Good morning, welcome to our half year results for the six months to September 2018. I'm delighted to say that we've made an excellent start to the year. We've maintained strong revenue and operating profit growth and delivered significant improvement in product uptake despite the market uncertainty. We continue to make good progress against our strategy to improve car buying in the U.K. to the benefit of consumers, retailers, and manufacturers. Most recently, we introduced finance options on three out of four cars on our marketplace, allowing consumers to search by monthly payment, and retailers and manufacturers to promote their finance offerings. This overarching goal remains true as we look beyond our core and explore other areas key to improving the buying and selling of cars.
A prime example is the recently announced joint venture with Cox Automotive, which seeks to drive efficiencies into the B2B marketplace to the benefit of wholesalers, manufacturers, and retailers. This JV is currently pending clearance from the Competition and Markets Authority. Just before we move to the highlights, I'd like to point out that we have adopted three new accounting standards, which have resulted in us restating the comparative period. Nathan will speak to that a bit later on. We're seeing continued growth in revenue at 7%. The growth has come predominantly from both retailers and manufacturers choosing to take advantage of new products launched over the past 18 months. Through continued operating leverage, operating profit grew at 10%, and margin improved one percentage point to 68%.
Basic EPS growth of 12% came through high single-digit growth in net income, fewer shares in issue as a result of our continued share buyback program. I'm also pleased to announce that we'll be paying an interim dividend of GBP 0.021, up from GBP 0.019 in the first half of last year. Cash generated from operations was also up 12% to GBP 129 million, emphasizing the high cash conversion of the business. We've reduced net debt by GBP 19.3 million since March, taking leverage down to 1.3 times, cash returned to shareholders in the period was GBP 81 million, through a combination of dividends and the repurchase of shares. On to key drivers. We continue to focus on the same priorities that underpin the health and sustainability of our core business.
Average revenue per retailer forecourt, or ARPA, grew by an average of GBP 152 per month or 9% when compared to the previous year. This was driven by excellent growth in our product lever due to our new Dealer Finance product launched in April 2018 and the continued upsell of both our managing products and our Advanced and Premium advertising packages. As anticipated, the number of cars on site was down 3% year-on-year to an average of 437,000 cars for the period. Although note that our core retailer stock was down 1%, which is broadly in line with used car transactions. Retailer forecourts remain relatively stable with only 60 retailers lost throughout the period. In terms of our key audience metrics, engagement was good with 1% growth in advert views averaging 247 million per month.
An average of 94 cars being looked at every second of every day throughout the first six months of the year. Cross-platform minutes were down 2% year-over-year, although we did gain market share during the period. During the period, we were almost four times larger than our nearest competitor in terms of visits, and five times larger in terms of minutes as measured by Comscore. Finally, the number of employees declined slightly to an average of 802 for the period. I'll now pass over to Nathan to take us through the financials in more detail.
Thank you, Trevor. Before I go through the financials, I wanted to point out that we've adopted three new accounting standards this financial year. IFRS 9 and 15 relating to financial instruments and revenue respectively have had no effect on our results. But IFRS 16 for leases has marginally impacted profit, and therefore, we've restated the 2018 comparative. A reconciliation of that restatement is included within the appendix. Starting with revenue. We've seen good top-line growth with revenue up 7%, which has been predominantly driven by both retailers and manufacturers adopting new products launched in the last 18 months. As with past years, growth in our core trade segment has been a key contributor, growing at 8%, driven by a 9% increase in ARPA versus the prior year. Also within trade, we have seen some growth from Motor Trade Delivery and a decline in home trader pay-as-you-go listings.
As discussed at the results in June, consumer services continued to see lower volumes of private listings, which we believe are a result of a number of different factors, including the increased ease with which consumers can part exchange their vehicle as a result of guide valuations now on Auto Trader, a lack of supply of older vehicles typically traded within this space, and finally, high levels of competition from free-to-list players. This drop in private revenue has been slightly offset by growth in motoring services. We were delighted with the 28% revenue growth in Manufacturer & Agency, particularly considering the tougher new car market. This market share growth confirms that we're on the right track when it comes to helping manufacturers sell new cars. The growth is driven by our cross-platform native performance product, InSearch, which provides high volume, cost-effective, and highly targeted advertising to influence in-market new car buyers.
Whilst this has had some negative effect on traditional display formats, we see this transition as critical to unlocking a much greater opportunity. On to ARPA, the key driver of our trade revenue. As Trevor said earlier, total ARPA has grown GBP 152 when compared to the same period last year. Underpinning this is the strongest level of product growth we have seen since listing as a public company. Throughout this period of ARPA growth, we have seen retailers remain broadly flat, which you can see in the chart on your right. The largest contributor to ARPA growth in the first half was product, which benefited from the products built and launched in the past 18 months, which we believe provide a platform to grow over a number of years.
