focus area: Maintain
the best consumer
experience for
buying and selling
vehicles.

• Board Engagement

• Review of feedback from

Guild.

analysts and investors from
results roadshows.

• Audit Committee:
internal audit and
Cyber/GDPR
updates.

• Reviewed feedback from

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

• Review and approval
of modern slavery
statement.

• Review of insurance

programme.

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r • Strategy off-site
e
with a particular
b
o
focus on culture
t
c
and people.
O

• Customer visits to
small and large
retailers.

• Key events
for FY21.

• Review:

Use of our data.

• Approval of
half-yearly
report.

• Remuneration
framework,
employee share
scheme, CEO and
CFO salary.

• Approval of interim dividend.

• Review: OEM:
Manufacturer
and Agency.

• 2020 focus areas
and operating
plan.

• Review: Audience
and marketing
activities.

• Review of tax
compliance.

• Focus area: Extend
our product offering
further down the
buying funnel,
towards online
transactions.

• COVID-19 customer

actions.

• COVID-19
financial
scenarios
planning.

• Review of

remuneration
framework.
• Gender pay

gap reporting.

• Succession planning,
talent development
and diversity.

• Director salary and
fee reductions and
bonus waivers.
• Internal Board

evaluation feedback
and action plan.

• Review and approval
of Group risk register.

• Business continuity.
• Audit Planning &
SM&CR regime.

• External legal and
regulatory update.

• Review of internal

and risk management
framework and
internal controls.
• Review of external

audit effectiveness.

• Approval of equity raise,

• COVID-19

suspension of share buybacks
and suspension of guidance.

• Agreement to set an ESG

strategy and framework, and
more metrics including Scope 3
GHG emissions reporting.

contingency and
business continuity
planning.

• Treasury Policy.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

CORPORATE GOVERNANCE STATEMENT CONTINUED

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 Directors have access to the advice and services of the
Company Secretary, Claire Baty. The appointment or removal
of the Company Secretary is a matter for the whole Board.

Appointments to the Board
The Board has established a Nomination Committee, chaired by
Ed Williams, with all other members comprising independent
Non-Executive Directors. The main responsibilities of this Committee
are to keep under review the structure, size and composition of the
Board and its Committees; to identify and nominate candidates
for appointment to the Board; to ensure that there are formal
and orderly succession plans in place; and to oversee talent
development, diversity and inclusion across the whole Group.

The work of the Committee is described on pages 70 to 72.

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 K of the Code. Biographies of
all members of the Board appear on pages 62 and 63.

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. The AGM
Notice sets out the specific reasons for reappointing each Director.

Tenure of Chair
The 2018 UK Corporate Governance 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.

As disclosed in the 2019 Annual Report, the Nomination Committee,
led by David Keens as Senior Independent Director, considered this
change in the Code and 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.

Board evaluation and effectiveness
An internal evaluation was conducted in 2020. The next external
evaluation is due in 2021; however, given the unfolding COVID-19
pandemic, the Board may consider deferring this into the next
financial year (2022).

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 in the previous review.

The results were reviewed by the Chairman and then discussed
with the Board in March 2020.

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.

There has been more discipline in ensuring the papers are as concise as possible without losing
the detail required; and in publishing these piecemeal through a Board portal, so as to give more
time to read.

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

Additional Committee meetings were 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 was reviewed and refreshed to ensure that it continues to provide
Directors with the information and knowledge they need about the business and their role.
This was used, on an appropriately tailored basis, for the new appointments during the year.

ACTIONS ARISING FROM THE 2020 INTERNAL REVIEW

Particularly for the newer Board members, Board papers
may include jargon/Company-specific terminology.

More focus by the Executive Directors and Company Secretary to ensure the jargon is kept
to a minimum.

More formality around training and development needs.

Training plans to be developed for individual Directors, taking into account their existing
knowledge, skills and experience, and records to be maintained of development activities.

More understanding of and engagement with newer
customer groups (for example, manufacturers, leasing
companies, automotive finance houses).

A greater focus on the strategy for ESG matters,
including establishing a governance framework
and setting targets.

Arrangements to be made for the Board to engage directly with these customer groups, including
customer visits and/or invitations to attend Board meetings.

Governance arrangements for ESG and sustainability matters to be reviewed, and more focus on
a formal strategy to be introduced. Further details will be provided in the 2021 Annual Report.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
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.

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.

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; or on request from ir@autotrader.co.uk. These
letters set out the expected time commitment from each Director.
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.

The Board acknowledges its responsibility
for establishing and maintaining the
Group’s system of risk management
and internal controls.

Audit, risk and internal control

The Board has established an Audit Committee, chaired by David
Keens and comprised entirely of independent Non-Executive
Directors. The Chairman is not a member of the Committee. 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, internal
control, internal audit and external auditors. The work of the
Committee is described on pages 73 to 76.

Financial and business reporting
Assisted by the Audit Committee, the Board has carried out a review
of the 2020 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 Report of the
Audit Committee on pages 73 to 76 for details of the review process.

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 in Principal risks and
uncertainties on pages 54 to 57.

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 2020 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.

Remuneration

The Board has established a Remuneration Committee, chaired
by Jill Easterbrook and comprised entirely of independent
Non-Executive Directors. The Remuneration Committee is
responsible for determining the remuneration policy, and for
setting remuneration for the Executive Directors, the Chairman
and senior employees; for monitoring the remuneration policies
for the wider organisation; and for ensuring the alignment of
reward with the culture of the organisation.

See pages 58 and 59 for the Board’s statement on going concern
and the viability statement.

The work of the Committee is described on pages 77 to 89.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTREPORT OF THE NOMINATION COMMITTEE

ED WILLIAMS
CHAIR OF THE NOMINATION COMMITTEE

OVERVIEW

• Composed of the Chairman and four 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.

OUR PROGRESS IN 2020

• Implementation of succession plan, resulting in
appointment of Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer.

• Appointment of an additional independent

Non-Executive Director, increasing the proportion
of women on the Board to 50%.

• Followed up on the recommendations of the 2019

external Board evaluation, and reviewed the results
of the 2020 internal evaluation.

• Review and updating of formal succession plans for the
Chairman, Non-Executive Directors, Executive Directors
and senior management.

FOCUS AREAS FOR 2021

• 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, including identifying and developing talent.

meetings were held during
the year:

100%

meeting attendance by all
Committee members

Member

Ed Williams (Chair)

David Keens

Jill Easterbrook

Jeni Mundy

Sigga Sigurdardottir1

Meetings
attended/
total meetings
held

Percentage of
meetings
attended

3/3

2/2

100%

1. Appointed to the Committee on 1 November 2019.

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

The Committee believes that effective
succession planning is critical to the
Company’s long-term success.

Dear shareholders,
I am pleased to present the Report of the Nomination
Committee for 2020.

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 once 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.

Our succession plan was put into practice this year when
Trevor Mather retired as CEO on 29 February 2020.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Board composition

As at 31 March 2019

As at 31 March 2020

Chairman

Independent Non-Executive Directors

Executive Directors

Gender diversity

As at 31 March 2019

As at 31 March 2020

% of women on the Board: 33%

% of women on the Board: 50%

Men

Women

Board tenure1

As at 31 March 2019

As at 31 March 2020

0-3 years

3-6 years

1. Refers to period since appointment to the PLC Board.

Following the announcement in April 2019 of Trevor’s planned
retirement, Nathan Coe was appointed as CEO-Designate, and after
a transitional period of several months, Nathan was appointed as
CEO on 1 March 2020. Catherine Faiers was promoted to the Board
as Chief Operating Officer on 1 May 2019, which enabled Nathan to
focus on an orderly handover. Jamie Warner was appointed as CFO
on 1 March 2020.

During the year, the Committee has updated and developed the
formal succession plans for the new Board, including the Chairman,
Non-Executive Directors, Executive Director and senior management.

Appointment of Non-Executive Director
The Committee keeps under continual review the size and
composition of the Board, and also the skills, knowledge and
experience required of the Board in the context of the Group’s
strategy. Taking into consideration the Group’s increasing
involvement in regulated activities such as consumer finance,
and the need for an orderly succession plan for the current
Non-Executive Directors, the Committee identified a need to
appoint an additional independent Non-Executive Director.

The process for identifying candidates was led by the Committee:

• A comprehensive candidate search brief was agreed, including the
required industry skills, knowledge and experience required, and
taking into consideration the benefits of diversity on the Board.
• An external executive recruitment consultant, Ivy Street, was
engaged, with whom the Group has no other relationship.

• The shortlisted candidates each met with members of the Board
on a one-on-one basis. These meetings included an assessment
of candidates in the context of the expected values and
behaviours of Board members.

Board skills and experience

The Board brings a wide range of skills and experience to
complement the Group and its strategy. Board members have
leadership experience within large and listed companies, and
each have their own specialist experience.

Following this process, Sigga Sigurdardottir was identified
as the Committee’s preferred candidate, having extensive
experience in digital transformation and financial services.
Following recommendation to the Board, Sigga was appointed
as a Non-Executive Director with effect from 1 November 2019.

8
Strategy

2
Retailing

8
Change/
transformation

8
Governance
and risk

3
Financial
reporting

3
Marketing

6
Digital/
technology
innovation

6
People

2
Prior listed
company

2
Financial
services

7
Consumer

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.

We adopted the Hampton-Alexander target for women representation
on our Board in 2019, and we are pleased to report that we continue to
exceed this target, with an equal number of women and men on the
Board. We continue to aspire to this as a longer-term goal for the
women in senior management and for the organisation as a whole.

We acknowledge the recommendations of the Parker review,
but have not at this stage set a target, and do not currently
meet the recommendations.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTREPORT OF THE NOMINATION COMMITTEE CONTINUED

Impact of the 2018 Corporate Governance Code
As reported in the 2019 Annual Report, 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.

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. We recognise
that women, and employees from a BAME (Black, Asian and Minority
Ethnic) background continue to be under-represented at senior
management level and throughout the organisation.

We remain committed to improving diversity at all levels, in
particular in parts of the business where women are currently
underrepresented, such as technology, and to attract and develop
more employees from a BAME background at all levels and areas
of the organisation.

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. The work
of the Guild is described in more detail on page 44.

At the end of our financial year, 40% of the Operational Leadership
Team (‘OLT’) were women, and 32% of the OLT’s direct reports were
women, a combined total of 32%, which means that we are close to
meeting the Hampton-Alexander Review recommendations.

Board evaluation
We carried out an internal Board evaluation during the year,
which included following up on the recommendations of the 2019
externally facilitated Board evaluation. This is described in detail on
pages 68 and 69 of the Corporate governance statement. Our next
external Board evaluation is due to take place in 2021; however, given
the evolving COVID-19 pandemic, the Board may consider deferring
this into the next financial year.

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 2020 AGM relating to the election
and re-election of the Directors.

I welcome any questions in respect of the work of the Committee,
which can be submitted to ir@autotrader.co.uk.

Ed Williams
Chair of the Nomination Committee
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020REPORT OF THE AUDIT COMMITTEE

DAVID KEENS
CHAIR OF THE AUDIT COMMITTEE

OVERVIEW

• Composed of four 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 CEO, COO, CFO, internal

auditors and external auditors by invitation.

OUR PROGRESS IN 2020

• Discuss key areas of financial judgement including

the acquisition of KeeResources.

• Assessing the Group’s going concern and viability

statements, including the impact of COVID-19.

• Review the effectiveness of internal audit, internal

controls and risk management.

• Evaluate the effectiveness and independence

of external audit.

FOCUS AREAS FOR 2021

• Agree with KPMG any changes for their 2021 audit.

meetings were held during
the year:

100%

meeting attendance by all
Committee members

Member

David Keens (Chair)

Jill Easterbrook

Jeni Mundy

Sigga Sigurdardottir1

Meetings
attended/
meetings held

Percentage of
meetings
attended

4/4

2/2

100%

1. Appointed to the Committee on 1 November 2019.

The Committee was fully engaged
and supportive of the capital raising
undertaken in April this year, which was
a response to the disruption caused by
COVID-19, as detailed in this Annual Report
as a post balance sheet event.

Dear shareholders,
I am pleased to introduce this, my fifth, Audit Committee report.

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 approves the Terms of Reference of the
Committee, which assists the Board in discharging its
responsibilities. This includes monitoring the integrity of the
Group’s financial reporting; effectiveness of the internal
control and risk management framework; internal audit;
and the independence and effectiveness of external audit.
Our internal audit function is outsourced to Deloitte LLP, who
provide us with specialist expertise in delivering a risk based
rolling review programme.

Our external auditors, KPMG, and internal auditors,
Deloitte, regularly attend Audit Committee meetings.
The Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer and other members of management
attend by invitation.

The Committee has reviewed the content in the Annual Report
and believes that this explains our strategic objectives and is
fair, balanced and understandable. We have considered the
impact of COVID-19 on our business and you will find important
detail on this in other sections of the Annual Report. The
Committee was fully engaged and supportive of the capital
raising undertaken in April this year, which was a response to
the disruption caused by COVID-19, as detailed in this Annual
Report as a post balance sheet event.

Whilst this Report of the Audit Committee contains some of
the matters addressed during the year, it should be read in
conjunction with the external auditor’s report starting on
page 94 and indeed the Auto Trader Group plc financial
statements in general.

At the 2019 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 2020 AGM.

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

David Keens
Chair of the Audit Committee
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTREPORT OF THE AUDIT COMMITTEE CONTINUED

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 accounting principles and policies
adopted, and whether management had made appropriate
estimates and judgements.

In doing so, the Committee discussed management reports and
enquired into judgements made. The Committee reviewed the
reports prepared by the external auditor on the 2019 half-year
statement and 2020 Annual Report.

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

DESCRIPTION OF SIGNIFICANT AREA

AUDIT COMMITTEE ACTION

Revenue recognition
Revenue recognition for the Group’s revenue streams is not
complex. However, this remained an area of focus due to the
large volume of transactions and as revenue is the largest figure
in the income statement.

The Committee reviewed the assumptions and disclosure around revenue
recognition made by management, particularly in relation to offers given to
customers as a response to the disruption caused by COVID-19 as set out on
pages 4 to 7. This will result in reduced revenue for the first half of the year
to March 2021 at least and increased bad debt risk as customers are under
increased pressure.

The Committee was satisfied with the explanations provided and
conclusions reached in relation to revenue recognition.

Share-based payments
The Company has a number of share-based payment arrangements,
accounted for under IFRS 2. These require the use of valuation models
and certain assumptions in determining their fair value at grant date and
in the recognition of charges and, as such, this is a significant estimate.

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 Single Incentive Plan. The Committee reviewed the comments
within KPMG’s report into the calculation of the charge and is satisfied that the
share-based payment accounting is appropriate and in accordance with
accounting standards.

Acquisition accounting
Management’s assessment of the allocation and valuation of goodwill
and intangible assets as part of the acquisition of KeeResources.

Investment value in joint venture
In the prior year, the Group entered a joint venture agreement with Cox
Automotive UK named Dealer Auction. Management’s assessment of
the recoverability of the investment value, given the infancy of the
investment, is based on future estimated cash flow forecasts.

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.

The Committee reviewed the assumptions made by management in respect
of the identification and valuation of intangible assets, and the allocation of
consideration, and was satisfied that these were appropriately accounted for
under IFRS 3. KeeResources is a relatively small business in comparison to the
Group and is in its early integration stage.

The Committee reviewed the assumptions made by management, particularly
in relation to the future cash flow forecast to support the carrying value of the
investment of the joint venture, and was satisfied that these were appropriately
accounted for given the infancy of Dealer Auction.

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 2023. 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 54 to 57. The feasibility of mitigating actions and the potential
speed of implementation to achieve any flexibility required were discussed.
Scenarios covering events that could adversely impact the Group were
considered. 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.

It is worth noting, the disruption caused by COVID-19 after the year end has
required the Committee to regularly re-assess the projections and conclusions.
Significant actions have been taken to limit the impact of loss of revenue, to reduce
costs and to reduce debt by way of the capital raising completed on 1 April 2020.
For additional detail, please refer to the external auditor’s report and Strategic
report contained in this Annual Report.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Fair, balanced and understandable
At the request of the Board, the Committee has reviewed the content of the 2020 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 internal
and external auditors, and considered the following:

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?

• How do these compare with the risks that KPMG include in their report?

Is the report
understandable?

• 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 2020 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 are appropriate responses, 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

Financial reporting

Budgeting and
reforecasting

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 monthly Risk Forum meetings.

Group consolidation is performed on a monthly basis with a month-end pack produced that includes an income statement,
balance sheet, cash flow 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.

An annual Plan is produced and monthly results are reported against this. A monthly rolling forecast is also produced to identify
how the Group is performing over the balance of the year versus the original Plan. The Plan is 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.

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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTREPORT OF THE AUDIT COMMITTEE CONTINUED

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 2020 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:

• Third-party verification and performance of revenue-share partners.
• Non-financial operating metrics.
• Procurement to payment processes.

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.

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.

