Ladies and gentlemen, thank you for standing by, and welcome to the Autotrader Group Plc Half Year Results. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you the call is being recorded today, Thursday, 5th November, 2020. I would now like to turn the conference over to your first speaker today, Nathan Coe, CEO of Autotrader.
Please go ahead.
Thank you, and good morning, everyone, and welcome to Autotrader's half year results for the period ended September 2020. The last 8 months have been challenging for everyone, and it's apparent that further challenges may lie ahead. I wanted to start today by thanking our incredible employees for their hard work and dedication through such a difficult period. They've supported our customers as they navigated the crisis and supported each other as our ways of working have changed radically. I feel both privileged and proud to lead an organization of such committed and talented people.
I also wanted to recognize our customers who operate in an incredibly competitive marketplace on very tight margins. Throughout the lockdown, we did not see an abnormal level of business closures, which in itself is no small feat. But to then see the speed with which our customers resume trading, with many achieving record breaking results, is all the more impressive. Everything that we have seen would suggest that Autotrader's relationship with its customers is in as good a place as it has ever been, which bodes well for the exciting opportunities that lay ahead of us. Before we start talking about our results for the first half, I wanted to touch on the current restrictions that have come into force today and outline what we are doing to support our customers through this period.
The U. K. Government announced on Saturday, 31 October that car retailers in England would be forced to close their showrooms for at least 4 weeks, joining Welsh retailers who are currently closed until the 9th November. Following the last lockdown, we saw demand for cars bounce back strongly with our audience levels consistently being 20% or more above prior year levels. This step change is due to concerns with public transport and has driven more and more people to private vehicle ownership, which regardless of lockdown restrictions is a dynamic that is likely to be with us for some time to come.
Given retailers can operate both home delivery and click and collect services, we expect that recent consumer activity will sustain a level of sales throughout November. However, there is no question that our customers will be impacted by these restrictions, particularly our smaller customers that represent a very significant portion of our customer base. We are more cautious of December where the combination of restrictions and a seasonal decline in car sales could place even greater pressure on retailers. For this reason, we have decided to support our retailer customers by making our advertising packages free for the month of December and extending credit terms for their November invoice by a month. This builds on our learnings early in the crisis when we saw that as a result of our simple, clear and supportive actions, we were able to keep our customers, keep their stock and return very quickly to normal charging.
There's no question this approach worked well for our customers as well, demonstrated by some of the most positive feedback that I've seen in my 13 years with the company. As shown in our full year financial results presented in June, the impact of going free for our customers is a £5,000,000 to £7,000,000 operating loss for each full month when we are free. It is expected that during this period, we will reduce marketing spend, but we have no intention to furlough staff or make use of government support. Now on to our results. The contrast between how we started the period and how we ended is such that we've split the summary of first half trading into 2 distinct quarters.
The Q1 from April to June, through which strict measures were in place to combat the pandemic and the Q2 from July to September when restrictions were relaxed and the car market bounced back strongly. Starting with Q1. As we all know, the COVID pandemic really started to take effect in March when the U. K. Went into lockdown.
As these restrictions were implemented, our first thought was to protect our employees. All of our people transitioned to working from home at the end of March, and we have done all that we can to support their mental and physical well-being since that time. Our next priority was to support our retailers. Retailers were forced to close their forecourts, which dramatically reduced sales. During this time, we decided not to charge for an advertising service from which our customers could not immediately benefit, so we went free for all retailers through April May.
We then offered a 25% discount in June as retailers reopened and extended credit terms for March invoices by 60 days. 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 stock offer combined with almost no cars being sold during April May resulted in 7% more cars on-site through the Q1 compared to the same period last year. We took all of these decisions early and ahead of government announcements because it was simple, clear and appropriate given our intention to support our customers, many of whom operate small family owned businesses. The customer reaction to these measures was overwhelmingly positive.
Despite retailers facing the worst period of trading ever, the average number of retailers advertising with us through Q1 was down just 2% year on year. As was expected, these measures had a material impact on our financial results for the Q1. Average revenue per retailer reduced by 76% in Q1 compared to the prior year and the decline in retailer revenue was the main contributor to a 72% decline in total revenue for the quarter. With less revenue being generated, we took the decision to reduce discretionary spend, which was primarily marketing. In addition to this, the executive directors forwent 50% of their salary and their cash bonuses for the year ended March 2020, although the latter obviously doesn't impact the results for this half year.
The remainder of the Board waived their fees by 50% or more during Q1. We furloughed around 25% of our staff for a short amount of time during April May when we were loss making and our customers were required to close their showrooms, many of whom closed their entire businesses. As we returned to profitability, we repaid all amounts claimed under the furlough scheme, resulting in no impact on our income statement. Our other costs are mostly fixed, which meant that the reduced amount of revenue generated dropped through to operating profit, which was down 97% year on year in Q1. We've been able to act so boldly to support our customers and our people through the crisis due to our strong balance sheet position.
On the 1st April 2020, we announced the placing of approximately 46,000,000 shares, raising proceeds net of all fees of 183 £1,000,000 Equity raise bid and will continue to enable us to act with a long term mindset considering the best interest of all our stakeholders. The 2nd quarter was in stark contrast to the first. As lockdown restrictions eased and retailers reopened, consumer demand for vehicles increased dramatically. We've seen consistently high levels of site traffic and audience, which has solidified our competitive position and provided the best possible marketing exposure for our retailers. Across Q2, we averaged 65,000,000 cross platform visits every month, which represents a 27% increase year on year.
This demand enabled retailers to sell cars and generate cash quickly. However, they were unable to restock at the same rate due to supply challenges. This coupled with the end of our additional stock offer resulted in live cast stock being down 8% year on year for the Q2. We returned to fully charging at the beginning of July and did so at new rates following our pricing event in April 2020. Average revenue per retailer or ARPA for Q2 therefore increased to £19.30 and was just 1% behind that of the prior year, while the number of retailers advertising with us increased steadily throughout the Q2.
Total revenue for the quarter was down just 1% year on year and we generated operating profit of £66,800,000 which was the same as the prior year. The impact of the pandemic has given us even stronger conviction that our strategy of bringing more of the car buying journey online is the right one. We've made significant progress towards this goal with the acquisition of AutoConvert and the development of our guaranteed part exchange product, both of which Catherine will speak about later. The aggregation of the 2 contrasting quarters resulted in the following financial performance for the half year. Revenue was down 37 percent to £118,200,000 Trade revenue was down 38% to £100,200,000 Operating costs reduced by 11%, primarily due to a reduction in marketing spend with our high operating leverage resulted in operating profit declining 48% to £68,500,000 Operating profit margin reduced to 58%.
Basic earnings per share was down 50% to 5.6p per share. Whilst it's our intention to return to our long term capital allocation policy as early as possible, following the recent government announcement, we will not be declaring an interim dividend. Cash generated from operations was down 50% to £66,100,000 Net bank debt decreased by £217,300,000 to £58,100,000 part of which was a result of the equity raise in April. Leverage reduced to 0.3 times. Now on to our operational metrics.
