Autotrader Group plc (AUTO) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Auto Trader Group plc Full Year Results Call. [Operator Instructions] I must advise you that this conference is being recorded today, on Thursday, the 25th of June, 2020. I would now like to hand the call over to your host today, Nathan Coe. Please go ahead.

Good morning, everyone, and welcome to Auto Trader's results presentation for the year ended the 31st of March 2020. This is the first time that we've delivered our results solely through an online format, but one of many firsts as a result of COVID-19. The pandemic also led to us delaying our results announcement by 3 weeks, enabling our auditors to complete their work and make a clearer assessment of forward-looking statements. Before we start, I will be lying if I said this is how I or Jamie imagined our first few months as CEO and CFO, respectively. I'd like to recognize and thank our leadership team, the Board and all our employees for their advice, support, hard work and dedication throughout the crisis. Today, I'm joined by Jamie, our CFO; and Catherine Faiers, our COO. Our presentation today is slightly different to our normal format, and we'll cover 3 areas. I will start with an overview of the highlights from last financial year, which was largely unimpacted by COVID-19, and Jamie will cover the financials in more detail. Secondly, Catherine will outline the impact that the pandemic has had on our business, the industry and more importantly, how we responded to this. I'll then finish with the outlook for 2021 and beyond, which will be followed then by a Q&A session with analysts. Starting with strategic highlights. We've had another good year despite the challenges faced by our industry and have continued to make progress on our long-term strategic goals. We have now monetized our new car proposition and are pleased to have over 1,000 retailers paying to advertise their new cars on Auto Trader. Most importantly, the number of car buyers engaging with these new cars is already many times larger than the total number of new cars sold in any given month, with almost 9 million users viewing a new car in 2020. In April 2019, we successfully launched vehicle check and text chat. These products benefit both consumers and retailers by building greater levels of trust and more ways of connecting with one another. We've continued to increase the penetration of our Advanced and Premium packages with stock penetration reaching 23% by year-end as more and more retailers look to increase their speed of sale through greater prominence in our marketplace. In October, we acquired KeeResources, which allowed us to secure the high-quality data on which much of our core platform depends. And finally, in early 2020, our joint venture Dealer Auction completed replatforming and integrating the 3 original businesses and is now ready to fulfill its goal to become the largest online B2B marketplace in the U.K. Now turning to the financial highlights. Revenue grew by 4% to GBP 368.9 million, underpinned by trade revenue, which increased by 6% to GBP 324.3 million. Operating profit grew by 6% to GBP 258.9 million. We estimate that COVID-19 had an adverse impact of GBP 3 million on operating profit for the financial year. Through continued operating leverage and profit contribution from our Dealer Auction joint venture, operating profit margin improved by 1% to 70%. Basic EPS increased by 6%. And if you exclude the GBP 8.7 million one-off noncash profit on disposal of Smart Buying to Dealer Auction last year, and underlying EPS grew by 11%, which was due to high single-digit growth in net income and fewer shares in issue as a result of our share buybacks. As anticipated, in light of the current economic uncertainty, the Directors will not be recommending a final dividend. Therefore, the total dividend for the year will be 2.4p being the interim dividend paid in January. Cash generated from operations was up 3% to GBP 265.5 million. Lower growth in cash generated from operations relative to operating profit being due to the contribution of profit from our joint venture and reduced levels of depreciation and amortization. High level of cash generation allowed us to reduce our net bank debt by GBP 31.7 million to GBP 275.4 million, translating into average leverage of 1x EBITDA at the end -- at year-end. And finally, cash returned to shareholders in the year was GBP 126.4 million delivered through a combination of dividends and the repurchase of shares. And finally, operational highlights. We continue to focus on the same priorities that underpin the health and sustainability of our core business. One of our proudest achievements for the year was our audience performance. Despite more competitors and a challenging market, cross-platform visits increased by 3% to GBP 50.8 million a month on average. We've grown our share of time spent amongst our competitors set to over 75% and are now 9x larger than our nearest competitor, Gumtree, increasing from 5x larger just 12 months ago. As always, we urge caution with third-party measures. However, the improvements we have seen are consistent with our own internal measures. We saw growth in retail at forecourt's increasing by 1% in the year. This came predominantly from smaller retailers, which has a dilutive effect on ARPR growth. Average revenue per retailer forecourt, or ARPR, grew by 6% when compared to the previous year, which Jamie will explain later in more detail. The number of cars advertised on-site increased by 4% to an average of 478,000 cars for the year. Much of that growth was in new car stock, however, private stock also increased due to our new whole tool sold package, which has proven popular. Core retailer large stock decreased by 3%. The number of employees increased to 853 on average during the year. This includes 64 employees from key resources, which contributed 32 to the average for the year. I'll now hand over to Jamie, who will take us through the financials in more detail.