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 2019, and in respect of the audit of the financial statements for the year ended 31 March 2020. 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. In particular, discussions have
been held with KPMG’s senior management to verify the Group’s audit partner’s performance and standing within KPMG. There were
no conflicts or matters of concern conveyed.

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, and will be
assessed going forward in line with the FRC Ethical and Auditing Standards.

NON-AUDIT SERVICE

POLICY

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

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 70%
of the average audit fees paid to the audit firm in the last three consecutive years.

Prohibited services
In line with the EU Audit Reform, services where the auditor’s
objectivity and independence may be compromised. Prohibited
services are detailed in the FRC Revised Ethical Standard 2019 and
include tax services, accounting services, internal audit services,
valuation services and financial systems consultancy.

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, and will be
assessed going forward in line with the new FRC Ethical and Auditing Standards.

Refer to plc.autotrader.co.uk/investors for full details of the policy. During the year, KPMG charged the Group £36,000 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
Chair of the Audit Committee
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020DIRECTORS’ REMUNERATION REPORT

Annual statement
by the Chair of the
Remuneration Committee

JILL EASTERBROOK
CHAIR OF THE REMUNERATION COMMITTEE

OVERVIEW

• Composed of four independent Non-Executive Directors.
• The Company Chairman, Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and other
relevant individuals are invited to attend the meetings
when appropriate – no person is present during any
discussion relating to their own remuneration.

• The Company Secretary acts as secretary to the Committee.

OUR PROGRESS IN 2020

• From 1 April 2020 the entire Board voluntarily waived at least
50% of their salaries or Board fees, to be returned to normal
levels from 1 July 2020 following a return to charging
customers and the unfurloughing of all employees.

• The Executive Directors have waived their FY20 annual

bonus entitlement.

• For FY21 we will not be operating an annual bonus but
will be granting a larger PSP three-year award which
will vest based on TSR performance.

FOCUS AREAS FOR 2021

• Review the Remuneration Policy to ensure it is aligned

with strategy and the creation of sustainable long-term
value creation and that it is appropriate in the context
of evolving shareholder guidance and corporate
governance in advance of submitting a revised Policy
to a binding vote at the AGM in September 2021.

meetings were held during
the year:

Member

Jill Easterbrook (Chair)

David Keens

Jeni Mundy

Sigga Sigurdardottir1

100%

meeting attendance by all
Committee members

Meetings
attended/ total
meetings held

Percentage of
meetings
attended

7/7

4/4

100%

1. Sigga Sigurdardottir was appointed to the Board and Remuneration

Committee on 1 November 2019.

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

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

In these uncertain times, it is important that
remuneration arrangements continue to
align Executive Directors with the long-term
interests of shareholders.

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 2020.

As highlighted in the Chairman’s statement on page 8 and the
Chief Executive Officer’s statement on page 12, the business’s
performance before the outbreak of COVID-19 was good with
both revenue and operating profit increasing year on year,
despite it being a challenging year for retailers due to UK
automotive market pressures. Since the start of the COVID-19
crisis, the business has focused on its people, customers and
long-term priorities to ensure the business emerges from the
crisis strongly and the business’s operations continue to be
maintained to a high standard.

On 1 April 2020 we announced that the entire Board had voluntarily
offered to temporarily forego at least 50% of their salaries or Board
fees, and that the Executive Directors had also requested that
their annual FY20 bonus entitlement be waived. The Board
believes that acting swiftly in this way is the clearest indication
that we stand together with all our stakeholders, whether
employees, customers, shareholders or suppliers. Following the
return to charging customers from 1 June 2020, and the return of
all of our employees from furlough, we intend to return Directors’
salaries and fees to normal levels from 1 July 2020.

Remuneration approach for 2021
To date, we have operated a traditional remuneration framework
including an annual bonus with deferral and an annual award
under our long-term incentive plan, the Performance Share Plan.

The COVID-19 outbreak has resulted in significant disruption
in the UK automotive market, with dealerships closed for an
extended period. Retailers in England were able to reopen
their forecourts from 1 June 2020. England has subsequently
been followed by Northern Ireland (8 June 2020) and Wales
(22 June 2020), while showrooms in Scotland will open on
29 June 2020. There remains, however, a significant degree
of uncertainty for the sector as well as the wider economy.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

DIRECTORS’ REMUNERATION REPORT CONTINUED

Board changes
On 6 February 2020, we announced that,
as the transition to the new executive team
has been progressing well, the retirement
date of Trevor Mather was brought forward
and he stepped down from the Board on
29 February 2020 (rather than 31 March 2020
as originally announced). Nathan Coe
was therefore appointed as CEO

(previously CFO & CEO-designate)
effective from 1 March 2020. In addition,
Jamie Warner joined the Board as CFO
effective from 1 March 2020. Catherine
Faiers was promoted to COO and joined
the Board from 1 May 2019. Details of their
remuneration arrangements are provided
in this report.

Due to the current uncertainty it was considered very challenging
to set robust and fair financial targets for the PSP, and furthermore
we believe that the success or otherwise of the Company’s
response to COVID-19 is most likely to be reflected in the share price
relative to that of other companies. We also wanted to ensure that
the vesting outcome remains aligned with shareholder returns and
hence the award is based on TSR performance.

In line with best practice and shareholder expectations the
Committee shall retain discretion to adjust the vesting outcome
if it is not considered to be reflective of underlying financial or
non-financial performance of the business or the performance of
the individual over the performance period or where the outcome
is not considered appropriate in the context of the experience of
shareholders or other stakeholders.

The intention is that we will operate this approach for FY21 only.
We are due to submit a new Directors’ Remuneration Policy to
shareholders at the 2021 AGM (our last policy was approved by
shareholders at the 2018 AGM). The Committee will therefore be
undertaking a full review of our approach to remuneration policy
over the next 12 months and will be consulting with shareholders
on any proposed changes in due course.

The CEO and CFO’s salaries were reviewed in advance of their
appointment and were set at £568,000 and £330,000 respectively,
with effect from 1 March 2020. The COO’s salary will remain at
£350,000. In response to the COVID-19 outbreak, with effect from
1 April 2020 the Executive Directors have voluntarily offered to
temporarily forego 50% of their salaries. Pension and benefits are
unchanged for 2020. The Company Chairman and the Senior
Independent Director have waived 100% of their fees, and I and the
other Non-Executive Directors have waived 50% of our fees from
the same date. The intention is to return all salaries and fees to
normal levels from 1 July 2020.

This uncertainty makes it difficult to predict performance
over the short and medium term which makes setting robust and
meaningful targets for incentive arrangements very challenging.
While the short term is difficult to predict the Board continues to
have full confidence that we have the right offering, operational
structure and culture to succeed over the long term and deliver value
for our shareholders. The Committee considers that it is important
that remuneration arrangements continue to align Executive
Directors with the long-term interests of shareholders.

We therefore intend to operate a modified approach to
remuneration for FY21 as follows:

• No annual bonus plan will operate for FY21 (meaning executives

will not receive any bonus payment for a two-year period
covering April 2019 to March 2021).

• The Executive Directors will be made an award under the

Performance Share Plan (‘PSP’) of 250% of salary. The proposed
award represents a reduction of c.30% for the CEO and c.10% for
the CFO and COO compared to their previous aggregate
incentive opportunity of 350% of salary (200% PSP and 150%
annual bonus) and 280% (150% PSP and 130% annual bonus) of
salary respectively, and is below the maximum PSP grant allowed
under our approved Remuneration Policy of up to 300% in
exceptional circumstances.

• The PSP award will be based on the Company’s TSR performance

compared to the FTSE350 index (excluding investment trusts)
over three years from 1 April 2020. No portion of the award will
vest for performance which is below the index, 25% of the award
will vest for performance equal to the index. Maximum vesting
will require performance 25% ahead of the index. This vesting
schedule is consistent with the approach used for PSP awards
in 2015, 2016 and 2017.

When determining the proposed approach for FY21 the Committee
sought to meet three key principles: (1) to minimise the potential
cash outflow to protect the business; (2) to maintain as much
consistency as possible with the approach used in prior years; (3) to
align Executive Directors’ remuneration with shareholder returns.

The Committee considers that this approach meets these
objectives. Not operating a cash bonus minimises cost and cash
liability in respect of the financial year, and by having the incentive
opportunity fully awarded in shares (with a three-year vesting
period plus a two-year holding period) we will align executives
with shareholders over the medium term. We have also reduced the
overall incentive opportunity by c.30% for the CEO and c.10% for the
CFO and COO recognising the broader economic environment and
to support our cost management programme.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
• This is our second year of disclosing our CEO pay ratio, as we

voluntarily disclosed a year in advance of being required to under
the regulations. Our median all employee to CEO pay ratio is 34.2
compared to 42.0 last year, and compared to a median ratio for
the FTSE250 of 37.0 and for the FTSE100 of 72.0. The Committee
considers the ratio is within a reasonable range taking into
account the structure and nature of our business.

The Committee intends to review our Remuneration Policy in the
coming year in advance of putting the Policy to a binding vote at
the 2021 AGM in line with the normal renewal cycle.

Retirement arrangements for Trevor Mather
As noted above, Trevor Mather stepped down from the Board and
his role of CEO on 29 February 2020. Trevor received his normal
base salary, pension and benefits until his retirement. Trevor was
eligible for an annual bonus in respect of FY20 but elected to waive
any bonus in line with other Executive Directors. The Committee
determined that Trevor will be treated as a ‘good leaver’ in respect
of outstanding share incentives. In light of his planned retirement,
Trevor Mather did not receive a PSP award 2019. Trevor Mather has
undertaken to retain shares equivalent to 200% of his salary for a
minimum of two years post leaving following his retirement from
the Board on 29 February 2020. Further details are provided on
page 87.

I look forward to receiving your support on the Directors’
remuneration report at the 2020 AGM and I welcome any specific
questions, which can be submitted to ir@autotrader.co.uk.

Jill Easterbrook
Chair of the Remuneration Committee
25 June 2020

Performance and reward in 2020
Annual bonus
The annual bonus for 2020 was based 75% on Operating profit and
25% on strategic targets (average live car stock and live retailers
paying for our new car package). Up until the outbreak of COVID-19
the business was performing well considering the challenging
market, with revenue and operating profit improving year on year.
The steps taken towards the end of the year to protect the
long-term interests of the business have, however, impacted overall
performance for the year. Performance against annual bonus
targets would have resulted in a total bonus for 2019/20 of c.26%
of maximum. In response to the COVID-19 outbreak, however, the
Executive Directors have requested that their bonus for FY20 be
waived. The Chief Financial Officer, Jamie Warner, who was
appointed to the Board on 1 March 2020, has waived part of his
pre-appointment Single Incentive Plan award, which was based
on the same performance conditions as the annual bonus scheme.

Performance Share Plan (‘PSP’)
PSP awards granted in June 2017 will vest in June 2020 based on
performance over the three years to 31 March 2020. The award was
based 75% on Cumulative Underlying operating profit performance
and 25% on TSR relative to the FTSE250 (excluding investment
trusts). As detailed on page 85, actual performance resulted in
a payout of 48.6% of the maximum 75% in respect of Cumulative
Underlying operating profit performance, and the maximum of 25%
in respect of TSR, giving an overall total performance of 73.6%. 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 the level of PSP award vesting appropriately
reflected the underlying performance of the Company and the
strategic progress over the three years and therefore it was not
necessary to exercise discretion to adjust payouts.

UK Corporate Governance Code and amended
disclosure requirements
The Committee continues to monitor developments in the 2018
UK Corporate Governance Code and emerging guidance from
investors. We comply with the requirements of the new Code,
following the introduction of a number of provisions last year.
These will form part of the Remuneration Policy put to shareholders
at the 2021 AGM.

• Our pension provision for Executive Directors since listing
has been aligned with our broader employee population.

• We operate a post-vesting holding period for the PSP

and malus and clawback provisions apply.

• Last year, the Committee introduced 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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS’ 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 16 September 2020.

Summary of Directors’ Remuneration Policy (‘Policy’) and implementation for 2021
Our Policy was put to shareholders for approval at the AGM on 20 September 2018 and applies to payments made from this date. We consulted
with shareholders when designing and implementing this Policy and received a strong level of support with 96% of shareholders voting in
favour. The following provides a summary of the Policy along with details of how the Policy will be implemented during 2021.

As outlined above, the COVID-19 outbreak has resulted in significant disruption in the UK automotive market, with dealerships closed for
an extended period. Retailers in England were able to reopen their forecourts from 1 June 2020. England has subsequently been followed
by Northern Ireland (8 June 2020) and Wales (22 June 2020), while showrooms in Scotland will open on 29 June 2020. There remains,
however, a significant degree of uncertainty for the sector as well as the wider economy. This uncertainty makes it difficult to predict
performance over the short and medium term which makes setting robust and meaningful targets for incentive arrangements very
challenging. In light of this no annual bonus plan will operate for FY21 with the Executive Directors receiving an award under the
Performance Share Plan only.

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

OVERVIEW OF OPERATION MAXIMUM OPPORTUNITY

PERFORMANCE CONDITIONS

IMPLEMENTATION FOR 2021

The CEO and CFO’s salaries were
set at £568,000 and £330,000
respectively, with effect from
1 March 2020 following their
appointment to their roles.
When setting their salaries,
the Committee considered:

• Market reference points

• Individual performance

and experience

• Wider context in the

organisation – salary levels
for other employees and
wider business performance

The COO’s salary will not be
increased from 1 April 2020 and
will remain at £350,000.

In response to the COVID-19
outbreak, with effect from 1 April
2020 the Executive Directors
voluntarily offered to temporarily
forego 50% of their salaries. The
intention is to return these to
normal levels from 1 July 2020.

No changes.

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

Salary

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.

Benefits

Pension

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

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

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).

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

N/A

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020ELEMENT

OVERVIEW OF OPERATION MAXIMUM OPPORTUNITY

PERFORMANCE CONDITIONS

IMPLEMENTATION FOR 2021

Normal circumstances:
maximum of 200% of salary.

Exceptional circumstances:
maximum of 300% of salary.

No annual bonus plan will
operate for FY21.

The Executive Directors will
be made an award under the
Performance Share Plan of
250% of salary. This represents
a reduction of c.30% for the
CEO and c.10% for the CFO and
COO compared to the previous
aggregate incentive opportunity
(annual bonus plus PSP) of 350%
of salary and 280% of salary
respectively.

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

Threshold
(25% vesting)

Stretch
(100% vesting)

TSR (100%
weighting)

Equal to
Index TSR

Equal to
Index TSR
plus 25%
or above

TSR performance is calculated
based on a three-month average
to the beginning and end of the
performance period.

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

Performance will be assessed
based on the Company’s TSR
performance compared to
the FTSE350 Index (excluding
investment trusts) over the three
years ending 31 March 2023.

See below for further details
on performance measures.

Maximum permitted based on
HMRC limits from time to time.

N/A

No changes.

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.

All-employee
Share Plans
– SIP & SAYE

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 are eligible
to participate on the same
basis as other employees.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS’ REMUNERATION REPORT CONTINUED

ELEMENT

OVERVIEW OF OPERATION MAXIMUM OPPORTUNITY

PERFORMANCE CONDITIONS

IMPLEMENTATION FOR 2021

Share
ownership
guidelines

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.

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

N/A

In 2019, the Committee
introduced 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 following his
retirement from the Board
on 29 February 2020.

Additional information
UK Corporate Governance Code
The Directors’ Remuneration Policy has been developed taking into account the following principles:

• Simple and clear: the remuneration framework has been designed to be simple and transparent to ensure that it is understood by
shareholders, participants and other stakeholders. Remuneration opportunities are set taking into account external and internal
comparisons. Incentive opportunities are capped so that the maximum potential payout under each scheme is clear.

• Aligned to strategy, culture and purpose: the remuneration framework has been designed to support our strategy of leading the future
of the UK’s digital automotive marketplace. When setting Directors’ Remuneration Policy, the Committee considers the approach to
remuneration throughout the workforce and how this framework supports the dynamic, inclusive, collaborative culture Auto Trader
aims to create and sustain.

• Shareholder value and alignment: the remuneration framework provides close alignment with long-term value creation for shareholders

through the selection of appropriate performance measures and targets, with the majority of remuneration delivered in shares.
Executives are expected to build up and retain (including post stepping down as an Executive Director) a shareholding in the Company.
• Mitigating risk: our remuneration framework includes features which mitigate risk where appropriate. Our policy includes provisions which
enable the Committee to exercise discretion to ensure that incentive outcomes are appropriate. Our policy also includes provisions which
allow for the application of clawback and / or malus in specific negative circumstances. We normally carry out a robust target setting
process each year taking into account our strategic plan as well as external expectations of performance. Targets are set to ensure that
the maximum remuneration can only be earned for delivering exceptional performance while not encouraging excessive risk taking.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Recovery 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
The annual bonus scheme will not operate for FY21.