Despite an initial decline in audience, the average number of cross platform visits increased by 4% to 57,000,000 visits per month. Based on our internal measures, this is the highest level of audience growth we have seen since our IPO. Engagement also increased with cross platform minutes up 12% to 557,000,000 minutes a month. Our share of cross platform minutes remains strong at over 75 percent of all time spent across our competitor set, which is 7 times that of our nearest competitor Gumtree. The average number of 4 courts advertising with us decreased by 2% to 13,056.
Average revenue per retailer or ARPA was down by £745 to £1206 on average per calendar month, of which the COVID-nineteen discounts in Q1 accounted for 6.95 pounds of that decline. Physical car stock on-site was down 1% to 478,000 on average across the half. New car stock contributed $46,000 to that average. Finally, the average number of full time equivalent employees increased to 893, majority of this being due to the acquisitions of Key Resources and AutoConvert, both of which occurred in the last 12 months. I'll now pass over to Jamie, who will take you through the first half financials in detail.
Thank you, Nathan, and good morning, everyone. Starting with revenue. Total revenue for the first half declined 37% to CHF 118,200,000 Trade revenue declined by 38%, with the largest component of this being retailer revenue, which declined by 39%. As Nathan said earlier, much of the year on year decline came in the Q1 where we supported our retailer customers. During April May, retailers could advertise their stock for free while their showrooms were closed and were given a 25% discount in June as they reopened.
These discounts had a material impact on ARPA, which decreased by 38%. Despite the unprecedented crisis caused by COVID-nineteen, the average number of retailers advertising with us over the first half declined by just 2% when compared with the same period last year. Retailer numbers decreased through April May, as through these months, we saw some retailer cancellations, albeit lower than prior year. However, we had almost no new business customers to replace those lost. Since May, this has not been the case, and we've seen a steady increase in the number of retailers advertising on our platform.
Also within trade, we've seen a decline in home trade of pay as you go listings, although this decline was offset by growth in other trade revenue, which includes a £2,200,000 contribution in the half from Key Resources following its acquisition in October 2019. Consumer services revenue decreased by 19%. Private revenue, which is generated from individual sellers who pay to advertise their vehicle on our marketplace, decreased by 30%. This was partially offset by an increase in motoring services revenue, which is up 12% as a result of strong growth in both our insurance and finance offerings. Revenue from manufacturing agency customers declined by 43% to 5,100,000 euros In addition to the impact that the pandemic had on this revenue line, we also removed standard format display advertising, thereby improving our consumer experience.
This removal contributed $1,900,000 to the overall reduction in manufacturer and agency revenue. Now on to ARPA, live card stock and retailers. ARPA declined by 38% year on year, with the average revenue per retailer generated across the period of GBP 1206 per month. The chart on the left shows the components that contribute to the movement in ARPA compared to the prior year. As you can see, the majority of the decline in ARPA came from the COVID related discounts implemented to help support our customers.
The effect of those discounts on ARPA for the first half was £695 shown by the red bar. Moving now to the stock lever, which declined by £156 Revenue generated from stock was impacted by a lower run rate coming into the year as franchise customers were holding lower volumes. This was then compounded as we entered the first half with some cancellations and downgrades occurring due to the uncertainty caused by the pandemic, which was followed by tight supply of vehicles. The additional stock offer we ran for much of the half also reduced the opportunity for stock upgrades, although we did see some towards the end of the half as we converted that offer. The chart on the right shows the profile of live physical car stock.
As a reminder, live physical car stock includes all cars advertised on Autotrader. This means that in addition to paid for retailer stock, this metric also includes new car stock, private and home trader stock and the impact of stock offers. Live physical car stock is shown by the lines on the chart. Stock increased through Q1 as fewer sales were made by retailers when their forecourts were closed, and our additional stock offer allowed increasing levels of inventory to be advertised on our site. Retailers reopened their showrooms in June, which was met with high consumer demand, but during this time, customers have had challenges with the supply of stock.
This saw the number of cars advertised reduce as sales were made through Q2 and our stock offer promotion ended. Offsetting these ARPA headwinds were positive contributions from both price and product. We executed our annual pricing event on the 1st April, with those rates coming into effect once we returned to charging in June. Price contributed £49 of growth, which equates to a 2.5% increase. For the benefit of doubt, the price lever shows a full 6 month impact of that price increase, with the impact of retailers not being charged shown through COVID related discounts.
Product contributed an additional £57 year on year. Much of this product growth was a result of embedding more of our data and insight with customers, which was done as part of our annual pricing event. Three products were made available through our packages. These were an upgraded performance dashboard, the inclusion of our entry level pricing tool Retail Check, and the new market insight tool. Catherine will talk more about these products later on.
There was also growth in our new car advertising product with over 1500 paying retailers at the end of September 2020, an increase of 50% since March. The penetration of our high yielding advanced and premium packages was stable at 22% of retailer stock. However, revenue generated from our pay per click prominence products reduced, the impact of which was predominantly in Q1. With a decline in revenue, we took sensible measures to control costs in the first half. Total costs reduced by 11% to €50,800,000 with that saving predominantly coming through marketing, which is the main discretionary cost of the business.
Marketing spend for the half reduced by 65 percent to $3,500,000 which was equal to 3% of revenue. People costs increased by 7% to €30,200,000 The increase in people costs was primarily driven by an increase in the average number of full time equivalent employees, which increased by 12% to 893. Much of the increase in headcount was down to the acquisition of Key Resources and Autoconvert, which contributed a combined 74 FTEs to the average for the period. The average cost per employee decreased by 4% due to a reduction in performance related pay and as a result of the executive directors and the Board foregoing 50% or more of their salary and fees from April to June. Underlying salary costs continue to increase as we invest in the best digital talent.
Other costs, which include data services, property related costs and other overheads, decreased by 10%. The decrease was primarily due to lower overhead costs, including lower travel and staff consumables. Depreciation and amortization reduced by 6% to 3,100,000 dollars Capital expenditure in the period was 2000000 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 products 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 down 37%, costs reducing by 11% and a £1,100,000 contribution from our share of dealer auctions profit, Operating profit was £68,500,000 a decrease of 48% from the prior year, and our operating profit margin reduced to 58%.
Cash generated from operations reduced by 50% to 66,100,000 euros The year on year decline in cash generated from operations was marginally bigger than that of operating profit due to a negative movement in working capital. Part of this movement resulted from the unwind of VAT payments that were deferred in March. With these VAT payments now made and with the repayment of all amounts claimed under the furlough scheme, we have repaid all government support made available as a result of the pandemic. The statutory income statement outlines areas beyond our revenue and operating costs. Net finance costs reduced by 38 percent to $2,300,000 as the lower level of debt drawn resulted in lower interest.