Indeed, this has been demonstrated by our Advanced and Premium packages, which represent almost half of the product growth in the period. Also contributing to the product lever was our successful packaging event, which included two new products and the launch of Dealer Finance, both of which took place in April this year. In addition to these, we continue to drive further penetration of managing forecourts, helping our customers turn cars quicker through data-driven pricing to market. Turning to stock and the chart on your right. The turquoise line shows the decrease we have seen in cars on site, which fell 3% in the period. Around two-thirds of this decline relates to the fall in private listings and pay-as-you-go home trader listings, with the remainder due to retailer subscription stock. Retailer stock was down mostly due to the restricted supply of younger vehicles where our share is strongest.
Supply has been affected by less part exchanges on new cars and fluctuating supply from lease companies due to disruptions to new car supply. From the chart, you may notice that Q2 saw some improvement. This was partially impacted by stock offers applying to franchise customers. The trends in stock resulted in ARPA being down GBP 45 in the period, which was in line with our guidance at the full year. The increase in price of GBP 55 relates to an effective increase of just over 3%, of which the majority was delivered in April 2018 and was consistent with that achieved in the prior year. Cost growth for the half was 2% in the six months to September, with growth in people and marketing offset by slight savings in other costs and D&A.
Our people costs now include share-based payments, as we have changed our remuneration policy such that a greater proportion of performance-related pay is settled in shares. The combination of the two gives a fairer like-for-like comparison. Despite headcount falling, people costs grew 5% due to the underlying growth in salaries as we continued to attract and retain talent in a competitive market. There was also a one-off credit in the first half of 2017 relating to foregone rights under the share scheme for employees leaving the business. Marketing costs represented 5.2% of revenue in the period. As previously guided, we expect to spend 5% on a full year basis. Savings in other costs were due to lower levels of bad debt and small savings in lower margin display products. Depreciation and amortization was broadly flat.
Now that we have written down capitalized development spend, we expect this to be reasonably consistent at these levels moving forward. As a reminder, our low levels of CapEx and depreciation are not a reflection of low levels of investment in our business. We have around 300 people in product and technology who are continuously improving our platforms and developing new products for customers, costs for which are taken in full through our P&L in people costs. The GBP 0.8 million of CapEx that we've spent year to date is low due to phasing of spend, and we still expect to spend close to GBP 3 million for the full year. The majority of the spend in the first half was on technology hardware. On costs. We mentioned at our full year results a contingent VAT liability, which has now been resolved with no charge.
With revenue up 7% and costs up 2%, operating profit grew by 10% and our operating profit margin increased another percentage point to 68%. Cash generated from operations was GBP 13.9 million higher at GBP 129 million, which reflects profit growth and a strong cash generative nature of the business. The statutory income statement outlines areas beyond our revenue and operating costs. Finance costs of GBP 6.1 million were higher year-over-year, even though gross debt has decreased. The higher charge is due to accelerated amortization of debt issue costs of GBP 1.7 million, which related to our previous loan facility and arose due to our refinancing in June 2018. Our profit before tax was GBP 114.5 million, and our effective tax rate was 19%, which is in line with the standard average U.K. rate.
At 12% growth, basic EPS grew faster than operating profit, largely as a result of fewer shares in issue due to our share buyback program. As Trevor said in the financial highlights, we will be paying an interim dividend of GBP 0.021 per share. Moving now to capital structure. A reminder that on the 6th of June 2008, the group signed a new GBP 400 million five-year revolving credit facility to replace our existing term loan, which was due to mature in March 2020. The new facility has no bearing on our stated capital allocation policy, which remains unchanged. Cash generated from operations of GBP 129 million was used to pay GBP 0.8 million of CapEx and lease payments of GBP 1.6 million. In cash terms, we paid GBP 3.3 million of interest, which as mentioned previously, is lower than the P&L charge due to amortized debt issue costs.
We also incurred GBP 3.3 million of refinancing fees in relation to the refinancing in June. Tax paid was GBP 19.8 million, which lags the P&L by six months. Of the remaining free cash flow, GBP 37.9 million was paid in dividends relating to last year's final dividend, and GBP 42.9 million was used to buy back shares at an average price of GBP 4.45. In total, we returned GBP 80.8 million to shareholders in the first six months of this year, as well as repaying GBP 20 million of debt. That concludes the financials. I will now talk a little bit more about the current market. The overall size of the U.K.'s car park continues to grow, which provides an underpin for transaction volumes. As noted in June, used car transaction volumes in the 2018 financial year decreased by 3.1%. However, in the first half of 2019, it is only down 1.2%.