PSP
2020 PSP awards will be based on relative TSR performance compared to the FTSE350 (excluding investment trusts). Due to the current
uncertainty, it was considered very challenging to set robust, fair and appropriate financial targets for the PSP. We also believe that
the success or otherwise of the Company’s response to COVID-19 is most likely to be reflected in the share price relative to that of other
companies, as opposed to revenue and profit performance. We also wanted to ensure that the vesting outcome remains aligned with
shareholder returns.

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 generally in line with the 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). However, during FY21, there will be no pay increase for Executive Directors, nor
for the wider workforce.

• 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.

As described more fully on pages 42 and 64, a Board Engagement Guild has been established to enable the Non-Executive Directors,
including all members of the Remuneration Committee, to engage directly with the workforce. The Committee also has access to the
results of the annual employee survey which includes matters relating to remuneration and wider pay policies.

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 or on request from ir@autotrader.co.uk. The CEO’s service contract date is 1 April 2017, the CFO’s service contract date
is 1 March 2020, and the COO’s service contract date is 1 May 2019.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
DIRECTORS’ REMUNERATION REPORT CONTINUED

Remuneration Policy for the Chairman and Non-Executive Directors

ELEMENT

OVERVIEW OF OPERATION

IMPLEMENTATION FOR 2021

Fees

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.

There will be no increase in Chairman or Non-Executive Director fees
with effect from 1 April 2020. In response to the COVID-19 outbreak,
with effect from 1 April 2020 the Chairman and the Senior
Independent Director voluntarily temporarily waived all of their fees,
and the other Non-Executive Directors voluntarily temporarily
waived 50% of their Board fees. The intention is to return these to
normal levels from 1 July 2020.

Base fees

• Chairman – £184,013
• Non-Executive Directors – £56,827

Additional fees
• SID – £9,742
• Audit Committee Chair – £9,742
• Remuneration Committee Chair – £9,742

There is no additional fee payable to the Chair 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 or on request from ir@autotrader.co.uk. Details of the appointment terms of the
Non-Executive Directors are as follows:

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Sigga Sigurdardottir

Start of current term

Expiry of current term

6 March 2018

1 May 2018

1 July 2018

1 March 2019

1 November 2019

5 March 2021

30 April 2021

30 June 2021

28 February 2022

31 October 2022

Single figure of remuneration for the year ended 31 March 2020 (Audited)
The table below shows the aggregate emoluments earned by the Directors of the Company in the year ended 31 March 2020.

£’000

Executive

Trevor Mather3

Nathan Coe4

Catherine Faiers5

Jamie Warner6

Non-Executive

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Sigga Sigurdardottir7

Salary and fees

Benefits

Annual bonus1

Long-term
Incentives2

Pension

Total

521

393

321

184

–

1,008

533

–

1,556

947

392

184

1. The outcome for the annual bonus for FY20 was c.26% of maximum as detailed below however, in response to the COVID-19 outbreak, the Executive Directors have

requested that their bonus for FY20 be waived.

2. 73.6% of PSP awards granted in 2017 will vest in June 2020 for performance over the three-year period to 31 March 2020. For the purpose of the single figure the vested
shares have been valued based on the three-month average share price to 31 March 2020 of 529.38p. Dividend equivalents to the value of £40,852 for Trevor Mather,
£21,615 for Nathan Coe, £2,171 for Catherine Faiers and £160 for Jamie Warner have also been included. 24% of the vested value is due to share price growth of 32% since
the date of award. No discretion was exercised in relation to share price appreciation. Jamie Warner includes a pro-rated amount for the Single Incentive Plan.

3. Trevor Mather stepped down from the Board on 29 February 2020. His amounts reflect his service as an Executive Director. Further details on his leaving

arrangements are set out on page 87.

4. Nathan Coe was promoted to the role of CFO and CEO-designate effective 1 May 2019 from his previous role as COO & CFO. He was appointed CEO effective 1 March

2020. The amounts disclosed reflect his service as COO & CFO, CFO & CEO-designate and CEO during the year.

5. Catherine Faiers was appointed COO and to the Board effective 1 May 2019. The amounts disclosed reflect her service in the year as an Executive Director.
6. Jamie Warner was appointed CFO and to the Board effective 1 March 2020. The amounts disclosed reflect his service in the year as an Executive Director.
7. Sigga Sigurdardottir was appointed to the Board on 1 November 2019. The amounts disclosed reflect fees from this date.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
The following table shows the aggregate emoluments earned 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

–

825

353

–

2,052

1,169

180

1. 51.2% of PSP awards granted in 2016 vested in June 2019 for performance over the three-year period to 31 March 2019. 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 2019 of 467.88p, giving a value of £683k for Trevor Mather and £292k
for Nathan Coe including dividends. The amounts disclosed in the table have been revalued based on the share price on the date of vesting of 564.80p. c.31% of the
vested value is due to share price growth of 45% since the date of award. No discretion was exercised in relation to share price appreciation.

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 2020
The performance measures, targets and performance outcomes for the annual bonus for the year ended 31 March 2020 are shown in the
following table:

Performance
measures

Financial

Strategic
targets

Total

Operating profit

Stock – average live
car stock

New cars – live
retailers paying
for our new
car package

Weighting

Threshold

75%

12.5%

£258m

470k

Target

£268m

490k

Stretch

£278m

500k

Actual
performance

Payout
(as a % of maximum)

£259m

17.2% of the 75%

478k

4.0% of the 12.5%

12.5%

100%

600

1,200

1,850

1,028

5.2% of the 12.5%

26.4% 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. As noted above, in response to the COVID-19 outbreak, the Executive Directors have
requested that their bonus for FY20 be waived. In respect of 2019/20 Jamie Warner participated in the Single Incentive Plan which is our
incentive plan for below Board senior roles, and is based on the same performance measures as the annual bonus plan. Jamie waived
the vesting element of this award which was due to vest in 2020.

Performance Share Plan vesting for year ended 31 March 2020
The PSP award granted in 2017 and will vest in June 2020 based on performance to 31 March 2020. 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 FTSE250 Index
(excluding investment trusts)1

Total vesting

Weighting

75%

Threshold
(25% vesting)

£690m

25% Equal to Index TSR

Stretch
(100% vesting)

Equal to or
above £750m

Equal to Index TSR
plus 25% or above

Actual
performance

Payout
(as a % of maximum)

£721.8m

48.6% of the 75%

Index TSR plus 26%

25% of the 25%

73.6% 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.

Nathan Coe and Trevor Mather 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. 2017 PSP awards were granted to Catherine Faiers and Jamie Warner before
they were appointed to the Board. Their awards are therefore not subject to a holding period.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS’ REMUNERATION REPORT CONTINUED

When considering the level of annual bonus payout and long-term incentive vesting, the Committee also considered the underlying
performance of the Group over the performance period, taking into account performance against key financial and non-financial
indicators as well as the share price performance and the experience of shareholders and other stakeholders. The Committee also
considered whether there had been a significant negative event (such as an ESG event) which would warrant an adjustment. The
Committee concluded the proposed pay-out outcomes detailed above to be appropriate. Overall, the Committee considers that
the Remuneration Policy has operated as it intended during 2019/20.

Scheme interests awarded during the year (Audited)
Awards granted in the year under the DABP and PSP are shown below. The award granted to Jamie Warner under the Single Incentive Plan,
prior to his appointment to the Board, are also shown.

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

57,125

37,937

£320,700

£212,981

1. DABP awards were granted in respect of the annual bonus for the year to 31 March 2019. The awards will normally be eligible to vest two years from grant (17 June 2021)

based on continuous employment.

2. Face/maximum value was calculated based on the closing share price on the day before grant date (17 June 2019) of 561.40p.

Executive Director

PSP awards1

Nathan Coe

Catherine Faiers

Jamie Warner2

Number of
shares awarded

Multiple of salary

Face/maximum value
of awards at grant date3

% award vesting
at threshold (% maximum)

Performance period

134,307

93,516

32,062

200%

150%

n/a%

£754,000

£525,000

£180,000

25%

1 April 2019 to
31 March 2022

Awards are granted as nil-cost options.

1. PSP awards will normally be eligible to vest three years from grant (17 June 2022) based on performance over the three years to 31 March 2022 and continuous

employment.

2. Prior to his appointment to the Board, Jamie Warner received a PSP award in line with his previous role.
3. Face/maximum value was calculated based on the closing share price on the day before grant date (17 June 2019) of 561.40p.

The performance conditions applying to the 2019 PSP awards shown in the table above are set out below. Each element will be assessed
independently.

Measure

Weighting

Basis

Threshold (25% vesting)

Stretch (100% vesting)

Operating profit

75% Operating profit compound annual growth rate
for the three years ended 31 March 2022

Total Group revenue

25%

Total Group revenue compound annual growth
rate for the three years ended 31 March 2022

6.5% p.a.

Equal to or above 11% 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.

Executive Director

Single Incentive Plan awards1

Jamie Warner

Awards are granted as nil-cost options.

Number of shares awarded

Face/maximum value of awards at grant date

68,133

£382,500

1. In June 2019 Jamie Warner was granted an award under the Single Incentive Plan, which operates for senior executives below the Board. This award vests based on
performance for 2019/20 based on the same performance criteria as the annual bonus for Executive Directors as summarised above. 26% of this award is therefore
capable of vesting based on performance achieved. 50% of this amount may vest in June 2020, 25% in June 2021 and 25% in June 2022. In response to the COVID-19
outbreak, Jamie has elected to waive the 50% of the award which was due to vest in June 2020. The face/maximum value was calculated based on the closing share
price on the day before grant date (17 June 2019) of £561.4p.

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. Non-Executive Directors do not have shareholding guidelines.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
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 2020, or at the date of retiring from the Board.

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 and Single
Incentive Plan2
conditional on
continued
employment

Unvested
Sharesave options
and Share
Incentive Plan
shares

Target
shareholding
guideline
(as a % of salary)

Percentage of
salary held in
shares as
at 31 March 2020
(or date of
leaving)3

11,623,031

2,924,366

16,792

–

6,875,444

50,000

–

389,136

430,981

175,187

56,140

–

587,772

251,901

–

103,129

63,485

31,335

53,570

–

7,449

–

200%

N/A

9,440%

2,455%

21%

Nil%

N/A

Director

Executive Directors

Trevor Mather4

Nathan Coe

Catherine Faiers

Jamie Warner

Non-Executive Directors

Ed Williams

David Keens

Jill Easterbrook

Jeni Mundy

Sigga Sigurdardottir

1. 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.

2. The Single Incentive Plan operates for senior executives below the Board. These awards were granted to Catherine Faiers and Jamie Warner before they were

appointed to the Board.

3. Based on the Director’s salary and the mid-market price at close of business on 31 March 2020 of 439.1p.
4. Trevor Mather retired from the Board on 29 February 2020. The shareholdings disclosed were as at the date of leaving the Board.

Payments to former Directors (Audited)
There were no payments made to former Directors during the year.

Retirement arrangements for Trevor Mather
Trevor Mather stepped down as CEO and from the Board on 29 February 2020. Trevor received his normal base salary, pension and
benefits until his retirement on 29 February 2020. He did not receive any payment in lieu of notice under his contract as he worked
substantially all of his notice. Trevor was eligible to receive an annual bonus in respect of 2019/20, however, in line with the other
Executive Directors, Trevor elected to waive his bonus for 2019/20. Further details are provided on page 84.

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. In light of his planned retirement, Trevor Mather did not receive
a PSP award in June 2019. Outstanding DABP awards will vest in full on the normal vesting dates. 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.

Performance graph and CEO remuneration table
The graph below illustrates the Company’s TSR performance relative to the FTSE350 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 over that
period of a hypothetical £100 invested.

)
£
(
n
r
u
t
e
R
r
e
d

o
h
e
r
a
h
S
l

a
t
o
T

)

d
e
s
a
b
e
r
(

250

200

150

100

Wed 18 March
2015

Tue 31 March
2015

Thu 31 March
2016

Fri 31 March
2017

Fri 30 March
2018

Fri 29 March
2019

Tue 31 March
2020

Auto Trader Group plc

FTSE350 (excluding investment trusts)

Source: Datastream (Thomson Reuters).

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT

DIRECTORS’ REMUNERATION REPORT CONTINUED

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)

20201

1,619

n/a4

73.6%

20192

2,052

76.75%

51.2%

2018

2,929

50.3%

100%

2017

980

51.8%

N/A6

2016

1,339

100%

N/A6

20153

N/A5

N/A6

1. The 2020 figures reflect Trevor Mather’s service as CEO to 29 February 2020, and Nathan Coe’s service as CEO from 1 March 2020.
2. The 2019 CEO total remuneration has been updated to reflect the value of the PSP based on the share price on the date of vesting of 564.80p rather than the

three-month average share price to 31 March 2019 of 467.88p.

3. From the date of Admission in March 2015.
4. The CEO elected to waive his bonus in respect of 2019/20.
5. Private company when bonus plan implemented in 2015.
6. 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 2019
to 2020.

Component

Salary

Benefits1

Bonus2

Change in remuneration levels

CEO

12%

(100%)

Average employee

19%

n/a

1. The average value of benefits has increased due to an increase 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
The table below shows the ratio between the CEO’s total single figure calculated as set out above on page 84 and the median, lower and
upper quartile total remuneration for our UK based workforce. Our median all employee to CEO pay ratio is 34.2:1 which the Committee
considers is within a reasonable range taking into account the structure and nature of our business. Last year, we voluntarily disclosed
our CEO pay ratio a year in advance of being required to under the regulations.

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

2020

2019

25th percentile

Method

pay ratio Median pay ratio

50.4:1

59.4:1

34.2:1

42.0:1

75th percentile
pay ratio

24.8:1

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 £30,125 and total remuneration was £32,119. The salary for the P50 employee was £45,000 and total remuneration was £47,379.
The salary for the P75 employee was £62,782 and total remuneration was £65,196.
The P25, P50 and P75 employees were determined as at 31 March 2020 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 (2019) 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 2020 of 529.8p.

The CEO single figure used for the purpose of calculating the pay ratio is based on Trevor Mather’s service as CEO to 29 February 2020,
and Nathan Coe’s service as CEO from 1 March 2020.

It should be noted that the CEO’s single figure of remuneration includes PSP awards, which are affected by changes in the Company’s
share price and achievement of targets over a three-year performance period; and also Annual Bonus, which are affected by
achievement of targets over a one-year performance period. The fall in the ratio between 2019 and 2020 is due to the waiver by the
CEO of the Annual Bonus for FY20.

The Board have confirmed that the ratio is consistent with the Company’s wider policies on employee pay, reward and progression,
and is appropriate for the Company’s size and structure.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Relative 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 7 to the consolidated financial statements)

Revenue (see Consolidated income statement)

Operating profit

Dividends paid and proposed and share buybacks (see notes 25 and 27 to the
consolidated financial statements)

2020
£m

55.3

849

368.9

258.9

84.1

2019
£m

56.0

802

355.1

243.7

156.4

% change

(1%)

(46%)

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. 0.75% 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 2020, the Trust held 523,955 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
29 February 2020, fees of £55,000 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.

Membership of the Committee
Jill Easterbrook is the Committee Chair, and its other members are David Keens, Jeni Mundy and Sigga Sigurdardottir. Refer to pages 61 and
77 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 or its Directors 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 £16,250 for advice provided to the Committee.
Deloitte provided additional services to the Company in relation to internal audit, risk advisory and tax services.

Statement of shareholder voting
Shareholder voting in relation to recent AGM resolutions is as follows:

2018 AGM: Remuneration Policy (binding)

2019 AGM: Annual Report on Remuneration (advisory)

Votes for

746,257,288

754,803,958

% of votes
cast for

94.93%

95.56%

Votes
against

% of votes
cast against

39,870,834

35,075,821

5.07%

4.44%

Abstentions

152,057

224,875

Approval
This Directors’ remuneration report has been approved by the Board of Directors.

Signed on behalf of the Board of Directors.

Jill Easterbrook
Chair of the Remuneration Committee
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS' 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 2020.

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:

Management report
This Directors’ report, on pages 90 to 93, together with the
Strategic report on pages 2 to 59, form the Management Report
for the purposes of DTR 4.1.5R.

SECTION OF
ANNUAL REPORT

Employee involvement

PAGE REFERENCE

Strategic report; Making a difference
(page 42)

Employees with
disabilities

Strategic report; Making a difference
(page 44)

Financial
instruments

Note 2 to the consolidated financial
statements

Future developments
of the business

Strategic report (pages 22 to 27)

Greenhouse gas
emissions

Strategic report; Making a difference
(page 47)

Non-financial reporting

Strategic report: Making a difference
(page 40)

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

Directors’ remuneration report (page 87)

Significant shareholders

Directors’ report (page 92)

Going concern

Principal risks and uncertainties
(pages 58 and 59)

Long-term incentive
schemes

Directors’ remuneration report
(pages 80 to 89)

Powers for the Company
to buy back its shares

Directors’ report (page 91)

Significant contracts

Directors’ report (page 92)

Significant related party
agreements

Directors’ report (page 92)

Statement of
corporate governance

Corporate governance statement
(pages 64 to 69)

Strategic report
The Strategic report, which can be found on pages 2 to 59, 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 64 to 89, all of which form part of this
Directors’ report and are incorporated into it by reference.

