TIDMMMH
RNS Number : 5605R
Marshall Motor Holdings PLC
09 March 2021
9 March 2021
MARSHALL MOTOR HOLDINGS PLC
("MMH" or the "Group")
Results for the Year ended 31 December 2020 ("the Year")
Resilient performance in a challenging environment
Marshall Motor Holdings plc, one of the UK's leading automotive
retail groups, announces its results for the Year ended 31 December
2020.
Financial summary
2020 2019 Var %
Underlying:
Like for like revenue (GBPm)
* 1,866.4 2,157.2 (13.5%)
Underlying profit before
tax (GBPm) ** 20.9 22.1 (5.4%)
Basic underlying earnings
per share (p) 21.1 22.9 (7.9%)
Reported:
Revenue (GBPm) 2,154.4 2,276.1 (5.3%)
Profit before tax (GBPm) 20.4 19.6 3.7%
Earnings per share (p) 17.8 19.9 (10.6%)
Dividend per share (p) nil 2.85(1)
Adjusted net cash / (debt)
(GBPm) *** 28.8 (30.6)
Reported net debt (GBPm) (70.5) (138.6)
------------------------------ -------- -------- --------
(1) Final dividend cancelled due to COVID-19 impact, 2.85p
represents interim dividend only which would typically represent
one third of full year dividend
2020 Highlights:
-- Underlying profit before tax GBP20.9m (2019: GBP22.1m), reported profit
before tax of GBP20.4m (2019: GBP19.6m);
-- Reported revenue of GBP2.2 bn, down 5.3% (2019: GBP2.3bn) with like-for-like
revenue of GBP1.9 billion, down 13.5% (2019: GBP2.2bn), despite significant
market decline as a result of COVID-19;
-- Total new vehicle unit sales down 9.2% with like-for-like total new vehicle
unit sales down 19.4%, a strong double-digit outperformance against a
UK new vehicle registration decline of 29.4%;
-- Total used vehicle unit sales down 5.3% with like-for-like unit sales
down 14.6%, compared with used vehicle transactions down 14.9%, a pleasing
result given showroom closures;
-- A resilient aftersales performance with total revenue down 5.2% and like-for-like
revenue down 13.5%;
-- Adjusted net cash at 31 December 2020 of GBP28.8m, an increase of GBP59.4m
from 31 December 2019 as a result of a combination of Government COVID-19
support measures, working capital control and management cash preservation
actions taken during 2020;
-- GBP120m revolving credit facility extended in July until 2023;
-- Eleventh consecutive year of Great Place to Work status and sixth consecutive
year of being ranked as one of the UK's best workplaces;
-- Further development of the Group's digital strategy, including the introduction
of 'click and collect' and online reservation services;
-- Continued promotion of the Marshall brand with a number of national TV
marketing campaigns;
-- No final dividend for 2020 proposed; the Board is mindful of the significant
financial support received from Government measures and other stakeholders.
Daksh Gupta, Chief Executive Officer, said:
"The unprecedented political, economic and social impact of the
COVID-19 pandemic in 2020 challenged governments, businesses and
individuals across the world.
"The response of colleagues across our businesses during the
Year was outstanding. Despite significant uncertainty, our
colleagues went above and beyond, rising to the challenges we
collectively faced. Their contribution to our financial result
cannot be underestimated and we thank them all for their dedication
and commitment during the Year. Our priority in responding to the
COVID-19 pandemic was the safety and wellbeing of our colleagues
and customers. As well as ensuring our businesses were safe
environments in line with COVID-19 secure guidelines, we worked
hard to support colleagues, both financially and through wider
wellbeing initiatives.
"Through a combination of support received from both the
Government and our business partners, a number of one-off sector
tailwinds and our continued and significant outperformance of the
wider market, we are pleased to report an underlying profit before
tax for the Year of GBP20.9m. Our financial position also remains
strong, with adjusted net cash at 31 December 2020 of GBP28.8m.