Thank you, Nathan, and good morning, everyone. As Nathan mentioned in the highlights, I want to remind everyone that the impact of COVID-19 on last financial year was relatively small. Some revenue lines, such as Home Trader, Consumer services and Manufacturer & Agency were impacted for a part of March. However, our core retailer revenue was largely unaffected during financial year 2020. This revenue impact, combined with additional provisions made to cover the risk of bad debt, had a combined impact of GBP 3 million or 1% on operating profit. Starting with revenue, where total revenue grew by 4% in the year, with our core trade segment being the key contributor. Trade revenue increased 6%, driven by an increase in retailer revenue, which grew by 7% year-on-year. ARPR was once again the primary driver, growing by 6% or GBP 105 per retailer per month. A number of retailers advertising with us grew by 1% as customers focus on maximizing their exposure in a competitive market. Also within trade, we have seen a continued decline in Home Trader pay as you go listings, offset by growth within other trade revenue which includes a GBP 2 million contribution from KeeResources following the acquisition in October. Consumer services revenue increased by 1% as our motoring services revenue stream grew. Private revenue was flat year-on-year despite the COVID-19 impact in the second half of March. The total volume of private adverts listed continues to decrease year-on-year. 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. Lastly, as anticipated, we saw a 28% decline in revenue from manufacturers and their media agencies. As reported in the first half, market pressures driven by Brexit uncertainty, coupled with regulatory changes, resulted in lower marketing spend throughout the year. Now on to ARPR, a key driver of our retailer revenue. ARPR grew 6% year-on-year with the average spend per retailer forecourt now at GBP 1,949 per calendar month. This good level of growth has been suppressed somewhat by an increase in retailers, many of which are smaller forecourts with lower average spend. The largest contributor to ARPR growth in the year was product, which benefited from products launched over the past 2 years. Penetration of our prominence products, including Advanced and Premium packages, continues to increase with this growth representing almost half of the product lever. Also contributing to this product growth was our successful packaging event, which took place in April 2019 and included 2 new products, text chat and the option of buying vehicle check. That was a small contribution from our new car product, which was monetized through the second half of the year, a contribution from our managing or data products, which grew by 400 forecourts in the year. Our desire to help retailers to use data as much as possible to manage their forecourt has led to a change in how we market our retail check product, which Nathan will cover later on. Turning now to stock and the chart on the right. The dark green line shows the increase in cars on site, which grew by 4% in the year, largely as a result of the increase in the number of new cars on our marketplace, since the product was launched initially as a free of charge trial in August 2018. Core retailer stock decreased by 3% on average through the year. Much of this decline came from larger customers who experienced difficulty sourcing stock, particularly in the second half of the year, which can be seen on the chart. This resulted in a GBP 30 decline in the stock lever. Finally, the increase in price of GBP 53 relates to an effective increase of just under 3%, of which the majority was delivered in April 2019 and was consistent with that achieved in the prior year. Costs were well controlled, increasing by just 1% in the year, with decreases in people costs, marketing and depreciation and amortization almost completely offset increases in other costs. People costs decreased by 1% in the year to GBP 55.8 million. This year-on-year saving was driven by a GBP 3 million reduction in share-based payments and annual cash bonus, part of which was due to the Directors waiving their bonus earned in response to the COVID-19 pandemic. The average number of full-time equivalent employees increased by 6% to 853, with 32 of that increase being the average impact from KeeResources following the acquisition in October 2019. Underlying salaries increased across the business. However, a change in staff mix as we focus on early careers has suppressed cost growth. Marketing was broadly flat year-on-year, decreasing by 2%. Despite this fall in spend, our audience performance has been particularly strong and has grown throughout the year. Other costs, which include data services, property-related costs and other overheads increased by 14%. The increase comes from costs associated to our vehicle check product that was monetized in April 2019, and those linked to the functionality Dealer Auction provides to retail accelerator customers. There were also higher costs as a result of the group's ongoing migration to cloud-based services, which increases our levels of resilience, security and speed of software release while reducing the need for capital expenditure in physical data centers. Finally, an additional GBP 2.1 million charge of anticipated credit losses was recognized in line with IFRS 9 to take account of the COVID-19 impact on the carrying value of receivables from customers. Depreciation and amortization reduced by 27% as the group's self-developed audit to billing system became fully amortized. As a reminder, our low levels of CapEx and depreciation are not a reflection of low levels of investment in our business. In addition to our investment in cloud-based services, we have over 320 people in product and technology who are continuously improving our platforms and developing new products for customers, the costs for which are taken in full through our income statement in people costs. With revenue up 4%, costs up 1% and a GBP 3.2 million contribution from our share of Dealer Auctions profit, operating profit grew by 6% and our operating profit margin increased by 1 percentage point to 70%. Cash generated from operations grew by 3% to GBP 265.5 million, which is a lower rate than operating profit for the following reasons. Depreciation and amortization provided a year-on-year cost saving, which has no effect on cash. Share-based payments yielded an operating profit benefit that has no impact on cash generated from operations. Profit from Dealer Auction provides growth to operating profit but had no effect on cash in the year as no dividends were received. Underlying cash conversion remained high at 99%. The statutory income statement outlines areas beyond our revenue and operating costs. Finance costs decreased year-on-year to GBP 7.4 million in part due to the reduced level of debt drawn under our facility. Prior year also included an additional GBP 1.7 million of accelerated amortization costs relating to our former debt facility, which we have not had to incur this year. Our profit before tax was GBP 251.5 million, and our effective tax rate was 18%. After removing the impact of Dealer Auction, which is consolidated post tax, this is in line with the standard rate of tax for the U.K. Basic EPS grew faster than profit after tax as a result of fewer shares in issue due to our share buyback program. Basic EPS growth of 6% is suppressed by the one-off profit on disposal of the smart buying asset to Dealer Auction in the prior year. As I said earlier, the Directors are not recommending a final dividend meaning that the total dividend for the year is 2.4p per share being the interim dividend that was paid in January 2020. Moving now to net bank debt and capital allocation. Net bank debt reduced by GBP 31.7 million over the period and leverage reduced to 1x, which is significantly below our covenant requirement of 3.5x. Cash generated from operations of GBP 265.5 million was used to pay GBP 1.5 million of CapEx and lease payments of GBP 2.9 million. In cash terms, we paid GBP 6.4 million of interest on our RCF and we incurred GBP 0.5 million of refinancing fees as we extended our facility for the first time in June last year. Following year-end, the group exercised its second plus 1 extension option on the revolving credit facility at the GBP 400 million total commitment, GBP 83.5 million matures on the original termination date in June 2023. The remaining GBP 316.5 million will now terminate in June 2025. Tax paid increased to GBP 69.8 million as HMRC accelerated the due dates for quarterly installment payments for companies with accounting periods beginning on or after the 1st of April 2019. As well as the final 2 quarterly installments for tax relating to financial year 2019, the group was required to make all 4 installments for financial year 2020. To be clear, this increased cash payment is purely an acceleration of when payments are made, and there is no additional tax charge. We acquired KeeResources in October, resulting in a net cash outflow of GBP 25.3 million, with a further GBP 0.7 million paid post-acquisition to extinguish debt in that business. The remaining free cash flow, GBP 64.7 million was paid in dividends relating to last year's final dividend and this year's interim dividend. And GBP 62 million was used to buy back shares at an average price of GBP 5.39. In total, we returned over GBP 126 million to shareholders during the year. Gross debt held flat at GBP 313 million as we opted to hold higher levels of cash reserves at the year-end given the uncertainty caused by the COVID-19 pandemic. The group had a strong balance sheet position at year-end with GBP 37.6 million of cash and headroom on the RCF of GBP 87 million. In early April, we strengthened this position further as we raised funds through an equity placing. The placing raised gross proceeds of GBP 185.9 million, which was reduced to GBP 183.2 million net of fees. The group's long-term capital allocation policy remains unchanged, continuing to invest in the business, enabling it to grow, whilst returning around 1/3 of net income to shareholders in the form of dividends. Any surplus cash following these activities will be used to continue our share buyback program 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. I'll now pass over to Catherine, who will talk you through our response to COVID-19.