2020 Annual General Meeting
The 2020 AGM will take place at 10:00am on Wednesday 16
September 2020 at the Company’s registered office at 4th Floor,
1 Tony Wilson Place, Manchester, M15 4FN. In light of the current
restrictions over public gatherings due to COVID-19, the AGM will be
run as a closed meeting. We strongly encourage all shareholders to
cast their votes by proxy, and to send any questions in respect of
AGM business to ir@autotrader.co.uk. 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 2020, and to the date
of approving this report unless otherwise stated:

• Ed Williams.
• Trevor Mather (resigned 29 February 2020).
• Nathan Coe.
• David Keens.
• Jill Easterbrook.
• Jeni Mundy.
• Catherine Faiers (appointed 1 May 2019).
• Sigga Sigurdardottir (appointed 1 November 2019).
• Jamie Warner (appointed 1 March 2020).

All Directors will stand for election or re-election at the 2020 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

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Director. 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 100 to 149.

The Company declared an interim dividend on 7 November 2019
of 2.4 pence per share which was paid on 24 January 2020.

As a result of the current economic uncertainty surrounding the
impact of COVID-19, the Directors are not recommending a final
dividend for the year.

Amendment of the Articles
The Company’s Articles of Association may only be amended by
a special resolution at a general meeting of shareholders. At the
2020 AGM, resolution 18 proposes an amendment to the Articles
of Association to reflect recent developments in market practice
in respect of holding combined physical and electronic general
meetings (also known as ‘hybrid’ meetings). These hybrid meetings
would enable members to attend and participate in the business
of the meeting by attending a physical location or by means of an
electronic facility or facilities. It is not the current intention of the
Board to routinely hold combined physical and electronic general
meetings. These amendments are being made to provide the
Directors with the flexibility should they need to make alternative
arrangements for participation in meetings (including where
physical participation may be prevented or restricted).

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 2020
comprised 922,540,474 of £0.01 each, and 4,090,996 shares were
held in treasury. On 3 April 2020, 46,468,300 additional shares
were allotted for a consideration of £4.00 per share as a result
of a non-pre-emptive placing.

As at 25 June 2020 the issued share capital of the Company comprises
969,008,774 of £0.01 each, and 3,429,427 shares were held in treasury.

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.

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. In the
2019 AGM, resolution 13 conferred upon the Directors the authority
under Section 551 of the 2006 Act to allot ordinary shares up to a
maximum nominal amount of £6,196,079 (619,607,899 shares),
representing approximately two thirds of the Company’s existing
share capital of which 309,757,499 shares (representing
approximately one third of the Company’s issued ordinary share
capital) could only be allotted pursuant to a rights issue. Special
resolution 14 further conferred upon Directors the authority to allot
ordinary shares up to a maximum nominal amount of £464,683
(46,468,300 shares), for cash, on a non-pre-emptive basis.
As noted above, the Directors used this authority to conduct a
non-pre-emptive placing of 46,468,300 ordinary shares which
was completed on 3 April 2020.

In the Notice for the 2020 AGM, ordinary resolution 13 seeks a
new authority to allow the Directors to allot ordinary shares up
to a maximum nominal amount of £6,437,518 (643,751,750 shares),
representing approximately two thirds of the Company’s existing
share capital at 25 June 2020, of which 321,827,596 shares
(representing approximately one third of the Company’s issued
ordinary share capital) can only be allotted pursuant to a rights
issue. Special resolution 14 seeks a new authority to allow the
Directors to allot ordinary shares on a non-pre-emptive basis up
to a maximum nominal amount of £482,790 (48,278,967 shares),
representing approximately 5% of the Company’s existing share
capital at 25 June 2020. Special resolution 15 seeks a new authority
to allow the Directors to allot ordinary shares on a non-pre-
emptive basis in connection with an acquisition or specified
capital investment, up to a further maximum nominal amount
of £482,790 (48,278,967 shares), representing approximately
5% of the Company’s existing share capital at 25 June 2020.

Authority to purchase own shares
The Company’s share buyback programme continued during
the year. By resolutions passed at the 2019 AGM the Company
was authorised to make market purchases of up to 92,936,538
of its ordinary shares, subject to minimum and maximum price
restrictions. A total of 11,431,823 ordinary shares of £0.01 each were
purchased in the year to 31 March 2020, being 1.23% of the shares in
issue at the time the authority was granted. The average price paid
per share was 538.85p with a total consideration paid (inclusive of
all costs) of £62.0m. 774,734 shares were purchased for treasury,
and the remaining 10,657,089 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.

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.

Voting 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 the Directors decide in
advance that a poll will be conducted, or unless a poll is demanded
at the meeting. 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,

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTDIRECTORS' REPORT CONTINUED

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.

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 2020. 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 ‘Making a difference’ section on page 47 and forms part of this
Report by reference.

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.

Transactions with related parties
As described in note 33, 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 £26,250 (2019: £1,250). There were no amounts
outstanding at the year end. All transactions were completed at
an arm’s length basis.

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.

Political donations
There were no political donations made during the year or the
previous year.

Post balance sheet events
COVID-19
Conditions were present regarding the pandemic including the
social distancing measures at the balance sheet date. Given the
circumstances, management made judgements relating to revenue
recognition and recoverability of assets, in particular accrued
income and trade receivables. These judgements have been
disclosed in note 1.

Management have assessed these events as adjusting post balance
sheet events given that they provide evidence of conditions that were
present at the balance sheet date. Management have therefore
reflected the impact of these events in the estimates made.

Equity raise
As noted above, on 1 April 2020 the Company announced its
intention to conduct a non-pre-emptive placing of up to 5% of its
issued share capital. On 3 April 2020 the placing was completed,
and a total of 46,468,300 new ordinary shares were allotted for a
consideration of 400.00 pence per Placing Share, a discount of
8.9% to the closing share price of 439.1 pence on 31 March 2020.
The placing raised gross proceeds of £185.9m for the Company,
or £183.2m net of fees incurred.

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:

AT 31 MARCH 2020

AT 25 JUNE 2020

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

9.90%

8.31%

5.01%

88,810,670

76,844,345

47,482,549

9.20%

8.31%

5.01%

SHAREHOLDER

BlackRock Inc.

Kayne Anderson
Rudnick Investment
Management LLC.

90,997,987

76,844,345

Baillie Gifford & Co.

47,482,549

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020RCF extension
On 1 June 2020, the Group extended the term for £316.5m of the
Syndicated RCF for one year, incurring additional associated debt
transaction costs of £0.5m. The facility will terminate in two tranches:
£316.5m will now mature in June 2025; 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.

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.

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.

Responsibility 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.

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’.

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 25 June 2020.

Approved by the Board and signed on its behalf.

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:

Claire Baty
Company Secretary
25 June 2020

• 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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUTO TRADER GROUP PLC

1. Our opinion is unmodified
We have audited the financial statements of Auto Trader Group plc
for the year ended 31 March 2020 which comprise the Consolidated
income statement, Consolidated statement of other comprehensive
income, Consolidated balance sheet, Consolidated statement of
changes in equity, Consolidated statement of cash flows, Company
balance sheet, Company statement of changes in equity and the
related notes, including the accounting policies in notes 1 and 2.

We were first appointed as auditor by the shareholders
on 22 September 2016. The period of total uninterrupted
engagement is for the four financial years ended 31 March 2020.
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.

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 2020 and of the Group’s profit for the year then ended;

• 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.

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.

Overview

Materiality:
Group financial
statements as
a whole

£10.4m (2019:£9.6m)
4.1% (2019: 4.0%) of Group profit before tax

Coverage

99.3% (2019: 100%) of Group profit before tax

vs 2019

Key audit matters

Event driven

New – Group and parent
company: Going concern
including the impact of
COVID-19 on the business

Recurring risks

Group: Revenue
recognition

Parent company:
Recoverability of parent
company’s investment in
subsidiary

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20202. 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 decreasing order of audit significance, 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

Going concern including
the impact of Coronavirus
on the business

Refer to page 73 (Report of the
Audit Committee), page 105
(accounting policy) and page
105 (financial disclosures).

Disclosure quality
The financial statements explain how the Board
has formed a judgement that it is appropriate to
adopt the going concern basis of preparation for
the Group and parent company.

The judgement is based on an evaluation of
the inherent risks to the Group’s and the parent
company’s business model and how those risks
might affect the Group’s and the parent company’s
financial resources or ability to continue operations
over a period of at least a year from the date of
approval of the financial statements.

The risks most likely to affect the Group’s and the
parent company’s available financial resources
over this period were:
• The uncertainty of the impact of Coronavirus

with the full range of possible effects unknown
given the rapidly evolving nature of the situation
on financial and operational performance;

• The impact on the Group’s financial covenants
of uncertainty arising from the Coronavirus.

The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have
required to have been disclosed.

Our procedures included:
• Funding assessment: we assessed the loan
covenant compliance to check whether the
Group is at risk of breaching the covenants and
reviewed the availability of cash and the cash flow
forecasts to determine whether the assumptions
are realistic, achievable and consistent with the
external and internal environment;

• Historical comparisons: we considered the

historical accuracy of management’s forecasting
in the previous year in comparison to actual
performance achieved;

• Sensitivity analysis: we considered sensitivities
over the level of financial resources indicated by
the Group’s financial forecasts taking account of
reasonably possible (but not unrealistic) adverse
effects that could arise from the risks identified
individually and collectively;

• Evaluating Directors’ intent: we evaluated the

achievability of the actions the Directors consider
they would take to improve the position should
the risks materialise; and

• Assessing transparency: we assessed the
completeness and accuracy of the matters
covered in the going concern disclosure against
our understanding of the risks.

Our results
We found the going concern disclosure without
any material uncertainty to be acceptable
(2019: no key audit matter). However, no audit
should be expected to predict the unknowable
factors or all possible future implications for
a company and this is particularly the case in
relation to the Coronavirus.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUTO TRADER GROUP PLC CONTINUED

2. Key audit matters: our assessment of risks of material misstatement continued

Revenue recognition
(£368.9m; 2019: £355.1m).

Refer to page 73 (Report
of the Audit Committee),
page 107 (accounting
policy) and page 115
(financial disclosures).

The risk

Our response

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
Singleview relating to the Trade and Manufacturer
& Agency revenue streams are updated manually
by Auto Trader personnel over time, we consider
a significant risk exists in relation to revenue
recognition in respect of fraud.

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 the entire population of
sales to cash received during the year and trade
receivables and accrued income outstanding at the
year end. Selecting a sample of trade receivables
and assessing their recoverability with reference to
post year end cash receipts and appropriateness
of the expected credit losses provision;

• Accounting analysis: Considering incentives

Accounting treatment
As a result of COVID-19, changes were made to the
pricing of certain customer arrangements. The risk
for our audit was whether revenue was recognised
appropriately where changes had been made.

offered to customers in light of COVID-19
including free listings post year end, offered
before year end, to assess whether March
revenue is correctly recognised in accordance
with the accounting standard.

• Tests of details: Inspecting credit notes raised

in the year and post year end to assess the
adequacy of the credit note provision and that
revenue is not misstated; 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 (2019: acceptable).

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 (2019 result: acceptable).

Recoverability of parent
company’s investment
in subsidiary
(£1,218.3m; 2019: £1,216.0m).

Refer to page 73 (Report of the
Audit Committee), page 145
(accounting policy) and page
147 (financial disclosures).

Low risk, high value:
The carrying amount of the parent company’s
investment in subsidiary represents 77% (2019: 75%)
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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Of the Group’s 5 (2019: 4) reporting components, we subjected
3 (2019: 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.

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 £10.4m (2019: £9.6m), determined with reference to a benchmark
of Group profit before tax of £251.5m (2019: £242.2m), of which it
represents 4.1% (2019: 4.0%).

The materiality of the parent company financial statements as a
whole was set at £6m (2019: £5.0m), determined with reference to
a benchmark of parent company net assets, of which it represents
0.5% (2019: 0.4%).

We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.5m (2019:
£0.5m), in addition to other identified misstatements that
warranted reporting on qualitative grounds.

Proﬁt before tax
£251.5m (2019: £242.2m)

Group materiality
£10.4m (2019: £9.6m)

Group revenue

Group proﬁt before tax

£10.4m
Whole ﬁnancial statements
materiality (2019: £9.6m)

£10.0m
Range of materiality at four
components (£10m-£0.1m )
(2019: £9.1m-0.2m)

£0.5m
Misstatements reported to the
Audit Committee (2019: £0.5m)

2.1%

97.9%

(2019: 100%)

100%

97.9%

0.7%

99.3%

(2019: 100%)

100%

99.3%

Group total assets

Full scope for Group audit purposes 2020

Full scope for Group audit purposes 2019

Residual components

Proﬁt before tax
Group materiality

99.0%

(2019: 100%)

100%

99%

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.

We identified going concern as a key audit matter (see section
2 of this report). Based on the work described in our response
to that key audit matter, 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
twelve months from the date of approval of the financial
statements; or

• the related statement under the Listing Rules set out on page 90

is materially inconsistent with our audit knowledge.

We have nothing to report in these respects.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUTO TRADER GROUP PLC CONTINUED

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.

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 emerging and 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 59)
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;

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:
• 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.

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

• the principal risks disclosures describing these risks and

we require for our audit.

We have nothing to report in these respects.

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.

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20207. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 93,
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.

Auditor’s 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 auditor’s 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
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.

Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an effect:
the General Data Protection Regulation, competition law,
employment law and certain aspects of company legislation
recognising the regulated nature of part of the Group’s activities.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the
Directors and other management and inspection of regulatory
and legal correspondence, if any. Through these procedures,
we became aware of actual or suspected non-compliance and
considered the effect as part of our procedures on the related
financial statement items. The identified actual or suspected
non-compliance was not sufficiently significant to our audit to
result in our response being identified as a key audit matter.

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 auditor’s 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
25 June 2020

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTCONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2020

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 (pence)

Diluted earnings per share (pence)

Note

2020
£m

368.9

(113.2)

3.2

258.9

(7.4)

–

251.5

(46.4)

205.1

2019
£m

355.1

(112.3)

0.9

243.7

(10.2)

8.7

242.2

(44.5)

197.7

22.19

21.00

22.08

20.94

100

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020

Profit for the year

Other comprehensive income

Items that may be subsequently reclassified to profit or loss

Exchange differences on translation of foreign operations

Note

2020
£m

205.1

2019
£m

197.7

(0.3)

(0.1)

Items that will not be reclassified to profit or loss

Remeasurements of post-employment benefit obligations, net of tax

0.6

Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable to equity holders of the parent

0.3

205.4

0.2

0.1

197.8

101

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTCONSOLIDATED BALANCE SHEET
AT 31 MARCH 2020

Assets

Non-current assets

Intangible assets

Property, plant and equipment

Deferred taxation assets

Retirement benefit surplus

Net investments in joint ventures

Current assets

Trade and other receivables

Current income tax assets

Cash and cash equivalents

Total assets

Equity and liabilities

Equity attributable to equity holders of the parent

Share capital

Retained earnings

Own shares held

Capital reorganisation reserve

Capital redemption reserve

Other reserves

Total equity

Liabilities

Non-current liabilities

Borrowings

Deferred taxation liabilities

Provisions for other liabilities and charges

Lease liabilities

Deferred income

Current liabilities

Trade and other payables

Current income tax liabilities

Provisions for other liabilities and charges

Lease liabilities

Total liabilities

Total equity and liabilities

Note

2020
£m

2019
£m

341.9

13.1

6.8

0.9

52.2

414.9

56.0

0.4

37.6

94.0

508.9

317.5

16.7

6.2

–

49.0

389.4

56.1

–

5.9

62.0

451.4

9.2

1,180.1

(17.9)

9.3

1,095.8

(16.5)

(1,060.8)

0.8

30.2

141.6

310.5

2.9

1.1

7.0

10.0

331.5

33.3

–

0.4

2.1

35.8

367.3

508.9

0.7

30.5

59.0

310.3

0.5

1.0

14.3

10.6

336.7

31.2

22.4

0.3

1.8

55.7

392.4

451.4

The financial statements were approved by the Board of Directors on 25 June 2020 and authorised for issue:

Jamie Warner
Chief Financial Officer
Auto Trader Group plc
Registered number: 09439967

102

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020

Balance at 31 March 2018

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

Balance at March 2019

Profit for the year

Other comprehensive income:

Currency translation differences

Remeasurements of post-employment
benefit obligations, net of tax

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

Own shares
held
£m

Capital
reorganisation
reserve
£m

Capital
redemption
reserve
£m

(16.9)

(1,060.8)

Note

Share
capital
£m

9.5

–

Retained
earnings
£m

1,042.7

197.7

–

0.2

197.9

4.7

(3.7)

(0.6)

0.6

(0.2)

(88.2)

–

(57.6)

–

5.6

0.6

–

(5.8)

–

0.5

–

0.2

–

0.2

(0.2)

(144.8)

0.4

9.3

1,095.8

(16.5)

(1,060.8)

0.7

30.5

–

205.1

–

0.6

205.7

3.4

(2.7)

(0.1)

0.4

(0.1)

(57.7)

–

(64.7)

–

2.8

0.1

–

(4.3)

–

(0.1)

(121.4)

(1.4)

–

0.1

–

0.1

Other
reserves
£m

30.6

–

(0.1)

–

(0.1)

–

Total
equity
£m

5.6

197.7

(0.1)

0.2

197.8

4.7

1.9

–

0.6

(88.2)

(5.8)

(57.6)

(144.4)

59.0

205.1

(0.3)

–

0.6

(0.3)

205.4

–

3.4

0.1

–

0.4

(57.7)

(4.3)

(64.7)

(122.8)

Balance at March 2020

9.2

1,180.1

(17.9)

(1,060.8)

0.8

30.2

141.6

103

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNote

2020
£m

265.5

(69.8)

195.7

(0.2)

–

(1.3)

–

(25.3)

(26.8)

(64.7)

–

324.5

(324.5)

(0.7)

(0.5)

(6.4)

(2.9)

(57.4)

(4.3)

(0.3)

(0.1)

0.1

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

(137.2)

(192.7)

31.7

5.9

37.6

1.6

4.3

5.9

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020

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

Repayment of other borrowings

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

Contributions to defined benefit pension scheme

Proceeds from exercise of share-based incentives

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

104

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020NOTES 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 2020 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 2020 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.