" Our resilient business model, ability to adapt to changing
consumer behaviours, such as those enforced by showroom closures,
together with our exceptionally strong relationships with our brand
partners, gives us confidence in the Group's future prospects and
success .
"I would like to take this opportunity, on behalf of the Board,
to thank our fantastic colleagues, our brand partners and suppliers
for their continued support."
* results on a 'like-for-like' basis include only the Group's
businesses that have been active and trading for a period of 12
consecutive months. Business that are excluded from the definition
of 'like-for-like' are those sites that have recently commenced
operation, therefore do not have a 12-month trading history, as
well as any businesses that were closed and market segments or
activities that were ceased during the current or previous
Year.
** underlying profit before tax is presented excluding
non-underlying items as set out in Note 5.
*** adjusted net cash / (debt) is presented excluding the impact
of IFRS16 Leases.
For further information and enquiries please contact:
Marshall Motor Holdings plc c/o Hudson Sandler
Daksh Gupta, Chief Executive Officer Tel: +44 (0) 20 7796
4133
Richard Blumberger, Chief Financial Officer
Investec Bank plc (Financial Adviser, Tel: +44 (0) 20 7597
NOMAD & Broker) 5970
Christopher Baird
David Flin
David Anderson
Hudson Sandler Tel: +44 (0) 20 7796
4133
Nick Lyon
Bertie Berger
Nick Moore
Notes to Editors
About Marshall Motor Holdings plc ( www.mmhplc.com )
The Group's principal activities are the sale and repair of new
and used vehicles. The Group's businesses have a total of 113
franchises covering 22 brands, across 28 counties in England. In
addition, the Group operates six trade parts specialists, two used
car centres, six standalone body shops and one pre delivery
inspection centre.
In 2020 the Group was recognised by the Great Place to Work
Institute, being ranked the 12th best place to work in the UK
(super large company category). This was the eleventh year in
succession that the Group has achieved Great Place to Work
status.
Cautionary statement
This announcement contains unaudited information based on
management accounts and forward-looking statements that are based
on current expectations or beliefs, as well as assumptions about
future events. These forward-looking statements can be identified
by the fact that they do not relate only to historical or current
facts and undue reliance should not be placed on any such
statements because they speak only as at the date of this document
and are subject to known and unknown risks and uncertainties and
can be affected by other factors that could cause actual results,
and the Group's plans and objectives, to differ materially from
those expressed or implied in the forward-looking statements. MMH
undertakes no obligation to revise or update any forward-looking
statement contained within this announcement, regardless of whether
those statements are affected as a result of new information,
future events or otherwise, save as required by law and
regulations.
Chairman's Statement
Introduction
I am pleased to present our annual results for the year ended 31
December 2020 (the "Year).
The Year was, inevitably, dominated by the impact of COVID-19
and the measures put in place to control the spread of the virus.
As a result, there were prolonged periods of the Year during which
all, or some elements, of our physical retail business were
required to close. Whilst this clearly affected trading during
those periods, we recognise and are grateful for, the fact that our
sector was not as negatively impacted as others.
As a sector, we benefited from a number of tailwinds following
the reopening of our businesses after the initial national
lockdown: we were permitted to open our retail businesses earlier
than other retailers on 1 June 2020 and we benefited from the
release of pent-up demand in both sales and aftersales, an
increased preference for private mobility and robust used car
valuations as a result of supply constraints for new cars.
We also benefitted significantly from Government support
measures; including business rates relief, retail grants and the
Coronavirus Job Retention Scheme (CJRS). We are grateful that these
measures enabled us to protect the vast majority of jobs within the
Group as well as our liquidity.
Our brand partners and suppliers have been extremely supportive
during this challenging period and we are thankful for this
support. In challenging times such as those experienced during the
Year, the importance of the symbiotic relationship with each of our
strong, global franchise partners was clearly demonstrated.
I am incredibly proud of how our management team and colleagues
across the Group responded to the challenges with which we were
presented during the Year. Our priority in responding to the
COVID-19 pandemic has been safety and wellbeing of our colleagues
and customers and doing our duty to the broader society to which we
belong. As well as ensuring our businesses were safe environments
in line with COVID-19 secure guidelines, we worked hard to support
colleagues, both financially and through wider wellbeing
initiatives.