Thank you, Jamie, and good morning, everybody. Moving on to Slide 13. The global health crisis caused by the emergence of COVID-19 has had far-reaching impacts on all of our lives, well beyond business, and we remain constantly vigilant for the well-being of all our stakeholders. As everyone is aware, the social distancing measures that were introduced back in March have had a significant impact on the entire automotive industry and therefore, on our business. Many of our customers, predominantly car retailers, were forced to close their showrooms and manufacturers were forced to shut down production lines. People across all businesses, including our own, were asked to work from home, if they could. Since the crisis started, our priorities have been centered around 3 areas: looking after our people, supporting our customers and protecting our business. In this section, I will describe how we reacted quickly and decisively through this period of uncertainty. I will detail the actions we have taken to ensure we are able to emerge from lockdown in a position of strength and able to progress -- to make progress against our long-term strategic goals. As we have said many times before, our people and our culture are at the very center of our business and key to our success. Therefore, our primary goal has been to ensure that all of our people are safe and supported. Since the 17th of March, our employees have been working from home. A transition to working remotely has been almost seamless and is a testament to our systems, technology and the can-do attitude of our people. We acknowledge though that for many working from home will afford additional strains and stresses. The health and well-being of our people and their families is always front of mind. And so we have increased the support we provide. We've held weekly all-company webinars, offered flexibility for those who need it and have increased our counseling and employee support services. We have worked hard to find ways to sustain the well-being of all employees and to keep morale high. Our product and technology teams have continued to innovate, test and launch new products through the lockdown as we work towards our strategic goals. These teams continue to deliver around 640 releases a week which is only marginally lower than normal. Understandably, the level of activity for some of our teams, particularly those in customer-facing roles decreased. As I will come on to talk about shortly, we utilized the coronavirus job retention scheme for a short period in April and May. All employees have now returned from furlough, and we have not had to make any redundancies as a result of the crisis. The Board cannot express its gratitude and appreciation enough for the support of Auto Trader's employees throughout this challenging period. We hope that our people feel the same way about the support we endeavor to provide during this difficult time. Between the 24th of March and until various points in June, retailers' showrooms were required to be closed to the public. During this time, we decided that we should not charge our customers for an advertising service from which they could not immediately benefit. We therefore went free for all retailers from the 1st of April and throughout the period, they were unable to meaningfully trade. We took this decision early, ahead of government lockdown announcement because it seemed simple, clear and appropriate, given our intention to support our customers, many of whom are small family-owned businesses. This allowed retailers to continue to advertise on our platform and to build a pipeline of consumer demand. In addition to not charging our retailer customers during lockdown, we also extended payment terms from March services by 60 days. Whilst showrooms were forced to close, we did not want to be a cash burden on our customers. On top of this financial support, 1 week before lockdown, we implemented a stock offer so that retailers could advertise more of their vehicles on our platform at no additional cost. The goal of this offer was to ensure retailers could sell as many vehicles as possible before we entered lockdown. It also enabled them to generate much needed cash before showrooms were required to close. This resulted in up to an additional 80,000 cars on Auto Trader at the high point in mid-April. We have also supported our customers by sharing data and insight from our platforms and through product development. We accelerated the launch of our new market insight products, it enabled retailers to advertise vehicles more effectively through the crisis, while highlighting their COVID-19 safety measures in place, home delivery and live video viewing options. In March, we began hosting weekly webinars designed to update the industry on what we were seeing on our platforms, to share our latest consumer research and to provide insights through industry experts. This was all designed to help guide retailers through the turbulent period. These webinars have been well attended with over 3,000 people joining one or more. 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 the 23rd of March to run through the lockdown period for free. We do not believe that other online marketplaces responded as promptly, clearly and definitively to the crisis. These measures were well received by customers, and we hope this sentiment will help us to strengthen these relationships in the months and years ahead. On the 25th of May, the U.K. government announced the lessening of the lockdown restrictions in England, allowing retailer forecourts to reopen from the 1st of June. Northern Ireland and Wales subsequently followed on the 8th and 22nd of June, respectively, with Scotland announcing they would lift restrictions on the 29th of June. We extended the free period for retailers into June for as long as they could not open. Once dealers were able to reopen, we resumed charging, applied a 25% discount to the normal rate. We will resume charging at normal rates from the 1st of July. Throughout the period that our customers were closed and our core services were free, we made the responsible decision to reduce costs. Our discretionary spend, which is primarily for marketing our own brand and products, has been significantly reduced. Our largest expense relates to our people. As previously mentioned, due to our customers being required to close and our decision not to charge for our services, we made use of the coronavirus job retention scheme and furloughed just over 25% of our employees at the beginning of April. For those who were placed on furlough, we supplemented the level of support provided by the government, so that the large majority remained fully paid. All employees were removed from the scheme on the 21st of May, ahead of retailers reopening on the 1st of June. Once sufficient certainty returns, we will repay the amount of claims through the government's furlough scheme. The executive directors have forgone 50% of their salary during this period of uncertainty and waived annual bonuses earned for the year ended 31st of March 2020. The remainder of the Board has waived its fees by 50% or more for the duration of this crisis. Salaries and fees were returned to pre-COVID levels in July 2020. Our other costs are mostly fixed. However, there has been some small savings across travel, staff entertainment, training and recruitment. In terms of cash flow, the group has deferred VAT payments totaling GBP 18.4 million to date as allowed by HMRC. The group's share buyback program was suspended in March and as Jamie said earlier, the Directors are not recommending a final dividend for the year. We entered the crisis with a strong balance sheet. At the year-end, the group had GBP 38 million of cash and GBP 87 million of headroom on our revolving credit facility. As Jamie said earlier, on the 1st of April, we raised GBP 183 million net of fees through an equity placing. This enabled us to significantly reduce balance sheet risk when we were generating losses, and it was unclear how long the situation might persist. It has allowed us to run the group through the crisis in the long-term interest of our shareholders, customers and our people. It also provides an insurance policy against protractive lockdown or series of lockdowns and puts us in a position to take advantage of strategic opportunities as they arrive. Whilst there is greater certainty now, the situation remains inherently uncertain. And therefore, we intend to maintain our balance sheet position for the time being. At the end of May, the group had net debt of GBP 80 million, and net bank debt was 0.4x EBITDA. The measures we took in March, April and May, have secured our position as the U.K.'s largest automotive marketplace. The chart on the left shows our performance for cross-platform visits and stock advertised by day since March 2020. Cross-platform visits were at their lowest on the 24th of March, the first full day after the U.K. government lockdown announcement. Since then, our audience has trended consistently upwards and is now at record levels. This period from the 1st to the 21st of June cross-platform visits averaged 2.1 million a day, which was up 28% from the prior year. The other side of the network effect model is stock on-site. Following the free stock initiative I mentioned earlier, a number of cars advertised on Auto Trader increased to a high of around 550,000 in mid-April. Allowing our customers to advertise all of their new and used vehicles to the largest and most engaged consumer audience during lockdown to help them to build a sales pipeline. This demand has been demonstrated by a dramatic increase in lead volume, up 135% year-on-year in June so far. Many consumers are looking to complete more of the buying journey remotely, if they can no longer walk into a retailer without an appointment. Some retailers have still been able to sell cars online and began handing over these vehicles when showrooms opened on the 1st of June. Our stock trend which has been steadily decreasing, shows how retailers are removing sold cars and many have struggled to restock as auction volumes remain low with physical auctions still closed and trade-ins not yet ready to advertise. The chart on the right-hand side shows the average change or the change in average price retailers have processed since the beginning of March. The volume of price changes reduced to lower levels in April and May and have steadily increased towards more normal levels in June as retailers reopen their showrooms. In general, prices are holding firm, which is encouraging given that consumer demand is strong, and so retailers do not have to discount less stock in order for it to sell. The blue line shows the quantum of price changes and you can see that the level of these changes is not substantially different to those made before the lockdown, shown by the orange line. Overall, like-for-like prices in May were 1.9% up year-on-year. This is an encouraging sign for retailer health as profit on vehicles sold in recent months should be robust. During April and May, actual cancellations only materialized at the same level as the prior year, but retailer numbers reduced as there was little to no new business over this period. The chart on the left-hand slide shows retailer numbers since the first of March 2020, along with the average number of cars per retailer advertising on our platform. Since the 1st of March, retailer numbers have slowly declined despite our advising services being free throughout April and May. For the period the 1st of June to the 21st of June, retailers were 3% down on the prior year. The chart on the right-hand side shows the retailer risk and how that has developed since the 1st of March. Our standard terms mean that a retailer must give 30 days' notice to downgrade or cancel their contract, giving us a pipeline of future cancellations. Many of these serve as an insurance policy for customers uncertain about the future. As a result, we have successfully retracted the majority of cancellations to date. Retailers appreciated the free period offered by Auto Trader, and so there was no substantial increase in pending cancellations through March. At the beginning of April, the volume of these pending cancellations increased at 8x the normal level as some retailers safeguarded themselves for the potential reintroduction of costs from the 1st of May. Following the government announcement on the lockdown extension, we confirmed on the 17th of April, that there would be a continuation of the free period into May, the pending retailer cancellations substantially reduced. Currently, pending cancellations are running at twice their usual level. We are confident that over the coming weeks and months, we can continue to retract cancellations and also increase the number of new retailers advertising with us. However, it is likely that the effects of COVID-19 on the market will result in a reduced number of retailers throughout the year. It is unusual for us to provide quarterly trading updates. However, given the uncertainty caused by COVID-19, we wanted to give a brief overview of trading through the first quarter of financial year 2021. The first table shows some of the key metrics we use to monitor health of the marketplace, which I have just spoken about. The second table shows our estimate of revenue and operating profit for the quarter. For the month of April and May, when the majority of our products and services were free of charge, we made an operating loss of GBP 11.4 million. In June, we remain free for retailers until the respective governments allowed showrooms to open. We resumed charging from the points at which retailers were able to reopen, but offered retailer customers a 25% discount for the month of June. With these discounts applied, retailer revenue is expected to be down 34% year-on-year. This return to charging resulted in estimated revenue of around GBP 21 million and an operating profit of around GBP 12 million. We expect revenue for the quarter to be GBP 25 million and so broadly breakeven at an operating profit level. I will now pass over to Nathan, who will cover the outlook.

