Trader Media Group - Digital Revenues up 11% and Digital EBITDA up 20%

Trader Media Group Revenues Up 11%
 

2 July 2012

Trader Media Group Limited ("TMG" or "the Group"), Europe's largest digital vehicle marketplace, has published its full year results for the year ended 1 April 2012.

Highlights

  • Underlying revenue* £257.2 million (2011: £254.4m)
  • Digital revenue up 11% to £202.0 million
  • Underlying EBITDA* up 10% to £142.9 million (2011: £129.8m)
  • Digital EBITDA up by 20%; now contributing 85% (2011: 77%) of Group EBITDA
  • Underlying operating profit* up 9% to £128.7 million (2011: £118.6 million)
  • Cash flow from operations remained strong at £129.3 million (2011: £134.0 million)
  • Average monthly number of vehicles on autotrader.co.uk up 4% to 380,000 (2011: 367,000)
  • Doubling of Auto Trader Mobile users to 2.3 million unique users at March 2012 (March 2011: 1.1 million) (Source: Omniture)
  • Auto Trader now largest provider of websites to dealer community
  • Raised additional £150.0 million of debt in June 2011
  • Distribution of £210.0 million to shareholders

* Underlying excludes discontinued businesses and exceptional items principally made up of impairments on carrying values and cancellation of accrued preference share interest

John King, Chief Executive of Trader Media Group, said:

"We delivered another year of double digit EBITDA growth despite the tough economic conditions - a clear demonstration of not only the business' resilience but the quality of our brands, products and services.

We are now seeing 1.1 billion monthly page views of autotrader.co.uk, on average reviewing 380,000 vehicles - a 4% increase on last year.

Although we do not expect a pick-up in the economic environment, our increasing range of products and services - such as mobile and embedded digital marketing services - together with our considerable data capabilities, provide us with confidence that we will continue to grow profits and generate cash."

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Contacts

College Hill

Adrian Duffield/Kay Larsen

t 020 7457 2020

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Note to Editors

Trader Media Group is Europe's largest digital marketplace for vehicles and the UK's leading publisher of automotive classified advertising through market-leading websites and iconic print titles.

The Group's leading brand, Auto Trader, is the UK's no. 1 motoring website, with 10.2 million unique users in March 2012 and 1.1 billion page views (source: Omniture March 2012).

Trader Media Group's success is built by providing trade customers with the ability to choose effective channels to market; building the service and relationship with dealers and manufacturers; and connecting them with consumers through multiple and easy-to-use channels including web sites and mobile devices.

Trader Media Group employs approximately 1,500 people and operates in the UK, Ireland, and South Africa. It is jointly owned by Guardian Media Group and Apax Partners.

 

Strategic overview

TMG delivered another strong performance with solid revenue growth in its Digital business including a range of new products, despite the economic environment. TMG recorded year-on-year improvements in both revenue and profit from continuing operations with double digit EBITDA growth for the year as a whole. The more difficult trading climate in the second half of the year has meant that both dealers and private customers have been more considered in their spending.

Underlying revenue for the year to 1 April 2012 was £257.2 million, with digital revenue up 11% to £202.0 million. Underlying EBITDA grew 10% to £142.9 million (2011: £129.8 million). Underlying operating profit rose 9% to £128.7 million (2011: £118.6 million). Cash flow from operating activities remained strong at £129.3 million (2011: £134.0 million).

Throughout the year, the used car market in the UK was impacted by a shortage of used vehicles, as a result of the significantly reduced output by manufacturers for three years during the economic downturn of 2008. Despite these factors, the Group maintained its strong, market-leading position by providing the best response and value for money across its product range.

The Group estimates that some 90% of dealers take one or more of TMG's services or products. TMG continues to reach more consumers across all digital platforms with autotrader.co.uk, which remains one of the most searched for websites in the United Kingdom (Source: Hitwise).

As the recognised route to market for individuals and vehicle dealerships in almost all of the areas in which it operates, TMG's focus this year has been on developing its products and services to create a deeper partnership with dealers by using the Group's data to provide increased levels of customer and markets insight. This has led directly to an overall increase in customer satisfaction scores and underpinned the Group's strong performance.

TMG launched Digital Marketing Solutions ("DMS"), bringing together the RAZSOR, 2nd Byte and Autotrade-mail brands under one business unit to provide products and services to dealers and manufacturers, to enable them to design and develop their own digital marketing strategies with TMG as their partner.

A notable success has been the growth of RAZSOR websites. The Group now hosts over 3,000 websites, achieving 18 million page views across all RAZSOR websites.

In August 2011 TMG launched a new quarterly Auto Trader Index - an industry reference index which tracks changes in UK advertised used car prices. It provides dealers with an unmatched level of market data. This initiative has reinforced Auto Trader's position as the authoritative voice on trends in the used car market and has gained considerable media exposure.

The Group is also now sharing its enhanced data and information capacity with dealers in its monthly Pulse reports, which are being used by dealers and customers to make better informed buying and selling decisions.

In November 2011 TMG sold its low-margin, low-growth magazine-focused Italian subsidiary, Edizeta. Also in November, the Group increased its stake in IAUTOS Company, which operates a Chinese automotive classified advertiser, to 22.7%.

The Group successfully raised an additional £150.0 million of debt from a new term loan in June 2011, and extended the term of the majority of its existing facilities.

During the year the Group also made a distribution of £210.0 million to its shareholders.

 

Financial review

TMG continued to grow the business amid an increasingly tough trading environment, posting underlying revenues of £257.2 million (2011: £254.4 million).