This improvement was somewhat expected due to adverse weather and supply-side shortages in the second half of 2018. As originally highlighted at our capital markets day, and subsequently at our full year results in June, we continue to expect used car transactions to see a 1%-3% decline for the year. We are also influenced, albeit to a smaller degree, by new car sales. We earn revenue from manufacturer advertising, new car sales influence used car supply, both in terms of part exchanges and used vehicle supply in the subsequent one to three years. Following a weaker financial year 2018, which was down 11%, the first four months of this financial year saw some improvement, whilst the last two months were significantly impacted by the WLTP emission test changes.
Under this legislation, which came into effect on the 1st of September, vehicles that do not meet the new emission standards cannot be registered, which pulled forward a significant volume of new car sales into August. In October, new car sales returned to what we would see as more normal levels, declining 2.9% on the prior year. Whilst Brexit has been and will continue to be a significant focus for the industry over the coming months, we will be affected by the outcomes to the extent that there is significant changes in consumer confidence and/or new vehicle supply into the country. We do not foresee any issues with our ability to provide our services, nor for it to materially change our cost base. We continue to publish a monthly price index of trade cars advertised on Auto Trader, the results of which are shown in this chart.
The red line shows the average price of a vehicle advertised, which you can see has increased steadily. By grouping cars by type, age, and fuel, we separate the impact on price from a change in mix of cars on-site. As you can see, for several years now, like-for-like prices have continued to increase. It is worth noting that this index shows prices at any point in time and does not attempt to show residual values, as it ignores the original retail price of the cars. Interestingly, in recent months, we have seen prices of both petrol and diesel grow, and whilst this is partly driven by restricted supply, it also suggests continuing used car demand amongst consumers. Thank you. I will now hand over to Trevor to take us through some of the key drivers in our business.
Thank you, Nathan. Starting with our audience metrics. We continue to exhibit clear market leadership in terms of audience. As you can see from the chart at the top of this slide, we are nearly four times larger than Gumtree, an increase from numbers reported in June. We are six times larger than PistonHeads and 18 and more times greater than competitors focused on trade customers, where most of our revenue comes. You also see that our relative position has not changed meaningfully for some time, despite the arrival of many competitors in the U.K. In terms of engagement, we have had another good year. Advert views were up 1%, to 247 million on average per month. Although average minutes spent on Auto Trader decreased 2% year on year, we gained market share.
Looking deeper at the total minutes spent, which is a key measure of engagement for consumers making such a large purchase decision, we are more than five times larger than our nearest competitor, Gumtree. A significant increase from the number reported in June. This is a greater lead than the visit volumes on the previous slide due to the greater amount of time spent per visit on Auto Trader over Gumtree. The average consumer spent more than 65 minutes per month on our site during the period. Note that with the recent announcement of eBay and Gumtree's interest in motors.co.uk, Gumtree's audience in the first half of this year has reduced relative to the same period last year by a larger number than the entirety of the motors.co.uk audience, and we have taken a large portion of that share. We are six times larger than all of the other motoring portals grouped together.
This includes the likes of Motors, who are 37 times smaller, as well as CarGurus, who are a further distance behind Motors. This clearly demonstrates the sheer scale of our audience, and the chart on the right shows the uniqueness of that audience. What you will see is that the vast majority of our audience does not visit our nearest competitors, and therefore, those buyers can only be accessed through Auto Trader. Our audience position as market leader continues to be unrivaled. The scale and reach that we offer our customers is significant, and this underpins the return of investment and the value we ultimately deliver to our customers. On to our selling packages. As already mentioned, the main contributors to our product lever have been package upsell and the launch of our Dealer Finance product, which we monetized in April this year.
This product launch and execution have been extremely pleasing. The monetization of the product has been underpinned by excellent car volumes, showing monthly prices, and consumers engaging earlier in their buying journey with how to finance their next purchase. The level of dealers buying the product penetrated at 70% of eligible retailers has remained broadly consistent, underlining the value of the product, and we've introduced a trial for van customers, which we expect to monetize in the next financial year. We also have over 3,000 dealers utilizing our partner, Zuto, which when combined with more than 5,000 retailers on their own finance version, presents 74% of car stock with a monthly price. In April 2017, we relaunched our advertising packages for trade customers, which introduced new higher levels for customers who wanted to spend more to gain more prominence in search results, and therefore sell more cars.
Over the six months to the end of September, we have increased the volume of customers on those two higher packages to represent 15% of retailer car stock, up from 12% in June and 8% when we reported our results for half year last year. The other contributor to our product lever is the continued steady growth of our managing products, which remains a key focus for our business. We now have around 3,300 forecourts. Our 25% of our retailer base using these tools to price their cars to market. Our data on the marketplace has shown unequivocally that using our tools and valuations to price the market from day one is one of the most critical determinants of a dealer's success when it comes to generating gross profit through fast stock turn and limiting the costs and discounts associated with an aging vehicle.
