Autotrader Group plc (AUTO) Earnings Call Transcript & Summary

[Audio Gap] As usual, I'm joined by our COO, Catherine; and our CFO, Jamie. Before we get to results, I wanted to take a moment to thank our Chair, Ed Williams, who will step down following this year's AGM as he approaches the end of his third 3-year term as Chair. Ed has been exceptional, not just for me personally or for past and present executive teams but for the Board, employees, shareholders and wider stakeholders as well. He's not one to seek the limelight, far from it but he has diligently worked for the good of Auto Trader year in and year out for a decade -- over a decade now. So thank you, Ed. Following a comprehensive search and selection process led by our Senior Independent Director, we have appointed Matt Davies as Non-Executive Director, Chair Designate, who will become Chair subject to shareholder approval immediately following our AGM in September. Matt is an experienced Chair, Board member and CEO of both private and public U.K. companies, including roles as the CEO of Tesco in the U.K., Halfords and Pets at Home. Matt is also a Chair at Greggs plc, where he was appointed in August 2022. Now for results. Well, a lot has happened this financial year, much of which feels a distant memory. We've had 3 Prime ministers, 4 Chancellors, an ill-fated growth plan, rising energy prices, broad-based inflation, industrial action and the passing of a Monarch. But despite all this disruption, the used car market has remained robust, albeit with supply constraints driven by years of limited new car supply. This, combined with strong demand has meant that most of our customers have continued to experience very positive trading conditions. And these years of constrained new car supply will feed into the used car market for younger vehicles. So whilst demand remains strong, these positive trading conditions are likely to continue for some time. From Auto Trader's perspective, I'm proud of the progress that we've made this year, which is credit to the hard work of the teams right across the business and the partnerships that we're building with customers. With that, we'll start with some highlights from the year. In our core marketplace, we have grown revenue by 9%, operating profit by 10% and maintained 70% operating profit margins. We have more buyers on Auto Trader, more retailers working with us and our annual price and package event in both April 2022 and 2023 went well. This, combined with continued upsell of our higher-level packages saw retailer revenue grow 10% year-on-year. We're seeing increased engagement with our platform solutions, which is helping to improve the quality and speed of our customers' advertising and the decisions they need to make every day. We've launched and started to scale our deal builder journey for used cars and integrated new car leasing offers into Auto Trader. During this financial year, we had 200 completed deal builder transactions. But as we're scaling up, we have done over that number in just the first 2 months of this financial year. We are confident that the software and experiences that we've built are both scalable to thousands of customers and will enable us to maintain our capital light model and operational cost profile. As we did at the half year results, following the acquisition of Autorama, we're now reporting segmented results for Auto Trader and Autorama. As mentioned earlier, our core Auto Trader business grew profits double digit and maintained 70% operating profit margins despite continued investment in new products and wider inflationary pressures. Autorama losses were as expected, given challenging new car supply, which we have mitigated to some extent through accelerating integration and a diligent approach to costs. The industry changes we have seen continue to give us confidence that online sales channel will be increasingly important to OEMs and it's a capability we now have in Autorama, having transacted almost 7,000 new cars this financial year. Given the disposal of Webzone and deferred consideration on the Autorama acquisition, we have provided adjusted measures to retain clarity on the underlying performance of our business, which does include the trading performance of Autorama. On this adjusted basis, group EBITDA grew 7% and EPS 6%. Our teams have also delivered solid operating results. We continue to see more people using Auto Trader, particularly in the second half of the year, which is on top of the very strong growth we saw last year. Retailer numbers held at last year's high levels and ARPR grew 10% year-on-year, driven by price and product, with the stock lever remaining flat. Physical stock on site was up 2%. As mentioned earlier, Autorama delivered 6,895 new vehicles on lease and over 60% of those were cars. Then finally, FTEs have grown 21% on an average basis, which is mostly due to the acquisition of Autorama. And finally, our cultural KPIs. We are pleased that 90% of the employees are proud to work at Auto Trader and our Glassdoor rating is 4.5 out of 5. This is a huge credit to the hard work that all our people put into building a culture that's unique, enabling and fulfilling. And while we still have plenty of work to do when it comes to diversity, we are making good progress. This year, the percentage of female and ethnically diverse employees, both in total and in leadership positions increased. And our Board continues to be majority female. On carbon emissions, we're aiming to be net zero across our value chain by 2040 and had our near and long-term targets and plans approved by the Science Based Targets initiative. To ensure a fair comparison for 2023, we have rebased financial year 2022, as if Autorama was in the group. This is largely the reason for our emissions being down year-on-year as Autorama had less vehicles pass through its balance sheet in 2023 compared to 2022. I'll now hand over to Jamie to talk through the financials in more detail.

