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Interim Report & Accounts Six months ended 30 th June 2018 Marshall Motor Holdings plc Daksh Gupta – CEO Mark Raban – CFO
Interim Report & AccountsSix months ended 30th June 2018
Marshall Motor Holdings plc
Daksh Gupta – CEOMark Raban – CFO
DAKSH GUPTACHIEF EXECUTIVE OFFICER
INTRODUCTION
AGENDA
• Highlights
• Financial review
• Operational review
• Outlook
• Summary
3
HIGHLIGHTS *
• Continuing underlying PBT of £16.4m marginally up on previous record result (H1 2017: £16.2m)
• Like-for-like retail unit sales down 5.9%
• Like-for-like used unit sales broadly flat, revenue up 5.2%, gross margin up 37bp to 7.2%
• Like-for-like aftersales revenue up 3.2%
• Continuing gross margin maintained at 11.5% (H1 2017: 11.5%)
• Net underlying operating expenses down 0.3%
• Net cash £0.9m following Leasing disposal (30 June 2017: Net debt £101.1m)
• Net assets of £201.2m, £2.58 per share (30 June 2017: £158.0m, £2.04)
• Strong balance sheet, £121.1m of freehold / long leasehold property (30 June 2017: £112.5m), £120m RCF extended to June 2021
• Interim dividend maintained at 2.15p per share (2017: 2.15p)
* All comparatives relate to H1 2017 4
MARK RABANCHIEF FINANCIAL OFFICER
FINANCIAL REVIEW
FINANCIAL SUMMARY
Variance %
H1 2018 H1 2017 Total Continuing operations
Revenue (£m) 1,162.9 1,187.4 (2.1%) (0.4%)
Gross profit % 11.5% 11.6% -13bps +1bp
Underlying operating profit (£m) 19.7 22.4 (12.2%) (0.6%)
(%) 1.7% 1.9% -19bps 0bp
Finance costs (£m) 3.3 3.9 14.4% 8.5%
Underlying PBT (£m) 16.4 18.6 (11.7%) 1.2%
Non-underlying items (£m) 0.9 -
Reported PBT (£m) 17.2 18.6
Reported effective tax rate (%) 21.0% 22.2%
Dividend per share (p) 2.15p 2.15p
Reported net cash / (debt) (£m) 0.9 (101.1)
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NON-UNDERLYING ITEMS
(£m) H1 2018 H1 2017 Var %
Continuing underlying PBT 16.4 16.2 +1.2%
Profit on disposal of subsidiary 0.6 - -
Profit on disposal of assets classified as held for sale 0.3 - -
Continuing reported PBT 17.2 16.2 +6.5%
Discontinued PBT - 2.4 -
Total reported PBT 17.2 18.6 -7.1%
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REVENUE AND VOLUMES *
Revenue (£m) H1 2018 H1 2017 Var % LFL var %
New 584.6 611.2 (4.4%) (4.6%)
Used 474.6 458.2 3.6% 5.2%
Aftersales 126.4 123.3 2.5% 3.2%
Internal (22.7) (24.8)
Total 1,162.9 1,167.9 (0.4%) 0.1%
Unit sales H1 2018 H1 2017 Var % LFL var %
New Retail 15,803 16,902 (6.5%) (5.9%)
Fleet 9,396 11,026 (14.8%) (14.5%)
New 25,199 27,928 (9.8%) (9.3%)
Used 22,659 23,716 (4.5%) (0.3%)
Total 47,858 51,644 (7.3%) (5.2%)
Class LeadingReturns
* Continuing operations 8
GROSS PROFIT
45.1
40.8
0
2
4
6
8
10
12
14
16
10
15
20
25
30
35
40
45
50
55
60
H1 2017 H1 2018
NEW
Class LeadingReturns
Mix % H1 2017 H1 2018
Revenue 51.3% 49.3%
Gross profit 33.7% 30.6%
Mix % H1 2017 H1 2018
Revenue 38.4% 40.0%
Gross profit 23.4% 25.6%
Mix % H1 2017 H1 2018
Revenue 10.3% 10.7%
Gross profit 42.9% 43.8%
31.2 34.1
0
2
4
6
8
10
12
14
16
10
15
20
25
30
35
40
45
50
55
60
H1 2017 H1 2018
USED
57.3 58.3
36
38
40
42
44
46
48
50
52
10
15
20
25
30
35
40
45
50
55
60
H1 2017 H1 2018
AFTERSALES / OTHER
Gross profit (£m) GP%
% % %£m £m £m
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PROFIT BRIDGE: PBT £m
* Underlying PBT on continuing basis
£m
Gross profit (0.4) Opex 0.3
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BALANCE SHEET
£m H1 2018 H1 2017Intangible 121.5 122.0
Property, plant & equipment 147.9 210.2Other 2.6 2.7
Fixed assets 272.1 334.9Inventory 351.4 372.9
Trade / other receivables 114.0 100.5
Cash & equivalents 7.7 8.3