We've also recently upgraded Retail Check, the entry-level product, with richer valuation measures and new desirability metrics so retailers have a more accurate picture of how their stock will perform on the live retail market. The tool is also now on a new mobile-friendly platform that offers an easier-to-use appraisal of any vehicle. And finally, on products, there's our InSearch product, which is in the early stages of transforming our relationship with manufacturers and the agencies that represent them. This has been demonstrated by the threefold increase in impressions sold in the period versus prior year. We've expectations to see this growth continue, albeit at some expense of standard formats. InSearch is very similar to AdWords offered by Google. They are advertising slots that appear within our search results in a format that is sympathetic to what the user is doing on our site.
Due to its format, it is instantly cross-platform and sees user engagement many times higher than the standard for traditional display advertising. Appearing in Search has two other very obvious advantages. Firstly, huge volumes due to the 65 searches taking place on our marketplace every second. Secondly, the quality of targeting as a result of the information we gain based on what the user is searching for and the location they are searching from at that time. The final trend that has been transforming the digital advertising landscape is video. The success of video across YouTube, Instagram, and Facebook is no secret, and we believe it is particularly relevant in automotive advertising, where 58% of car buyers use video to inform the purchase decision. In response to this, we have developed a video format within the InSearch product and are at the early stages of testing and iterating this with customers.
Now, on to the outlook. Having made such a strong start to the year, we are upgrading our previous guidance due to the product take-up by both retailers, which will contribute to an upgrade to ARPA, and manufacturers, which will contribute to an upgrade to the Manufacturer & Agency revenue. On ARPA, we have achieved a great set of results in the first half due to a strong set of products that delivered growth surpassing our expectations. Whilst product-related ARPA growth will exceed previous guidance, it will be lower than that achieved in the first half due to a stronger second half comparator. For the sake of clarity, due to the anticipated small decline in stock for the year, we do still expect overall ARPA growth to be below that of 2018. We anticipate retailer forecourts to remain stable for the rest of the year.
Manufacturer & Agency has performed exceptionally as a result of strong take-up of our new car advertising, in particular, InSearch. The uncertainties facing manufacturers such as WLTP and Brexit do lead us to believe that this growth will be tempered in the second half of the year, but we believe that that growth will still be significantly ahead of what was achieved last year. Consumer services growth is expected to improve slightly as we lap a weaker second half comparator. We continue to anticipate our total operating costs for the year will increase at a rate of low to mid-single digit, with more cost growth for the year than that seen in the first half. Finally, the board remains confident of delivering its growth expectations for the remainder of the year. Thank you for joining us this morning.
That now concludes the presentation, we will now take questions from attendees in the room.
Will. Hi, it's William Packer from Exane BNP Paribas. 3 questions from me, please. Firstly, you have given a very clear outline of the FY 2019 ARPA performance, and your revenue model means that it's got a very high level of credibility. One thing you've done in previous years is talk to the vision for the next year. How should we think about FY 2020? Is it going to be more of a price year and what new products can help drive growth there? That's the first question. Secondly, in terms of cost phasing, you're very clear that costs should be up in the second half of the year relative to H1. Could you just talk us through why? In the release, I think it says that marketing will be more H1 weighted. What are the moving parts there? Finally, display had a very strong first half.
My understanding is that the WLTP change actually helped that business. What would you consider the underlying growth excluding that benefit? How sustainable is the display ad growth on a kind of 2-3-year view? That'd be great. Thanks.
I'll take the ARPA one. I think last year unusually we had the situation where we were trialing Dealer Finance in particular for quite a period of time. We knew that was going to be monetized in April, we could talk that through with everybody. That situation is a little bit different this year. As we enter into next year, we're going to have, obviously, our Advanced and Premium will still be going, and we think penetration can be driven up to somewhere between 20%-25% before we think about whether we need to change something. There's still plenty of growth there. Managing, obviously there's more penetration to go there. Dealer Finance, we've got a number of things that we'll be doing to drive further growth in there, which I don't want to talk about at this point.
We've got another number of products that are in the pipeline that will be coming through towards the end of the half, I'm just not going to talk about them right now.
maybe one question of clarification. On the Dealer Finance product, is that going to be more penetration, or is it segmenting the existing penetration, or both?
I think there's a bit of penetration growth and expanding the eligibility. For example, going into vans and other vehicles. There's a bit of that. There's also mid-year next year, we'll start introducing different phases of finance that people can start buying into.
In previous years, you've talked about a bigger price year or a bigger product year. Is 2020 bigger price year or a bigger product year?
I think it'll be similar to this year. Well, yeah. Kind of similar to this year. He's got his high expectation.
On costs. I think we talked about marketing coming in, our expectations to still be around 5% of revenue. I think that speaks to that. In terms of why the cost might be different, I think you did have credit in the first half, in the comparable period, which has some impact on that. Also our recruitment profile. You'll notice we've talked about headcount being more or less flattish to not declining at the full year. That will probably end up being more or less true for the year, but we run quite a few big intakes, particularly around our software engineers. One of which the date that they all flood into the business is the 1st of October, which doesn't go into these numbers.