Thanks, Nathan and good morning, everyone. We'll start with the core Auto Trader financials. Total Auto Trader revenue increased by 9% to GBP 473 million. Trade revenue increased by 10%, with the largest component of this being retailer revenue, which also grew by 10%. The year-on-year increase was largely a result of retailers continuing to see value in advertising on our marketplace and taking additional products. The average number of retailer forecourts advertising on our platform was broadly flat at 13,913, although, when accounting for the disposal of Webzone, retailers were up 1% versus prior year. Average revenue per retailer increased by 10% year-on-year to GBP 2,437 per month with more details given on the following slide. Also within trade, we've seen an increase in Home Trader pay-as-you-go listings, which increased 15%, alongside smaller growth in other trade revenue. Consumer Services revenue increased by 4% in the year. Private revenue, which is largely from individual sellers who pay to advertise their vehicle on Auto Trader increased by 11% but was partially offset by Motoring Services revenue, which decreased 8%. Instant Offer contributed GBP 0.8 million, which is included within Private revenue. Finally, revenue from Manufacturer & Agency customers was flat year-on-year as new car advertising continued to be impacted by new car supply shortages. Now on to ARPR, live car stock and retailers. ARPR increased by 10% year-on-year, with the average revenue per retailer generated across the period at GBP 2,437 per month. The chart on the left shows the components that contribute to the movement in ARPR compared to the prior year. As you can see in 2023, ARPR was driven by both the product and price levers with the stock lever being flat. We delivered our annual pricing event on 1st of April 2022, which included additional products but also a like-for-like price increase. The price lever contributed growth of GBP 90 to total ARPR, equating to an effective increase of just over 4%. Products contributed GBP 137 to ARPR growth. Of this growth, broadly half was due to retailers purchasing more of our prominence products. which included our higher-yielding Enhanced, Super and Ultra packages, where penetration increased to 33%. Our Market Extension product, allowing retailers to sell outside of their local area with 7% of retailer stock on the product by the end of March 2023. And finally, there was also some contribution from our pay-per-click product, where retailers can boost visibility of their stock in our search listings through pay-per-click campaigns. The other half of the product lever was made up from our Auto Trader Connect Retail Essentials product included in our annual pricing events and also some smaller contributions from Auto Convert finance and data products. Turning then to stock. It's important to note that the stock lever is not driven by live stock but by the number of paid retailer stock units. You'll see on the right-hand chart that the number of live cars advertised on Auto Trader increased by 2% year-on-year. As usual, we strip out the impact of new cars and provide underlying used car live stock, the darker of the 2 lines, which increased by 3% on average across the year. Much of this increase came from a higher volume of private listings, which has no impact on retailer revenue and therefore, no impact on the stock lever, which was flat in the year. Onto costs and operating profit for Auto Trader's core business. Total Auto Trader costs increased by 8%, within that, people costs increased by 6%. The increase in people costs was driven by an increase in average number of full-time equivalent employees to 996 and an increase in underlying salary costs. Marketing spend increased by 9% in the year. Other costs increased by 15%. This increase was primarily due to higher costs associated with completing the buy-in of our legacy defined benefit pension scheme, return of travel and higher office and people-related costs. Depreciation and amortization decreased by 7%. 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 350 people in product and technology, who are continuously improving our platforms and developing new products for consumers and retailers, the costs for which are taken in full through our income statement in people costs. Auto Trader operating profit increased by 10% to GBP 332.9 million and operating profit margins remained flat at 70%. Our share of profit generated by Dealer Auction, the group's joint venture, decreased 14% to GBP 2.5 million in the year due to lower levels of auction activity as a result of supply constraints. Having covered the Auto Trader part of the business, we'll now move to the Autorama business. The acquisition completed on the 22nd of June 2022 and so the results represent just over 9 months of trading. Autorama revenue was GBP 27.2 million, with Vehicle & Accessory sales contributing GBP 16 million and Commission & Ancillary revenue contributing GBP 11.2 million. The Autorama business delivered circa 700 vehicles, which were temporarily taken on balance sheet in the reported period, which represented just over 10% of total vehicles delivered. The cost of these vehicles was taken through cost of goods sold with the corresponding revenue in Vehicle & Accessory sales. Total deliveries amounted to 6,895 units, which comprised of over 4,000 cars, over 2,000 vans and less than 500 pickups. Average commission and ancillary revenue per unit delivered was GBP 1,624. On the cost side, we saw people cost of GBP 10.5 million from the 209 FTEs employed on average since acquisition. The contribution to the group's average number of FTEs in the year was 164. The remaining cost of marketing, other costs and D&A totaled GBP 12.2 million. The Autorama operating segment made a loss of GBP 11.2 million, which is in line with the guidance given in November. Work on the integration of Autorama is progressing and we're very focused on significantly reducing the current annualized operating losses in 2024. With Auto Trader operating profit increasing by 10% to GBP 332.9 million, Autorama losses of GBP 11.2 million and group central costs, which relate to the deferred consideration of Autorama and the amortization of acquired intangibles of GBP 44.1 million, group operating profit declined by 9% to GBP 277.6 million. The group operating profit margin was 55%. We continue to deliver strong cash flow consistently over time. And it's worth emphasizing that strong cash generative nature of our business leaves us well placed to return surplus cash to shareholders. Cash generated from operations was GBP 327.4 million for the year. The statutory income statement outlines areas beyond our revenue and operating costs. Net finance costs increased to GBP 3.1 million due to the increased utilization of our revolving credit facility. We recently amended this facility, reducing our commitment to GBP 200 million and extending it until February 2028. Our profit before tax was GBP 293.6 million, 2% lower than 2022, with the decrease being better than operating profit, predominantly due to the GBP 19.1 million profit on disposal from the sale of Webzone. The group tax charge of GBP 59.7 million represents an effective tax rate of 20%. This was marginally higher than the average standard U.K. rate due to the Autorama deferred consideration charge being nondeductible. Basic EPS decreased by 2%, which was slightly better than the profit after tax with less shares in issue following our share buyback program. And finally, the directors are recommending a final dividend of 5.6p per share, giving total dividends for the year of 8.4p per share. Moving now to net bank debt and capital allocation. At the year-end, the group had drawn GBP 60 million of its indicated revolving credit facility and held cash of GBP 16.6 million, resulting in net bank debt of GBP 43.4 million. During the year, a total of 25.3 million shares were purchased for a consideration of GBP 147.3 million at an average price of 582p. A further GBP 77.7 million was paid in dividends, giving a total of GBP 225 million of cash returned to shareholders. The group's long-term capital allocation policy remains unchanged, continuing to invest in the business, enabling it to grow, while returning around 1/3 of net income to shareholders in the form of dividends. Following these activities, any surplus cash will be used to continue our share buyback program and steadily reduce gross indebtedness. It's the Board's long-term intention that the group will return to a net cash position. That concludes the financials. I'll now hand over to Catherine to talk through the market dynamics and progress against our strategic priorities.