From a trading perspective, our continued outperformance of the
wider market was significant and (in combination with the support
measures and sector tailwinds referred to above) enabled us to
achieve a strong financial result for the Year despite the
challenges we faced.
Strategy
The Group's strategy of close partnership with major global
automotive brands has served us well over many years, none more so
than in 2020 when the strength and depth of our partnerships was
clearly demonstrated. Whilst completed corporate activity during
the Year was more limited as a result of COVID-19, our clear
strategy, strong financial position and support of our key brand
partners will enable us to take further growth opportunities as
they arise. We also believe that those automotive retailers with
both scale and a diverse portfolio will be best placed to succeed
in a changing market and continue to explore ways to increase our
scale with high quality, financially attractive acquisitions.
The automotive sector was already undergoing a period of
evolution, driven by a combination of environmental, technological
and social change factors. COVID-19 has accelerated a number of
these developments, in particular, the progression towards a more
flexible, consumer-centric retail model incorporating remote sales
utilising technology such as video consultations, online purchases
with vehicle delivery and 'click and collect' services. We have
embraced these developments and the operational efficiencies and
improved customer choice of experience they offer.
Nevertheless, COVID-19 has also demonstrated the importance of
our physical presence. Despite widespread use of remote sales
channels throughout the pandemic, vehicle sales during the Year
were significantly impacted by the closure of showrooms for
prolonged periods with research consistently showing that the
majority of consumers continue to opt for a showroom experience as
part of the car buying process.
Along with our manufacturer partners, we continue to believe
that a strong retail franchise network will be a crucial component
of the future automotive sector. This perfectly complements our
increasingly strong online presence and is positioning us to
provide the 'best of both worlds' to our customers, offering a
bespoke customer experience with warm human relationships at its
heart.
Results
The Group delivered a strong financial performance in what was a
very challenging year.
The Group achieved reported revenue (including 2019
acquisitions) of GBP2.2 billion (2019: GBP2.3 billion). Underlying
profit before tax* ('PBT)' for Year was GBP20.9m (2019: GBP22.1m).
The Board considers this to be a strong result given the
circumstances and, as stated above, was achieved as a result of a
combination of continued market outperformance, sector tailwinds
and significant Government support.
The Group's balance sheet is also strong, with adjusted net
cash** of GBP28.8m at 31 December 2020 (2019: adjusted net debt of
GBP30.6m). Net assets rose to GBP215.9m, underpinned by GBP125.8m
of freehold land and buildings.
Dividend
The Board has considered the position in relation to dividends
extremely carefully. The Board is cognisant of the fact that, in
light of the uncertainty caused by COVID-19, it suspended and
subsequently cancelled the previously announced final dividend for
2019 and did not declare an interim dividend for 2020. The Board
continues to believe this was the right action to take to maximise
the Group's financial resilience in the face of an extremely
unpredictable trading environment.
In relation to 2020, whilst the Group has performed well and its
financial position is strong, the Board is mindful of the
significant support the Group has received both from Government
measures such as business rates relief and CJRS and from other
stakeholders.
As a result, the Board feels it would be inappropriate to
recommend the payment of a final dividend for 2020.
The Board understands the importance of dividends to
shareholders and intends to resume the payment of dividends as soon
as conditions allow and will consider the position next at the time
of release of its interim results in August 2021 . Our approach to
management bonuses supports this position: while we value
management's efforts and commitment enormously, the Board and
management have collectively agreed that no executive management
bonuses should be paid until to the Group can restore
dividends.
AGM
Our annual general meeting will be held on 20 May 2021. The
Board would prefer to hold a physical meeting at which shareholders
are able to attend in person, but that may not be possible.
Summary
The impact of COVID-19 continues to dominate the social and
economic environment in 2021. Our experience of meeting these
challenges during the Year, coupled with the demonstrable
resilience and flexibility of our business model, leads to our
belief in being able to navigate through the headwinds that may
arise in the short term.