I think the guidance that we gave at the full year is still probably more or less where we'd expect to end up, but we don't engineer the financials to get to that. We do what we think is the right thing for the business. Did you want to?
Yeah. From an M&A perspective, I'm not sure that our excellent growth in the first half is as much to do with WLTP as it is to do with. We're taking reasonably significant share away from the other automotive publishers, and primarily with the products like InSearch, where the market is moving away from standard formats. I think there's no reason to think that's not going to continue for a number of years to come. There's plenty of runway to go into that space.
I think just the reason for our tempering expectations for the second half is just the combination of what's happened with WLTP, and we're still working through that now, and Brexit coming up is making manufacturers think hard about what they want to do next year in terms of scale of new cars being pushed into the country, and therefore the advertising spend that's going in. They pushed quite hard this year. We've been able to take a bigger share of what they've pushed. Next year, are they going to push as hard? Is a question that we're just expecting it may come down a bit.
The rollout of InSearch has been a bit of a game changer in terms of your relations with the manufacturers.
Definitely. I think it's something that none of the other automotive publishers can offer because they don't have the search volumes. That just the massive volume and the targeting that comes from that is just something that nobody else can offer. As manufacturers and agencies want to drive much more towards actual results, performance marketing, they're going to get that more from massive search volumes than they are from just standard formats.
Just to help us understand, could you give us the percentage of manufacturer revenue from InSearch and how fast that's growing?
It's all 100% from manufacturer. InSearch is 100%. I think it's not 100%, it's 98%. There might be a couple of dealers in there somewhere.
Thank you.
Adam.
Good morning. It's Adam Berlin from UBS. Just two questions from me. The first thing, can you just explain why if core retailer stock was only down 1% year-on-year in the half, why was there such a big negative stock impact on the ARPA? Because I assume the ARPA is only affected by the retailer core stock and not the other cars. That's the first question. The second question is, if eBay plus Motors decide to go aggressive on marketing when the deal completes next year, are you comfortable you can keep marketing spend at 5% of revenue, or might you decide to up that a little bit just to fend them off? Thanks very much.
The first one's a little bit relatively easy to answer. We talk about 1%, and each percent represents around GBP 20 of ARPA. It's much more complicated than that in real life, but that's as good a rule of thumb as any. The reason for the difference is the live stock being down 1%. It's the paid-for stock that's impacted, and within that 1% down, there was some franchise stock offers, which isn't paid for. Actually, the subscription number, if you like, is probably double the 1%, so it's probably more like two. If you take 2%, roughly GBP 40. There's a bit of mix and yield changes in there because it depends on the type of customers that take it. That's kind of the reconciliation, if you like, between the two.
I think on the competitive environment, maybe more broadly, actually. I think we've obviously had competitors around us for quite some time. To be honest, until we see eBay, Gumtree, Motors, if they do get the authorization to combine, until we see any traction, there's no reason to change our view. eBay and Gumtree have been in the market for a long time. Motors have been in the market for a long time. People have got choices as to where they put the stock. They've chosen not to put that stock there. Our discussions with our customers, clearly with the franchise customers, is very much they're not going to push that stock to eBay and Gumtree. They don't believe that that's appropriate for their stock. It may come the other way, and they may decide to spend a lot of money on Motors.
Motors had a lot of money spent on it before with deep pockets by someone like Cox Automotive, it's got to where it is. Of course, we watch everything and see if there's any traction. I wouldn't think we'd respond at all, actually, if there was an increase in marketing spend that comes from there. I think we always reserve the right to increase the spend if we suddenly see traction, which is a different discussion. Certainly, I'd be surprised if we saw a significant difference for next year.
Silvia, yeah.
Thanks. Good morning. It's Silvia Cuneo from Deutsche Bank. We just have two questions. First one is a follow-up on costs, really, just thinking about the bigger picture. At time of IPO, you were talking about an 80% drop through to profit on average, while clearly in the first half, you reported a much higher percentage. It was about 91. How sustainable is this? Is this driven by the advertising product, maybe that higher margin? The second question is on your newly announced joint venture with Cox. Do you have any updates, or do you want to give some details about your expectations there? It would be good to get some color on how much ARPA was driven by the buying package.
Okay, I'll take both of those. I think at the time of the IPO, the 80% drop through, we'd still probably give the same general guidance or direction if we were to do it again today. We don't see any reason, I don't think, why that's not sustainable. I think it's partly down to the nature of our strategy. We're not one to chase areas that we're not experts in or aren't really leveraging our core. Most of the products where we get our greatest successes, like Advanced and Premium InSearch , actually leverage the core business that we have. Now, I won't say that they don't come without additional costs and they're 100% margin, but they tend to be products that generate similar margins to what our core does. Yeah, I do think that is sustainable.