Our profit before tax was $66,200,000 and our effective tax rate was 19%, which remains in line with the standard U. K. Rate. Basic EPS declined by 50% as a result of the decrease in profit after tax and an increase in the number of shares in issue following the equity placing in April. Moving now to netbank debt and capital structure.
Netbank debt reduced to €58,100,000 at the end of the period and leverage reduced to 0.3x. Cash generated from operations of $66,100,000 was used to pay $200,000 of CapEx and lease payments of $1,200,000 In cash terms, we paid $1,700,000 of interest and $18,000,000 of corporation tax. In June, we extended the term of our RCF for an additional year, incurring fees of $500,000 in the process. At this extension, dollars 316,500,000 now matures in June 2025, with the remaining €83,500,000 maturing at the original termination date of June 2023. The equity placing that was completed in April raised €182,900,000 after all related fees were paid.
Finally, the acquisition of AutoConvert in July resulted in an initial net cash outflow of $10,000,000 dollars There is an element of deferred consideration for this acquisition with another $8,100,000 coming payable in 2 years' time. It is the group's intention to return to our long term capital allocation policy as early as possible. However, following the recent government's announcement, we have decided not to declare an interim dividend at this time. That concludes the financials. I'll now pass over to Catherine to take you through the current market and to give an overview of our product development.
Thank you, Jamie, and good morning, everyone. I'll give a brief overview of the current market before providing an update on product development. We continue to exhibit clear market leadership, and we have grown our audience substantially in what has been a buoyant market. Starting in the top left, cross platform visits grew by 12% year on year to 57,300,000 visits per month. Engagement, which we measure by the total number of minutes spent on our platform, also increased by 12% to 557,000,000 minutes per month.
That means for each visit to Autotrader, a consumer spends around 10 minutes on our marketplace. Our share of total minutes amongst our main competitive sets, as measured by comScore, remained at over 75%. We know that comScore data has its flaws, and so we use our internal metrics to measure our performance, but it remains a useful reference point for tracking our position in the market over time. The chart on the right hand side of the page shows the total minutes spent across an expanded set of competitors, retailers and manufacturers. On average, over the 6 month period, Comscore estimated that consumers spent 578,000,000 minutes on Autotrader per month, which was over 7 times that of Zumtree, 20 times that of CarGurus, 22 times that of PistonHeads and 30 times that of motors.co.uk.
All of the other classified sites, including Finch, Hay Car and RAC Cars totaled 23,000,000 minutes, making Autotrade a 25x bigger than all of those sites combined. Outside of our competitors, we also compared our size of audience to that of retailers that are large enough to be tracked by Tom's score. This includes Franchise Groups and independent supermarkets, which would include Koozoo. The number of minutes spent on Autotrader was 24x that of all of these retainer sites combined. And doing the same exercise with all manufacturer sites, Portis Trader is 35 times their scale.
As Nathan described earlier, there was certainly a contrast between the 1st and second quarters when it comes to performance. The chart on the left shows the year on year performance of cross platform visits and the number of cards advertised on Autosrader. To explain this chart, it is easiest to divide it into 2 sections. The first period to look at is between the start of March when the pandemic started to take effect and the 31st May. Cross platform visits declined through March and reached a low point around the time when the U.
K. Was sent international lockdown. From that point on, the level of cross platform visits steadily increased and returned back to prior year levels at the point lockdown restrictions were eased. The number of cars advertised on site through this period initially grew rapidly as we implemented our additional stock offer. The second period to look at is what happened after retailers reopened on the 1st June.
Demand increased almost immediately and cross platform visits have been tracking up over 20% year on year since this time. Our consumer research has consistently shown that around 30% of consumers believe owning a car is more important now than before the pandemic and that 12% are currently in market specifically to avoid traveling on public transport. There was also pent up demand as we had 2 months with low transaction volumes. Overall consumer confidence remains strong as many consumers have not been able to spend money on holidays, eating out and other leisure activities. As a result of this demand, retailers were able to start selling cars quickly and at good margins.
The chart on the right hand side shows Autotrader's retail price index, which tracks the like for like price of a used car being sold on our marketplace. Used car prices have increased consistently since May. And in September, on a like for like basis, the average price of a car was 7.6% higher than September last year. The supply side of the market was less quick to recover once restriction eased. Auction centers struggled to get back up to normal volumes.
Logistics providers still had a number of people on furlough, and so they couldn't move enough cars. And resellers themselves found it more difficult to prepare cars in a socially distanced way. With demand outpacing supply, the number of cars on Autotrader reduced from the 1st June until around mid August when the demand supply dynamics began to rebalance. As the supply side has continued to recover, we have seen an increase in the number of cars advertised on our site. I will now give an overview of some of our key product developments.
We successfully executed our annual pricing events with new rates being effective from the 1st April. In addition to the like for like price increase, we made a number of data products available customers. The first of these was an upgraded performance dashboard that was made available to all retailers as part of their advertising package. This allows retailers to measure, track and improve their advert performance to optimize the car buying journey. We also released a new market insight tool, which provides all of our retailers access to up to date market intelligence so that they can identify key market trends, understand how they may impact performance and adapt accordingly.
Over the last 6 months, this insight has been more important than ever for retailers and has driven much of the content for our retailer webinars and updates. Finally, we made a change to our package structure to make our retail check data product more readily available for independent customers. Retail Check helps retailers make better and faster pricing decisions on cards they are considering buying and on stock that's already on their forecourt. Over 8,000 retailers are now using one of our managing data products. Our new car listings product continues to grow and is delivering more value for our franchise customers.
We believe we have now built the leading new car marketplace in the UK based on audience performance and stock listing volumes. After starting to monetize this product in the last financial year, we continue to grow the franchise retailer base and by September, we had over 1500 retailers paying for this product. In the 6 month period from April to September, we saw a 39% increase in the volume of new cars listed on our marketplace of 46,000. This new car stock on Autotrader generated on average 1,300,000 unique visits each month and over 35,000,000 advert views as we continue to extend the positive network effects from this model. During the summer, we launched our instant offer service in partnership with Cox Automotive.
This new service is an incredibly convenient way for consumers to sell their car. This allows a private seller to obtain an accurate condition adjusted valuation for their vehicle, which will be guaranteed for 7 days. Fox Automotive will then collect the vehicle from the seller and transfer the funds quickly. This instant offer product includes an appraisal process, which will be a vital part of our path exchange product. This product, named Guaranteed Path Exchange, will allow consumers who are interested in purchasing a vehicle to obtain a condition adjusted valuation for their part exchange through Autotrader.
These details will then be sent to the retailer who will honor that price for the car exchange as part of their transaction. If the retailer does not want to keep that car, then Cox Automotive will collect the car and repay the retailer. This process allows retailers a hassle free disposal channel
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cars they do not want to retail. It also gives retailers access to more stock at accurate valuations and allows them to remove any risk on taking a part exchange vehicle. For consumers, it makes the buying process easier. We have recently started a beta trial with around 100 retailers and are excited to develop this product further over the coming months for monetization in the next financial year. On the 31st July, we acquired AutoConvert, a finance insurance and compliance software platform with integrated customer relationship management solutions.