Thank you, Catherine. Whilst much of our focus has been on navigating COVID-19, we have not bared from our purpose to significantly improve car buying and selling in the U.K. and bringing efficiencies to the entire automotive ecosystem. The package of actions we took early in the crisis enabled us to remain assertive and front footed when it came to protecting our people and business, supporting our customers and ensuring we continue to progress the significant opportunities ahead of us. If anything, the events of the past few months have increased our conviction in our strategy and our confidence in its benefits to the industry should they embrace it. As a result, we have an even greater sense of urgency to bring more of the car buying journey online. We look at our strategy with reference to 3 horizons. And to be clear, the horizons do not relate to when we expect to work on these initiatives, with our product and technology teams working on all these areas. Horizons relate to when we expect these initiatives to meaningfully pay back over time. The first of these horizons is to continually improve our core. Our core is a great business. It is healthy and has a long runway for growth. We will continue to improve our search experience to ensure it is the best it can possibly be. This year, we have improved the quality of adverts by adding vehicle checks, fair and higher-priced flags and move to a relevance based sort order. We've also removed standard format display advertising, allowing us to increase the size of our search results. While standard format display advertising contributed GBP 5 million to revenue in 2020, it was declining quickly, is of little value to our core customers and limited the amount of space dedicated to our core consumer experience. On top of this, we've improved our mobile search experience, increasing the size of each listing by 40% and increasing imagery by 90%. The continued investment and evolution of our platform is critical to ensuring we remain a leading destination for car buying and selling in the U.K. Importantly, we will also continue to ensure we always have a good staircase for retailers to increase their prominence and sell more cars quicker. For some time, we have made it a priority to embed our data into retailers to enable faster and better decisions. We've grown the penetration of our managing products to over 25%. From the 1st of April, independent retailers can take the entry-level managing product retail check as part of their advertising package. In addition to this, we have included new performance analytics and a market insight tool within our core dealer portal. This enables every retailer to understand their own relative performance and the supply and demand dynamics within their own local markets. And finally, on core, we've been migrating our technology platform to the cloud to improve the performance, security, monitoring and resilience of our infrastructure. Ultimately, this enables us to deploy changes to our platforms even quicker than we do today with increased levels of stability. We expect this to be largely completed by the end of this financial year. A second horizon refers to opportunities adjacent to our core. We've made huge strides forward with new car this year and the now the largest new car marketplace in the U.K. We're seeing network effects with consistent growth in both stock levels and audience. Last year, there were over 31,000 cars advertised a day and over 41 million advert viewers. We monetized this product in the second half of the year and have over 1,000 retailers using the product. However, we are only at the early stages of this opportunity and expect it to further develop and grow in the years ahead. Logistics is another key area where we believe we can reduce costs and inefficiencies within the ecosystem. We acquired MTD, an asset-light logistics platform that helps retailers move vehicles cost effectively in 2017. We currently facilitate over 10,000 moves a month and expect this to grow as we begin facilitating home delivery for retailers. Another area of B2B opportunity is the sourcing of vehicles by retailers. We entered into our joint venture, Dealer Auction, in the previous financial year. And in 2020, they facilitated the sale of around 110,000 vehicles. As the past year has been challenging due to supply shortages, we remain confident that a digital-first approach to sourcing, led by data is the best and right solution for both buyers and sellers of trade vehicles in the U.K. Finally, our third horizon points to how we see cars being transacted in the future. We believe consumers are ready and willing to purchase their next car online, and the last few months have proved this to be the case. There are 3 main elements for us to solve at scale to become a transactional marketplace. The first is to provide an easy and transparent way for consumers to sell a vehicle through part exchange on our platform. The second is to enable consumers to apply for and be approved for finance online again on our platform. And the third is to effectively complete the sale through some form of reservation or deposit. Achieving this at scale is not likely to happen quickly due to the changes required from our customers and other players within the industry. However, we are working on each of these areas at pace to ensure we solve this problem first at quality and scale. In closing, COVID-19 has made obvious to everyone what many of us always suspected. More of the buying and selling of cars needs to happen online. This shift would make it more convenient for car buyers and more cost-effective for retailers, and we believe Auto Trader is best placed to help make this happen. We have a massive audience of car buyers and a core capability in technology, software and automation. If we can successfully bring these to the automotive industry then buyers, retailers and manufacturers all stand to benefit significantly. This has been our strategy for some time now. And if there is any good to come from the coronavirus pandemic is that it might well provide the impetus for the automotive industry to pursue these very same goals. And now on to the outlook. Catherine has given an overview on the first quarter of trading. Here is the outlook beyond June 2020. Following a period of reduced revenue through which we supported our customers, we will return to full rates from the 1st of July 2020. Based on current trends, we would expect July retailer revenue to be down by mid-single digits on the same month last year. Total group costs are likely to decline at a rate of low to mid-single digits for the year as cost measures were taken in response to COVID-19. This was largely through reduced marketing and other smaller discretionary spend. Given the situation, it is difficult to sensibly provide guidance on what the number of retailer forecourts or the level of stock might be over the coming months. The reduction in stock levels and the stability in used car prices are a sign of industry health, which although negative for our stock on-site at the moment is positive for our customer base. The COVID-19 outbreak is likely to result in an increase in the level of vehicle ownership, and we believe the current environment will only accelerate the shift towards greater digitization of the car buying process. The Board, therefore, remains confident in Auto Trader long-term growth prospects. That concludes the presentation, and we will now take any questions from analysts.