On the joint venture, we are probably relatively reluctant to give too many details about it because we are in the middle of the competition, the CMA review at the moment. We do not really disclose the contribution to ARPA from the current buying products because, to be honest, I think it is more or less irrelevant in terms of what we are looking to do with the joint venture. The one thing I would say there is it remains something that we are very excited about. There is no real players that are looking to disrupt that entire market space from a digital perspective. There is a huge opportunity to do that because costs are very high for buyers and cost structures are very high, and that is kind of the perfect model for a digital disruption.
There is probably in the region of 2 million or so cars that are transacted in that space, of which the joint venture is currently only touching, or each of the individual parts are only touching a very, very small part of that. We remain very interested in it, and we are very much focused on doing the right thing and getting through the CMA review before we talk too much more about it, because if it is phase two, then it is not even in this financial year. Thanks. Yep. Sorry, I am making him come right down the front.
Yeah.
Thanks. Niasseem Wit-booi from Liberum. Just one question. I mean, you Yeah, I know. You mentioned about the car manufacturers sort of trimming their plans for 2019 because of uncertainty about Brexit. I am sure you have done your own sort of Brexit planning in sort of what could be the worst case. In a worst case scenario, just for the benefit of us all, just if that worst case was to come, how do you think that would impact your business? What sort of thoughts are you thinking in terms of impact on things like stock, retailers, the advertising and so forth? What steps you could take to mitigate that, particularly as you have got, as you said, a very high drop-through rate of revenues to profits?
I think the lightly negative scenarios and obviously they have various ranges depending on your view. The two things that will impact are, number one, significant shifts in exchange rate. If the euro and dollar become much stronger against the pound, then the appetite from manufacturers to push cars into the U.K. is going to reduce. Everything that we have heard from manufacturers, who are kind of in a really difficult situation right now because they are making the decisions now about the targets and the manufacturing throughput for next year, is that they are looking at something similar to this year. It may well be that that is just what is going to happen next year. But whether that continues beyond that is a question. That is one thing. Obviously what that does for us is, it reduces the stock throughput into the U.K. market.
That just has a knock-on effect over the years, which hurts us in our core business by that percentage because we're a stock-based model in the early days and then into the private business as we're seeing today for the financial crisis cars, or the reduction in financial crisis cars 10 years, 8 years later. I think that's not a huge impact. In fact, what we're seeing right now is actually a good demonstration of what's happened during WLTP, where there just isn't as many new cars available to buy, is that what's generally happening over the last couple of months is we're seeing that retailers are just shifting people from brand new cars into used cars, which actually in some ways helps our model. We've got a sort of weird benefit, which will be short-term, not mid-term and long-term.
I don't think there's anything significant there. I think that the second thing is obviously, if that moves into the consumer confidence world, where suddenly people are sitting there going, "Yeah, I don't want to buy a car anymore." Generally that isn't really the case that they don't buy. Even during the financial crisis, we still saw that they'll downgrade the cars they buy, so a cheaper car. In general, not a huge effect, but obviously the bigger effect is on our retailers. If our retailers aren't making as much money, their appetite to spend more money is going to reduce.
I think in terms of the services we offer, in terms of our general cost base, we sort of sit there and say we don't see a big change, but clearly there's that delta of potential revenue that might hit us at different points in the cycle over a period of years. I think, not for a minute saying that we're not immune to this, because that's not true, because our customers are clearly affected. I think our model is just somewhat buffeted against some of those changes.
Yeah. I'd just add one. I think it's very true that our model naturally has some mitigants if there's less cars, and they tend to sell quicker, and we're seeing a little bit of at the moment. The one thing I would say on consumer sentiment as it relates to our business is the best way to look at it. One of the things that's been missed is used car transactions kind of showing a slight decline, but it's a bigger decline if you consider that actually that used car car park continues to grow and is much bigger than it was kind of five years ago. If you take the amount of time someone, or how often someone looks to change their car in the U.K., actually we're at 3.3 years and probably a little bit above that just at the moment.
In the middle of the financial crisis, it got to 3.5 years. Its lowest point has been 2.9. It's kind of we're already at a slower level in terms of that term, and we're delivering these results. It feels like there's that underlying point.
I mean, it was just trying to do very simplistic and probably sort of too simplistic sort of think about things. Probably where you would see the impact is you'd probably see the car stock being impacted and you'd probably see retailers maybe being less willing to take the more advanced products.
I'll just give you an empirical observation. During the first six months of this year, new cars has been quite hard. If you look at the publicly listed car retailers in this country, the way to outperform has been to grow used cars. Some of those have shown that you can do that to the tune of 8% against a used car market that's down 3%. When new cars gets tough, you can grow in the used car side of your business. In order to grow in the used car side of the business, nothing's free. You've got to look at process. You've got to look at change. You've got to look at how you buy cars, and you've got to look at how you advertise them.