Thank you, Jamie, and good morning, everyone. Moving on to Slide 16 and looking at new car and light commercial vehicle registrations in the U.K. back to financial year 2016. On the chart, we have highlighted that for the 5 years prior to the pandemic, we saw on average a new car and LCV market of 2.8 million registrations each year. However, since the pandemic, the new vehicle market has been impacted by well-documented supply chain challenges. These challenges continued into financial year 2023, where the new car and LCV market remained 29% behind the pre-pandemic 5-year average. This means that in the past 3 years, we have missed out on around 2.5 million new car registrations that we would have expected to happen. This impacts our new car stock product and our Autorama business and also the flow of cars into the used car market. While levels of supply remain constrained, the availability of stock is improving very gradually. New car registrations in Q4 of our financial year saw 18% growth year-on-year. There are 2 other dynamics worth calling out in the new car vehicle market. The first is that we see manufacturers bringing more electric cars to market ahead of the 2030 deadline. In the financial year, 16.5% of new car registrations were battery electric, up 3 percentage points year-on-year. This will start to flow into the used car market over the coming years. We've also seen 2 new manufacturers enter the U.K. market in the last year, BYD and ORA, focusing on the supply of new electric vehicles. This provides consumers with even more choice. The second dynamic is manufacturers changing their distribution models and operating under an agency agreement for new cars, where the risks and rewards of retailing substantially remain with the manufacturer rather than being passed on to the retailer. The retailer continues to act as a distributor and sales support agent in the transaction but does not control the price or advertising of the new vehicle. We are working closely with brands who are moving to an agency model. We are either already working with them today or will be live with them, seeing retailing new cars on Auto Trader. We continue to invest in our partnerships with manufacturers and we believe these changes overall present more opportunities than risk to our business. Moving on then to think about used car transactions, the U.K. car parc and the frequency of transactions. Starting first with used car transactions. Used car transactions were 8% below 2022 levels at GBP 6.9 million for the financial year 2023. As we have shown on the chart, this was around 1 million transactions below the pre-pandemic 5-year average. This year, we saw differences in the 2 halves, as many of you will have seen in our monthly market intelligence reports. In the first half, we saw demand on Auto Trader down compared with H1 2022. And the DVLA reported used car transactions back 15% year-on-year. This was lapping a very strong comparative period in the summer of 2021 when the U.K. exited lock downs and we saw record months for used car transactions in the U.K. By contrast, in the second half of financial year 2023, we continue to see demand metrics improve year-on-year. And although supply tightened, used car transactions in the second half were actually up marginally year-on-year. On the right-hand side of the chart -- on the right-hand side of the slide, we have shown 2 metrics: the car parc and the transaction rates. We only have this data available for the calendar year 2022. By the car parc, we are referring to the total number of cars on U.K. roads. You will see that this number grew slightly in 2022 with new car transactions marginally ahead of the scrappage rate. The second number on the chart on the right-hand side is the transaction rate. This shows how regularly each car changes hands in the U.K. and is calculated by taking the combined new and used car transaction volume in the year and dividing it into the car parc. Prior to the pandemic, we saw the transaction rate sit consistently between 3 and 3.5 years. However, since the pandemic, driven by the lack of supply, we have seen this number rise to between 3.8 and 4.2 years. As new car supply gradually returns, we expect the frequency of transactions will speed up again. Onto Slide 18 on used car pricing. We continue to publish a monthly price index of cars advertised by retailers on Auto Trader, the results of which are shown in this chart. The dark blue line on the chart shows the average price of a used vehicle advertised since April 2014. The lighter blue bar charts show the like-for-like year-on-year price movements and are therefore not impacted by mix adjustments. You can see on the chart that average used car prices rose to around GBP 17,500, a 12% like-for-like pricing growth over the full year. The lighter blue bar chart illustrates the monthly data. For the first 9 months, we saw the growth rate of price rise is slow but it picked up again in the last quarter as demand has outstripped supply, a trend we continue to see in the financial year 2024. One of the key metrics we monitor for retailers, is days to sell. The quicker a retailer can sell their used cars, the more profitable they will usually be. Over the whole year, we saw retailers turn their cars 2 days quicker than pre-pandemic norms. We expect to see resilient used car pricing through financial year 2024 and good days to [ sell ] performance for retailers. Let's move on to consider progress against the strategic goals we talked to at the Investor Day last summer. As Nathan mentioned at the start, during 2023, we have made good progress against each of our 3 strategic priorities. Our core classified marketplace continued to grow as evidenced by site visits, retailer numbers and adoption of products and services. We executed a successful product and pricing event with the launch of our first Auto Trader Connect module, Retail Essentials in April 2022. This enabled retailers to use Auto Trader taxonomy, our market-leading underlying vehicle reference database to create accurate answers in their existing systems with real-time stock updates between retailer systems and Auto Trader, to drive better operational efficiency and an improved consumer experience. Retailers continue to take up more of our prominence products despite a buoyant market backdrop. This gives us some confidence that we can continue to grow uptake of prominence even in a robust market. On the new car side, the number of retailers on our new car stock products grew by over 100 retailers despite the loss of retailers for brands that have moved to agency. This sets us up well into financial year 2024 as we expect to see new car stock gradually return. Our data and platform is increasingly important for our retailers and partners, and we have seen strong adoption of our data and technology services from industry technology providers, retailers and manufacturers. As we did last financial year, we have embedded a new Auto Trader Connect module into this year's events, which I will talk to shortly. We are also making progress in bringing more of the car buying journey online [indiscernible] Deal Builder and the work we are doing to integrate Autorama. We'll cover a few brief highlights on both shortly. Over the year, consumer engagement has remained strong. We have maintained our position as the U.K.'s largest and most engaged automated marketplace for new and used cars. With our share of total minutes among our main competitor set as measured by Comscore remaining strong at over 75%. We were 7 times larger than our nearest competitor. Over the year, we saw cross-platform visits increase 1% year-on-year. However, it's important to appreciate the differences in performance in the 2 halves. You will recall that at our half year results, our audience was back 10% and yet we have finished the full year up 1%. This is due to a very strong second half with record-breaking consumer engagement in January and then again in March. We've included in the appendix a slide which shows our year-on-year audience performance by month. Both visits and minutes were up significantly versus pre-pandemic levels, up 24% and 16%, respectively, versus 2020. The chart on the right-hand side shows the total minutes spent across an expanded set of competitors, retailers and manufacturers. It shows that we continue to have a significant lead in terms of both volume and engagement against both our closest competitors and all other marketplace participants. Our traditional competitors have not changed significantly over the past few years and we have not seen new entrants or players exiting the market. We continue to be significantly larger than those retailers who are large enough to appear in Comscore and all manufacturer websites combined. Moving on to consider electric vehicles, a growing and increasingly important part of our core marketplace. We are focused on extending our lead wherever we can as the industry migrates and car buyers switch to electric vehicles. On the supply side, you can see that the share of electric new car registrations is growing, albeit slowly. And the share of electric used car transactions is accelerating but from a very low base. We offer consumers the widest choice of electric cars with over double that offered by our nearest competitors. We will continue to see growth in demand for electric vehicles. You can see on the third chart, the growth in the share of engagement with 0 to 5-year-old used electric cars. In 2019, just 1 in 100 advert views were for electric cars, now it is 1 in 14. This is a good signal of the level of consumer interest in making the switch. We continue to invest in content to ensure we are the #1 destination for car buyers interested in purchasing an electric vehicle. There are still a number of barriers for buyers looking to make the switch and we have an important role to play in breaking these down. We are focused on informing consumers about electric vehicles through our social media channels and are working to raise awareness through our monthly electric vehicle giveaway, which has achieved over 3.6 million entries this year. We have also improved electric vehicle charging information to help give consumers simpler, more consistent information to make informed decisions. We are working closely with a wide range of stakeholders to share our data on electric vehicles. This includes retailers, manufacturers, funders, the energy and charging sector and government to ensure they have the data they need to make informed decisions on what is still a relatively nascent industry. Many of you would have seen our Road to 2030 Report, which we issue 3 times a year. And if you haven't, we've included a link to it and other market reports in the appendix. This is becoming the go-to source of information on progress, barriers and a call to action for the industry and the government on what still needs to be done to support the transition. We will continue to play an active role in driving change for the industry and shaping an electric future for car buyers. We continue to invest in the technology, data and product platform, which supports our core marketplace. As part of the April 2022 event, we launched Auto Trader Connect: Retail Essentials, which enables real-time stock management and makes our vehicle taxonomy available to retailers through our own portal or our platform via APIs. We've been also using Retail Essentials to ensure that imagery and video content is always up-to-date. At the end of March 2023, we had integrations with over 90 partners. As part of our April 2023 pricing event, we launched the second module of Auto Trader Connect, Valuations. This makes our live retail specification adjusted valuations available for retailers. This data is unique to Auto Trader based on over 0.5 million observations we see each day across our platforms and our algorithms, which capture and learn from these observations and share the latest live market data back to retailers and buyers through our price [ levers ] on Auto Trader. For retailers, there are multiple benefits to pricing to live retail market data. Servicing this data enables retailers to optimize pricing, improve speed of sales and drive performance in their businesses. For car buyers, it also provides a consistent, central and importantly, a transparent view of pricing, which is an important step to support buyers to complete more of the buying journey online. These data can be accessed either through portal or our API platform, enabling third parties and retailers to directly integrate valuations into the systems they use to manage their businesses. These modules are an important part of how we are enabling retailers to use our platform to power their businesses, which strengthens our marketplace and is a key enabler for digital retailing. Moving then to talk to the outer ring of our strategy, digital retailing. Our approach to digital retailing is to be, car first, and to enable any retailer, including manufacturers and leasing companies to sell their vehicles online. With this goal in mind, we will initially offer 2 digital retailing consumer journeys on Auto Trader and used car Deal Builder journey and an online retailing journey for consumers to lease a new car. Let's take them in turns. Firstly, our Deal Builder product shown on the slide. Deal Builder uses Auto Trader technology to enable car buyers to do more of their car buying journey online, including valuing their part-exchange, applying for finance and reserving the car. Importantly, all of these interactions can easily be carried out either online, over the phone or in person at the dealership. Currently, these tools are available in our Auto Trader Retailer portal but over time, they will be made available via APIs as a part of our platform strategy, enabling these transactions to be picked up in retailers' existing sales systems and processes. In summer 2022, we started a Deal Builder trial with a handful of retailers and we've been encouraged by how the trial has performed to date. Towards the end of the year, we started to gradually scale the number of customers on the product. And so by the end of the financial year, there were over 50 retailers live. We saw over 200 deals submitted in the year and have delivered over that number in the first 2 months of this financial year. We are encouraged by the percentage of deals that have converted into a sale and the positive feedback from both buyers and retailers. We're seeing strong buyer engagement out of retail hours, 7 days a week, which supports the case that this should build sales capacity for our retailer partners. We will continue to scale the number of retailers on Deal Builder and iterate the products during this financial year with the goal to monetize some retailers by the end of financial year 2024. Secondly, let's briefly consider our new vehicle leasing journey. As we've talked about before, there are significant structural changes impacting the new vehicle market in the U.K. These changes present us with an opportunity to play a more significant role in the new vehicle market and were part of the strategic rationale behind the acquisition of Autorama, which completed during the financial year. During the latter part of 2023, we began to work to integrate Autorama and successfully tested driving traffic into the Autorama journey. In the past few weeks, we have completed the work to enable the full checkout of a leasing deal on Auto Trader. By bringing our brand, the scale of our platform and continued products improvements throughout financial year 2024, we are confident that new car leasing sales will grow whilst also delivering efficiencies in consumer acquisition costs. I'll hand back now to Nathan to summarize the outlook for 2024.