Our strategic focus and tried and tested business model,
together with our exceptionally strong relationships with our brand
partners, gives us confidence in the Group's future prospects and
success. The Group's balance sheet remains strong and we continue
to be well positioned to take advantage of further growth and
consolidation opportunities as they arise.
I would like to thank the leadership team, our brand partners,
business suppliers, shareholders and colleagues throughout the
Group for their wholehearted support during a very challenging
year.
Finally, I would also like to thank all of our customers
throughout the UK who continue to choose Marshall for their
mobility products and services. We believe in putting our customers
at the heart of everything we do and we never lose sight of the
fact that our sustained success as a business is dependent on
meeting and exceeding their expectations.
Professor Richard Parry-Jones CBE
Chairman
8 March 2021
Operating Review
Overview
2020 was dominated by COVID-19 and the impact of measures put in
place to control the spread of the virus, both in the UK and
globally. In common with many other businesses, there were
prolonged periods during the Year when our physical retail
businesses were required to close, in full or in part, which
clearly had a significant impact on trading.
Nevertheless, through a combination of support received from
both the Government and our business partners, a number of one-off
sector tailwinds and our continued and significant outperformance
of the wider market, we are pleased to report an underlying profit
before tax for the Year of GBP20.9m (2019: GBP22.1m). Our financial
position also remains strong, with adjusted net cash at 31 December
2020 of GBP28.8m (2019: adjusted net debt of GBP30.6m).
Our priority in responding to the COVID-19 pandemic was and
remains the safety and wellbeing of our colleagues and customers.
As well as ensuring our businesses were COVID-19 secure in line
with Government guidelines, we worked hard to support colleagues,
both financially and through wider wellbeing initiatives, further
details of which are set out later in this report.
In recognition of the vital role our aftersales operations play
in supporting essential vehicle mobility, we continued to provide
essential vehicle aftersales services during periods of national
and local lockdown to support the emergency services, commercial
vehicle operators, vulnerable customers and key workers. The Board
believed it was appropriate for the Company to continue to offer
these services, notwithstanding they operated at a small loss, to
support the country, particularly in light of the various
Government support schemes provided to businesses through this
period.
The response of colleagues across our businesses during the Year
was outstanding. Despite significant uncertainty, our colleagues
went above and beyond, rising to the challenges we collectively
faced. Their contribution to our financial result cannot be
underestimated and we thank them all for their dedication and
commitment.
Whilst the impact of COVID-19 will continue to dominate the
social and economic environment in 2021, our success in meeting
these challenges to date, coupled with the demonstrable resilience
and flexibility of our business model, gives us confidence in our
ability to successfully navigate the coming months.
Financial Highlights :
-- Reported revenue of GBP2.2 billion, down 5.3% (2019: GBP2.3bn), with
like-for-like revenue of GBP1.9 billion, down 13.5% (2019: GBP2.2bn),
despite significant market decline as a result of national lockdowns;
-- Underlying profit before tax of GBP20.9m (2019: GBP22.1m), reported profit
before tax of GBP20.4m (2019: GBP19.6m);
-- Total new vehicle unit sales down 9.2%, with like-for-like total new
vehicle unit sales down 19.4%, heavily impacted by COVID-19 but a strong
double-digit outperformance against a UK market registration decline
of 29.4%;
-- Total new vehicle unit sales to retail customers down 4.6% with like-for-like
down 16.9%, an outperformance against a UK retail market registration
decline of 26.6%;
-- Total new vehicle unit sales to fleet customers down 16.8% with like-for-like
down 23.2%, an outperformance against a UK fleet market registration
decline of 31.7%;
-- Total used vehicle unit sales down 5.3% with like-for-like unit sales
down 14.6%, compared with used vehicle transactions down 14.9%, a pleasing
result given showroom closures;
-- Reduced impact in aftersales with total revenue down 6.7% and like-for-like
revenue down 13.5%;