The business is based in Manchester and employs 28 people. The business helps its customers to face increased finance penetration and to reduce costs by automating the full finance journey. Auto Convex customers include automated retailers, retailer networks and financial brokers. The business's core functionality, coupled with the fact it is integrated into over 50 lenders, will help us to deliver our future finance products on Autotrader. This will enable finance agreements to be completed entirely online.
I'll now hand over to Nathan to cover strategy and outlook.
Thank you, Catherine. I'd like to take some time to talk through how some of our recent product launches along with recent acquisitions will fit together to enable our retailers to sell cars online. There are a number of key stages in the car buying journey that we can help digitize. First of these steps is to find the right car, something we already do a comprehensive job of. Our marketplace has the largest choice of trusted stock, all of which is accurately described in detail using the data provided through key resources.
Our search functionality allows consumers to narrow their search through mechanisms like search by monthly payment, so they can find the right car quickly. Once a consumer has found a car they like, our price indicator flags help consumers gain trust in the price of that vehicle. We then help consumers gain trust in the retailer through more than 1,000,000 dealer reviews.
And
finally, our vehicle check product launched last financial year provides trust in the car they are buying. The next stage of the journey requires the consumer to know how they will dispose of their current car. We've always enabled private consumers to sell their car on AutoTrader, but we will add to this with our instant offer and guaranteed part exchange products. Part exchange is often the most convenient way to dispose of a vehicle that requires negotiation and very often leaves the consumer feeling uncertain as to whether they've received a fair value or not for their car. By bringing this process online, we can increase transparency, confidence and trust in the part exchange process.
Financing and paying for the car comes next. Currently arranging finance at the point of sale can be a daunting and drawn out process for consumers with little transparency. With AutoConvert, we can develop an online application journey to improve this process. That application journey will allow consumers to apply and be approved for finance offered by the retailer. They can do this from the safe environment of their own home, increasing transparency and reducing pressure.
Those retailers who don't have their own finance arrangements, we will use a partner to provide those finance options for car buyers. Once the finance is arranged, a deposit is often taken, which is an area we still have some more work to do in order to provide on our platform. The only step left then is the handover of the vehicle. It's our expectation that the majority of car buyers will continue to pick up their used car from the dealership for some time to come. However, with the transaction already done online, the consumer will spend less time at the retailer and the experience should be more exciting and perhaps less stressful.
In some cases, however, the consumer may want to have their car delivered, which we can help arrange in a cost effective way through our motor trade delivery platform picking up any part exchange in the process. So there's still a lot to do to bring these areas together to provide a seamless experience. We're making good progress. Given the events of 2020 so far, we have even more conviction that this is the right thing to do to improve car buying in the U. K.
Now on to the outlook. Given the continued uncertainty surrounding COVID-nineteen and further customer support in December, it is difficult to provide sensible revenue guidance for the balance of the year. Looking at the past month, we have started the second half well. Audience volumes remained substantially above prior year levels. Livestock numbers have improved throughout October and both retailer forecourts and average revenue per retailer were consistent with the prior year level.
Total group costs for the full year are likely to decline at a rate of lowtomidsingle digits due to cost saving measures taken in response to COVID-nineteen. During December, we will again reduce marketing spend and we have no intention of using the government's furlough program. Following the recent government announcement, we have decided not to reinstate our long term capital allocation policy. However, we have every intention of doing so at the appropriate time. The Board believes the actions taken by the company have strengthened its foundations and positioned it well to enable car buying to shift online, which has only been accelerated as a result of the COVID-nineteen pandemic.
The Board therefore remains confident in Autotrader's long term growth prospects. That concludes the presentation. We'll now move over to analyst Q and A. And if I could just ask you to be considerate of one another and please limit the number of questions you ask to 1 or 2.
Thank you very much. The first question we have today comes from the line of William Packer from BNP Paribas. Please go ahead.
Hi there. Will Peker from Exane BNP Paribas. Thanks a lot for taking my questions. I'll limit it to maybe get back in the queue if needed. So firstly, could you talk a little bit about the product outlook heading into the March 2021 pricing event?
I suppose for context, it feels like there's a huge opportunity for Autotrader with consumers pushing the digital route, new pressure from online car dealers. But arguably, you need to move now in order to make expose the opportunity most significantly. On the other hand, monetizing the opportunity could be quite difficult in the sort of operational backdrop. So how should we think about price the product event for next year? And the second question is, I suppose, online cardiators are the hot new topic in the sub raising lots of money with aggressive expansion plans.
How are your relationships with the key players in online car dealing in the UK? And could you update us on how monetization is progressing with those counterparties?
Okay. Thanks, Will. Nathan here. I'll take both those questions. I think in terms of the product outlook as it relates specifically to our April event, I think we're thinking about that really in 2 ways.
There's a bucket of products that we've spoken a bit about today, which are the online retailing products. We've talked about finance, we talked about GPX. There's also a bucket of products we have in our core advertising business, if you like, that we're also developing. So I think as it relates to products to support the event that we do in April, we feel reasonably positive about those. We've got good options of products that will be developed by that time.
So it's not all dependent on doing a really, really quick job of financing guaranteed part exchange. I would say some of the online retailing products that we are looking at, I suspect over time may not be the sorts of products that lend themselves to events for exactly the reason that you've highlighted. These will involve some level of operational change. They'll take time to embed into retailers. So I don't think we're hinging the event, certainly not next year, on having those online retailing products ready to go for that.
I think we're kind of looking at them as 2 different product groups, one set of products which is operationally complex that stands to make a big difference to retailers. It's likely to be taken up not necessarily by all of our customers or 75% of our customers at one time. And then there's the advertising products where actually you can achieve those kind of penetrations. On your second question on online car dealers, there's certainly been a lot of news and a number of launches, obviously, Kazoo being the best known one with their very successful fundraisings. I would say our relationship with those customers is naturally pretty good.
They're definitely progressive. They're definitely wanting to make a difference and they're definitely wanting to move fast. So they can be demanding customers in the best of ways. But I'd say we are an obvious important partner for a business like that given the level of audience that we've got on our side. So I'd say our relationship with those kind of retailers is in a good place.
And in terms of monetization, I mean, it's no different really to any other retailer. They do have a certain number of cars by no means more cars than our biggest customers and we just engage with them on the normal basis. We tend to work very closely with them actually in areas around data to support their pricing decisions and some of those operational aspects of their business. But I'd say we do feel quite good about our relationships with them.
And thanks. And just to follow-up on the product point, I suppose in the last 18 months or so, product growth has been in the region of 3% to 4% year on year. Is it fair to use a similar assumption for FY 'twenty one?