Thank you, Catherine. Now for the outlook. We have a healthy core business with a good runway for growth, which we continue to prioritize and focus on. In parallel, we're strengthening that core by increasing engagement with our platform solutions and growing the number of retailers using our digital retailing capabilities in Deal Builder and new car leasing. For this reason, we are confident in the year and years ahead. This financial year, we expect another good year of growth in trade revenues with similar ARPR growth to FY '23, once again driven by price and products. We expect a slight decline in retailer numbers, which is mainly due to the disposal of our Webzone business. The smaller areas of the Auto Trader business are expected to be flat to low single-digit growth year-on-year. We are, as Jamie said, looking to significantly reduce Autorama losses through leveraging the Auto Trader brand and platform to transact more new cars on lease deals and to limit costs. Group central costs, which solely relate to the Autorama acquisition will fall from GBP 44.1 million to GBP 18 million. These changes, combined with maintaining core Auto Trader margins at 70% mean group margins will increase year-on-year. Finally, our capital policy remains unchanged. So that concludes the presentation. We'll now move to Q&A with analysts in the room. As I always say, could we please try and keep the questions down just to make sure we can get around to everyone and Jamie will coordinate.

Yes, we'll start with Giles and work around on the front, then work all the way back.

It's Giles Thorne from Jefferies. First question is on digital retailing and Deal Builder. It would be interesting to know, of the 200 cars that went into Deal Builder in the last financial year, how far did they get through the process before being handed over back to the forecourt? And secondly, on monetization, you've been quite coy, for want of a better word, around how you're going to monetize Deal Builder. But if you had monetized Deal Builder in a way you're thinking about monetizing Deal Builder, what was the incremental revenue here from those 200 cars have been? And second question, speaking about digital retailing, the turn to C2B marketplace is obviously a very popular topic at the moment. We've spoken about today or you've spoken today about some of the constraints that dealers have on getting cars through the traditional channels. So C2B marketplace seem to be increasingly relevant and Motorway is out there, with Motorway Pay now, which is addressing some of the scalability issues. So it looks like they're here to stay. I guess one for you, Nathan, what's your latest thinking on the role of a [indiscernible]?

Do you want to take the first one?

Yes, I can take the first one. Let's just share around. Catherine can maybe take the third one. So on those 200 transactions and the 200 we talked about that have happened in the first 2 months of this year, they have -- those transactions have been completed now, completed from a Deal Builder perspective, means ultimately that they paid a reservation fee for their car. It doesn't mean you've necessarily done a part-exchange quote and finance quote. So I'd say the majority of them, the reservation is the key aspect. But many of them will go through parts of the other processes. So we're seeing quite a lot of people will get to the point of checking their eligibility for finance, finding that it's all right but then wanting to go and see the car before they go to the retailer. Now that's why the build has been so complex, is because we've designed it so that actually the consumer can be provided that we get to that end point of reservation and that's kind of the flag to us that a sale is kind of highly likely, then we're okay if the rest of it doesn't necessarily go all the way through because that can then be picked up by the retailer in our systems and completed on the forecourt. So all of those transactions have been through that. It's fair to say the work that we haven't necessarily done yet, is it's a much, much higher number that have gone into Deal Builder and haven't necessarily got to that completion point, which is quite normal in these processes. But we think there's still quite a bit that we can do given the complexity of the car buying journey and the propensity that we see or the desire people have to do more of that online. But we're pretty happy, actually, I think, with how conversion is kind of looking and how it's being picked up in dealerships.

Yes.[indiscernible]

CFO's questions.

So I think [indiscernible] tried to lay it out a little bit at the Investor Day that we gave in September. I think -- and I don't think there's anything significantly changed from what we've learned from then to now. The belief is that the charging model is likely to be more transactional than subscription. So a charge based on a deal being complete, which Nathan said is what the [ 300 ]number is. We talked about an average yield equivalent to what we get on advertising subscription, so 90 to 120. So you don't -- just to manage expectations, you're only looking at sort of 20,000 from those 200 sort of early days. But that's still how to think about it. I think that's still the kind of quantum. Obviously, we're going to learn more through the next 6 months. And as Catherine said in the presentation, the target is still -- it's unlikely to be big buying all customers, but some of these customers that we're bringing on at this stage, look to monetize in the last quarter of this financial year.