In some ways, certainly my advice, which you wouldn't be surprised, would be, no, you should look at exactly those packages at those time. We're seeing those kind of behaviors, certainly not across the board, but those that really want to prop up the results from the more difficult parts of their business. It's actually ironically buying those packages is probably one of the better things that they can do. Yeah, Andrew. Yeah, or Andrew and John.
Let them choose.
Hi. It's Andrew from Barclays. I've got two. First one is on physical new car stock, which you talked a bit about at your CMD, that you were going to try and get onto the platform. I'm wondering about special deal you've been doing is related to that or not. Perhaps you could give us an update on how are stocks going? When you might start to monetize it? Is that part of your mystery thing for fiscal 2020 that you won't talk about or not? Second thing is back on eBay. Do you have a sense for if they're successful at integrating all the listings between the three platforms onto one, which I agree is a big if, but if they are, how many listings they'd actually have on a like-for-like basis to you?
I guess as an extension to that, what would you be monitoring to alter your view on C2C and whether you need to drive up more scale in that bit of your business? Because that clearly is one area where they have more stock than you do.
I'll take the first one. Yes, physical new cars was something that we spoke about at the capital markets day, it is true that there is many tens of thousands of them in the U.K. We're working with retailers at the moment to get them onto the platform. I would say that, you can see those just by simply choosing the New tab and see what retailers are doing there. Some of the things that we've found, a general finding that we've had is that retailers, manufacturers for that matter, are not used to marketing these cars online. It might sound strange in 2018 with such an expensive item where everything else is sold online, but it's just not been done before.
The number of logistical challenges that we've got to in terms of getting a really high-quality listing of a real vehicle with a real price, pulling them out of IT systems, is certainly something there seems to be almost universal interest in doing with us, but that doesn't necessarily make it easy. At the moment, I wouldn't say it would be premature for us. We typically wouldn't talk about monetizing something until we feel like the machine's working and the stock's on there, and we can get a bit of a sense of the value that our customers are getting out of that product. At the moment, that's one that we're ticking away on, but I think we've made material progress, actually, since the CMD.
All I'd request is don't measure progress by the number of new cars necessarily, because it's actually the process and the getting the dealership process in place to actually do something they've never really thought about doing before. Did you want to speak about eBay integrating?
Yeah. I think the press release talks about 600,000 cars, which if you add the number up between the three channels, that's what it says. When you do the analysis and dedup, because obviously some are, particularly in eBay and Gumtree, they're heavily duplicated. Then you also look at Motors, which actually has about 30,000 cars which are sold on the site, and you can actually see that if you look, which we don't do because we just think that's a wrong consumer experience. Also, they allow some of the larger groups to duplicate. What I mean by that, if you've got 3,000 cars, they can allow those 3,000 cars to be seen on every one of their sites. It actually increases the ticket because it looks like there's 3,000 on each one of them.
If you remove all those, then you de-duplicate between them, they've got somewhere between 30,000 and 50,000 cars less than us overall. I think to us, the more important factor on that actually is the audience stats that I talked about earlier, which is we're still going to be significantly greater, therefore, the response from us is going to be significantly higher. When you look at the analysis of those cars, as you say, the biggest difference is private. It's an interesting market, but Gumtree and eBay, well, eBay particularly, have been in the market now for about eight years, traditionally they will be slightly above, slightly below, they will continue to be. They've already got more than we have on the site today. There are things that we can do, we obviously monitor that all the time.
We see our private is reducing, but at the same time, we see that eBay and Gumtree's private stock is reducing. I think for us, it's more a focus rather than comparing ourselves to them for that. Although we obviously monitor that all the time and see whether it's growing compared to us, et cetera. It's much more of a case of what can we constantly be doing to see what we can increase the private stock, primarily because we think that's a better consumer experience overall, to be able to search through private stock as well as trade stock in the market. We think that's important to our core marketplace.
I think whilst we'll have all the things in there to say, let's monitor private, let's monitor where they're going, let's see what we're going to do, and we've got some things that we will do as a response over the next 12 or 18 months, I'm sure, which we should not include marketing. I don't think there's nothing that we'll focus just because of that. We'll do it because we want to improve our marketplace overall.
Just the one point I'd add on that too is one thing that we've seen, if you look at a business like WeBuyAnyCar that's seen volumes grow in this space, it's pretty clear that in some ways cost isn't the issue. The observation is if you look at the cost in terms of the price that you take on your car, putting it through a car buying channel versus on Auto Trader or another site for that matter. It does feel like there's an element of this that there's a convenience play to be had. We're probably as focused on perhaps. At the same time, consumers have shown greater willingness to part exchange with retailers, and I talked about that because they've now got valuations. At the same time, we're thinking about, well, maybe we're best to focus our efforts
Not necessarily on fixing a private model, but actually looking at where can we deliver something that's more convenient and easier for a consumer to sell their car, which might involve working with our retailers who are the ones at the end of the day that are buying most of the vehicles in the U.K. That's the other angle I'd say. I don't think the solution We've tried and we have indeed, we're lapping part of the private performance is down to going free to list under GBP 1,000. It's not like that's the silver bullet. Actually, it feels like it's something different going on.