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.

Going concern
Throughout the year ended 31 March 2020 the Group has continued to generate significant cash and has an overall positive net asset
position. The Group had cash balances of £37.6m at 31 March 2020 (2019: £5.9m). During the year £126.4m (2019: £151.1m) of cash was
returned to shareholders via dividends and discretionary share buybacks.

The Group has access to a Syndicated revolving credit facility (the ‘Syndicated RCF’). The Syndicated RCF, which is unsecured, has
total commitments of £400.0m and a termination date of 23 June 2023. The Group has extended the term for £316.5m of the Syndicated
RCF to 23 June 2025. At 31 March 2020 the Group had £313.0m of the facility drawn (2019: £313.0m).

Financial projections for the period of 12 months from the date of this report have been impacted by the COVID-19 global pandemic.
The Group implemented measures to support customers by allowing vehicles to be advertised for free throughout the period in which
Government enforced lockdown restrictions resulted in the temporary closure of retailers.

In order to strengthen the Group’s balance sheet and liquidity position and increase certainty around meeting future covenant tests
despite the impact of the virus, the Group completed the placing of 46,468,300 new ordinary shares for net proceeds of £183.2m on
3 April 2020.

Stress case scenarios have been modelled to make the assessment of viability, taking into account severe but plausible potential
impacts of the pandemic or a data breach. 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.

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.

105

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

1. 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 and judgements believed to require the most subjectivity or complexity are as follows:

The impact of customer offers on revenue recognition
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.

Judgement was made in assessing if the communication of the free period for April represents a contract modification under IFRS 15.
Management have determined that as our services were free for April, a price change that is deemed to be universally accepted by
customers, this does represent a contract modification. The impact of the modification has been considered and revenue recognised
in line with IFRS 15.

Home Trader and Private 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.

In March 2020 all Home Trader and Private advert customers with an advert live on 19 March 2020 were notified that their adverts would
be extended until the end of April 2020. This represents a modification of the contract under IFRS 15 and this modification has been
reflected in the financial statements.

The impact of COVID-19 on the recoverability of financial assets
IFRS 9 prescribes that historical expected credit losses should be adjusted for forward looking information to reflect macro-economic
and market conditions. The closure of retailer forecourts from 24 March 2020 would be expected to have an adverse effect on the cash
flows of retailers and credit risk is therefore likely to be increased over this period.

Adjustments were made to the expected credit losses on financial assets to reflect this. Further details are set out in note 31. The
‘lockdown’ event and subsequent closure of dealer forecourts was pre year end, and estimates were made for the impact of this at
the balance sheet date. The events post year end, being the extension of the ‘lockdown’ and subsequent closure of dealer forecourts,
provided additional evidence of conditions that already existed at the balance sheet date. These events were deemed to be adjusting
post balance sheet events (note 35) and have been reflected in the estimates made.

Carrying values of goodwill
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 payments
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
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 2019:
• IFRIC 23, Uncertainty over income tax treatments was issued in June 2017. IFRIC 23 sets out how to recognise and measure deferred

and current income tax assets and liabilities where there is uncertainty over a tax treatment;

• Annual Improvements to IFRS Standards 2015-2017 Cycle;
• Plan Amendment, Curtailment or Settlement – Amendments to IAS 19;
• Long-term Interests in Associates and Joint Ventures – Amendments to IAS 28; and
• Prepayments Features with Negative Compensations – Amendments to IFRS 9.

The adoption of these standards and amendments has had no material effect on the Group’s consolidated financial statements.

Standards, amendments and interpretations to existing standards that are not yet effective
There are a number of amendments to IFRS that have been issued by the IASB that become mandatory in a subsequent accounting
period including: Amendments to References to Conceptual Framework in IFRS Standards, Definitions of a Business – Amendments to
IFRS 3 and Definition of Material – Amendments to IAS 1 and IAS 8. The Group has evaluated these changes and none are expected to
have a significant impact on these consolidated financial statements.

106

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Existing significant accounting policies
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 2019.

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 as follows:

(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 typically 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.

KeeResources revenue
KeeResources customers pay a subscription fee to access elements of KeeResources’s vehicle database or to access the Fleetware
software. Control is transferred to customers across the life of the contract where customers have continuous access to the database
or the software.

(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 typically 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. Rebates are present in
the contractual arrangements with customers and are awarded either in cash or value of services based upon annual spend; an estimate
of the annualised spend is made at the reporting date to determine the amount of revenue to be recognised. A receivable is recognised
only when the Group’s right to consideration is only conditional on the passage of time.

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AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2. 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. Contributions
paid to the scheme by the Group have been classified as financing activities in the Consolidated statement of cash flows as there are no
remaining active members within the Scheme.

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 is development that 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.

108

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Leases
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 remeasurements 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 lease liability is measured at amortised cost using the effective interest method. It is remeasured 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.

Financial instruments
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 and accrued income, 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.

The Group has elected to measure loss allowances for trade receivables and accrued income at an amount equal to lifetime expected
credit losses (‘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).

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.

When required, ECLs are adjusted to take into account macro-economic factors. As at 31 March 2020 ECLs were adjusted for the current
macro-economic uncertainty caused by COVID-19.

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.

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, customer relationships, brands and databases
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, customer relationships, brands and databases acquired in a business combination are recognised at fair value at the
acquisition date and subsequently amortised.

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AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2. Significant accounting policies continued

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
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.

Impairment 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.

110

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020

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).

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.

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.

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AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

2. Significant accounting policies continued

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.

112

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20203. 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 98% 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 of 100 basis points in the interest rate of floating rate financial liabilities (with all other variables held constant) will increase
or decrease post-tax profit for the year by £2.3m (2019: £2.3m).

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. In March, more than 78.0% (2019: 82.0%) of the Group’s Retailer
customers paid via monthly direct debit, minimising the risk of non-payment.

Sales to private customers are primarily settled in advance using major debit or credit cards which removes 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.

The COVID-19 pandemic has caused significant disruption for our customers and resulted in the closure of forecourts. As a result,
the proportion of customers paying by direct debit reduced and there is increased uncertainty over the cash flows for our customers.
To support our customers through these challenging times, we extended credit terms for their 1 April 2020 invoice. Overall, the Group
considers that it is not exposed to a significant amount of either customer credit or bad debt risk, due to the fragmented nature of the
customer base and the actions taken to support customers through the current economic uncertainty.

ii. Cash and cash equivalents
As at 31 March 2020, the Group held cash and cash equivalents of £37.6m (2019: £5.9m). The increase in cash held was in response to the
COVID-19 crisis to secure liquidity for the Group at a time of significant uncertainty. 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 RCF.

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.

The Group has access to a Syndicated RCF which has total commitments of £400.0m. Of the total commitment, £83.5m matures in June
2023 and £316.5m in June 2025. The facility allows the Group access to cash at one working day’s notice. At 31 March 2020, £313.0m was
drawn under the Syndicated RCF.

To secure liquidity for the Group in a time of significant uncertainty, £37.6m of cash and cash equivalents was held as at 31 March 2020 in
response to the COVID-19 crisis.

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AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

3. Risk and capital management continued

On 1 April 2020, Auto Trader Group plc (the ‘Company’) announced the successful placing of ordinary shares. The placing raised gross
proceeds of £185.9m for the Company. A total of 46,468,300 new ordinary shares in the Company (the ‘Placing Shares’) were placed,
at a price of 400.0 pence per Placing Share (the ‘Placing Price’), a discount of 8.9% to the closing share price of 439.1 pence on 31 March
2020 and a premium of 0.9% to the middle market price at the time at which the Company and BofA Securities (as sole bookrunner)
agreed the Placing Price. The Placing Shares issued represented approximately 5% of the ordinary share capital of Auto Trader at the
time of issue.

On 3 April 2020, the Placing Shares were admitted to the premium listing segment of the Official List of the Financial Conduct Authority
and to trading on the main market for listed securities of London Stock Exchange plc (together, ‘Admission’). The Placing Shares rank pari
passu in all respects with the existing ordinary shares in the Company, including the right to receive all dividends and other distributions
declared, made or paid after the date of issue.

Capital 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 19. 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

2020
£m

282.4

141.6

424.0

2019
£m

321.0

59.0

380.0

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 cost of capital structure. To maintain or adjust the capital
structure, the Group may pay dividends, return capital through share buybacks, issue new shares or take other steps to increase share
capital and reduce or increase debt facilities.

As at 31 March 2020, the Group had borrowings of £313.0m (2019: £313.0m) through its Syndicated revolving credit facility. 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 are three
operating segments (2019: one operating segment), being Auto Trader (‘AT’), Webzone (‘WZ’) and KeeResources (‘Kee’). A change in the
operational reporting structure of the business led to WZ being reported as a separate segment during the period. The Group has
restated the corresponding items for prior periods.

Management has determined that there are three operating segments in line with the nature in which the Group is managed. The reports
reviewed by the Operational Leadership Team (‘OLT’), which is the chief operating decision-maker (‘CODM’) for all three segments, splits
out operating performance by segment. The OLT is made up of the Executive Directors and Key Management and is responsible for the
strategic decision-making of the Group. Revenue and cost streams for each operating segment are largely independent.

The OLT primarily uses the statutory measures of Revenue and Operating profit to assess the performance of the operating segments.
The revenue from external parties reported to the OLT is measured in a manner consistent with that in the income statement.

There is considered to be only one reporting segment, which is the Group, the results of which are shown in the Consolidated income
statement. A reconciliation of each segment’s Operating profit to the Group Profit before tax is shown below.

Segment

Total segment Revenue

Total segment Operating profit

Finance costs – net

Profit on the sale of subsidiary

Profit before tax

£m

361.3

254.7

–

254.7

2020

£m

5.3

1.7

–

1.7

£m

Kee

2.4

(0.2)

–

£m

Group

(0.1)

2.7

(7.4)

–

£m

Total

368.9

258.9

(7.4)

–

£m

349.9

241.1

–

(0.2)

(4.7)

251.5

241.1

2019

£m

5.2

1.7

–

1.7

£m

Group

–

0.9

(10.2)

8.7

(0.6)

£m

Total

355.1

243.7

(10.2)

8.7

242.2

Group adjustments which are borne centrally and are not attributable to any specific operating segment include finance costs on the
Group’s RCF, share of profit from joint ventures, the elimination of transactions and consolidation adjustments. Consolidation
adjustments include the amortisation of intangible assets recognised under IFRS 3 business combinations.

114

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Geographic 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)

2020
£m

363.6

5.3

368.9

2020
£m

24.3

0.7

25.0

2020
£m

401.3

6.8

408.1

2019
£m

349.9

5.2

355.1

2019
£m

24.5

0.4

24.9

2019
£m

376.6

6.6

383.2

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.

In the following table the Group’s revenue is detailed by customer type. This level of detail is consistent with that used by management
to assist in the analysis of the Group’s revenue-generating trends.

Revenue

Retailer

Home Trader

Other

Trade

Consumer Services

Manufacturer and Agency

Total revenue

2020
£m

312.1

8.3

3.9

324.3

28.3

16.3

368.9

Contract balances
The following table provides information about receivables and contract assets and liabilities from contracts with customers.

Receivables, which are included in trade and other receivables

Accrued income

Deferred income

2020
£m

28.4

28.1

(13.7)

2019
£m

293.0

10.2

1.4

304.6

28.0

22.5

355.1

2019
£m

27.0

28.0

(13.2)

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 trade receivables when invoiced.

Deferred income relates to advanced consideration received for which revenue is recognised as or when services are provided. £3.7m
(2019: £2.6m) of the deferred income balance is classified as a current liability within trade and other payables (note 20). Included within
deferred income is £10.6m (2019: £11.2m) relating to consideration received from Auto Trader Autostock Limited (which forms part of the
Group’s joint venture Dealer Auction) 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; given this time period the liability has been split between current and non-current liabilities.

115

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

6. Operating profit

Operating profit is after charging the following:

Staff costs

Contractor costs

Depreciation of property, plant and equipment

Amortisation of intangible assets

Profit on sale of property, plant and equipment

Note

2020
£m

(55.3)

(0.5)

(3.9)

(2.6)

0.3

2019
£m

(56.0)

(0.4)

(4.9)

(4.0)

0.1

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

2020
£m

0.1

0.2

0.3

2019
£m

0.1

0.2

0.3

Fees payable for audit-related assurance services in the year were £36,000 (2019: £34,396). Fees payable for other non-audit services in
the year were nil (2019: £3,000).

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

Share-based payments and associated NI (note 29)

Total

2020
Number

2019
Number

398

323

128

849

2020
£m

44.5

5.1

2.1

51.7

3.6

55.3

370

317

115

802

2019
£m

43.2

4.7

2.2

50.1

5.9

56.0

Note

Wages and salaries include £20.7m (2019: £17.3m) 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.

116

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20208. Directors and Key Management remuneration

The remuneration of Directors is disclosed in the Directors’ remuneration report on pages 77 to 89:

Key Management compensation
During the year to 31 March 2020, Key Management comprised the members of the OLT (who are defined in note 4) and the Non-Executive
Directors (2019: OLT and the Non-Executive Directors). The remuneration of all Key Management (including all Directors) was as follows:

Short-term employee benefits

Share-based payments

Pension contributions

Total

9. Finance costs

On bank loans and overdrafts

Amortisation of debt issue costs

Interest unwind on lease liabilities

Total

2020
£m

4.1

3.0

0.1

7.2

2020
£m

6.3

0.7

0.4

7.4

Amortisation of debt issue costs incurred on the former Senior Facilities Agreement was accelerated in the prior year resulting in an
additional £2.0m recognised in the 2019 Consolidated income statement.

10. Disposal of a subsidiary

In the previous year 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.

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. 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 was recognised in the 2019 Consolidated income statement:

Proceeds from disposals

Intangible assets – Goodwill

Intangible assets – Licence agreement

Profit on sale of subsidiary

2019
£m

5.3

3.5

0.2

9.0

2019
£m

6.5

2.8

0.9

10.2

2019
£m

28.4

(8.4)

(11.3)

8.7

117

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

11. 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

Effect of rate changes on opening balance

Adjustments in respect of prior years

Total deferred taxation

Total taxation charge

2020
£m

47.1

0.2

(0.1)

47.2

–

(0.8)

–

(0.8)

46.4

The taxation charge for the year is lower than (2019: lower than) the effective rate of corporation tax in the UK of 19% (2019: 19%).
The differences are explained below:

Profit before taxation

Tax on profit on ordinary activities at the standard UK corporation tax rate of 19% (2019: 19%)

Expenses not deductible for taxation purposes

Income not taxable

Adjustments in respect of foreign tax rates

Effect of rate changed on deferred tax

Adjustments in respect of prior years

Total taxation charge

2020
£m

251.5

47.8

0.2

(0.6)

(0.1)

(0.8)

(0.1)

46.4

2019
£m

44.9

0.2

(0.1)

45.0

(0.6)

–

0.1

(0.5)

44.5

2019
£m

242.2

46.0

0.3

(1.7)

(0.1)

–

44.5

Taxation on items taken directly to equity was a credit of £0.4m (2019: £0.6m) 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% (2019: 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.
A change to the main UK corporation tax rate, announced in the Budget on 11 March 2020, was substantively enacted on 17 March 2020.
The rate applicable from 1 April 2020 now remains at 19%, rather than the previously enacted reduction to 17%.

