(Sharecast News) – Auto Trader said on Wednesday that it expects sales demand to take a hit in January and February following the imposition of the latest lockdown, which has forced all car retailers to close their showrooms.
In the quarter from October to December 2020, demand for car buying remained strong, the company said, with visits to its marketplace up 20% on the prior year. “Despite this demand, we do expect sales volumes to be impacted in January and February,” it said.
Auto Trader said it will again provide its advertising packages for free in February and will also extend payment terms for customers’ January invoices.
“As reported in our first half results on 5 November, the business recovered well through our second quarter and we have seen continued improvement in customer numbers and stock on site through the third quarter to December,” it said.
Despite the underlying positive momentum of key performance indicators, being free for customers in December 2020 and February 2021 will lead to a £5-7m operating loss for each month in which it is free.
Auto Trader said its balance sheet remains strong. At the end of December, it had drawings of £45m on its £400m revolving credit facility and remains “substantially below” its covenant requirements for both debt and interest cover.
Broker Peel Hunt said: “Due to the free listings in February, our current year estimates for revenues are likely to decline by 9% to £246m and earnings per share by 14% to 11.6p.
“Today’s actions by Auto Trader are not surprising: the company continues to support the car industry, after providing free listings during the last two lockdown periods, leading to strong reputational gains for the group. However, due to the uncertainty for the car market in the current environment, we maintain our ‘hold’ recommendation for now.”