Thanks. It's Tom Singlehurst here from Citigroup. During the half, the LeasePlan IPO, I think raised the awareness of the opportunity for some leasing companies to go direct to consumer via platforms like CarNext.com. The question or two questions actually.
One is just broadly speaking, platforms like this, are they an opportunity or a threat? The second question is whether you can talk about sort of direct deals you've done with leasing companies, either in the past or potential opportunity from that going forward. Thank you. I think generically across the board, something like 80% of the wholesalers, the large lease providers, are looking at different routes to market. Some of them are looking at different routes to dealers. Some of them are looking at different routes to consumers. All of those things, some of them are doing both. Someone like LeasePlan have clearly made statements about the fact that they're going and driving to a significant greater number of their cars direct to consumers. They're doing that both through an online platform, CarNext, and indeed through growing their own effective retailer base.
We are today, and you can see it on the site, we work with LeasePlan. They're a partner, and we view them as both a customer and a partner in those ways. We're learning together, also in some ways, they're just a traditional retailer from our model because they're selling cars directly from physical sites from when they're coming off lease. Different wholesalers are saying, "No, we're not going to do that. What we want to do is have a more effective route to dealers." Some of them will do that through physical auctions, some of them will do that, they're looking at doing that through digital auctions. Many of them have actually got their own digital auction that they're trying to drive themselves.
Our opportunity there will be, can we help them with that access to what we've undoubtedly got the largest dealer base and buyer base that's out there. How can we help them be more efficient? Whilst I'm not going to talk about individual deals, all of those things, we've got some that are advertising with us today, B2C, that will grow. We expect that to grow. Some that are doing B2B, they're testing some things with us and with others. I think that whole market is in for quite a big shakeup, not only in the used space, but also in the new space, because they're looking at how do we get access to consumers through things like PCH and new finance models and how can we help them with that is another question.
A lot of those things are up in the air. We're working closely with them. We're spending more time with them than we ever have done before. Presumably the opportunity, the sort of direct dealer route is when it's sorted out, will be done via the Cox JV. I think my anticipation is, yeah, that's probably right. To be confirmed once we've worked through the details. At the moment, we can have a conversation about the prospect, but there's no reality until it's cleared.
Morning, Jessica Spake from Peel Hunt. Two quick questions, please. First, going back to M&A. You mentioned video. I think you said you're trialing it now. Do you expect the revenue potential of video to cannibalize what you have for InSearch, or will it be incremental? Second is, with Cox selling Motors.co.uk, do you envision there to be more opportunities in the B2B space in partnership with Cox?
I can take the video on. Both? No, you do. Short answer on video is no. We don't see it cannibalizing at all, actually. InSearch is only at the very early stages, we have high aspirations for them, as usual, it'll probably take a bit longer than anyone would like for it to happen overall. Video at the moment is one of the biggest digital advertising markets within this country and indeed globally. At the moment, we had no offering at all for it. If you like that basic, InSearch is like Google, InSearch video is kind of our play with YouTube in that space. We see them, agencies tend to treat them as quite distinct buckets. Indeed, they're even spent by different parts, often within the agency.
No, we see it very much as being complementary. Video is at the very earliest stages, though, in terms of just getting the product to be exactly right and ready.
Do you see the monetization to come through in the second half of this year or really into next year?
We should. I'd be disappointed if, as far as you're concerned and as what you would notice in the P&L, I think you'd be thinking more about it next year for that. It'll all come through that broad M&A line, which we don't split out at the moment. One point to make, and we did mention in the conversation, what we're doing on InSearch is quite detrimental to some other display lines, both within ours, but more importantly, as Trevor mentioned, it's the whole industry, the whole concept of very high yield display formats. InSearch is able to really compete more in that kind of Google-like sphere in terms of the cost per click and the advertising effectiveness that you get, which as Trevor said, you can only do that if you have a search engine.
I think from a Cox perspective, they certainly have some physical services that we don't want to get into. They have some appetite for risk on vehicles that we have never traditionally done. There's some things there that are interesting, so do many others. I think, sure, they'll have some, and we've probably got an easier route in than we had before because we can talk to them. There's nothing that we sit there today and go, we must use them for this, or we're going to use them for that or anything along those lines. I think it'll be a question of what are we trying to do? Who are the right people to partner with? Just because they have the capability, they're going to have to, in our minds, compete with other service providers for that business to work together.
There are some things, we've not discussed any of those things. Okay. Very good. We might finish up there. Thanks a lot. Thank you very much indeed.