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 19% being used to measure all deferred tax balances as at 31 March 2020 (2019: 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 2020

Basic EPS

Diluted EPS

Year ended 31 March 2019

Basic EPS

Diluted EPS

118

Weighted average
number of
ordinary shares

Total
earnings
£m

924,499,320

929,247,835

941,506,424

944,254,998

205.1

197.7

Pence
per share

22.19

22.08

21.00

20.94

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020The 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 2020

Issued ordinary shares at 31 March 2019

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

933,197,563

(3,974,149)

(4,184,444)

(539,650)

924,499,320

4,748,515

929,247,835

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 2018

Additions

Disposals

Exchange differences

At 31 March 2019

Acquired through business combinations

Additions

Disposals

Exchange differences

At 31 March 2020

Accumulated amortisation and
impairments

At 31 March 2018

Amortisation charge

Disposals

Exchange differences

At 31 March 2019

Amortisation charge

Disposals

Exchange differences

At 31 March 2020

Net book value at 31 March 2020

Net book value at 31 March 2019

Net book value at 31 March 2018

Software
and website
development
costs
£m

Goodwill
£m

Financial
systems
£m

Database
£m

Other
£m

442.8

–

(12.4)

(0.1)

430.3

13.9

–

0.3

444.5

120.8

–

(3.9)

0.1

117.0

–

117.0

327.5

313.3

322.0

55.3

0.3

(42.4)

–

13.2

1.9

–

(5.8)

–

9.3

54.4

0.6

(42.2)

–

12.8

0.4

(5.8)

0.1

7.5

1.8

0.4

0.9

12.6

0.3

–

12.9

–

0.2

–

13.1

8.9

2.4

–

11.3

0.9

–

12.2

0.9

1.6

3.7

–

8.5

–

8.5

–

0.3

–

0.3

8.2

–

17.1

–

(1.3)

–

15.8

2.2

–

0.1

18.1

13.9

1.0

(1.3)

–

13.6

1.0

–

14.6

3.5

2.2

3.2

Total
£m

527.8

0.6

(56.1)

(0.1)

472.2

26.5

0.2

(5.8)

0.4

493.5

198.0

4.0

(47.4)

0.1

154.7

2.6

(5.8)

0.1

151.6

341.9

317.5

329.8

119

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

13. Intangible assets continued

Other intangibles include customer relationships, technology, trade names, trademarks, non-compete agreements and brand assets.
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 15 years).
The longest estimated useful life remaining at 31 March 2020 is 15 years (31 March 2019: five years).

For the year to 31 March 2020, the amortisation charge of £2.6m (2019: £4.0m) has been charged to administrative expenses in the income
statement. At 31 March 2020, £0.1m (2019: £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 goodwill allocated to each CGU is as follows: Digital £307.6m,
Webzone £6.0m and KeeResources £13.9m. 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
(including lease assets), intangibles and lease liabilities, as follows:

Digital

Webzone

KeeResources

Total

2020
£m

311.9

5.8

28.3

346.0

2019
£m

327.6

6.6

–

334.2

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, with adjustments made to reflect a period of low revenue due to COVID-19. Cash flows beyond the budgeted
period of five years are extrapolated using the estimated growth rate stated into perpetuity; a rate of 3.0% has been used. This is
marginally higher than the rate of inflation in the UK, reflecting the relative growth potential of the industry compared to the economy
as a whole and is consistent with the approach taken by other technology companies. 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.

Digital and Webzone
The pre-tax discount rate used within the Digital and Webzone recoverable amount calculations was 9.4% (2019: 8.5%) 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 the Digital and Webzone CGUs as the principal risks and uncertainties associated with
the Group, as highlighted on pages 54 to 57, 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.

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

2020

3.0%

1.3%

6.2%

1.08

2.3%

2019

3.0%

5.0%

0.83

3.3%

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.

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 Digital and Webzone CGUs.

Having completed the 2020 impairment review, no impairment has been recognised in relation to the CGUs (2019: no impairment).

120

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020KeeResources
A pre-tax discount rate of 12.0% has been applied to the Kee CGU, based upon the weighted average cost of capital reflecting specific
principal risks and uncertainties to KeeResources. The discount rate takes into account the risk-free rate of return, the market risk
premium and beta factor and comparator companies which are used in deriving the cost of equity.

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

2020

3.0%

0.9%

8.3%

1.10

Forecast cash flows assume good levels of organic growth in the medium term primarily through increased data subscription revenue,
and are adjusted in the short term to reflect the reduced revenues as a result of COVID-19.

Sensitivity analysis has been performed in assessing the recoverable amounts of goodwill. Management has identified that a
reasonably possible change in two key assumptions could cause the carrying amount to exceed the recoverable amount. The amounts
by which these two assumptions would need to change to individually and collectively for the estimated recoverable amount to be equal
to the carrying amount are set out below:

• Increasing the pre-tax discount rate to 13.5%.
• Decreasing the annual growth rate after the plan period to 1.4%.
• Increasing the pre-tax discount rate to 12.9% and decreasing the annual growth rate after the plan period to 2.0%.

Having completed the 2020 impairment review, no impairment has been recognised in relation to the KeeResources CGU.

14. Property, plant and equipment

Cost

At 31 March 2018

Additions

Disposals

At 31 March 2019

Acquired through business combinations

Additions

Disposals and modifications

At 31 March 2020

Accumulated depreciation

At 31 March 2018

Charge for the year

Disposals

At 31 March 2019

Charge for the year

Disposals

At 31 March 2020

Net book value at 31 March 2020

Net book value at 31 March 2019

Net book value at 31 March 2018

Land, buildings
and leasehold
improvements
£m

Office
equipment
£m

Motor
vehicles
£m

18.3

0.8

(1.3)

17.8

2.2

0.1

(3.6)

16.5

3.1

2.5

(1.3)

4.3

2.1

(0.2)

6.2

10.3

13.5

15.2

16.8

0.9

(3.7)

14.0

0.1

1.1

(0.1)

15.1

12.9

1.9

(3.7)

11.1

1.5

(0.1)

12.5

2.6

2.9

3.9

1.1

0.2

(0.1)

1.2

0.1

(0.1)

1.3

0.5

(0.1)

0.9

0.3

(0.1)

1.1

0.2

0.3

0.6

Total
£m

36.2

1.9

(5.1)

33.0

2.4

1.3

(3.8)

32.9

16.5

4.9

(5.1)

16.3

3.9

(0.4)

19.8

13.1

16.7

19.7

Included within property, plant and equipment are £6.8m (2019: £11.9m) of assets recognised as leases under IFRS 16. Further details of
these leases are disclosed in note 15. The depreciation expense of £3.9m for the year to 31 March 2020 (2019: £4.9m) has been recorded
in administrative expenses.

During the year, £0.4m (2019: £5.1m) worth of property, plant and equipment with £nil net book values were disposed of.

121

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

15. 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 2018

Additions

Depreciation charge

Balance at 31 March 2019

Additions

Disposals

Modifications

Depreciation charge

At 31 March 2020

Lease liabilities in the balance sheet at 31 March

Current

Non-current

Total

2020
£m

6.3

6.8

13.1

Land, buildings
and leasehold
improvements
£m

Office
equipment
£m

Motor
vehicles
£m

13.0

–

(1.5)

11.5

–

(1.4)

(2.1)

(1.5)

6.5

0.1

–

0.1

–

0.1

0.6

0.2

(0.5)

0.3

0.1

–

(0.2)

0.2

2020
£m

2.1

7.0

9.1

2019
£m

4.8

11.9

16.7

Total
£m

13.7

0.2

(2.0)

11.9

0.1

(1.4)

(2.1)

(1.7)

6.8

2019
£m

1.8

14.3

16.1

A maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented within note 31.

During the year the Group renegotiated the lease agreements for its London and Manchester offices. The accounting adjustments
under IFRS 16 are set out below:

The Group surrendered a proportion of the London office back to the landlord. The surrender represents a disposal under IFRS 16.
The right of use asset was reduced by £1.4m to reflect the value of assets disposed. The Group’s lease liability reduced by £1.6m with
a £0.2m gain on disposal recognised in the consolidated income statement.

The Group renegotiated the London office lease agreement for the remaining office space. The change to the agreement represents
a modification under IFRS 16. The right of use asset was increased by £1.0m to reflect the value of the asset held after the modification.
The Group’s lease liability increased by £0.9m as a result of the modification and the dilapidations provision increased by £0.1m.

The Group renegotiated the rent payable for the Manchester office in line with the rent review date stipulated in the lease agreement
and the Group reassessed the lease term based on the likelihood of exercising the break clause within the lease agreement. These
changes represent a lease modification under IFRS 16. The right of use asset was reduced by £3.1m with corresponding adjustment to
the lease liability and dilapidations provision.

Amounts charged in the income statement

Depreciation charge of right-of-use assets

Interest on lease liabilities

Gain on disposal of right-of-use assets

Total amounts charged in the income statement

Cash outflow

Total cash outflow for leases

122

2020
£m

1.7

0.4

0.2

2.3

2020
£m

2.9

2019
£m

2.0

0.9

–

2.9

2019
£m

3.1

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 202016. 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.

The Group owns 49% of the ordinary share capital of Dealer Auction Limited (previously Dealer Auction (Holdings) Limited).

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:

Equity investment
in joint ventures
£m

Group’s share
of net assets
£m

Net investments
in joint ventures
£m

Carrying value

As at 1 April 2018

Investment in joint venture

Share of result for the year taken to the income statement

As at 31 March 2019

Share of result for the year taken to the income statement

As at 31 March 2020

Set out below is the summarised financial information for the joint venture:

–

48.1

–

48.1

–

48.1

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

–

0.9

3.2

4.1

2020
£m

98.4

9.7

1.2

–

48.1

0.9

49.0

3.2

52.2

2019
£m

98.9

0.2

6.9

109.3

106.0

2.3

107.0

2020
£m

13.0

6.4

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 34.

123

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

17. Other investments

Shares in other undertakings

Investment in IAUTOS Company Limited

At 31 March 2020 and 31 March 2019

£m

–

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

Net accrued income

Prepayments

Other receivables

Total

2020
£m

28.4

(3.4)

25.0

27.1

3.8

0.1

56.0

2019
£m

27.0

(2.1)

24.9

28.0

2.9

0.3

56.1

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. Included within net accrued income is provision for the impairment of financial
assets of £1.0m (2019: nil).

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

2020
£m

36.9

0.7

37.6

2019
£m

5.8

0.1

5.9

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 0.2% (2019: 0.3%).

124

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 202020. Trade and other payables

Trade payables

Accruals

Other taxes and social security

Deferred income

Other payables

Accrued interest payable

Total

2020
£m

4.7

7.4

16.6

3.7

0.5

0.4

33.3

2019
£m

4.3

10.5

13.0

2.6

0.3

0.5

31.2

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

Total

The Syndicated RCF is repayable as follows:

Two to five years

Total

The carrying amounts of borrowings approximate their fair values.

2020
£m

313.0

(2.5)

310.5

2020
£m

313.0

2019
£m

313.0

(2.7)

310.3

2019
£m

313.0

Syndicated revolving credit facility (‘Syndicated RCF’)
The Group has access to a Syndicated revolving credit facility (the ‘Syndicated RCF’). The Syndicated RCF, which is unsecured,
has total commitments of £400.0m and the associated debt transaction costs at initiation were £3.3m.

On 1 June 2020, the Group extended the term for £316.5m of the Syndicated RCF for one year, incurring additional associated debt
transaction costs of £0.5m. The Syndicated RCF will now terminate in two tranches:
• £316.5m will mature in June 2025; and
• £83.5m will mature at the original termination date of June 2023.

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 Syndicated RCF has financial covenants linked to interest cover and the consolidated debt cover of the Group:
• Net bank Debt to Consolidated EBITDA must not exceed 3.5:1.
• EBITDA to Net Interest Payable must not be less than 3.0:1.

EBITDA is defined as earnings before interest, taxation, depreciation and amortisation, share-based payments and associated NI, share
of profit from joint ventures, exceptional items and adjusting for the adoption of IFRS 16.

All financial covenants of the facility have been complied with through the year.

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

2020
£m

313.0

2019
£m

313.0

125

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

22. Provisions for other liabilities and charges

At 31 March 2019

Charged to the income statement

Recognised under IFRS 16

Utilised in the year

At 31 March 2020

Current

Non-current

Total

Dilapidations
provision
£m

Holiday pay
provision
£m

1.0

–

0.1

–

1.1

0.3

0.4

–

(0.3)

0.4

2020
£m

0.4

1.1

1.5

Total
£m

1.3

0.4

0.1

(0.3)

1.5

2019
£m

0.3

1.0

1.3

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 2021.

23. 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 2018

Credited to the income statement

Credited directly to equity

At 31 March 2019

Acquired through business combinations

Effect of rate changes on opening balance

Debited directly to equity

At 31 March 2020

Deferred taxation liabilities

At 31 March 2018

Credited to the income statement

At 31 March 2019

Debited to the statement of comprehensive income

Acquired through business combinations

At 31 March 2020

Share-based
payments
£m

Accelerated
capital
allowances
£m

Other
temporary
differences
£m

1.2

0.7

0.3

2.2

–

0.5

(0.3)

2.4

3.9

(0.2)

–

3.7

–

0.2

–

3.9

0.2

0.1

–

0.3

0.1

–

0.5

Share-based
payments
£m

Accelerated
capital
allowances
£m

Other temporary
differences
£m

–

0.7

(0.2)

0.5

0.3

2.1

2.9

Total
£m

5.3

0.6

0.3

6.2

0.1

0.8

(0.3)

6.8

Total
£m

0.7

(0.2)

0.5

0.3

2.1

2.9

The Group has estimated that £0.8m (2019: £1.1m) 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.

Acquired deferred tax liabilities of £2.1m have been recognised in relation to the acquisition of KeeResources for the value of intangible
assets recognised under IFRS 3 business combinations. See note 30 for further details.

126

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 202024. 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 2020 the pension
contributions to the Group’s defined contribution schemes amounted to £2.1m (2019: £2.2m). At 31 March 2020, there were £0.3m
(31 March 2019: £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 2020, approximately 55% of the defined benefit obligation (‘DBO’) is attributable to former employees who have yet to
reach retirement (2019: 60%) and 45% to current pensioners (2019: 40%). 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.

Risks associated with the Scheme
The Scheme exposes the Company to some risks, the most significant of which are:

Asset volatility

Inflation risk

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.

Change in bond yields

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.

Life expectancy

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 £140,000 for the year
ending 31 March 2020 (2019: £70,000) and is committed to further contributions of £140,000 per annum under the current Schedule of
Contributions. 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 2020, taking account of experience over the period since 30 April 2018, changes in market conditions,
and differences in the financial and demographic assumptions. The present value of the defined benefit obligation was measured using
the projected unit credit method.

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

The financial assumptions reflect the nature and term of the Scheme’s liabilities.

2020
%

2.30

1.95

2.75

–

1.85

5.00

2.75

2019
%

2.45

2.35

3.45

–

2.10

5.00

3.35

127

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24. Retirement benefit obligations continued

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)

2020

Men
Years

86.9

88.6

Women
Years

88.9

90.7

2019

Men
Years

86.8

88.5

Women
Years

88.9

90.7

It is assumed that 50% of non-retired members of the Scheme will commute the maximum amount of cash at retirement (2019: 50% of
non-retired members of the Scheme will commute the maximum amount of cash at retirement).

Post-employment benefit obligations disclosures
The amounts charged to the Consolidated income statement are set out below:

Past service cost

Settlement cost

Total amounts charged to the Consolidated income statement

2020
£m

–

0.2

2019
£m

0.4

–

0.4

Past service cost
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. Allowance was made for the cost of GMP equalisation as a past service cost for
the year ending 31 March 2019. No further update or adjustment was applied to this figure during the year ending 31 March 2020.

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.

Settlement cost
During the course of the financial year, the Company and Trustees of the Scheme implemented an Enhanced Transfer Value exercise,
where members of the Scheme were given the option to transfer their benefits away from the Scheme, and provided with paid-for
independent financial advice.

During March 2020, seven members elected to take a transfer, and a total of £1.2m was paid out from the Scheme. These transfers settled
£1.0m of defined benefit obligation, resulting in a settlement cost of £0.2m recognised in the Consolidated income statement for the year
ending 31 March 2020.

In addition, the following amounts have been recognised in the Consolidated statement of comprehensive income:

Return on Scheme assets below / (in excess of) that recognised in net interest

Actuarial losses due to changes in assumptions

Actuarial gains due to liability experience

Effect of the surplus cap

Deferred tax on surplus

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

2020
£m

1.5

(0.1)

(2.2)

0.3

(0.6)

2020
£m

18.8

(19.7)

–

(0.9)

2019
£m

(0.9)

0.3

(0.5)

0.9

–

(0.2)

2019
£m

20.0

(22.2)

2.2

–

During the year, the Trustees of the Scheme sought legal advice which concluded that the Group has an unconditional right to a refund of
surplus from the Scheme, if the Scheme were to be run-off until the final beneficiary died. As a result, the Group has concluded that IFRIC
14 does not apply, and therefore has recognised the accounting surplus of £0.9m and an associated deferred tax liability of £0.3m in the
Consolidated balance sheet. The Group has not restated the prior year.