[Operator Instructions] And your first question comes from the line of John King at Bank of America.

Two, if I can. First one, perhaps for Catherine. Interested to understand, I guess, well, why you still see the click and collect or home delivery elements of the market coming through in horizon 3? I'm just wondering why this won't accelerate that a little bit faster. And I guess also if you could comment as well around the threat from Cazoo in that regard and whether this gives them an opportunity as persists to capitalize the market? And the second one, perhaps for Jamie. Any comments you could make around what the customers downgrading packages at the moment? What are you seeing right now on that front? What do you think has to happen for that to start improving?

Okay, I'll take -- just in terms of the first question, I think the way to read the horizons is that they are -- the right way to think about them is when we believe they will become material contributors to financial performance, it's not when we will be working on those initiatives. So you will have seen one of the features that we've launched over the last month or so is the ability for retailers to promote if they're offering home delivery options on their advert views. So we are highlighting those features to consumers already. And it's absolutely part of the next evolution of our journey towards online retailing. However, the journey that most retailers need to go on to enable that part of the model is quite significant. The logistical capability and the operational capability that needs to be in place is something that some dealers are embracing. But for most of them, it's relatively early stage. The interesting thing will be how much this current period acts as a catalyst for others to accelerate that development of their business model. In terms of Cazoo, clearly, they are one of the players that have set out very much from the beginning of their journey to operate with only a home delivery option and no physical presence. And there's no doubt that some of the current market dynamics we're seeing and some of the data we're seeing from our consumer research suggests that their model will play well to a segment of consumers in the current markets. So I think, potentially, in terms of consumer demand, there's some upside that come out of recent events for them. But we see them, today, we work with them as a customer. They've got 1,800 or so cars on our platform, and we're working closely with them. In the future, we -- in the same way that we compete for audience with other customers, they're clearly investing a lot in marketing. So while we benefit from the fact that this industry remains massively fragmented. So the biggest retailer group is still only about 3% of total used car transactions. And Cazoo have got a very long way to go before they come close to that level. So we're confident that for consumers the value in a marketplace and the value of having that choice and ability to compare across options is incredibly powerful and valuable.

Yes. And John, if I take your question on packages. I mean, sorry, slightly interpreting the question. There are obviously 2 options that dealers have in terms of packages. One is around the level that they're at, and one is around the level of paid stock that they opt to take. We've obviously given July retailer revenue, and we've given retailers. So I think people can sort of triangulate that ARPR is down low to mid-single digit. ARPR is then made up. We put through our price increase on the 1st of April, and we're carrying some good product growth from the prior year. And we haven't seen -- despite the period that we've been through, we haven't seen packaged downgrades. So I think where you're talking about the downgrades that have occurred or the headwind, if you like, it is very much around stock. I think there are 3 reasons behind that. One is a little bit the run rate that we were bringing into this year, largely from franchise livestock that you see through what we've reported in FY '20. Secondly, there have been some downgrade through this period of uncertainty. Thirdly, and probably most importantly, what we were going through a process in the middle of March, where we were doing a kind of annual stock offer that we normally do. And in the middle of March, we effectively said -- so there we had some half price units live, and we effectively said, put those back to free, reinstate the stock offer and that's what we've got running at the moment. And so you've got a headwind where we had a stock initiative last year around that stock offer that we haven't had this year. But it is still -- it's a stock offer that we can convert at some point. So we think we've got a catalyst there to improve the rate of stock that we've got currently.

Your next question comes from the line of William Packer, Exane BNP.

It's Will Packer. So just to come back on the last response and apologies, the line was breaking up a little bit. Should I understand, therefore, to be the key flex in 2020 ARPR is the extent to which stock is weak or not? And because of the pricing events that took place earlier in the year, there should be some underlying growth on a like-for-like basis if we exclude the discounting? So that's question one. Secondly, if we look forward to the 2021 pricing event, which I know feels a long way off now, but will come sooner than we think. Is the ambition to grow ARPR if macro is okay? And what are the key product innovations you're working on? And then finally, pampered through the presentation is this transition towards digital retailing solutions and delivery. It's not imminent, but it's definitely a focus. Could you talk us through how you're thinking of monetizing that? Would it be subscription products? Would it be transactional products? Any color would be helpful.

Yes. So if I take the first one for clarity, hopefully, the line is coming through, okay. So I think your interpretation is exactly right. So -- and I think it's still to work through presentationally, how we put it together, but price should be reasonably like-for-like in FY '21 as we saw in FY '20. I think we will show the discounts that we provided to retailers as a separate lever. It is effectively priced, I think it's helpful to split it out separately. Products we're taking still good levels of run rate into this year. There's a bit of an unknown whether going forward, and there is high levels of uncertainty, whether you do see some pressure around prominence products. Like I said, we've not seen it yet. And then stock is the main driver. If you look at the livestock on-site that we've sort of presented, we've seen an interesting trend where stock levels are very high through April and May. They come off in June, which we think is a reflection of high volumes of sales in those first 3 weeks. And I think we're hopeful that some of that stock gets replenished. And then like I said, at some point, we will look to convert that offer that's currently running, and that hopefully lends some support to that stock lever.