-- Total overheads of GBP207.1m, down by 9.5% (2019: GBP228.8m), reflecting
Government and partner support combined with strong management actions;
-- Adjusted net cash at 31 December 2020 of GBP28.8m, an increase of GBP59.4m
from 31 December 2019 as a result of a combination of Government COVID-19
support measures, working capital control and management cash preservation
actions taken during 2020;
-- Positive cash position enabled voluntary repayment, 18 months early,
of GBP10.9m being all amounts due under the VAT Payment Deferral Scheme;
-- GBP120m revolving credit facility extended in July until 2023; COVID-19-related
covenant amendments agreed;
-- No final dividend for Full Year 2020 proposed
Strategic and Operational Highlights:
-- The Group added three further locations with the acquisition of Aylesbury
Volkswagen and start-ups of Oxford Seat and King's Lynn Ford Commercial
Vehicles;
-- Eleventh consecutive year of Great Place to Work status and sixth consecutive
year of being ranked as one of the UK's best workplaces;
-- Further development of the Group's digital strategy, including the introduction
of 'click and collect' and online reservation services;
-- Continued promotion of the 'Marshall' brand with a number of national
TV marketing campaigns and continuation of our award-winning social media
activities;
-- Ongoing portfolio management with the closure of four sub-scale, loss
making businesses.
COVID-19: impact and timeline
As stated above, 2020 was dominated by the impact of COVID-19
and the Year was characterised by four distinct trading
periods:
1. Pre-COVID-19: strong trading (Jan to late March 2020)
In our 2019 results announcement on 10 March 2020, we reported
that our order-book for the important March 2020 plate-change month
had been encouraging. As the month progressed, the Group continued
to perform strongly and was confident of achieving an excellent
operational and financial performance in the first quarter of the
Year.
Notwithstanding the temporary closure of our physical sites in
what is traditionally the busiest week of the year, we were able to
significantly outperform the wider UK new car market in the first
quarter:
-- Like-for-like new unit sales for the three months to 31 March 2020
were down 10.6% compared to the 31.0% decline in new vehicle registrations
reported by the Society of Motor Manufacturers and Traders (SMMT)
over that period. This outperformance reflected both strong order-take
throughout the first quarter of the Year and a focus on completing
customer handovers in anticipation of the potential closure of our
operations given the emerging situation with COVID-19;
-- Like-for-like used unit sales were down 9.7%, a pleasing result given
the fact that our showrooms were closed in the busiest week of the
year;
-- Like-for-like aftersales revenues were down just 3.1% despite the
loss of seven trading days at the end of March;
-- Total like-for-like revenue was down 6.9% in the first quarter of
the Year.
2. Safeguarding our business through the closure period (Late March to June 2020)
Our priority in responding to the COVID-19 pandemic was the
safety and wellbeing of our colleagues and customers and we
announced the temporary closure of our dealerships on 23 March
2020, prior to Government restrictions requiring car showrooms and
all non-essential businesses to close, impacting the busiest week
of the year.
In recognition of the vital role our services play in supporting
essential vehicle mobility, the Group kept 62 of its aftersales
operations open across the country to support the emergency
services, commercial vehicle operators, vulnerable customers and
key workers throughout the COVID-19 national emergency. The Board
believed it was appropriate for the Company to continue to offer
these services, notwithstanding they operated at a small loss, to
support the country, particularly in light of the various COVID-19
Government support schemes provided to businesses through this
period.
We continued to operate online and on the telephone to manage
customer enquiries for sales. During the closure period from late
March to June 2020, the Group took orders for over 3,700 new and
used vehicles. This was, inevitably, significantly down on the
comparable prior year period during which c.19,000 new and used
vehicle orders were taken.
During this period, the Group furloughed around 90% of its 4,300
colleagues. The Group acknowledges the support provided by
Government through the Coronavirus Jobs Retention Scheme (CJRS)
which enabled the Group to support colleagues and protect their
employment.