And on C2B, very big [Indiscernible] level. The thing that we care about the most is that those cars or vehicles end up staying in our ecosystem that, they end up back on retailers [Indiscernible]. And that's very much what those models are facilitating the market backdrop and write off has been very [Indiscernible] and that had very constrained supply environment, which means sourcing their top priority for dealers, and we've had a backdrop for consumers where car valuations have been going off and so consumer awareness of the value of their car has definitely heightened. So they are more likely to be shopping around sort of different ways to sell. So consumers, I think, the different options you can part exchange your car, with a retailer, you can sell it through a buying service. You can go to one of the C2B model or you can sell privately. We still continue to very much dominate the top of the funnel for all of those journeys. So our valuations journey on Auto Trader still sees the highest volume of any of those peers. And the vast majority of consumers are still coming to Auto Trader to validate and check their valuation. We then obviously today offer them a private selling journey, and we offer them a route into that part exchange journey with a retailer, and we have a small instant offer proposition. Our priority is continuing to own that evaluation space with consumers and to be the authority -- the trusted authority and where you value your car. I think that means and gives us options in the future as to the other roles that we could play in the ecosystem and then perhaps connect to us a bit more the buying of cars for retailers as well. But overall, the cars are ending back with our -- ending up back with our retailer; say for now, we're seeing and retailers, I think, are seeing it as a useful source of supply in what is still a very constrained market backdrop.

Just by way of follow-up. On the deal build question, and I appreciate it's very, very doors. But are any of those 50 dealers saying they're thinking about reallocating human resources within the dealership as a result of the product?

A big piece of research on this. We break the deal builder and other retailers. I think so far, the way retailers talk about it, it's adding an extra sales. It's enabling them to do more with the same resources. So with their physical focal footprint and with the sales team they have, they can sell more cars without needing to scale their cost base. We are seeing first still, at the moment, a relatively small example of the retailer saying, I've embraced these processes and actually it's meant that these people that used to be doing this job and now doing something else or I've been able to reallocate resources or even reduce resources. We are hearing that, but it's in the minority of cases. The more they're talking about it as a platform for future growth rather than like immediate and direct cost cutting opportunity today. But I think that reflects the scale, as well at the moment it is still -- we're growing and scaling the pilot, but for any individual retailer it's still the minority of their transactions that are going through that journey. I think as that percentage grows, the efficiency and the operational cost argument probably grows as well.

Adam, you can go ahead.

It's Adam Berlin from UBS. I've got a couple of questions. So 10% ARPU growth in FY '23 and the guidance for similar in FY '24 is 10% ARPU growth to new normal. And if you can keep doing that, is there upside to the 70% margins in the core business, if you can deliver that? And the second question is, can you just take us through the product ARPA elements for FY '24, I think it's about 6% roughly of the 10%, how much of that is even and how much of that is to build other products?

Yes. I can take back to those. So I'm not sure 10% in core marketplace ARPA growth is the new normal. We sort of said at IPA that we believed it was possible to do consistently mid- to high single digit, and that's what we've delivered on. I think we clearly had a couple of a very strong -- a strong year with an expecting of another one, but I'd still be saying over the long-term core marketplace mid- to high single digit. We did say at the Investor Day that we hope the digital retailing deal builder could be incremental on top of that. But I think we would need to find out, it's not going to be in FY '24. We need to see how we answer that question. How that product develops to have real conviction over that. And then the second question, the product lever is a very similar breakdown to this year. So about half of that we expect to be made up from prominence products, which is package upsell market extension, the pay-per-click product, as much of the other half made up in the event product and again, some smaller contributions from [Indiscernible] data. We kind of gave a number in Charles' answer deal builder hopefully have some contribution, but not at a meaningful level.

It's Will Packer from BNP Paribas Exane. Three for me, please. Firstly, you've guided for flat stock ARPU. Could you help us think about the sort of medium-term stock ARPU outlook? We're now annualizing or we're 3 years on from the very weak new car market off COVID, and I imagine, therefore, that supply constraints will remain a factor. Is flat stock ARPU, good outcome on a 3-year view from here? And what are the implications for general ARPU growth? Can you sort of use the price little bit harder to compensate for that? Or I being too pessimistic? Secondly, within the early experimentation deal builder, could you talk through how car finance is progressing? How are you ensuring the interest were aligned with the dealer typically digitally savvy dealers make less on the metal and more on the finance, is that a point of contention or attention? And any early indications as to how you're monetizing that at this stage? Or is it an optionality in the future? And then just coming back on the operating leverage point of the core auto trader, how should we think that in the kind of longer term? Do you have the capacity to expand margins further? Or is future growth to be reinvested?

So flat stock half of this year expectation, I think people track and monitor the live stock listings very closely. Everyone will be aware that it was quite weak coming into the end of the last financial year, and we can -- April and May starting to show some signs of improvement, but still down year-on-year. And you mentioned the kind of historic view, we have been historically much higher volumes of stock. So I think the hope is we started at weaker level. We hope it will improve through the year, netting off to be flat. But I think the hope if you think FY '25, '26 is it might only be small, but the stock is a small net positive over that time horizon, just on the basis of being at historic lows and having a belief that it improves at some point. The only sort of caveat is customers have held these lower inventory volumes for such a long period of time. Is it the new normal? That's why I caveat that there might be a small uplift to that stock offer. And we've seen some big swings over the years. I would be cautious about assuming a big tailwind to offer. And I don't think we're expecting to kind of offset anything through prices sort of dealt with independently when we're thinking about the events and we're thinking about the value we're putting into packages, we're thinking about the value we've delivered over the 12-month period. So that will continue to be done in isolation from what happens with the other 2 levers.

Yes. And the only observation I'd add to that is, you'll remember, at the time of the IPO, we kind of said the mid- to high single-digit growth of which 1/3 will come from stock -- would come from price. Well, not doing that anymore, and we're still kind of achieving the overall growth rate, just more of an observation. So I think we've definitely got a good cadence around product, and we're pretty clear on the products. So we're good at selling the products that will be harder to push. On finance, I mean, starting with the last question first. In terms of monetization, as it is at the moment, we're fully focused on the bundled product that is deal builder. So it is part exchange, it is finance and it all finishes with reservation. We have thought previously and had stand-alone trials around finance. But when you think of the product of finance, in order to work out what you need to finance, you need to understand the value of the part exchange and normally put down a deposit, which sounds a lot like a reservation. So actually finance itself sound a lot like digital retailing. So I think it falls into the answer that Jamie gave around deal builder more generally. And I would say specifically, finances where retailers do make quite a lot of the money. So you are right. I think there are dealers who made much money on the metal margin, if you like, and they'll make it all in the finance. But even if you're making money on the metal margin, you're still making a lot on the finance as well. So I would argue that it's a bit of the process that's most complicated. It's a bit of a process people would quite like to do at [Indiscernible] and not holding to one lender in the dealership. It feels like it's a place where we can add a lot of value for consumers and a lot of value as Auto Trader. And for that reason, I think it will be pretty important when it comes to monetizing deal builder. In terms of its attractiveness to retailers, I'd say most retailers are wanting to sell finance if they have kind of license. So I think there's an opportunity for us to look at retailers that currently operate finance because they're not regulated, although that feels like it's a little bit down the track. For the retailers that are very heavily financed orientated, actually, our proposition at the moment isn't quite right. And that's because not only are they very heavily dependent on finance, but any of you that have bought a car recently [Indiscernible] insurance or [Indiscernible] proposition capital insurance, warranty, those value-added products are quite important to them as well. So I think those retailers might well come on with finance, but they'll be even more interested if we can help them bundling, not present those other products to consumers as well because they are the combination of those other 2 or 3 products can be as big as big as finance.