Yes. In terms of your question on the 2021, Will, I think the answer is yes to your question, are we looking to grow ARPR at the event and during the year, more generally, subject to macro conditions. We are speaking specifically to the price and product elements because I think stock is obviously the moving piece. In terms of the event itself, as you said, it's some way away. We've got a number of candidates that we're considering for that and we feel pretty good about most of those, but we'll make a decision later in the year. In terms of 2021 as a whole, so moving away from just the event that happens on the 1st of April. We still have -- we still feel good about our prominence products. And we hope to be launching some new prominence products over the next few months, which is obviously relevant to 2021. Our data products, our analytics products, if you like, still have runway to go in terms of their penetration and then in terms of the online retailing, horizon 3, if you like, and just to make that point again from John's question, these are all things that we are working on now. It's just more about when we expect them to come to fruition. That part exchange -- solving part exchange is one of our biggest focuses. And we've tested and trial things depending how the impact on COVID and the like on some of the partners that we're working with, we'd hope that, that would come to fruition sometime during next year. Then your final question -- sorry, yes, your final question was around pricing online transactions. That could take the rest of the call to answer it. So I'll give you the brief version. We don't see -- we're not shooting for the end goal and saying, well, someone needs to transact entirely online on Auto Trader, and then we'll be able to monetize that. We think that's the wrong way to think about it because we believe the dealership, the physical forecourt will have a big role -- will have a role to play in a very large number of transactions. So we would be -- there would be value leakage there if we just only monetize the ones that got all the way through the funnel. So the way to think about it is we're thinking of the steps in the purchase process, how we can bring those online and then what value does that create for the retailers and what might be the right way to monetize it. So the part exchange may be monetized in a certain way. Finance might be monetized in another way. And then if you do get through the full transaction, that again could be probably more obviously, in that case, that's going to feel like a transactional model. But all of these things sit on top of our core advertising business. So we don't see this as being a business model transition. But the answer is to whether it's subscription or whether it's transactional or whether it's a bit of both will actually be a bit different in all those cases, I suspect.

Your next question comes from the line of Miriam Adisa, Morgan Stanley.

One question from me. So if you could just give us a bit more color on performance of dealers between independent and franchise, it seems quite a bit of difference in behavior or performance among the independent franchise. And also how you think about consolidation among dealers and whether or not you think you may see an acceleration in coming months? And then secondly, on dealers again, how are dealers preparing for the end of furlough. Are you concerned at all that you may see another wave of dealers going out of business? If you could just talk a bit about how you're preparing for that and if you did see enclosures, and what would your approach be in terms of offering discounts for leaders again?

Yes. I mean I'll take the first bit, and Catherine can perhaps talk to the consolidation and the furlough. I think the thing that is common between independent and franchise dealers particularly at the moment is that used car sales for them isn't very good and very, very strong as they've come out of lockdown. So that's a similarity, the big difference, obviously, between a franchise retailer and an independent retailer is that franchise retailers also sell and have a great deal of their business model exposed to the new car market and also aftersales. Aftersales is doing from everything that we hear, aftersales feels very, very solid. But new car sales or new car -- new car sales have not come back nearly as quickly as used cars. At the moment, it's unclear, it would be strange to see such strong demand on the used car side without equally strong demand on the new car side. So many people are putting that down just to the length of the sales cycle. But that does mean that exposure to new car, the fact that they've not been able to sell new cars and the bonuses and the like to go along with that does mean franchises do see different pressure on their business to what an independent retailer does. An independent retailer, not to oversimplify, but it's about buying cars at the right price, selling as quickly as you can at a decent margin, whereas from a franchise perspective, they do have a bunch of other complications that come around new cars and pre registrations and targets and bonuses and the like, which does -- has made it challenging for them, certainly last year and will probably be the same than this year as well.

In terms of furlough and preferring for the end of furlough, so we have quite a lot of data that we've gathered from our surveys on where retailers are at. And most of them apart from those in Scotland are now very much open and back to trading. And most of them have now unfurloughed 50% or more of their people. So we're in a position where we're sort of halfway back and through that journey. The backdrop at the moment is interesting because for many of our retailers, they are struggling to keep up operationally with the lead volume and the level of consumer demand that they are seeing. So I think there's a good case over the coming weeks, that 50% of people being back in business increasing quite significantly. So I'm not sure it will take through September for retailers to -- for that -- for that position to unwind. And we have seen some redundancies announced already by a couple of big groups, in particular. I think it's likely that there are other groups that look to take similar courses of action and potentially don't look to bring back all of their people. I think the big driver of where we end up in September with retailer numbers overall is likely to be the macro backdrop and how much of the consumer demand that we've seen now, we believe some of it is pent-up demand from April, May. We do believe we're seeing data on-site and through our research that suggests that some of it is a structural shift towards people being in markets to buy cars that weren't previously in market. And if that's the case, actually, that might help to support retailers' trade through that difficult autumn period. That -- and the other big factor, I think, that we need to keep a close eye on is pricing. Pricing so far has been very robust because we've had strong consumer demand combined with the supply side that's been constrained with the auction -- physical auctions remaining closed. If pricing remains robust and consumer demand remains strong, then we're hopeful that retailers will be in a reasonable position to trade through that furlough moment in September, October time. In terms of the final question and how we're thinking about dealer closures. I think, hopefully, that context has covered our view. Short term, I think we're very -- we are confident that from what we're seeing in new business and from what we're seeing in cancellation levels that retailer numbers will remain strong. When we get to that September, October moment that we talked about, I think there's still quite a number of unknowns that will feed into how that trends through.

Yes. The only point I'd add just around consolidation is that I think there's as strong a case to -- I mean, as it is, the market is hugely fragmented. I think there's probably as strong a case for that being less consolidation than there has been historically. 2020 was an example of that. We saw a number of groups actually getting rid of franchises that they thought were unprofitable or didn't necessarily suit their portfolio. So I think it's less than clear that there will be a strong trend towards greater consolidation, certainly within the short to medium term. And I think even in the medium to long term, any level of consolidation, I'm not sure, it dramatically changes the market structure that we have.

Your next question comes from the line of Andrew Ross at Barclays.

