TIDMAUTO
RNS Number : 3683I
Auto Trader Group plc
01 April 2020
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
1 April 2020
AUTO TRADER GROUP PLC
FURTHER ACTIONS IN RESPONSE TO COVID-19 DISRUPTION: ADDITIONAL
MEASURES TO STRENGTHEN OUR BALANCE SHEET, COST REDUCTIONS AND
PROPOSED PLACING OF SHARES
Auto Trader Group plc (LSE: AUTO, "Auto Trader" or the
"Company"), the UK's largest digital automotive marketplace, today
provides a further update on the evolving COVID-19 situation
following its previous statement on 19 March 2020.
This announcement covers the additional actions which we are
taking to further strengthen our balance sheet, reduce costs and
support both our employees and customers during this time of
uncertainty. We have also announced this morning our intention to
launch a non-pre-emptive placing of new ordinary shares
representing approximately 5% of the Company's current issued share
capital.
The Board believes the combination of actions communicated below
will make an important contribution to maintaining and
strengthening Auto Trader's position as the place that the UK
public go to find their next car.
Nathan Coe, Auto Trader's Chief Executive Officer, commented: "I
would like to thank everyone at Auto Trader for their commitment
through these challenging times. We believe our actions to support
our employees and customers, to reduce our costs and to strengthen
our balance sheet will provide greater flexibility to act in the
long-term interests of shareholders, employees, customers and other
stakeholders."
Actions taken to support our customers
Prior to the announcement of the lock down in the UK on 23 March
2020, Auto Trader announced that we would support our vehicle
retailing customers by allowing them to advertise all their
vehicles on our site and by making the service free to them
throughout April. This has contributed to a record number of
vehicles being displayed on the Auto Trader website (around 540,000
as at 31 March 2020 as compared to around 480,000 at the end of
March 2019).
Car retailers are currently closed for business, at least in
relation to the selling and buying of cars, with many staff
furloughed under the government's scheme. We remain committed to
supporting our industry through these difficult times and would
expect our next major communication to customers to occur at an
appropriate point in April.
Actions taken to reduce costs
The entire Board has voluntarily offered to forego at least half
of their salaries or Board fees for the foreseeable future. The
executive directors have also requested that their annual FY20
bonus be waived. The Board believes that acting in this way is the
clearest indication that we stand together with all our
stakeholders, whether employees, customers, shareholders or
suppliers.
Action has already been taken to remove the majority of
discretionary spending, including marketing. We do not believe that
pausing marketing spend at this time will make a material
difference to our levels of consumer audience nor our long-term
brand recognition.
We have announced a furlough programme to our employees which
will take effect shortly. We intend to fully top up salaries for
the large majority of those who are impacted. The Company is
supportive of the government's goal of trying to keep as many
people as possible in work. We believe our use of the furlough
programme will be in the long-term interest of shareholders as well
as other stakeholders. The Company has also received indications of
support for this approach from some of our major investors.
Balance sheet update
The Group's balance sheet is strong. At the end of February, we
had drawings of GBP289 million on our GBP400 million revolving
credit facility, with a net debt/EBITDA ratio of 1.1x which is well
below our covenant level of 3.5x. Covenants are tested in March and
September and look at a rolling 12 month period. As well as debt
cover, the test includes interest cover for which the last 12
months' EBITDA must be at least 3x the net interest expense. We
expect to meet the March 2020 test with significant headroom
available. Looking forward to our September 2020 covenant test, we
expect our net debt/EBITDA ratio to rise as a function of the free
services being provided to our customers but will remain well below
the maximum covenant threshold.
Equity placing to further strengthen our balance sheet and
increase flexibility for the future
The Board believes it is important to support our customers and
employees through this period of uncertainty. We also believe there
may be attractive opportunities to strengthen the business in the
immediate aftermath of the current crisis. The Board believes it is
in the best long-term interests of all stakeholders to strengthen
our balance sheet today and ensure we avoid constraints that might
otherwise be imposed in the medium term in order to meet debt
covenants.
Consequently, Auto Trader is announcing today a proposed equity
raising:
-- Intention to conduct a non-pre-emptive placing of up to
46,468,300 new ordinary shares in the Company (representing
approximately 5% of the Company's current issued share
capital).
-- The net proceeds of the placing will be used to strengthen
Auto Trader's balance sheet and liquidity position, support all
stakeholders, increase our flexibility to take advantage of future
opportunities, and increase certainty around meeting covenant tests
in future years. Furthermore, this equity raise will allow us to
resume our existing capital return policy at the earliest prudent
opportunity.
Capital Structure and shareholder returns
As previously announced, we will not buy back any further shares
until we report our full year results. No decision has yet been
made regarding the final dividend for FY20, although if the current
environment persists then it is unlikely that one will be declared.
Notwithstanding that, the Board continues to believe in the
long-term benefits of the Company's existing capital structure and
return of surplus capital policy. In summary, low levels of
indebtedness and a very high proportion of post-tax operating
profit returned promptly to shareholders through a combination of
dividends and share buy backs.
Reporting on FY20 and Guidance for FY21
Auto Trader will delay releasing its full year results for the
financial year ended 31 March 2020 and a new date for reporting
will be announced in due course. The FCA have allowed and even
encouraged companies to utilise the additional two months offered
to enable auditors more time to complete work and make a clearer
assessment on forward looking statements.
We continue to believe our results for FY20 will be broadly in
line with the market consensus, though this may be subject to
prudent provisions for post year end events relating exclusively to
the impact of the COVID-19 pandemic. As we previously stated, we
cannot sensibly provide guidance for FY21 given the considerable
uncertainty around the COVID-19 pandemic, the timing of any changes
to the government's regulations and guidelines and the subsequent
impact on the UK automotive industry.
Media Enquiries:
Powerscourt +44 (0)20 7250 1446
autotrader@powerscourt-group.com
Market Abuse Regulation: Auto Trader Group plc Legal Entity
Identifier: 213800QLK9BZILB1DI86. Notification by Claire Baty,
Company Secretary
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END
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