Anything to sell finance is, obviously, it's -- we're now integrated with 19 of the retailers, lenders, about 40%, 50% coverage, but we are working to get all of our lenders -- that all of our retailers work with integrated through that Auto Trader platform capability, so that we can offer any retailer combination of lenders that they work with. So it's very much the retailers finance partner and products that we are promoting through the Auto Trader journey on our side.

And just on margins, I think [indiscernible]. The group margins will improve because you got the group central cost diminishing and the loss is also diminishing. I think an Auto Trader level, the guide is to hold flat at 70%. I think it's fair to say that a lot of the growth that's coming through ARPU does come through a higher margin. I think with where we are with the deal builder, the 50 customers that we put on, we're pleased by the tech completely scaled. I think it's with only 50 will be cautious around the sales resources required. There's actually a relatively low touch point, also from a consumer's perspective, we're at such low levels. I think we just want to hold if we need to put more cost in to make that a success, we can see that within 70% margin guide, and we just want to make sure that we're not under committing on that front before we really know what it looks like at any kind of scale.

Actually -- and just coming back on the sort of longer-term stock ARPU is the way to think about it that supply will remain constrained, but demand will normalize and therefore, that's good for inventory levels?

I think we have -- because of the volume of transactions that have been lost over this last 3-year period that demand remains reasonably robust, then it's actually volumes of new car registrations that then frees up part exchange, frees up leasing, aging leasing inventory that comes into the retail space as much.

[Indiscernible] from Credit Suisse. Just 2 from me. A number of OEMs are already making changes to their sales and distribution models, which include a pivot to an agency model or even online direct-to-consumer models. How do you see this impacting your customer base? And I guess, on a related note, are you seeing any signs of consolidation in the new or even used retail space?

So on agency and new cars. So I think we're saying firstly that only about 50% to 60%, about half of the manufacturers have currently said that they are either moving to you or are looking at moving to an agency model. So it's not all manufacturers for all makes models of cars. We're also seeing some of the new entrants particularly some of the Chinese brands, many of them are actually adopting the traditional franchise model rather than moving to agencies. So I think the new car market is still going to be characterized like a mix of different retailing models. In terms of what it means for our retailers, firstly, I think it means helpfully perhaps for us, they are undoubtedly going to be more and more focused on the used car businesses. Building those out, we've seen the average franchise retailer extend the average age profile of the car that they're holding during the last years, and I imagine we'll continue to see that growth. We're also seeing for retailers where the manufacturers have leased agencies, they are still playing a very important role. They are still often helping with what's not paying for the advertising, helping with some of the [indiscernible] of how you get [Indiscernible]. They're still very much handing the whole -- handholding consumers through the journey, very involved in finance. So the brands that have gone live, the retailers are still owning the part exchange journey, for example. So a lot of products and actually the parts of the journey that Nathan was just talking to, were all very much still supported by and facilitated by the retailer. So we are seeing agency in terms of balance sheet position of retailers, relative risk is clearly quite different. But actually, the profit opportunity and the role that they're playing still remains important. Second question was then on consolidation. So we're actually still seeing the AM 10 and the AM 100, which is the top 10 biggest and the top 100 biggest groups in the U.K. They continue to have a smaller share of the market today than they did 5 years ago. So actually, overall, our bigger customers are not getting proportionately bigger. That said, we have seen in the last year or so, a number of acquisitions announced, we have seen some consolidation. And I think we do expect, particularly in the franchise base as more and more brands move towards agency. Some of them are using that agency needs to rationalize networks, to drive consolidation of ownership, not necessarily of retailer locations, but actually the ownership structure and model. So we -- I think we expect some net consolidation on the franchise side. When it comes to independent retailers, we continue to see the barriers to entry to that space being as low as ever, and we see new entrants emerging each month new retailers. And I think we expect that very much to continue going forward.

Yes. The only thing I would just very quickly add to that is I think, in some ways, making sure those smaller retailers aren't left behind is a big part of our strategy, and there's an economic reason for that because they're a big part of our revenue base as well. But actually, one of the things that could have driven some level of consolidation, if you had an advantage from a brand perspective, and that's kind of -- that conversations kind of change and Auto Trades, still kind of a leading way to get to those consumers, which anyone can access. Then there is -- well, if this technology becomes important, you need to be able to sell online, then that could be another driver of consolidation, actually, we're democratizing that as well as part of the digital retailing strategy. And I think the byproduct of that is it is fragmentation. And there's a few last barriers to entry, but the way we think about it more making sure the barriers coming in are actually easy and barriers to stay in the game for -- a lot of our customers have been with us for years and are kind of put up.

Andrew?

It's Andrew from Barclays. I've got 2. The first 1 is to [Indiscernible] consolidation, and ask if you could remind us the dilution you see on a per car basis if 2 dealers consolidate. I remember a chart you put up maybe 5 years ago, I could be wrong on that, but kind of showed distribution of cars and it's something like a 50% gap between for most expensive car and the least expensive car and [Indiscernible] to dealers, but help us understand how that distribution has changed and how we might think about the headwind to your revenue if we start to see consolidation.

I mean, I generally don't think it's changed -- changed, since we put that slide up. You do tend to find the acquirer and is always going to be a rule of thumb that often tends to take higher-level products, it might be slightly larger. So kind of any kind of volume yield that's offset. It's often taken back by incremental product. So there is some headwind, but I don't think it has proven to be considerable at an individual customer level, and the customer volumes are coming through at such a low level, but it hasn't just haven't seen it in the numbers.

And it is also worth saying that customers tend to be consolidating, tend to start by being big, and they're looking for someone biggish because they wanted to make a difference. And [Indiscernible] car is very steep through to 100 cars, but then it's not flat. I mean, it's noticeably flatter. So actually just percentage difference between the price points as you get up above 100,000, 200,000, 300,000 cars, does tend to be much, much worth. It's a lot smaller than the difference between, say, 5 to 20 cars and the risk of consolidation down that end of the rate curve, I think, is very, very like impossible to almost make the argument for that, which car will [indiscernible] up.