Yes. I mean, I think for the year as a whole versus what we've done in the first half, I think we'd say it's probably likely to be slightly lower. The reason being you start to lap in the second half the new car monetization. And it's difficult to predict what the remaining 6 months looks like. As I think we said in June, we were probably a little bit cautious on package upsell.
I think that's probably still the case in the second half. So I would expect product to still be positive, but just slightly lower than what we've done in H1.
And Will, I will just follow-up on the point of online car retails, because I suspect if I don't answer it now, we'll just be asked the question later. I think we do see a very collaborative relationship with those kind of retailers. They're not only a good customer of ours as we've spoken about, but I think they've provided a good level of impetus for the whole industry actually to look further at how they might do more of the selling of cars online. And that's really the opportunity that we see is ours, both with those retailers, but actually with our many more much smaller highly fragmented customer base that don't have the wherewithal or capital to be able to build that sort of technology. That's really the opportunities there for us to help them sell more cars online as well.
Thanks very much.
Thank you very much. The next question we have today comes from the line of Michael Tyndall from HSBC. Please go ahead.
Hey, good morning, gentlemen. Mike Tyndall from HSBC. A couple for me. I wonder the first one is kind of theoretical. I mean, you've got a dealer body at the moment that's got a shortage of cars and very high levels of consumer interest.
So can we talk about their appetite to actually advertise their appetite to hold stock? Is that changing at all because in theory, they've got more customers than they have cars? And then the second one, more specifically on the guaranteed part exchange product. I know it's very early days, but could you walk us through a little bit the revenue stream for you from that product? I'd be very interested to know how that kind of plays out going forward.
I'll take the first question on appetite for advertising. I mean, we benefit from being in an industry that's highly, highly fragmented and highly competitive. And so for our retailer customers, arguably, there's never been a more important time to ensure that all of their stock is visible and all of it is online. And in particular, in the climate we find ourselves in, if their cars are not advertised on Autostrade, then effectively, they're not for sale at the moment. So we've certainly seen no emission in the appetite for our customers to put their stock on Autostrader.
What we have seen and one of the dynamics I think we talked about at full year results as well was a significant increase in the leads that we're delivering to those customers. And there's no doubt as more of the car buying journey moves online, and particularly during this pandemic, that we're seeing more and more consumer interactions happening on Autosrader. So I think when Jamie talked about our prominent penetration staying broadly flat, one of the factors that has been driving that is the very strong level of consumer demand that retailers have seen, which has meant that they haven't felt the need to invest in those prominent products in the way that we would have expected had the market been more normal.
And then just on the part exchange product, and it's definitely worth sort of adding the caveat that we're at early stages with a relatively small trial live at the moment. I think the way we're thinking about it though is a little bit more like our retail accelerator or eye control product in terms of it's a piece of software that needs to be embedded in how the dealer operates because consumers doing the appraisal online, but then it's still a process at the forecourt that needs to be completed. And so with that in mind and making the comparison with that product, we're looking at subscription. It's more likely to be a higher yielding product, high yielding than something like dealer finance. But then you'll probably see slightly lower volumes of penetration, and then we're optimistic we'll grow that over time.
So there's lots to learn through the trial period and for the rest of this financial year and into next. And it will be next year that we'll be looking to monetize, and that's the sort of initial thought process on how we might monetize. There is a small cost associated because obviously we've got COGS providing the disposal channel if the retailer doesn't want it. So there's also that to consider as well.
Thank you very much. The next question today comes from the line of Maria Medusa from Morgan Stanley. Please go ahead.
Hi, good morning, everyone. Thanks for taking my questions. Just 2 for me. Firstly, could you talk a bit more about dealer health, what that looks like at the moment and what it might look like by the end of the year, sort of post this lockdown? I think you mentioned that you think some of your smaller customers may be impacted a bit more.
So could you talk a bit about what you expect to see in terms of forecourt closures post the lockdown? I think you had sort of a 2% decline during April or during Q1. So is that sort of the same level that we should expect for this lockdown? And then secondly, just longer term, just from your conversations with dealers over the last 6 months, it would be great to hear how you're thinking about how dealers emerge from this current environment in terms of their willingness to spend on products, but then also perhaps some structural changes in their model? Do you think we could, for example, see a permanent reduction in headcount?
Just, yes, I will be interested to hear your thoughts on that.
Thanks. On data health, I think we've seen since the since Foreports were allowed to reopen on the 1st June, we've seen an incredibly strong period of trading for most of our customers. We're still waiting for the used car transaction data to be published for Q3. But from what we've seen in our proxy sold data, it looks like that Q3 performance will be robust. All of the listed players that have reported and those private customers that have put out numbers have all been reporting sales levels up north of 10%.
That's also been underpinned by very strong and healthy margins and profitability levels. We've seen from our own retail price index that we've published very strong pricing trends, which has meant that not only have retailers been selling good volume of cars, they've been typically selling them at good margin as well. So there's no doubt that entering into this latest lockdown and retailer health is in a much stronger position than it was in March. In terms of behavior that we're expecting over the next few months and what the impact on our retailer number might be, At the moment, we're seeing retailers sort of fall into 2 camps. There are some that are very positive looking to enter this period very positively and are promoting very strongly click and collect and home delivery options.
And we're helping them to promote those on auto trader through the online hub that we've launched. We are seeing some that are looking to shut up almost completely again and to take advantage of the government furlough scheme that's been extended. So we're seeing a bit of a segmentation in the base at the moment. But overall, I think
the fact that
the market recovered strongly and we and most of our customers entered this period strongly means I think we're pretty confident about where we expect retailer number to trend when we come out the other side of the latest lockdown, in particular because I think all of us have taken a lot of confidence from how quickly the market rebounded last time. And most retailers have good reason to feel positive and confident about that again.
And Miriam, on your second question, the long term, how dealers might emerge and what they might look like on the other side of the lockdown. I'll actually answer the 2 questions the other way around and start with how their model might change and then talk about what that might mean for their willingness to engage with our products. I think there's no question that as a combination of perhaps players like Zekazoo coming in and launching online home delivery only models or actually probably more importantly their experience during the lockdown periods where they've seen that with many, many of their staff certainly in the 1st lockdown almost all of their staff on furlough they still sold a significant percentage of cars. I think the kind of writings on the wall, if you like, or the evidence is there for retailers to see that perhaps they don't need the same approach to business and operation as what they've had historically and maybe digital can play a much larger part of that. So I do think they will look to evolve.
Certainly, dealerships when it is such a fragmented customer basis, will never be true of 100% of them. But there is going to be the progressive retailers that are going to look to change their model, bring more of the selling online, look at things like taking deposits online, look at things like allowing finance to be done online. All of these are things that historically they've told themselves you need to do that in the dealership because then we might want to get the add on sale or we want to make sure that the consumer completely understands the products, but all of that can be well done online. I think what that translates into whether it's lower headcount, it's probably not how a progressive retailer would describe it, but they would say that we should be able to get more sales per salesperson. So today, I mean, it's difficult to know exactly what the number is across the entire industry, but it's probably something like 11 to 12 cars sold per salesperson per month.