Further details of how the Group supported colleagues during
their period of furlough are set out in the 'People Centric'
section below. These included the additional financial support we
provided to supplement CJRS, through regular video communications
and a focus on supporting colleagues' mental wellbeing.
3. Re-opening under COVID-19 secure operating procedures (June to October 2020)
The Group reopened all its showrooms and other operating units
from the 1 June 2020. Detailed preparations were made to ensure our
business reopened under revised, COVID-19 secure, operating
procedures to safeguard our colleagues, customers and all other
visitors to our businesses.
Through its close connections with the National Franchised
Dealers Association (NFDA) and working alongside the SMMT, the
Group was pleased to contribute to the COVID-19 safety guidelines
issued by the Government for motor retailers. The Group carried out
detailed risk assessments, mandatory colleague training ahead of
return to the business (with a required pass mark of 100%) and
implemented robust auditing by our Health & Safety team to
provide assurance that our COVID-19 secure procedures were being
implemented and followed.
Trading from June to October was strong, benefitting from a
number of sector tailwinds including a release of pent-up demand
(including the delivery of outstanding vehicle orders not completed
prior to the closure period and those taken during that period),
extended vehicle financing agreements coming to an end and a shift
from use of public transport towards vehicle ownership with an
increase in first-time car purchasers. Resilient consumer demand
was augmented by strong margin retention and robust used car
valuations as a result of supply constraints in new cars following
the prolonged closure of many manufacturers' factories during the
first lockdown period.
In addition to these sector tailwinds, the Group's
outperformance of the wider market during this period was
significant. As announced in October 2020, the Group's
outperformance of the market in the important plate-change month of
September was particularly strong. Against the SMMT-reported
decline in total new vehicle registrations in September 2020 of
4.4%, the Group's like-for-like total new vehicle sales were up
18.4%. Across the third quarter of the Year as a whole, the Group's
total new unit sales were up 11.8% on a like-for-like basis
compared with SMMT-reported new vehicle registrations down
0.5%.
This strong period of trading enabled the Group to eliminate
losses from the first lockdown period and gave the Board the
confidence to target a significant upgrade to our adjusted profit
before tax for the Year.
4. Second National Lockdown and Geographical Tiers (November to December 2020)
The second national lockdown in November 2020 and the subsequent
introduction of Tier 4 restrictions during December 2020 and the
closure of all non-essential retail (including vehicle showrooms),
again impacted trading during the last two months of the Year.
With the Group's strong presence in the south and east of the
country which were first to be impacted by the tier system during
December 2020, around 90% of our dealerships were required to close
during the last month of the Year. The Group was, however, able to
continue to operate 'click and collect' retailing of new and used
vehicles during this period.
The work and investment made in ensuring we could operate
effectively on a 'click and collect' basis mitigated the impact of
the closure of our physical showrooms to customers. We were
encouraged by the level of order-take and deliveries utilising
telephone, online and 'click and collect' services.
This trading environment has continued into 2021 and whilst it
has resulted in reduced order-take, the impact has been markedly
less than that experienced during the first lockdown period.
Strategy
The Group's strategic vision to be the UK's premier automotive
group remains central to everything we do. The five strategic
pillars, which underpin our vision are: class leading returns;
putting our customers first; delivering retailing excellence for
the benefit of our customers; being people-centric by focusing on
employee engagement; and pursuing strategic growth both organically
and through targeted acquisitions in line with the Group's
strategy.
Class Leading Returns
Although the past Year has been challenging, the Group has
delivered a resilient performance by continuing to focus on the
basics of customer service combined with margin, stock and cost
control. The Group continues to focus on market outperformance. In
addition, the Group continues to drive sales of used vehicles and
aftersales, thereby mitigating the effects of a decline in the new
vehicle market.
The Group's strategy, of building a balanced brand portfolio
with the right brand partners in the right geographic locations,
helps allow for the cyclical nature of individual brands as well as
regional variations in performance resulting from local economic
issues.