That's helpful. And then the second one is to try and pin you down a bit more on fiscal '25, which I appreciate is still some way off. But the language you used at the CMD in September was that you aspire to be growing double digits because the deal builder would start to contribute incrementally. I don't think you're walking away from that, but Jamie's language was maybe a bit softer than I might have expected. So as it stands today based on what you see for deal builder, how confident are you about core Auto Traders ARPU grow double-digit in fiscal '25?

That's a good question. I mean I think -- I don't think we're walking away from that. I think a lot a lot of hinges on the kind of next 6 months of what we see from deal builder. We're really pleased with the progress that we made. We feel like we're moving things forward. There was commentary in the script around. We got to a certain point at the end of March, but we've seen things pick up a little bit more in the first 2 months of this year. So I think the kind of mid- to high single-digit ARPU [Indiscernible] for core marketplace feels achievable. And then deal builder will be some contributing fact to the fiscal '25. They may see us retain these kind of growth rates. But I think we just want to see what happens over the next 6 months. And you've got lots of things in there. The stock -- what will the stock [indiscernible] in '25, what will the event look like on the first of April 2024. There's some unknowns that I think to pin us down on that double digit. I think we feel like we've got loads of the component parts that gives us a good chance of getting there. I don't think we feel we need to be pinned at this point in time.

It's Pete from Morgan Stanley. Three for me. So firstly, on FTEs on the core platform. So I think you added quite a decent amount in the second half, especially given the divestment of [Indiscernible]. So can you give any sort of what are your plans for adding the [Indiscernible] in 2024 from the second half levels? That's the first question. And maybe like where are these people going, also relates to the margin topic that has been discussed. Then the second question is on Google's vehicle listings. Have you heard anything regarding this, especially maybe from dealers or dealers asking questions about this? And any thoughts on this would be helpful. And then the last one is on Autorama, can you give some kind of sense on to what degree has the Auto Trader platform kind of boosted the KPIs that you see on Autorama or Vanarama. So whether you want to talk about traffic or volumes, like what share is now coming actually from the Auto Trader platform as opposed to the Vanarama site?

So FTEs, so you're right, we've added a number into the Auto Trader FTE count. We do have and have had for quite a long period of time, quite a large, I think by the scale of the organization as a whole gradual and apprenticeship intake that across the board into tech, into operations, into sales and also the smaller support areas. So I think the bulk of the increase does predominantly come through that area, although we're also always recruiting developers, designers for engineers across the spectrum and a little bit more senior sales [Indiscernible] onboarding deal builder, which is worth pointing out the early careers because if you look at the average salary, it's maybe not as high as you'd expect because those people are diluting that on an average basis. But that's where the uplift is coming from predominantly.

On Google and the vehicle listings. So yes, it's launched in the U.S., Canada and Australia so far. And the product supposed to be coming to the U.K. in 2024, so next year. In terms of Auto Trader and the impact on us for at first and talk about our customers. And for us, the vast majority of our traffic, more than 90% still comes directly to us. We don't pay for it. So we don't have a huge dependency on Google as a marketing channel. We also see on our platform, and I guess, in automotive more generally, the -- back to that taxonomy point and the very structured data set that we work with in automotive, typically, consumers search queries are relatively specific, and they are looking very clearly for a certain type of make, model and often a derivative level and the ability to contextualize that and serve that up in 1 shopping position is quite different and difficult to other categories. And we've obviously spent a lot of time with our peers in the markets where it has launched, and they haven't seen a particularly big impact either on their marketing mix or on their customers' marketing mix. For them, some of them have tested with substituting out some PPC spend, to spend on Google vehicle activity is not performing as well yet of the PPC channels. In terms of our customers, we've not had any feedback from customers on it. I don't think customers are either hugely excited or worried about it either way. But I'm sure they will consider it as another part of their marketing mix and potentially look to substitute out some PPC spend for the product. I think the performance of that, I feel, is still very much to be proven. We haven't heard big feedback from those other markets that it's transformed how people search for cars or that it's delivering a dramatically different buyer journey from the one that we're seeing today.

Yes. Another question on Autorama. I think the straight answer to your question is Auto Trader today is a very meaningful contributor of traffic to vanarama.com their website, but it doesn't represent a majority of the transactions that are happening either there -- and the transactions that are happening on Auto Trader are kind of the biggest chunk of those that are there. But I think that's more a function of the journey. Where we're heading to is the answer to question will be all the transactions are driven by Auto Trader. It's just a matter of when, where we are in terms of the integration as we started with display like advertising within Auto Traders core search, lots of volume, but generally a low converting unit, then we've -- in parallel, we we're building a checkout journey, which we've launched within the leasing, if you see, the little leasing tab in Auto Traders, so low traffic, but very focused journey, and we've kind of done a technical tick, yes. We can make that work, and we can do an end-to-end transaction. The next obvious step is then, well, how do you put that checkout journey in those listings into the core Auto Trader search. They have the proper experience in with all the traffic. And that's when we'd expect to have the volume. So up until now, we've more -- it's been more of a technical milestone that we've been looking or technical and customer experience milestone that we've been trying to get over. But the fact that we're a drive a very large driver of audience into their business with it, we would consider to be very low converting, gives us some encouragement that, yes, we should be able to get there.

Bridie from Stifel. Just one question following on from the -- on Autorama. Obviously, supply issues are a bit of a headwind at the moment. But I was just wondering if you're able to kind of provide some context perhaps sort of looking through that on the consumers' appetite in general for the leasing model at the moment, rate rises, price changes and all that sort of stuff? Have you seen any shifts? And I suppose what I'm getting at is what do you think it will take to get that business kind of coming?

I mean, I can take that one and perhaps we can all add. So I think -- and there was recently a McKinsey article and this as well, if you want to get an independent point of view, I think leasing is putting all of those things to one. So if you take the interest rate head on, the alternative way people buy most -- but most new cars is PCP. So it is again influenced by the same factors that influence the lease, which is residual value and interest rates. Leasing tends to be a little more cost effective, and that's because on a PCP agreement. If you've got positive equity, you get the benefit of it in a leasing deal, the leasing company gets the benefit of it. So they tend to be better. If you take the most extreme deals that Autorama do is that leasing companies and personal leasing, particularly those cars tend to be on terms from the manufacturers. So actually your monthly payments will tend to be reasonably good. Now I wouldn't argue, I think where we're heading is that we want to just be able to offer that as a PCP or PCH and there's very little difference other than that change in ownership structure at the end. The other point with leasing that I think is going forward, particularly at this stage of the cycle is it does lend itself quite well to electric vehicles because a lot of consumers still have and from what we've seen in our data and what we've talked about in some of our market reports, they have a good reason for this. There is uncertainty around residual values and at least completely takes that completely takes that away. Then there's just the broader trend of we do believe -- we don't necessarily think cars will move full subscriptions and you change your car based on the weather outside. But we do think there is a good case to say more and more being bundled into a simple monthly payment, would reduce the complexity in cognitive load that people tend to face when they're buying a car. And the leasing does that typically with service, with insurance and with the payment. So we will probably say structurally it's probably well positioned. But at the moment, it is coming from a small place. So it is growing and has been growing over the last number of years, but from a smaller base.