We see examples of online retailers or more online retailers in the U. S. That can get up to 18 to 25. And so I think that opportunity is there. It's all about moving some of the selling online.
It's all about shifting the store experience to be more about supporting the consumer and ensuring that that visit that the consumer needs to make is less long than it is today. So rather than spending 2, 3 hour parts of the weekend in a dealership, perhaps it's just a half an hour handover of the vehicle. Now all of those things, the areas that we're looking to develop over the years to come. So I'd like to think that the fact that we've got products or we're looking to build the products that will allow retailers to do some of these things because we are a technology business at the end of the day and their specialty is retailing. When you combine that with the positive sentiment that we've built certainly with the announcement today based on the early read of it, but definitely with what we did throughout April May, I'd like to think that dealers as they shift towards digital will naturally shift hopefully towards AutoTrader and those solutions that we've got to offer, including our advertising actually, but above and beyond that as well.
The next question today comes from the line of Joe Van Aelhan from Credit Suisse.
A couple of obvious but important ones left from me, guys. So given you brought back in the fee holiday, should we assume that holidays will last for the duration of any lockdown Given click and collect and some what Catherine said are e retailers health, I wonder if your views might be different this time. And then secondly, with regards to the impact of the 2nd lockdown, can you briefly discuss what you think it means for stock and supply going forward? Clearly, it obviously had a major disruption, as you spoke about earlier previously. Would you expect similar sorts of impacts going forward?
Or do you view it differently? Thanks.
Hi, Joe. Thanks for your question. Nathan here. On the fee holiday, I think the short answer is we're definitely not applying a blanket rule. If you look at what we did during April May, dealerships were actually required to close towards the end of March.
We decided to go free for April May whilst they were closed and then reintroduce charging when they opened. We come to this period around and whilst the lockdown is similar and the dealerships are required to close, this time we've made the decision to continue charging for November, but actually do the fee holiday in December because we think that works best both actually for us and our apply the fee holidays. We obviously pay attention. There could well be a lockdown in which retailers are considered essential. In that situation, would obviously probably come up with some form of support or what we would do would be different to what we would do where they're required to close their showrooms.
And as you said, they still are able to provide click and collect and home delivery services. That being said, something we'll probably learn during this lockdown actually is exactly how many cars do retailers sell having been set up now for those two services. What happened in the 1st lockdown is they sort of assumed they weren't going to sell any cars. They found that they did. Now they're set up for we're going to learn again.
And we'll apply all those learnings to make sure that we're doing a fair thing both for Autotrader and our customers if there are further lockdowns. So unfortunately there's no rule. The big thing that we do pay attention to is whether their showrooms are required to close. So to what extent are they restricted in their ability to trade? And you've got to remember too a lot of our customers are smaller.
So it's not always helpful to imagine the large groups because whilst they are an important very important part of our customer base, we do need to think equally about our average customer, which is much, much smaller than that.
And on the supply of stock, I mean, I think it is very difficult to know for certain. I think I'd make 2 observations. And I think supply will still be tight, but not as challenging as we've seen it through some of this first half. And the reason being, I don't think the supply chain will be as heavily disrupted this time around as it was last time, just with the restrictions being not as severe and lots of those involved in the supply chain are involved in prep better prepared this time around. Why I still say though that I think it could be tight, and I think it comes down to what we think will happen for new car sales into the new year.
I think if you think about manufacturing the time period that it was disrupted, what might happen around Brexit. I think we're more cautious around what happens to new car and obviously that has implications for trade ins and the used car supply coming in, in that sort of 3 to 4 year bracket. They're not as tight, I think there are still some challenges there to overcome.
Thanks, Nathan. Thanks, Jamie.
Thank you very much. The next question today comes from the line of Giles Thorne from Jefferies. Please go ahead. Giles, your line is open. Are you on mute?
I'm having a wonderful conversation to myself here on mute. Sorry about that, everyone. So to begin again. Nathan, it would be useful so coming back to guarantee part exchange products, Nathan, it would be useful to hear you characterize, as you consider all the various blockages to transacting online, it would be useful to hear how powerful or mediocre guaranteed part exchange is going to be to unblock another one of those roadblocks. I suppose you could reference the slide that you put up in the deck today.
The second thing is just seeing Cinch finally commercially launched despite being rumored about a year ago. The arrival has obviously caused a bit of hullabaloo in the dealer community as they see BCA coming down into the retail channel. BCA would just say they're helping small guys plug and play an online e commerce proposition. From your vantage point, what do you think about this development? And I suppose specifically, is this going to be an opportunity to take a bit of share for dealer auction?
Thanks, Charles. So on guaranteed part exchange, just to explain the way the proposition would feel to a customer because I think it goes some way to helping you draw your own conclusion as to how powerful it is. What the product that we're testing at the moment does is it allows a retailer on Autotrader to offer a consumer a guaranteed price when they're looking at the car from that retailer. That's a price that will be guaranteed for 7 days for the consumer and they can come in and have that get that price for their car. When the consumer arrives at the dealership, and this is very different to the way the process works today.
The way the process works today is the dealer does a physical inspection. They have kind of an argy bargy around valuation. Dealers actually got to decide whether they want that car. And very often the dealer doesn't want this hard exchange might be too old. It might be the wrong brand.
It might be the wrong type of stock. And we hear from retailers that quite a few deals fall over because they can't provide a part exchange or they're not willing to provide a part exchange for the consumer and the consumer goes off to another dealer that has a similar car that they want to buy but will do the part exchange. Now with this proposition that we're offering, whether the person walks into the store or does it by our AutoTrader, the dealer can effectively risk free offer a price on any part exchange. If they don't want to keep that car in stock, then they simply let us know via the portal and we'll come and pick up the car and it will go through auction. So I think it unblocks a lot of the buying process, not just the digital buying process, but actually the overall shopping process altogether because it means the consumer can effectively go into any deal that has this product and be assured that they'll get a fair price for their car.
So I do think we kind of outline what we see are the big blockages, if you like, or the big hurdles that we've got to get over than the most complicated ones. I think part exchange is right up there. It is a big deal. It's not a small deal alongside finance and reserving a car. They're definitely the areas where we've got to do the hard work.
But we think if we can get this product right and we get the take up right amongst customers, this is solving a big part of the process that drives lot of the physical process that requires manual labor. So in terms of our bigger goal to move the carbine process online move more of that out of the dealership. It is a big part of that formula. In terms of your second question, do you want to take that Kathy?