Three questions from me as well. So first one is to come back on your ARPR commentary for July. I'm wondering if you can quantify how big the price component has been. Is it the normal kind of 3 points? Are we thinking it's more than that? And then it would be helpful to quantify the product piece as well, just to give us a sense of the modeling for the rest of the year. Second question on manufacturing and agency and your expectations. To that, it sounds like there's a GBP 5 million headwind from less inventory, but how are you thinking about everything else? And then third question, Dealer Auction, it would be helpful to get an update as to your thinking on that business, now it's fully up and running. And I guess, it would be great if you could share kind of where you think it might get to in the next year or 2, it's 110,000 transactions, GBP 13 million of revenues? What are we thinking in the next year or 2 as that starts to scale?

Great. So I'll take the first one. So price is similar levels to at which we've done the last 2 years. I think products, without wanting to go into too much detail, I mean, it is still positive in the month. We've obviously got new car run rate and still some advanced and premium run rate. It's not as positive as what we've reported in the prior year. That gives you quite a big range, but I think that's probably where it starts hearing. And the reason we're not going too detailed is there's so much unknown beyond July and additional product, if retailers are looking at their marketing spend, it's just very hard to give a steer. Hopefully, the price being reasonably similar and product being positive, although not as positive as FY '20 is hopefully helpful.

In terms of manufacturing agency, I think our performance last year very much reflected the Auto display category overall being down significantly and structurally in the market with Brexit, emissions, challenges and a hugely difficult year in terms of new car volume to manufacturers. And for us, it was a year of consolidation, where we've consolidated our products now back to native products on our platform that we believe are more optimized for our consumer experience and also deliver better performance for our manufacturer partners. That period of consolidation now has effectively re-baseline that business for us. I think as we head into this year, clearly, we've got a number of headwinds on top of the standard format revenue in terms of the market backdrop, an Incredibly challenging set of circumstances for manufacturers, but we are confident that for the products that we now have remaining and for the capability and team that we have in place, that they are the right platform for us to begin to build from, again in the future when the macro backdrop is a bit more positive. Long term, overall, the momentum we're seeing and the positive network effects we're seeing in our new car marketplace means that we do still believe and see lots of opportunity to create incremental revenue streams from manufacturers in the future through that marketplace.

And just to your question on Dealer Auction. You may not be happy with my answer, Andrew. So I do apologize in advance. I think Dealer Auction did 110,000 transactions. That's, broadly speaking, in a market of 3 million B2B transactions where roughly 2 million is I guess, traditional auction, which does include some online and 1 million dealer-to-dealer transactions, which very often happen offline and by personal relationships. I think we -- so we've got the #1 position as an online marketplace for dealer-to-dealer transaction. So we've got quite a big position. But as you can see from those numbers, a relatively small number -- share of overall transactions or the overall opportunity. So I think we're definitely looking to grow that over time significantly as in -- not up by 10% or 20%. So I think we're really looking to grow that at a much quicker rate. I think within the short term, there is a -- it will be more difficult for any business that's involved in certainly dealer transactions because dealers due to the supply shortages that they're seeing, can often have a reluctance to trade out of vehicles as they used to because it's just impossible to get the retail stock that they want. So they tend to, in their words, go deeper or into older vehicles than they might otherwise do in more normal times. So I think actually, they're probably likely -- longer-term opportunity remains good. What we're trying to do is we want to broaden that business now that it's all on one platform to take it just -- take it out of just doing dealer-to-dealer transactions and actually helping many of those corporate clients, which call -- which have formed the core base of the auction markets. And it's about just getting those customers on board again. So over time, I think, a very, very good opportunity, but there's some short-term difficulties given supply shortages, none that we're overly concerned about, and it is about getting those large customers on, which sometimes have quite intricate or involved agreements in place with physical auction houses, including de-fleeting and the like.

Very helpful. Just quickly to follow-up on the second point there. The GBP 5 million headwind on manufacturing agency from the change in format. Is that all incremental to fiscal '21 or some of that already in the numbers for fiscal '20?

No, it's all for this year.

Your next question comes from the line of Silvia Cuneo, Deutsche Bank.

My first question is on the increased user engagement, that was pretty impressive in FY '20 and also coming out of the lockdown in June with the gap versus Gumtree increasing to 9x despite the limited change in marketing expenses. So can you please talk about what you think is driving your market share gain? And what, in your view, the Auto Trader platform offers more compared to competitors to the users base? And second, can you remind us of the motor trade delivery revenue model? How is that linked to the number of deliveries? Just wondering how to think about the benefit of adding on deliveries. And finally, maybe just a follow-up on the manufacturers and agency revenue. I see that in June, that revenue stream already increased. So can we expect that positive trend to continue also in light of the easy comps from FY '20? Or is pent-up demand so robust that it could take longer for advertising to pick up actually because it's not as much needed?

Sure. So in terms of the first question on user engagement and competitive position. If I start with competitive position. So I think we are more confident in our consumer proposition and have invested in it more significantly in the last 12 to 18 months. And I think we have done at any point in the last few years. There were 3 big changes that we've made over the course of the year that I think drives this confidence. The first one is we introduced relevant sort order for consumers last summer. So our default sort order is no longer driven by price. And we have seen a good increase in consumer engagement and response delivered for retailers off the back of that. We also introduced fair and higher price cars and confidence over price is the #1 pain point for consumers when buying a car and that product has been well received by consumers. And I think is just another addition to our product set that has been very valuable. And then the more recent decision to remove third-party standard formats, we've already seen improved site performance, improved consumer engagement and really by dedicating more space to our core retailer adverts, we've seen improved response for them as well. So some big product changes in year that have all built on the fact that we've always had more choice, we've had part exchange, we've had to finance. We've got a much broader consumer experience now, we believe, than any of our competitors. In terms of what's driven the strong audience performance in year. There's probably 2 main themes to talk about. The first one is leveraging the strength of our organic channels. So for us, unpaid traffic is still at over 90% of the audience that we drive. We've had a very strong year in apps. We've now have over 14 million U.K. app downloads. And so we're in the pocket of 1 in 5 people in the U.K. and we've seen good growth, over 100,000 downloads a month each month in apps, and that's driving good repeat visitor performance for us. We've also strengthened our position in SEO, and we've begun to -- begun to involve our CRM strategy that means that organic performance and repeat visit performance overall looks strong. And we've also spent a lot of the year optimizing our paid activity. Paid activity is a relatively small portion of our channel performance, but it has the campaigns we've optimized differently and taken some big step forward this year. So feeling confident and in a good place on that. And then for the future, this year, one of the platforms we have, we're going to build and invest in it our content and social platform. And it's still very early days, but we're seeing encouraging signs in terms of audience engagement and performance being driven from those channels as well. So we feel like we've -- we're in a strong position. All of that with a backdrop that media spend in the category has never been so high in the last 12 months. So between PayCar, Cazoo and Cinch, we've had a very significant increase in marketing spend from peers and still managed to deliver this robust performance, which feels good.