Underlying EBITDA grew by 10% £142.9 million (2011: £129.8 million). The contribution from the Digital UK division increased to 85% of the Group's underlying EBITDA.

EBITDA margins grew to 56% (2011: 51%) excluding discontinued operations as a result of the combination of a reduced contribution from the lower margin print business, an increase from the margin rich digital business and a general improvement in efficiencies across the Group.

Underlying operating profit, before impairments and exceptional items, was up 9% to £128.7 million (2011: £118.6 million). Actual operating profit was lower at £105.9 million (2011: £107.5 million), including exceptional items for impairments of £18.2 million (2011: £9.6 million) and the restructuring of Group operations of £4.6 million (2011: £1.5 million).

Finance costs increased by 4% to £89.2 million (2011: £86.0 million) following the refinancing and subsequent increase in the margins payable on the Group's syndicated debt.

TMG's taxation charge has increased to £14.7 million (2011: £12.0 million), reflecting the increased profitability of the Group.

TMG continues to have a high level of operating cash conversion, which has allowed the group to generate cash of £129.3 million (2011: £134.0 million) from operating activities.

The Group successfully raised an additional £150.0 million of debt from a new term loan in June 2011 and extended the term of the majority of its previous facilities. The Group also made a distribution to shareholders of £210.0 million. Excluding the impact of the refinancing and dividend, the Group generated £36.4 million of cash for the year ended 1 April 2012 (2011: £19.4 million).

 

Operational review

During the year the Group was restructured into three business divisions to reflect the changing priorities of the business.

 

Digital

The Digtial division encompasses the Group's UK car and non-car websites including: online classified automotive advertising (listings), principally through the autotrader.co.uk website; Auto Trader Mobile; and its DMS services provided to automotive dealers and manufacturers such as RASZOR and 2nd Byte.

This division contributes the majority of the Group's revenue (79%) and EBITDA (85%). It has shown growth despite the economic backdrop with revenue and EBITDA increasing by 11% and 20% year- on-year respectively.

TMG continued to invest in developing both content and search functionality in its flagship autotrader.co.uk web site. This resulted in improved consumer satisfaction scores from buyers, sellers and casual browsers alike. The investment has also benefitted monthly page views of autotrader.co.uk, which averaged 1.1 billion in March 2012 (Source: Omniture) and peaked at 1.5 billion page impressions during February 2012.

The Group also continued to develop its mobile device offerings to provide search and targeted advertising wherever and whenever needed. Unique visitors using the Auto Trader mobile app grew by over 100% to 2.3 million in March 2012 (source: Omniture). TMG is the clear market leader in mobile solutions to the automotive classified sector and usage is expected to continue to grow at a rapid rate in the current year.

TMG has also leveraged its role as an integral provider of tools and data to expand its offering beyond the autotrader.co.uk website into digital marketing solutions for dealers. This includes RAZSOR, which provides the automotive industry with websites powered by an unparalleled search engine. RAZSOR is the market leader, hosting over 3,000 dealer websites and it generates over 400,000 leads on average for dealers. TMG is now expanding the product, offering dealers the opportunity to develop their own mobile RAZSOR sites as well.

In 2011, TMG began operating in the £900 million new car advertising market with the launch of a digital marketplace for new cars, highlighting great deals and featuring rich editorial content including reviews to help consumers to make informed decisions on new, nearly new and used purchases. The Group has 602,000 unique users on its New Car market place.

 

Magazines

This division, which encompasses the classified automotive advertising in magazine titles in UK and Ireland, has continued to manage the decline in its print publishing businesses by bringing all its titles under a single management team, focused on maximising profitability and cash generation.

With the classified automotive advertising market migrating online, the Group's published titles nevertheless retain a strong presence on shelves throughout the United Kingdom and Ireland with circulation figures averaging over 87,000 copies per week across all magazines (including Auto Trader, AdTrader and national titles) throughout the year. This circulation keeps the Auto Trader magazine in the number one spot in the classified automotive market, with divisional revenues of £27.8 million, down £16.3 million on last year.

 

International

The International division includes South African online and print classified advertising and "carzone.ie" the online business in the Republic of Ireland. The managerial focus for both these markets is to replicate the successful UK model. The division had flat revenue growth at £27.4 million year-on-year.

In South Africa, TMG is a clear market leader through its Auto Trader and Commercial Trader magazines and has initiated the transition to online operations with the launch of an improved website in January 2012. Use of mobile is also growing rapidly and TMG is seeking to capitalise on this initiative.

In Ireland, TMG maintained its number one brand and market penetration via carzone.ie. Revenues improved through the development of new online product opportunities with display advertising, mobile listings and website hosting. These products have all grown over the last year and position the business well for when the economy recovers.

 

Outlook

As a digital business embedded into its customers work flow, TMG's focus is on maximising revenue by delivering a compelling range of enhanced services, data and functionality with a greater choice of products and services, particularly in DMS, moving further up the value chain. However, the Group is expecting used car transactions to be largely flat in the current financial year with a slow recovery in calendar 2013.

The Group will continue to invest in developing new products to leverage its leading market position and fully utilise the data that results from this position. Increasingly TMG is using social media and real time market information to further enhance its market position. In digital advertising, TMG aims to increase advertising yields through delivering improved service, flexibility and functionality, which will in turn boost dealer usage. The Group will also seek to capitalise on new, fast-growing markets, including the new car advertising market, digital marketing and mobile.

Despite a sluggish UK economy, a combination of new products and services plus the Group's market position means that TMG is confident that the business will continue to grow profits and generate cash.

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