Yes. On Cinch and BCA, there's no doubt that they've launched a consumer retailing proposition with their own stock that does directly compete with their customer base. It's definitely made some of the big retailer groups and some of the players that we speak to in the industry feel uncomfortable with that position. They've also launched a dealer solution that enables resellers to sell their cards through the platform. But the economics of that look pretty challenging and kind of demote the dealer role, almost to being one of the capital provider to fund the vehicle and not much else.
I think the biggest challenge, undoubtedly, the business will face is building a brand in a market that is now increasingly noisy and increasingly competitive. And we've been really positively encouraged by the performance of our brand over the last few months. We've definitely seen a situation where consumers have gone back to brand they trust and to brand where they're very clear of their proposition. We've seen 96% of our traffic come to us through unpaid channels at a time when we've been growing 20% -plus year on year. And between Cinch, Kazoo, Kazzam, Casa and all of the other consumer brands that we'll be launching, all going out with very noisy, slightly confusing at times marketing campaigns, we're very hopeful that our the strength of our brand position and the clarity of it will be able to strengthen and reinforce over the coming months.
In terms of dealer auction, I think probably it's definitely positive dynamics and it's just towards digital. And the sentiment and uncertainty that DCA have caused, we would hope would be a helpful headwind for that business.
That's great. Thank you very much.
Yes, I was going to ask a follow-up, but I won't. I'll jump back in the queue. Thanks.
Thank you. The next question today comes from the line of Adam Berlin from UBS. Please go ahead.
Hi, good morning everyone. 2 for me. Firstly, I think Nathan, you mentioned that you're looking at bringing the deposit for the car onto the website, but there are some barriers to doing that. Could you just give a bit more detail about what those barriers are and what the timescale would be? I'm sure there's a lot of demand from dealers to be able to do the deposit on auto trader.
So just want to understand the barriers to doing that a bit better, please. And the second question is, if you look at where consensus is for ARPA in FY 'twenty two, it's about 4% above what you did in FY 'twenty or what you did what you seem to be doing right now. Is that if you just delivered that, would that be disappointing, especially since you've got price increases in product coming through? How do you feel about where that is at the moment? Thanks very much.
Well, Adam, I'll let Jamie opine on your second question. But on the first one, I think I understand your question because it feels like taking a deposit, whether let's just say a £99 deposit from a consumer doesn't sound like the most complicated of things to facilitate. And you'd be right to assume that. I think where the complication comes and it's probably as difficult, maybe more difficult than what we've got to do on both finance and guaranteed part exchange is we need to be able to when we take that deposit, give the consumer an assurance that that car is now reserved for them. In order to do that, essentially we've got to be able to reach into a retailer system and mark that car as sold.
Now, whilst even that might not sound overly complicated, what you need to understand is across our customer base, maybe with smaller retailers, that's much easier to do because they rely more heavily on our systems. The larger the retailer starts to get, the more you're getting into a world of multiple systems configured in loads of different ways. There's no single API or way for us to get bidirectional integration into those systems. So the complexity is working out how can we in a highly scalable way ensure that when a consumer places a deposit on a vehicle, we can ensure that that car is reserved for them. So it's not so much the taking of the deposit, it's almost the reserving of the car that we need to get right.
And the truth might be that initially we can't do that in a normal auto trader way, which is typically highly automated and totally based on software. We may have to find a middle ground where there's some manual intervention or we support it through people actually to make that happen. But it's an area that we're looking at and speaking with a number of our customers now just to try and size and shape the problem. I'd say we're pretty early days in terms of understanding that one. That being said, we've got plenty of work to do ahead of us on finance and guaranteed part exchange.
So it's okay that that moves along in parallel.
Yes. And I hate to give a politician's answer to the question, Adam. I mean, I think, yes, we've clearly not given any outlook for the rest of this year. And yes, that is really down to the uncertainty caused by the pandemic. And depending what you read and what your view is, I just don't think you can say with any certainty how much or how little it impacts the next financial year.
You've also got what's the macroeconomic backdrop look like, which will undoubtedly impact the numbers. I think to put some positive tilt on it, and we've talked about it a lot this morning, we do feel as though the product pipeline that we're building, it have many positive aspects to it. Whether they all land in FY 'twenty two, I don't think that will be the case. But for a 2 to 3 year outlook, the products are there to hopefully drive that ARPA number going forward.
Thank you very much. The next question today comes from the line of Sylvia Cugniak from Deutsche Bank. Please go ahead.
Good morning, everyone, and thanks for taking my questions. The first one is on cost platform minutes that improved significantly in the period. Do you have any more granularity you could, sir, that points to consumers spending more time online rather than at the physical forecourts? And how the cross platform minutes in the month of 1st lockdown compared to when showrooms actually reopened? Just wondering how much users are actually willing to complete more of the buying process online, no matter whether dealers are open or not?
And then secondly, on the ARPA growth driven by product, that was £57 overall in the period. Just wondering if you could please share some color on the different drivers. For example, how much of that was driven by your listings for new cars, even 50% more retailers are now paying for this compared to the previous financial year? And what's the target for that particular product in the medium term? Thanks.
So if I pick up the cross platform minutes question. So when we originally went into lockdown, we saw minutes trend down as far as kind of 30%, 40%. They steadily decreased from when lockdown was announced into April May. And they rebounded very quickly post lockdown, and we were up north of 25% for a period of time when we came out of the other side of lockdown. In terms of consumers' propensity to complete more of the buying journey online, when forecourts were closed and consumers weren't able to visit, and even in the weeks when we began to emerge from lockdown, we saw lead volumes up consistently over 50%, which showed that actually consumers were very readily able to and willing to complete more of the interactions and more of the buying journey that they would normally do on the forecourt online.
We launched a number of features, consumer features, when we emerged on the 1st June from lockdown, including virtual walk around, video walk around with the cars, promoting retail and home delivery options. And we've now, over the last 24 hours, made those much more visible on our platform. So increasingly, I think through a combination of consumers not being able to and us facilitating more of those journeys online, we're confident that we can help consumers do more of those jobs effectively online. When we ask consumers through our consumer research as well about willingness to spend and complete more of the buying journey online. We have seen a reasonably significant step up through our consumer research in appetite.
And I'm sure that the events over the next few weeks and us being back in a place where clearly consumers can't visit full court, That behavior or shift that we've already begun to see is likely to be reinforced. And potentially, we're likely to see an even bigger swing in the propensity of consumers when we hopefully do come out the other side more permanently in that behavior being more of a permanent shift than a one off response or reaction to lockdown.
And then just on the product lever. So the way to think about the £57 is there's a reasonably big component in there that relates to the data products that we put into our packages. You've then absolutely right, you've got the new car contribution, which was a little bit less than £20 as a positive contributor. And then there's a little bit of a headwind from, I mentioned in the presentation, we have a kind of PPC prominence product that saw lower volume taken through the first half than we saw the prior year. Hopefully, some color on what made up the £57.