It's [Indiscernible] 2 for myself, please. Just from the data that you see, is there any transactional frequency differential between EVs and ICs? And do you think going forward in a market where there's a higher proportion of EVs, there's going to be structurally lower transactions? Two, I think you previously said the transition to deal builder is analogous to going from a magazine to a website, I guess, in terms of trial thus far, have you seen anything that would suggest there's unrealized pain points in the user journey that's going to make it easier or more difficult transition relative to the magazine to online journey?

That's EV question. So on EV, I think if we look at the data set today, we'd see a slightly higher transaction frequency, but that's because they're nearly all new cars. And so most electric vehicles that have been bought so far have either been bought on a PCP deal as a new car or taken out as a lease where there is a natural trigger for a change cycle. So speed of sale today, I think, will be faster just because of how they've typically been purchased and funded. I think given it's still a relatively nascent product and given the biggest change so far, I think, has been the shortening of the product cycle. So we used to see car big like [indiscernible] car make models, probably once every 9, 10 years, I think, with electric vehicles because of the importance of the battery technology, those cycles is definitely reduced and the generational shifts that we're seeing in kind of 2 to 3 years are huge in terms of performance, battery life, range that you can achieve from that from the product. So at the moment, as we're still in that kind of early adoption, moving into early majority phase of the product cycle, I think we'll see and continue to see a relatively quick change cycle. And I think what you have to -- you have to believe that for the change cycle to be structurally longer for an electric vehicle that product that we experience, the brands don't do a good job of convincing consumers as to why the next product is attractive, and why you really should want an upgrade or different in-car tech or a different solution. And as yet, we haven't -- if anything, I think we've seen probably a bit of the opposite, but it's a space we continue to watch very closely.

And on the kind of change, I mean, I'm billing that comment of the change of going from magazine to website, going from subscription marketplace to more transactional is as big a change. I think the thing that we've been pleased with is the software build. We've got fantastic developers engineered tech team that's probably gone as well as we could have hoped. Still, the change though is culturally how you go from a big audience or a big customer base down to an individual completing a transaction. We can now gain learnings. We've got brilliant people that are working on it, but that mindset shift and the things you have to optimize for is just that a little bit different, but we're working through them. It will still -- it will take time. I think there's every hope that we're as successful as we were with that kind of first transition that we referenced.

The only thing I would add to that having been around at the time is the difference between the print to digital migration is that we tried to put printing one place and said that's the old business and really aggressively grow a digital business, which ultimately kind of beat the print business up along with other competitors that were kind of caught up as we grew digital where this is much more complementary. So I think when we use -- very intentionally using words in the outlook like we continue to see a good runway for growth in our core, and we see those things as incremental. And we will always preserve that call. We may even use these things to make the core stronger in some places, which we have been known to do historically. So it's more complementary than it is substitutional. The only other small point I'd make is I joined in 2007 to help make that print to digital transition take place and we finished in 2013. So we're actually -- [Indiscernible] timelines on this are far more ambitious than what ours were potentially at the time.

We might have time for one more for Catherine.

Catherine from Citi. So I've got 3 more, hopefully, quite short. One is just could you remind us what your split is of independent versus franchise within your customer base. The second is on the OEMs and move to agency. I just wondered if you could give a bit more detail around the conversations you're having with those OEMs in terms of their behavior around spend and product uptake. I think you talked about that potentially being maybe incremental spend coming from those given they're going to be taking [Indiscernible] risk? And then finally, quite a broad question, but just wanted to get a bit more detail on sort of use of an implementation of AI, especially if you talk about moving from large audiences to more personalized. And if Google is launching its own product, is there a sort of longer-term risk around how consumers might search for cars or used cars wide platforms, look at your views on that?

Yes. Talking on customer split. So I think we have put out in various points and it kind of picks up as the retailer base has grown, has been reasonably represents across the base. So we've got just over 7,500 independent customers, over 4,000 franchise customers with the balance made up of non-car retailers.

Yes. On manufacturers and the agency model. So we do feel as manufacturers increasingly take the risk of those cars on their balance sheet and are responsible for pricing them, for advertising them, for distributing them, so that we can play a really important role in helping them with that, not just through our advertising products both through our data, through our platform and some of the technology we were talking about earlier. And we are talking to all of the manufacturers that are either selling directly to consumer or have moved agency and it's early days, but we're confident that all of them will end up advertising on our platform in some form in the coming days and weeks. In terms of the product proposition, if you think about the model that works and should work best for those customers. It is a version of our market extension centrally held products because they're going to be acting as a single retailer effectively from one location and they go to one national reach for this product. So in terms of the yield, in terms of the opportunity, whilst more concentrated in a smaller number of partners than we used to, and we do still think over time, it could be a growing new revenue opportunity for us, but very early days so far.

And on AI, I'm not sure that is a short answer to the question, but I'm going to give it a go. So we invest a lot in data science. We have a very strong data science capability within the organization. We did that. It wasn't always the case and is taken ages to get there, but we also have the infrastructure so the data platform, so you can actually get to the data and it's curated in the right way that you can then apply AI models over the top of it, which we do. So the way artificial intelligence shows up in Auto Trader is when we talk about things like spec adjusted valuations, we talk about the pricing algorithms that we give our retailers. We tell them the predictive speed of selling a particular vehicle in their area, you can't do those things on average because the cars are all unique. So we have to use machine learning to do all those metrics on the retail side. On the consumer side, we also use to actually our search when you'll see our default search, source order is relevancy. I am [indiscernible] that we just put that in order based on how they pay us. That's not the case. That's all the base setting of that listing to which package is applied is a relevancy algorithm, which again is all driven by machine learning and price lags. And most of the tools that [Indiscernible] consumers and retailers are driven by AI, and we've got good at it over time. We're also -- we don't use a lot of large language models, but we've got a collaboration with the Manchester University, where we do a lot of work around neurolinguistic programming on which the larger language models are made up. So we're in a position to be able to deploy those things if we saw a good news for them. As for the longer term, I guess, the opportunity and the risk. On the opportunity side, if you think about what we're trying to do for retailers, we're trying to move the thing from being done manually to being things that are done digitally and in an automated way, broadest Auto Trader kind of view and a view of digital retailing via AI, and generally AI particularly is only a tool that allows you to potentially increase productivity more and more and more. So it feels like it's a great tool that we could bring to bear both for retailers and consumers. As to the risk, Catherine said a lot of our traffic comes to us already as it is, a lot of that traffic does come through Google. Now if other search engines get better at using AI for the text base search. We suspect that might just be a different channel that ends up coming to us, because ultimately, what people are looking for is a car that is available now for sale, but we would probably start by looking at -- if we make those improvements in our own search with those open models and why wouldn't we do that because we do have the capability to do it, that's the short answer.

Very good. Well, thank you, everyone, for joining us today. We'll call it there, and we look forward to speaking in the future. Thank you.