And on the motor trade delivery, so the revenue model is a small subscription fee for logistics providers. And then it's a fee per move and then the vast majority of the revenue comes through that fee per move. The revenue sits in other trade within trade. So I think if you look at that number, it's still relatively small contribution to the overall group. I think we've seen good levels of growth in terms of moves. We've done some re-platforming. So we think it's in a much better place to be able to grow volume. And I think with all the changes that we had about the last 3 months, we think it's very well positioned in those circumstances. From a revenue -- manufacturing agency perspective...

Sorry just one point. Just one point I think is important to make on MTD whilst it's relatively small to us in terms of a revenue stream. The real strength of that proposition is the saving that it potentially makes our retailers because we're taking a very, very small transaction fee to connect a logistics provider and a customer, but logistics fees as a general cost to retailers are very, very, very expensive. So it does really make a big difference in terms of our broader objective to make the industry more efficient. Our customers that have used MTD have saved a large amount of money per move as a result of using the platform. So it does become whilst it's not as important to our P&L, it's actually very important to our customers' P&Ls. Sorry, Jamie.

No problem, Nathan. Just on the manufacturer and agency question. So we have grown through April, May and June. But we are still quite a long way behind prior year, so 65%. I think we would hope that, that trend does continue. So we narrowed that gap to prior year. But as Catherine sort of answered previously, we obviously got the slight headwind from the standard format removal. And I think these budgets are still under some level of pressure. So I think hopefully close the gap year-on-year, certainly through Q2, but continue to see some improvement as we go through the course of the year.

Your next question comes from the line of Joe Barnet-Lamb at Crédit Suisse.

Just 2 left from me. Firstly, on consumer, stepped up quite substantially. Do you think that's pent-up demand, cash strapped consumers trying to maximize sell prices, what do you think is underlying in your view? And secondly, on cash returns, can you help us understand when you may resume cash returns to shareholders, is that a 2H '21 event or an FY '22 event?

So we're tracking the consumer data that we see very closely and asking a number of different questions and getting different data points from different sources. We do think, based on the data we're seeing, but there are more new buyers in markets than we've seen at any point for a long time. So there's a number of people coming to market that either don't have a part exchange or that have -- don't have an existing vehicle has definitely increased on our platform. What we can't tell is whether this is a longer-term structural shift that will continue to play out or is a specific trend that we're seeing at the moment because of the challenges of some people needing to get back to work and wanting to avoid public transport. And there is definitely an element as well of pent-up demand. When you look at the lead volumes we were delivering in April and May during lockdown, we know that clearly, many of those consumers will not have been able to transact, and we'll be flowing through the numbers that we're seeing coming into June. One of the encouraging things, I guess, structurally, from our perspective, is that historically, 2/3 of the volume of consumers that we typically deliver to our retailer customers through walk-ins. So they turn up at a retailer's forecourt without having left any digital footprint. Now with the lead volumes that we're seeing and the lead volumes we're driving year-on-year, we should be able to get much closer attribution of that sales volume and should learn more about that consumer journey over time. So we're getting more data and more visibility than we've ever had, but trying to piece together what is a response to events of the last few months versus what is a bigger longer-term structural shift is still quite challenging at the moment.

And in terms of the cash returns, I think we want to continue to monitor the ongoing situation. But I think being back to charging customers, I think we're hopeful subject to that monitoring, that we would be able to declare an interim dividend which will be declared in November and paid in January, and that would be the first step to getting back to our capital allocation policy, which is as it was prior to COVID-19.

And just anything you can say with regard to buybacks?

So that -- so I think the declaration of the dividend is likely to be the first point in returning to that policy. And then subject to the monitoring, that would be followed then by a return to share buybacks.

And your final question comes from the line of Adam Berlin at UBS.

I'll try to ask them quickly. Firstly, just to think about the price product question in a different way. If you were a traditional Tier 3 independent dealer and now you've got to take retail check as well, how much more are you paying per car now, say, in July, than you would have paid last year as a way to think about the impact of that price product combination for a typical dealer? Secondly, what's been the effect of that product, have people who stayed on Tier 3 or people downgraded to avoid having to pay the retail check? And my third question is just when you say that the number of dealers who've given notice is up 2x normal, can you just put that in real number for us? What's the risk to the forecourt numbers if all those dealers did leave the platform in the next couple of months?

Yes, I can take the first one. So I mean, I think that combination is not wholly dissimilar to what we did last year around putting through something on an underlying basis around price and then some level of additional product. I mean I think it's fair to say we've seen very limited downgrades in terms of people moving down the packages as not to take up product because I think it's clearly hugely able to understand valuations and desirability in the market. I mean it's worth pointing out as well that from a Tier 3 that you sort of referenced, the entry price has been relatively live for that product as a stand-alone. So when it bundles in, it's not -- it doesn't necessarily mean it's a large amount incrementally, as you might imagine.

Yes. And on the question on cancellations. Adam, this might come across as a strange answer to the question. But cancellations have been run -- pending cancellations, a very normal part of our business due to the 30-day notice period. They've -- as Catherine said, they reflect more nothing -- they reflect a lot less about us and more about how our retailers are feeling about the uncertainty. And just to give you a few data -- and the real answer to your question is I'm not sure we really feel that there's a strong risk of those -- a higher level of cancellations in the next -- certainly in the next few weeks. That's not why we've flagged -- flagged that in the presentation. And just to put that in perspective, the reason why retailer numbers really has gone down, has been as a result of us not acquiring new business during the period that retailers were closed, which probably comes as no surprise to anyone else. It wasn't due to people canceling at any abnormal rate. As a matter of fact, despite pending cancellations being higher throughout the crisis, which you can see easily on the chart, the number of customers we actually lost during those periods was less than what we lost in the prior year. So the way that we see those -- that cancellation chart looking slightly higher than normal. I think our answer is we don't really see probably any -- at least in the near term, and based on what we're seeing at the moment, we don't see any spike from our normal levels of cancellations. They're mostly precautionary. They're almost like an insurance positive for our dealers, and they'll probably retract them at the last minute. And some of the retailers will want to still have that insurance policy in place, and they'll put in another pending cancellation for 30 days. So it's not really a risk that we -- it's not really a risk that we see. And now coming back to my first point, the reason why retailer numbers went down through the period, we're now back and reacquiring new business. So -- and you can see, if you look very closely at the far right hand -- at the left-hand chart on Slide 18, at the very far end of it, you can see that, that retailer number is definitely not going down. If anything, starting to creep back up, and that is the new business number starting to come in and offset, what is just a very normal level of churn.

Thank you for your questions. I'll now hand the call back to Nathan.

Okay. Well, thank you. That ends the presentation. I hope that's been helpful. Thank you very much for making the time to attend.

That does conclude the conference for today. Thank you for participating. You may all disconnect.