Current assets 473.1 481.7Trade / other payables (501.6) (521.1)Leasing debt - (65.9)
Bank / other debt (6.8) (43.5)
Other liabilities (35.6) (28.1)
Total liabilities (544.0) (658.6)Shareholders’ equity 201.2 158.0
Reported net cash / (debt) (£m) 0.9 (101.1)
Trade / other payables
H1 2018 H1 2017Vehicle funding 324.3 353.0
Other 177.3 168.1
Total 501.6 521.1
Property, plant & equipment
H1 2018 H1 2017Freehold/long leasehold 121.1 112.5
Other retail assets 26.8 25.5
Contract rental assets 0 72.2
Total 147.9 210.2
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Working capital
H1 2018 H1 2017Inventory 49.8 7.2
Trade and other receivables (22.0) (5.5)
Trade and other payables (inc stock funding) (31.5) 16.2
Other (0.7) (3.2)
Total (4.2) 14.7
CASHFLOW
£m H1 2018 H1 2017
EBIT 20.5 22.4
Depreciation: retail 4.5 5.0
Depreciation: leasing - 9.1
Share based payments 0.7 0.7
Profit on disposals (0.9) (0.0)
Adjusted EBIT 24.9 37.3
Working capital (4.2) 14.7
Operating cashflow 20.6 52.0
Tax / interest (6.1) (8.6)
Gross cashflow 14.5 43.4
Capital expenditure: retail (8.8) (12.3)
Capital expenditure: leasing - (17.2)
Sale of business / disposal proceeds 1.8 7.0
Free cashflow 7.5 20.9
Acquisitions (net of cash acquired) (0.1) (0.1)
Dividends (3.3) (2.9)
Net borrowings (0.3) (9.7)
Other (1.0) -
Cashflow 2.8 8.2
Class LeadingReturns
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2018 FINANCIAL GUIDANCE ITEMS
• Retail capex 2018 c.£26.0m
• Interest charge c.£7.0m – £7.5m
• Full year reported ETR c.21%
Class LeadingReturns
UNCHANGED
UNCHANGED
UNCHANGED
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DAKSH GUPTACHIEF EXECUTIVE OFFICER
OPERATIONAL REVIEW
25%
30%
35%
40%
45%
50%
Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18
Diesel share
NEW CARS – H1 MARKET• 1.31m new cars registered in H1, down 6.3%
• Retail down 4.9%, fleet / business down 7.3%
• Q1 down 12.4%, Q2 up 2.4% - 2017 VED
• Sales by fuel type:• Diesel down 30.2% (32.6% share)
• Petrol up 11.4% (61.9% share)
• AFVs up 24.2% (5.5% share)
• Premium brands under pressure due to higher historic diesel content, OEMs rebalancing mix
• SMMT FY 2018 forecasts:• Previous: -5.8% (January 2018)
• Latest: -4.1% (August 2018)
• Indicates decline of -1.9% for August onwards
• Note: July +1.2%, YTD -5.5%
• Expect market distortions in H2 due to WLTP
• 2019 forecast: -1.9%
0.00.51.01.52.02.53.03.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F
UK NEW CAR REGISTRATIONS (m)
Source: SMMT
FALLING MARKET SHARE OF DIESEL
Jan-17 May-18
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NEW CARS – MMH PERFORMANCE
• LFL new unit retail sales down -5.9%, with LFL new unit fleet sales down -14.5%, total new LFL sales down -9.3%
• Exit of certain low margin fleet business announced in 2017 (daily rental), excluding impact of this total new unit LFL sales down -3.5%
• Gross margin 7%, down 40 bps, driven by more challenging new market
• PCP continues to be popular:
• 80% of new car finance cases (H1 17: 83%, FY 17: 83%)
• 66,540 Live PCPs (H1 17: 66,450)
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NEW CARS – WLTP
• Worldwide Light Vehicle Test Procedure (WLTP) replaces the outgoing New European Driving Cycle (NEDC)
• Effective from 1st September 2018 with the objective of deriving ‘real-world’ emissions and fuel economy figures
• After this date only WLTP compliant vehicles can be registered. All outgoing NEDC approved cars must therefore be registered by 31st August 2018
• OEMs can apply for derogation (12 month extension) of existing NEDC stock built before 1st