In terms of new car looking forward, I mean, I think we are really pleased with the progress that we've made through this first half to grow that paying retailer number by 50%. We've got to just over 1500 dealers. We've got just over 4,000 franchise dealers that could take the product. I think you would expect we've got sort of those early adopters and very open minded customers to thinking about us to help them sell their new cars that we've moved early on. I think we want to continue to grow that half on half, but I wouldn't expect the growth rate to be quite as good as we've seen in this first half.
But we're targeting to try and get to really high penetration rates of those 4,000 dealers.
The next question today comes from the line of Lisa Yang from Goldman Sachs.
So I'm just wondering, given I would say how strong the sort of dealer end market has been and obviously you're giving them 1 month of food packaging in December despite them being healthier than where they were before entering the previous lockdown. I'm just wondering like how confident you are about the next sort of pricing event. Do you still feel like you should be able to do it in April? And should we still be aiming for about 3%, which I think is what you've done historically? And I guess the other, I would say, software.
I appreciate there's a lot of uncertainty, but previously you were targeting back to sort of flattish stock growth by the end of March 2021. So I'm just wondering if you can maybe give an update on how to now when you expect that stock lever to go back to positive. And the second question is on this other opportunity from your online retailing products. So I'm just wondering like given obviously the new restrictions, which probably will, I would say, shift more cardiologists towards, I would say, being willing or preparing themselves to sell online. What proportion of your car dealers you think could potentially take your online retailing products next year?
And how big the opportunity is in your view probably in the next sort of 3 to 5 years? Should we start to basically think beyond just the share of dealers' marketing spending? How should if you can maybe give
a bit more color on
the hand, that would be really helpful. Thank you.
Yes, I heard 3 questions in there, so maybe we'll break
them up.
I think that in answer to your question, yes, dealers, the backdrop has been strong, particularly because supply is quite constrained. Demand is very, very strong and that basically translates into more margin. And that tends to be a bigger swing factor for retailers than volume does. So retailers are doing very, very well. I think in the presentation, I talked about the fact that they run on relatively thin margins and they do have quite high fixed cost base.
So we still think that will be impacted by a lockdown period. But as we said, they'll be able to carry that through to November. And in terms of how that broadly when we emerge from a lockdown and retailers are able to open, we suspect that strong demand is going to be there again. And retailers will be doing well probably very similar or maybe at a lower level than they did between June September. So we feel fine about the pricing there.
But I think one of the benefits is that we're not pulling that pricing lever hard. I think it's generally on average between 2.5% or 3% or so. And we do have products to go alongside that as well. So we feel okay about the event and I think retailers would understand that. In terms of stock, did you want to pick up that question, Jamie?
Yes. If you think about the information that we've given in the press release and the presentation this morning, you've obviously got the stock lever of minus 100 and 56 that we did in the first half. When you then think about where we said we've entered the second half with flat ARPA, you've obviously still got positive components from price and product, even though it's maybe a little bit less than what we did in the whole half, it's still positive. So you buy the working out those or thinking about those 2, you still got stock as a negative component as we go into the half. And that's undoubtedly going to impact the full year.
I mean supply, as I said to Joe's answer, is I think it will still be tight through the lockdown period and into the Q4, particularly if new car sales are a little bit weak. And then you're looking into FY 'twenty two, and depending what the macro backdrop is, there's a question how much inventory a customer is going to want to hold. It all hinges on how the market bounces back, how the economy recovers. And I couldn't say with any certainty. I think the start lever is improving, but whether we get back to flat, time will tell.
And in terms of the final bit of your question, and unfortunately, I might need to resort to a politician's answer as well only because I don't think I've got any basis for an idea that might be better than your own. And that's what portion of customers might buy an online retailing product in 3 to 5 years' time or next year. I think we are at an early stages as Jamie said on the key products. We've talked about 3 today guaranteed part exchange, finance and then closing the transaction of the deposit. I think our hope would be next year that we're able to move to productionize at scale guaranteed part exchange during next financial year.
As Jamie said, I suspect because of the operational changes that are required or the fact that it needs to be embedded in the core process of the dealership, it's likely the numbers will start off at a lower level and build over time, which is something that I'll be confident that we'd be able to do. There's also a very obvious question there. Very often, we balance the penetration that we want to achieve on a product with the price that we charge for that product. So something like dealer finance was relatively cheap, I say, in inverted commas. And as a result, it achieved 75% penetration overnight, which we wanted to do that so that we could embed that behavior change into consumers.
I think with some of these products, one, we recognize that dealers aren't going to be able to switch them on necessarily quickly and they are hugely valuable. So we probably prefer to price these at more of a fair level rather than a no brainer full penetration level and grow that over time because we suspect just like the retail accelerated products, we're going to have to embed those products over time anyway. So we'd only be under monetizing them if we kind of tried to rush them out at low yields. We're obviously working on finance, but at the moment we don't have anything in trial on finance. So I suspect the way that you should think about it is we're going to want to get guaranteed part exchange out there first and start embedding that and we'd expect finance hopefully to follow not long after that.
And in terms of the 3 to 5 year view, sorry, I mean, I think it's really difficult to say actually because had I answered that question, we've been talking about this for some time and working towards it for some time. And my answer has changed radically in the past 8 months, I guess, if you take the pre COVID period. I think it's difficult to say. I think the way that we're building these products is that they should unequivocally drive more sales at better profits, at better margins, if you like, into retailers. So there's a side to me that says, well, we're going to hopefully build these products in a way that every dealer should take them.
But at the same time, I thought every dealer should probably use our data to reprice their cars and we still don't have every single retailer buying our data product. So there's going to be a question about retailers' abilities to shift their mindsets and operating models.
Okay. Thank you very much. It was helpful.
Thank you very much. We only have time for one more question today. That comes from the line of Andrew Ross from Barclays. Can you please ask only one question? Thank you.
What a disappointment. I had 2 such good questions. My question is a quick and easy one, man, just on costs. Obviously, you're guiding to down a bit this year. But can you just talk us through how much of that is temporary versus permanent cost saving?
And really, I'm asking what's your cost guidance for fiscal 2022 at this point?
Yes. I can take that one. So I think the majority of the cost saving is coming through marketing. You can obviously see with the acquisitions that we've made and the investment we're making in people that people costs have increased this year, and I would expect them to next year. I think very difficult to know what positioning is with the pandemic.
If things are getting back to some sort of new normal in inverted commas and not in free periods, I would expect marketing to come back to closer to the percentages of revenue that we were at prior to the pandemic. So I think you'd see on the basis we were saving it this year, you'd see that cost come back in fiscal year 'twenty two. So sort of you've got a kind of underlying increase of mid single digit and then you've got the fact that you're lapping a year where we've made some savings. I'm not sure we would be making in 'twenty two if we're if the outlook looks improved.
Thank you very much. Please continue.
That's all from us. I mean, we just want to say thank you to everyone that's made the time to attend the call and we look forward to no doubt speaking in future. Thank you.
Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect. Speakers, please stand by.