128

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Movements 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 (losses)/gains on Scheme assets

Contributions by the employer

Settlements

Net benefits paid

Fair value of Scheme assets at the end of the year

Movements 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) on Scheme liabilities arising from experience

Settlements

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

Settlement cost

Interest

Contributions by the employer

Remeasurement and experience gains

Effect of surplus cap

Closing post-retirement benefit surplus

Plan assets are comprised as follows:

Equities

Bonds

Cash

Real estate

Total

2020
£m

22.2

0.6

(1.5)

0.1

(1.2)

(0.5)

19.7

2020
£m

20.0

–

0.5

(0.1)

(1.0)

(0.5)

18.8

2020
£m

–

0.2

(0.1)

1.3

(2.2)

(0.9)

2020

2019

£m

10.0

7.2

1.4

1.1

19.7

51.0

37.0

7.0

5.0

100.0

£m

12.2

8.9

–

1.1

22.2

2019
£m

21.0

0.5

1.0

0.1

–

(0.4)

22.2

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

–

55.0

40.0

–

5.0

100.0

All plan assets have a quoted market price.

Sensitivity to key assumptions
The key assumptions are deemed to be the discount rate, inflation rates and life expectancy. The tables below gives an approximation
of the impact on the IAS 19 (revised) pension scheme liabilities to changes in these 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 2020

Defined benefit obligation at 31 March 2020

Surplus at 31 March 2020

Change
£m

New value
£m

–

0.9

19.7

(17.9)

1.8

129

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

24. Retirement benefit obligations continued

Following a 0.25% increase in the RPI and CPI inflation assumptions

Assets of the Scheme at 31 March 2020

Defined benefit obligation at 31 March 2020

(Deficit)/Surplus at 31 March 2020

Following a 1 year increase in life expectancy

Assets of the Scheme at 31 March 2020

Defined benefit obligation at 31 March 2020

Deficit at 31 March 2020

25. Share capital

Change
£m

New value
£m

–

(0.3)

19.7

(19.1)

0.6

Change
£m

New value
£m

–

(0.9)

19.7

(19.7)

–

Share capital

Allotted, called-up and fully paid ordinary shares of 1p each

At 1 April

Purchase and cancellation of own shares

Total

2020

Number
’000

Amount
£m

2019

Number
’000

Amount
£m

933,198

(10,657)

922,541

9.3

(0.1)

9.2

952,161

(18,963)

933,198

9.5

(0.2)

9.3

In the year ended 31 March 2017, the Company commenced a share buyback programme. By resolutions passed at the 2019 AGM, the
Company’s shareholders generally authorised the Company to make market purchases of up to 92,936,538 of its ordinary shares, subject
to minimum and maximum price restrictions.

A total of 11,431,823 ordinary shares of £0.01 were purchased in the year (2019: 20,229,881). The average price paid per share was 538.8p
(2019: 461.5p), with a total consideration paid (inclusive of all costs) of £62.0m (2019: £94.0m). 774,734 shares were purchased to be held
in treasury (2019: 1,266,000 shares), with 10,657,089 being cancelled. Included within shares in issue at 31 March 2020 are 523,955 (2019:
565,555) shares held by the ESOT and 4,090,996 (2019: 3,996,041) shares held in treasury, as detailed in note 26.

26. Own shares held

Own shares held – £m

Own shares held as at 1 April 2018

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives exercised

Own shares held as at 31 March 2019

Own shares held as at 1 April 2019

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives exercised

Own shares held as at 31 March 2020

Own shares held – number

Own shares held as at 1 April 2018

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives exercised

Own shares held as at 31 March 2019

130

ESOT shares
reserve
£m

Treasury
shares
£m

(1.4)

0.6

–

(0.8)

0.1

–

(0.7)

(15.5)

–

(5.8)

5.6

(15.7)

–

(4.3)

2.8

(17.2)

Total
£m

(16.9)

0.6

(5.8)

5.6

(16.5)

0.1

(4.3)

2.8

(17.9)

ESOT shares
reserve
Number of shares

Treasury
shares
Number of shares

932,761

4,194,989

Total
number of
own shares
held

5,127,750

(367,206)

–

(367,206)

–

1,266,000

(1,464,948)

565,555

3,996,041

4,561,596

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Own shares held – number

Own shares held as at 1 April 2019

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives exercised

Own shares held as at 31 March 2020

27. Dividends

Dividends declared and paid by the Company were as follows:

2018 final dividend paid

2019 interim dividend paid

2019 final dividend paid

2020 interim dividend paid

ESOT shares
reserve
Number of shares

Treasury
shares
Number of shares

Total
number of
own shares
held

565,555

3,996,041

4,561,596

(41,600)

–

774,734

(41,600)

774,734

(679,779)

523,955

4,090,996

4,614,951

2020

Pence
per share

–

4.6

2.4

7.0

2019

Pence
per share

4.0

2.1

–

6.1

£m

–

42.6

22.1

64.7

£m

37.9

19.7

–

57.6

The Directors are not recommending a final dividend for the year ended 31 March 2020. The 2020 interim dividend paid on 24 January 2020
was £22.1m. The 2019 final dividend paid on 24 September 2019 was £42.6m.

The Directors’ policy with regard to future dividends is set out in the Strategic report on page 39.

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)/loss 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

2020
£m

251.5

2019
£m

242.2

3.9

2.6

3.4

(3.2)

(0.3)

0.2

7.4

–

1.0

(0.2)

(0.8)

4.9

4.0

4.7

(0.9)

0.1

0.3

10.2

(8.7)

(1.5)

2.2

1.0

265.5

258.5

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 £3.6m (2019: £5.9m) with a Company charge of £1.1m (2019: £2.3m). 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.

131

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

29. 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

2020
£m

–

0.4

1.2

1.8

3.4

0.2

3.6

2019
£m

–

0.3

2.1

2.3

4.7

1.2

5.9

Company

2020
£m

–

0.7

0.4

1.1

–

1.1

2019
£m

–

1.3

0.4

1.7

0.6

2.3

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.

UK SIP

Outstanding at 1 April

Dividend shares awarded

Forfeited

Released

Outstanding at 31 March

Vested and outstanding at 31 March

2020
Number

320,872

3,641

(2,650)

2019
Number

690,791

4,518

(9,275)

(39,404)

(365,162)

282,459

320,872

The weighted average market value per ordinary share for SIP awards released in 2020 was 556.1p (2019: 386.1p). The SIP shares
outstanding at 31 March 2020 have fully vested (2019: fully vested). 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

Exercised

Outstanding at 31 March

Vested and outstanding at 31 March

2020
Number

5,416

(4,062)

1,354

2019
Number

35,922

(30,506)

5,416

The weighted average market value per ordinary share for Irish SIP options exercised in 2020 was 548.9p (2019: 350.0p). The SIP shares
outstanding at 31 March 2020 have fully vested (2019: fully vested). 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 June 2019, the Group awarded 259,885 nil cost options under the PSP scheme. For the 2019 awards, in line with 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 2019 – March 2022 (2018 awards: April 2018 – March 2021).

For other 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 FTSE250
share index.

132

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020The 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

TSR dependent

19 June 2015

UOP dependent

17 June 2016

16 June 2017

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

17 June 2019

OP dependent

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

5.65

Nil

n/a

3.0

0.9

0.4

0.2

0.7

0.6

0.0

0.4

0.0

1.7

1.3

0.0

2.08

3.06

2.16

3.89

2.17

4.00

2.17

3.42

4.48

5.65

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 2020 was as follows:

Outstanding at 1 April 2019

Options granted in the year

Dividend shares awarded

Options forfeited in the year

Options exercised in the year

Outstanding at 31 March 2020

Exercisable at 31 March 2020

2020
Number

2019
Number

2,978,478

3,104,563

259,885

8,570

(297,678)

(568,666)

452,695

9,749

(105,213)

(483,316)

2,380,589

2,978,478

873,575

721,269

The weighted average market value per ordinary share for PSP options exercised in 2020 was 576.2p (2019: 445.0p). The PSP awards
outstanding at 31 March 2020 have a weighted average remaining vesting period of 0.5 years (2019: 0.8 years) and a weighted average
contractual life of 7.0 years (2019: 7.6 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 Bonus Plan (‘DABP’) and the Single Incentive Plan Award (‘SIPA’).

Deferred Annual Bonus
The Group operates a Deferred Annual Bonus Plan (‘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 2019, the Group awarded 95,062 nil cost options under the DABP. 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

17 June 2019

Share price at
grant date
£

Exercise
price
£

3.89

4.00

4.48

5.65

Nil

Option
life
years

2.0

Risk-free
rate
%

Dividend
yield
%

Non-vesting
condition
%

Fair value
per option
£

0.4

0.2

0.7

0.6

0.4

0.0

1.7

1.3

0.0

3.89

4.00

4.48

5.65

133

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

29. Share-based payments continued

The number of options outstanding and exercisable as at 31 March was as follows:

Outstanding at 1 April 2019

Options granted in the year

Dividend shares awarded

Options exercised in the year

Outstanding at 31 March 2020

Exercisable at 31 March 2020

2020
Number

149,397

95,062

2,261

(80,106)

166,614

–

2019
Number

303,880

71,552

3,343

(229,378)

149,397

–

The weighted average market value per ordinary share for DABP options exercised in 2020 was 549.0p (2019: 438.1p). The DABP awards
outstanding at 31 March 2020 have a weighted average remaining vesting period of 0.9 years (2019: 0.8 years) and a weighted average
contractual life of 8.9 years (2019: 8.8 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
The Group operates a Single Incentive Plan Award (‘SIPA’) for the Operating Leadership Team and certain key employees. The extent to
which awards vest will depend upon the satisfaction of the Group’s financial and operational performance in the financial year of the
award date (the ‘Performance Conditions’). The awards will vest in tranches, with the first tranche vesting on the date on which the
Remuneration Committee determines that the Performance Conditions have been satisfied, and subsequent tranches vesting on the
first and second anniversary of this date, subject to continuing employment.

On 17 June 2019, the Group awarded 699,024 nil cost options under the SIPA scheme. For the 2019 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
number of retailers paying for the new car product as at 31 March 2020 (12.5% of the award), as well as separate individual performance
conditions for some OLT members and key employees. The fair value of the 2019 award was determined to be £5.65 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 SIPA awards are as follows:

Grant date

17 August 2018

17 June 2019

Share price
at grant date
£

Exercise
price
£

Expected
volatility
%

Option
life
years

Risk-free
rate
%

Dividend
yield
%

Non-vesting
condition
%

Fair value
per option
£

4.48

5.65

Nil

n/a

3.0

0.7

0.6

1.7

1.3

0.0

4.48

5.65

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 exercised in the year

Options forfeited in the year

Outstanding at 31 March

Exercisable at 31 March

2020
Number

923,052

699,024

4,109

(254,407)

(235,118)

1,136,660

51,680

2019
Number

–

974,106

–

(51,054)

923,052

–

The weighted average market value per ordinary share for SIPA options exercised in 2020 was 561.0p (2019: no share exercised). The SIPA
awards outstanding at 31 March 2020 have a weighted average remaining vesting period of 0.4 years (2019: 0.4 years) and a weighted
average contractual life of 4.2 years (2019: 3.7 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.

134

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Sharesave 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

13 December 2019

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

5.74

2.64

2.59

3.49

4.32

3.0

1.0

0.6

0.7

0.6

0.0

1.3

1.7

1.3

0.96

1.12

1.29

1.63

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

2020

2019

Number
of share
options

Weighted average
exercise price
£

Number
of share
options

Weighted average
exercise price
£

1,347,698

298,237

(43,526)

(161,652)

1,440,757

–

3.05

4.32

2.68

3.17

3.31

–

1,530,852

699,528

(721,748)

(160,934)

1,347,698

34,731

2.61

3.49

2.64

2.70

3.05

2.64

The weighted average market value per ordinary share for Sharesave options exercised in 2020 was 548.8p (2019: 424.8p). The Sharesave
options outstanding at 31 March 2020 have a weighted average remaining vesting period of 1.7 years (2019: 2.3 years) and a weighted
average contractual life of 2.2 years (2019: 2.8 years).

30. Business combinations

On 1 October 2019, Auto Trader Limited, a subsidiary of Auto Trader Group plc, acquired the entire share capital of KeeResources Limited
for consideration, net of cash acquired, of £25.3m.

KeeResources is a trusted provider of software, data, and digital solutions to the automotive industry, including a detailed vehicle
dataset for new and used cars which Auto Trader uses to power its platform. KeeResources has been an integral supplier to Auto Trader,
as its unique vehicle data underpins much of the Auto Trader core platform.

The total cash consideration paid of £26.8m excludes acquisition costs of £0.2m 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

2020
£m

26.8

(1.5)

25.3

From the period from acquisition to 31 March 2020, KeeResources contributed revenue of £2.4m, and a loss of £0.2m to the Group’s results.

If the acquisition had occurred on 1 April 2019, Group revenue would have been an estimated £4.9m and loss would have been an
estimated £0.4m. In determining these amounts, management has assumed that the fair value adjustments that arose on the date
of acquisition would have been the same if the acquisition occurred on 1 April 2019.

135

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

30. 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

Software

Database

Brand

Deferred tax liability arising on intangible assets

Intangible assets and related deferred tax

Property, plant and equipment

Deferred tax asset

Non-current assets

Current assets

Trade and other receivables

Cash and cash equivalents

Current assets

Non-current liabilities

Borrowings

Current liabilities

Trade and other payables

Deferred income

Current liabilities

Total net assets acquired

Goodwill on acquisition

Total assets acquired

Cash consideration

Fair value
£m

1.5

1.9

8.5

0.7

(2.1)

10.5

2.4

0.1

13.0

0.8

1.5

2.3

0.7

0.4

1.3

1.7

12.9

13.9

26.8

The goodwill recognised on acquisition relates to value arising from intangible assets that are not separately identifiable under IFRS 3.
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, brand, software, and database obtained through the acquisition
met the requirements to be separately identifiable under IFRS 3. The database asset represents highly granular and accurate vehicle
data set which KeeResources maintains and sells to customers; the database was valued based on subscription revenue that customers
pay to access the data. The software asset is the Fleetware software which is used by leasing companies and contract hire providers to
manage every aspect of fleet operations; the software was valued based on the subscription revenue that customers pay to Kee to use
the software.

On acquisition the net assets of KeeResources Limited included borrowings of £0.7m relating to a mortgage held over land and buildings.
On 2 October 2019 the Group repaid the outstanding amount of £0.7m, together with accrued interest under the terms of the mortgage
agreement.

136

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 202031. Financial instruments

Financial assets

Net trade receivables

Net accrued income

Other receivables

Cash and cash equivalents

Total

Note

2020
£m

25.0

27.1

0.1

37.6

89.8

2019
£m

24.9

28.0

0.3

5.9

59.1

Credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2020
was £89.8m (2019: £59.1m). The maximum exposure to credit risk for trade receivables and accrued income at the reporting date by
geographic region was:

Ireland

Total

2020
£m

51.0

1.1

52.1

The maximum exposure to credit risk for trade receivables and accrued income at the reporting date by type of customer was:

Retailers

Manufacturer and Agency

Other

Total

2020
£m

45.8

2.5

3.8

52.1

2019
£m

52.0

0.9

52.9

2019
£m

45.6

4.9

2.4

52.9

The Group’s most significant customer accounts for £0.9m (2019: £0.5m) of net trade receivables as at 31 March 2020.

Expected credit loss assessment
Expected credit losses are measured using a provisioning matrix 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 and accrued income from individual customers as at 31 March 2020.

Accrued income

Current

Past due 1–30 days

Past due 31–60 days

Past due 61–90 days

More than 91 days past due

Expected credit
loss rate

Gross carrying
amount
£m

Loss
allowance
£m

Credit-
impaired

3.6%

8.3%

33.6%

40.4%

80.5%

28.1

22.4

2.6

0.5

0.4

2.5

56.5

(1.0)

(0.2)

(0.1)

(2.0)

(4.4)

Actual credit loss experience over the past three years was adjusted to take into account current macro-economic uncertainty due to the
impact of COVID-19.

137

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

31. Financial instruments continued

Comparative information about the exposure to credit risk and expected credit losses for trade receivables from individual customers
as at 31 March 2019 is set out below:

Accrued income

Current

Past due 1–30 days

Past due 31–60 days

Past due 61–90 days

More than 91 days past due

Expected credit
loss rate

Gross carrying
amount
£m

Loss
allowance
£m

Credit-
impaired

–

0.4%

0.7%

8.5%

43.7%

97.0%

28.0

21.5

2.9

0.4

0.2

2.0

55.0

–

(0.1)

–

(0.1)

(1.9)

(2.1)

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.

The movement in the allowance for impairment in respect of trade receivables during the year was as follows.

At 1 April

Charged during the year

Acquired through business combinations

Utilised during the year

At 31 March

Note

The movement in the allowance for impairment in respect of accrued income during the year was as follows.