June but only 10% of total annual sales volume
• New rules require many model derivatives to be tested to account for options that affect weight
• Expect to see:• Significant amount of non derogated cars being registered in August (some OEMs already
actioned)• Distortions from historical norms, in sales and registrations, for the remainder of the year
and possibly into 2019, notably August and September 2018, resulting from testing backlog• Certain brands affected more than others
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USED CARS
• LFL used unit sales broadly flat
• LFL revenue up 5.2%
• Gross profit up 9.2%
• Strong focus on profitability, margin up 37bp at 7.2%, driven by robust operating controls:
• Prudent 56 day stocking policy
• Stock profiling
• Unique digital initiative in Phoenix 2
• Continued online focus
• Continued PCP growth in used, now 63% of finance cases (H1 17: 62%)
1.02.03.04.05.06.07.08.09.0
2009 2010 2011 2012 2013 2014 2015 2016 2017
UK USED CAR MARKET (m)
Source: SMMT 18
AFTERSALES
• Continued growth in aftersales revenues, 2.5% total, 3.2% LFL
• Total aftersales gross profit up 1.7%, despite a margin decline to 46.1% (H1 2017: 46.5%), driven by:
• Increased parts sales mix – lower margin
• Reduced internal work due sales rate – charged at retail rate
• Lower warranty work in certain brands
• Service plans key to aftersales retention. Over 78,000 live at 30 June 2018
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PEOPLE CENTRIC
21stBest UK
workplace
8 YearsRunning
GPTW status
4 YearsRunning ranked
Top 30
No.1Automotive employer
78%Trust index
76%participation
rate
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DIGITAL
Source: Google analytics, internal management information
www.marshall.co.uk
>11.8m page views+11.8%
>8,355 Live chats+50.1%
Sector Leading Social Media
39,155 Followers+4.3%
93,351 Likes+7.8%
8,089 Followers +67.2%
Winner - “Most Influential Dealer on Social Media”
Highly Commended - “Best Social Media Strategy”
Shortlisted - “Social Media Award”
>3.2m visits+16.3%
-----------------------------
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CAPEX INVESTMENT
• 2016 to 2018 £75m capex programme nearing completion
• £10.0m incurred in H1 2018 with completed CI upgrades at 13 sites, including significant refurbishments at Bedford Land Rover, Cambridge Volvo, Salisbury BMW / Mini, Reading Volkswagen CV and Reading Skoda
• Purchase of long leasehold and commenced development of Ford Store Cambridge
• Commencement of combined JLR facility in Lincoln – £4.2m investment to date
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OUTLOOK
• Positive first half performance
• Continued general economic uncertainty
• Ongoing consumer confusion around diesel product affecting some premium brands in the short term
• WLTP will cause market distortions for remainder of this year and possibly into 2019
• Board remains cautious on second half
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SUMMARY
• Financial performance from our continuing businesses marginally ahead of last year’s record result
• Challenging new vehicle market continues
• Strong used vehicle profitability performance
• Continued growth in aftersales revenues and gross profit
• Maintained interim dividend at 2.15p
• Strong balance sheet with £201.2m of net assets, equating to £2.58 per share
• Well positioned to take advantage of future opportunities
• Despite market uncertainties, full year guidance unchanged at upper end of previous expectations
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