At 1 April

Charged during the year

At 31 March

Note

2020
£m

2.1

2.4

0.1

(1.2)

3.4

2020
£m

–

1.0

2019
£m

3.4

0.8

–

(2.1)

2.1

2019
£m

–

Cash and cash equivalents
Cash balances are held with the Group’s principal bankers, NatWest, and are used for working capital purposes. The Directors do not
consider deposits at this institution to be at risk.

Financial liabilities

Trade and other payables

Borrowings (gross of debt issue costs)

Leases

Total

As per
balance sheet
£m

2020

Future
interest cost
£m

Total
cash flows
£m

As per
balance sheet
£m

2019

Future
interest cost
£m

13.0

313.0

9.1

335.1

–

0.7

13.0

313.0

9.8

335.8

15.6

313.0

16.1

344.7

–

3.6

Total
cash flows
£m

15.6

313.0

19.7

348.3

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 £6.4m (2019: £6.6m).

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.

138

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Liquidity 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 2020

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 2019

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

13.0

–

13.0

–

313.0

–

313.0

2.3

2.4

4.6

0.5

9.8

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

Total
£m

15.3

2.4

317.6

0.5

335.8

Total
£m

18.3

2.7

320.5

6.8

348.3

Fair values
The fair values of all financial instruments in both years are equal to the carrying values.

32. 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 2020

Debt due after more than one year

Accrued interest

Lease liabilities

Total debt and lease financing

Cash and cash equivalents

Net debt

March 2019

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 2019
£m

Cash flow
£m

Non-cash
changes
£m

At
31 March 2020
£m

310.3

0.5

16.1

326.9

(5.9)

321.0

At
1 April 2018
£m

340.8

0.5

18.2

359.5

(4.3)

355.2

(0.5)

(6.4)

(2.9)

(9.8)

(31.7)

(41.5)

0.7

6.3

(4.1)

2.9

–

2.9

310.5

0.4

9.1

320.0

(37.6)

282.4

Cash flow
£m

Non-cash
changes
£m

At
31 March 2019
£m

(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

139

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

32. Net debt continued

Reconciliation of movements in liabilities to cash flows arising from financing activities

Balance as of 1 April 2019

Changes from financing cash flows

Dividends paid to Company’s shareholders

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

Borrowings
and accrued
interest

Lease
liabilities

Share
capital

Retained
earnings

Own
shares
held

Other
reserves

Equity

310.8

16.1

9.3

1,095.8

(16.5)

(1,029.6)

–

(0.5)

(6.4)

–

(2.9)

–

(0.1)

–

(64.7)

–

(57.4)

–

(0.3)

0.1

–

(4.3)

–

0.1

–

Total changes from financing cash flows

(6.9)

(2.9)

(0.1)

(122.3)

(4.3)

0.1

Other changes – liability related

Interest expense

Other

Total liability related other changes

Total equity related other changes

Balance as of 31 March 2020

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

7.0

–

7.0

–

310.9

0.4

(4.5)

(4.1)

–

9.1

–

9.2

–

206.6

1,180.1

2.9

(0.3)

(17.9)

(1,029.8)

Liabilities

Borrowings
and accrued
interest

Finance
lease
liabilities

Equity

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

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)

Total

385.9

(64.7)

(0.5)

(6.4)

(2.9)

(57.4)

(4.3)

(0.3)

0.1

(136.4)

7.4

(4.5)

2.9

209.2

461.6

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

(192.7)

10.2

0.1

10.3

203.1

385.8

140

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020
33. Related party transactions

Dealer Auction Limited
The Group transacted the following related party transactions with its joint venture, Dealer Auction Limited (previously Dealer Auction
(Holdings) Limited) and its subsidiaries (together ‘Dealer Auction’), during the period.

The Group provided data services to Dealer Auction under a licence agreement established as part of the formation of the joint venture
in January 2019. The value of services provided to Dealer Auction was £0.6m and has been recognised within revenue. At 31 March 2020,
deferred income outstanding in relation to the licence agreement was £10.6m.

The Group provided services to Dealer Auction as per the Transitional Services Agreement entered into on its formation. The Group also
seconded an employee from April 2019 to November 2019. The Group did not recharge Dealer Auction for the provision of these services,
the total value of which is estimated to be £0.2m.

The Group also provided invoicing and collection services for Dealer Auction’s Smart Buying product. Cash is collected by the Group
and passed through to Dealer Auction. The total amount invoiced on behalf of Dealer Auction during the period was £2.3m.

During the period Dealer Auction provided data services to the Group amounting to £1.1m. Services were provided to the Group on an
arm’s length basis and recorded as administrative expenses within the Consolidated income statement.

The Group had a creditor of £1.0m outstanding with Dealer Auction as at 31 March 2020.

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 £26,250 (2019:
£1,250). 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.

The Group sponsors a funded defined benefit pension scheme. Details of transactions with the Wiltshire (Bristol) Limited Retirement
Benefits Scheme are set out in note 24.

34. Subsidiaries and joint ventures

Subsidiaries
At 31 March 2020 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

KeeResources Limited 1

Kwikcarcost Limited 1

Kwiksystems Limited 1

Republic of Ireland

Online marketplace

England and Wales

Data services

England and Wales

Non-trading

England and Wales

Non-trading

Class of
shares held

Ordinary

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.

Percentage
owned by the
parent

Percentage
owned by the
Group

100%

–

100%

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.

141

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

34. Subsidiaries and joint ventures continued

Joint ventures
At 31 March 2020 the Group’s interests in joint ventures were:

Country of
registration or
incorporation

Principal activity

Class of
shares held

Percentage
owned by the
parent

Percentage
owned by the
Group

England and Wales

Online marketplace

Ordinary

Joint ventures

Dealer Auction Limited 1 (previously
Dealer Auction (Holdings) Limited)

Dealer Auction (Operations) Limited 1
(previously Dealer Auction Limited)

England and Wales

Dormant company

Auto Trader Autostock Limited 1

England and Wales

Dormant company

Dealer Auction Services Limited 1

England and Wales

Dormant company

1. Registered office address is Central House, Leeds Road, Rothwell, Leeds, West Yorkshire, England, LS26 0JE.

Ordinary

–

49%

All joint ventures have a year end of 31 December which is consistent with the year end of the majority shareholder.

35. Post balance sheet events

COVID-19
The COVID-19 outbreak has developed rapidly in 2020, with a significant number of infections across many countries. The conditions
that existed at the balance sheet date were that, a disease was present in a number of countries globally. The novel Coronavirus that
had been present in China was spreading rapidly. On 11 March 2020 the World Health Organization declared the virus a global pandemic.
On 16 March 2020 the UK Government introduced social distancing measures to safeguard the public alongside a number of fiscal
measures that included Government backed loans.

On 23 March 2020 the Government instructed the British public that they must remain at home unless for very limited purposes
(‘lockdown’). These instructions resulted in retailers closing their forecourts to comply with the new rules with immediate effect.
The restrictions came into force on 24 March 2020 and would last indefinitely, with the first review being no earlier than 13 April 2020.

Conditions were present regarding the pandemic including the social distancing measures at the balance sheet date. Given the
circumstances, management made judgements relating to revenue recognition and recoverability of assets, in particular accrued
income and trade receivables. These judgements have been disclosed in note 1.

The social distancing measures were extended on 13 April 2020 and 7 May 2020. Retailers in England were able to reopen their forecourts
from 1 June 2020. England has subsequently been followed by Northern Ireland (8 June 2020) and Wales (22 June 2020), while showrooms
in Scotland will open on 29 June 2020. Management have assessed these extensions to the lockdown period as adjusting post balance
sheet events given that they provide evidence of conditions that were present at the balance sheet date. Management have therefore
reflected the impact of these events in the estimates made.

Equity placing
On 1 April 2020 the Company announced its intention to conduct a non-pre-emptive placing of up to 5% of its issued share capital. On
3 April 2020 the placing was completed, and a total of 46,468,300 new ordinary shares were allotted for a consideration of 400.00 pence
per Placing Share, a discount of 8.9% to the closing share price of 439.1 pence on 31 March 2020. The placing raised gross proceeds of
£185.9m for the Company, or £183.2m net of fees incurred.

The Placing Shares rank pari passu in all respects with the existing ordinary shares in the Company, including the right to receive all
dividends and other distributions declared, made or paid after the date of issue. Immediately following Admission, the total number of
shares in issue in the Company was 969,008,774. Auto Trader held 4,090,996 shares in treasury, and, therefore, the total number of voting
shares in Auto Trader in issue was 964,917,778.

RCF extension
On 1 June 2020, the Group extended the term for £316.5m of the Syndicated RCF for one year, incurring additional associated debt
transaction costs of £0.5m. The facility will terminate in two tranches: £316.5m will now mature in June 2025; 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.

142

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020COMPANY BALANCE SHEET
AT 31 MARCH 2020

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

2020
£m

1,218.3

368.1

–

368.1

2019
£m

1,216.0

415.9

–

415.9

(489.5)

(411.4)

(121.4)

4.5

1,096.9

1,220.5

9.2

(17.9)

0.8

1,104.8

1,096.9

9.3

(16.5)

0.7

1,227.0

1,220.5

The financial statements were approved by the Board of Directors on 25 June 2020 and authorised for issue:

Jamie Warner
Chief Financial Officer
Auto Trader Group plc
Registered number: 09439967

143

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTShare
capital
£m

9.5

Own shares
held
£m

Capital
redemption
reserve
£m

(16.9)

0.5

Retained
earnings
£m

1,372.3

Total
equity
£m

1,365.4

–

0.2

–

0.2

0.7

–

0.1

–

0.1

0.8

(0.2)

(88.2)

(57.6)

4.7

(3.7)

(0.6)

–

0.3

(0.2)

(88.2)

(57.6)

4.7

1.9

–

(5.8)

0.3

(145.1)

(144.7)

1,227.0

1,220.5

(0.2)

(57.7)

(64.7)

3.4

(2.7)

(0.1)

–

(0.2)

(122.0)

(0.2)

(57.7)

(64.7)

3.4

0.1

–

(4.3)

(0.2)

(123.4)

1,104.8

1,096.9

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020

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

–

(0.2)

–

Total transactions with owners recognised directly in equity

(0.2)

–

5.6

0.6

(5.8)

–

0.4

Balance at March 2019

9.3

(16.5)

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 2020

–

(0.1)

–

(0.1)

9.2

–

2.8

0.1

(4.3)

–

(1.4)

(17.9)

144

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020NOTES 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 historical
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 2020. The comparative financial information presented is at and for the year
ended 31 March 2019.

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 (2019: loss of £0.2m).

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 £60,100 (2019: £58,350). 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.

145

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

1. Accounting policies continued

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.

146

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 20202. 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 77 to 89.

3. Investments in subsidiaries

At beginning of the period

Additions

At end of the period

2020
£m

1,216.0

2.3

1,218.3

2019
£m

1,212.9

3.1

1,216.0

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 34 to the consolidated financial statements.

4. Debtors

Amounts owed by Group undertakings

Other receivables

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

2020
£m

366.7

0.1

1.3

368.1

2020
£m

–

2020
£m

488.4

1.1

489.5

2019
£m

414.7

–

1.2

415.9

2019
£m

–

2019
£m

409.7

1.7

411.4

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 2020 and the year ended 31 March 2019 may be analysed
as follows:

Financial assets

Financial assets measured at amortised cost

Financial liabilities

Financial liabilities measured at amortised cost

2020
£m

366.8

2020
£m

489.5

2019
£m

414.7

2019
£m

411.4

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.

147

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

8. Dividends

Dividends declared and paid by the Company were as follows:

2018 final dividend paid

2019 interim dividend paid

2019 final dividend paid

2020 interim dividend paid

2020

Pence
per share

–

4.6

2.4

7.0

2019

Pence
per share

4.0

2.1

–

6.1

£m

–

42.6

22.1

64.7

£m

37.9

19.7

–

57.6

The Directors are recommending no final dividend for the year ended 31 March 2020.

The 2020 interim dividend paid on 24 January 2020 was £22.1m. The 2019 final dividend paid on 24 September 2019 was £42.6m.

The Directors’ policy with regard to future dividends is set out in the Strategic report on page 39.

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

2020

Number
’000

Amount
£m

2019

Number
’000

Amount
£m

933,198

(10,657)

922,541

9.3

(0.1)

9.2

952,161

(18,963)

933,198

9.5

(0.2)

9.3

Included within shares in issue at 31 March 2020 are 523,955 (2019: 565,555) shares held by the ESOT and 4,090,996 (2019: 3,996,041) shares
held in treasury, as detailed in note 10.

10. Own shares held

Own shares held – £m

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 as at 1 April 2019

Transfer of shares from ESOT

Repurchase of own shares for treasury

Share-based incentives

Own shares held as at 31 March 2020

148

ESOT shares
reserve
£m

Treasury
shares
£m

(1.4)

0.6

–

(0.8)

0.1

–

(0.7)

(15.5)

–

(5.8)

5.6

(15.7)

–

(4.3)

2.8

(17.2)

Total
£m

(16.9)

0.6

(5.8)

5.6

(16.5)

0.1

(4.3)

2.8

(17.9)

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020Own shares held – number

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

Own shares held as at 1 April 2019

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 2020

11. Related parties

ESOT shares
reserve
Number of shares

Treasury
shares
Number of shares

932,761

4,194,989

Total
number of
own shares
held

5,127,750

(367,206)

–

(367,206)

–

1,266,000

(1,464,948)

565,555

3,996,041

4,561,596

565,555

3,996,041

4,561,596

(41,600)

–

774,734

(41,600)

774,734

(679,779)

523,955

4,090,996

4,614,951

During the year, a management charge of £3.3m (2019: £4.6m) was received from Auto Trader Limited in respect of services rendered.

At the year end, balances outstanding with other Group undertakings were £366.7m and £488.4m respectively for debtors and creditors
(2019: £414.7m and £409.7m) as set out in notes 4 and 6.

12. Post balance sheet event

COVID-19
The impact and timeline of COVID-19 has been set out within note 35 to the consolidated financial statements. Based on information
provided there have been no changes in the judgements made by management for the Company and no adjustments have been made.

Equity placing
On 1 April 2020 the Company announced its intention to conduct a non-pre-emptive placing of up to 5% of its issued share capital. On
3 April 2020 the placing was completed, and a total of 46,468,300 new ordinary shares were allotted for a consideration of 400.00 pence
per Placing Share, a discount of 8.9% to the closing share price of 439.1 pence on 31 March 2020. The placing raised gross proceeds of
£185.9m for the Company, or £183.2m net of fees incurred.

The Placing Shares rank pari passu in all respects with the existing ordinary shares in the Company, including the right to receive all
dividends and other distributions declared, made or paid after the date of issue. Immediately following Admission, the total number of
shares in issue in the Company was 969,008,774. Auto Trader held 4,090,996 shares in treasury, and, therefore, the total number of voting
shares in Auto Trader in issue was 964,917,778.

149

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTUNAUDITED FIVE-YEAR RECORD

Trade

Consumer Services

Manufacturer and Agency

Revenue

Costs

Share of profit from joint ventures

Operating profit

Net interest expense

Profit on disposal of subsidiary

Profit before taxation

Taxation

Profit after taxation

Net assets/(liabilities)

Net bank debt (gross bank debt less cash)

Cash generated from operations

Basic EPS (pence)

Diluted EPS (pence)

Dividend per share (pence)

1. 2017 and 2016 financial years have not been restated for IFRS 16.

2020
£m

324.3

28.3

16.3

368.9

(113.2)

3.2

258.9

(7.4)

–

251.5

(46.4)

205.1

141.6

275.4

265.5

22.2

22.1

2.4

2019
£m

304.6

28.0

22.5

355.1

(112.3)

0.9

243.7

(10.2)

8.7

242.2

(44.5)

197.7

59.0

307.1

258.5

21.0

20.9

6.7

2018
£m

281.2

29.8

19.1

330.1

20171
£m

262.1

31.8

17.5

311.4

(108.8)

(108.3)

–

221.3

(10.6)

–

210.7

(39.6)

171.1

5.6

338.7

228.4

17.7

5.9

–

203.1

(9.7)

–

193.4

(38.7)

154.7

(21.4)

355.0

212.9

15.6

5.2

20161
£m

236.4

30.3

14.9

281.6

(112.0)

–

169.6

(14.6)

–

155.0

(28.3)

126.7

(51.5)

392.6

180.1

12.7

1.5

150

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020SHAREHOLDER 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 2020–2021
Annual General Meeting
2021 Half-year results
2021 Full-year results

16 September 2020
5 November 2020
10 June 2021

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.

151

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020GOVERNANCE FINANCIAL STATEMENTSSTRATEGIC REPORTNOTES

152

AUTO TRADER GROUP PLCAnnual Report and Financial Statements 2020This report is printed on GenYous uncoated paper.
Manufactured at a mill that is FSC® accredited.

Printed by Principal Colour.

Principal Colour are ISO 14001 certified, Alcohol Free
and FSC® Chain of Custody certified.

Designed and produced by three thirty studio
www.threethirty.studio

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

plc.autotrader.co.uk
autotrader.co.uk