In the medium to longer-term, continued growth with our brand
partners will enable the Group to access additional benefits of
scale across a number of areas of the business, supported by the
use of the Marshall brand across the entire portfolio. The Group
has a robust platform which is scalable for further future growth
and is well placed to take advantage of a consolidating market. The
has been most recently demonstrated by the successful integration
of the twenty new business units acquired in 2019. The Board
anticipates further rationalisation of manufacturer dealer networks
over the coming years and given the Group's strong balance sheet
and manufacturer relationships, is confident of continued future
acquisitive growth.
Customer First
Customer satisfaction is an important element of the Group's
strategy, driving repeat business and loyalty to the Marshall
brand.
Our in-house developed management information system, Phoenix 2,
provides daily customer satisfaction information by dealership,
which allows management to proactively respond to customer needs.
The Group centrally monitors customer satisfaction for both sales
and aftersales across all locations and brand partners on a weekly
basis. This ensures we remain focused on delivering on our brand
partners' key measures whilst ensuring consistency of internal
performance monitoring.
The Group's continued expansion and scale provides customers
with a wider choice of location, stock and products, increasing
both customer satisfaction and sales .
The Group's ability to adapt effectively to changing consumer
preferences was demonstrated during the Year as we responded to the
various restrictions imposed as a result of COVID-19. By utilising
existing customer interaction capabilities (including through our
website, our award-winning social media channels, online chat and
use of video) we were able to respond effectively to the challenges
presented by the closure of our physical showrooms.
We also accelerated plans already in place to further improve
our website enabling online vehicle reservations and aftersales
bookings. Further development of our online capabilities are
underway, including the functionality to enable customers to
complete the entire vehicle purchase and part exchange process
online. Whilst fully online sales remain low across the sector as a
whole, we recognise it is a growing area of interest for certain
consumer groups and we are investing significantly in further
improving our digital capabilities to enhance customer experience,
improve our operational efficiencies and ensure consistent
compliance.
Compliance
The Group operates in a regulated environment and takes its
commitment to compliance seriously as well as recognising the
benefit it can bring our customers. The Group recognises that
compliance is an ongoing process and adopts a culture of continual
improvement focused on training and awareness, system and process
development, compliance monitoring and internal audit. Key
compliance areas for the Group include environmental, health and
safety, data protection and financial services. The Group has
established compliance committees attended by cross functional
colleagues from both compliance and internal audit and from
operations and members of the senior management team.
Supported by the Group's experienced team of compliance
professionals, the Group made detailed preparations for the
introduction of the Financial Conduct Authority's 'Senior Managers
and Certification Regime' (SMCR). These include clear statements of
responsibility for the Group's Approved Persons, the identification
and certification of the Group's 'Certification Employees' and
group-wide training on SMCR and related conduct rules.
Retailing Excellence
The Marshall brand is synonymous with good customer service and
the Group continues to leverage the use of the 'Marshall' brand
consistently across all of its franchises. This brand consistency
is unique amongst the large multi-brand motor retail groups in the
UK.
A single brand approach allows the Group to have a single online
point of entry for users with an instantly recognisable brand name.
The Group's recently relaunched website, marshall.co.uk
accommodates all of the Group's brand partners and stock, allowing
for much wider customer choice in one place.
The Group has continued to leverage the Marshall brand during
2020 in a number nationwide marketing campaigns, including
advertising at televised premier league and EFL football matches,
England's Six Nations rugby matches and England cricket matches.
These campaigns have reached a combined live audience of over 100
million and enjoyed over 300 million page impressions online. In
addition, the Group has recently announced the sponsorship of a
trio of leading professional darts players for the 2021 season. The
sponsorship includes shirt branding and the Group will be running
competitions, personal appearances and online game challenges over
the next 12 months.
Another key differentiator for the Group in achieving retailing
excellence, is a focus on technology and data to drive performance.
Phoenix 2, the Group's bespoke MI system, supports local
decision-making combined with central oversight to ensure
consistency of performance and a focus on what makes a difference.
One of the key benefits of Phoenix 2 is the integration of third
party external used car pricing and transaction data. This enables
visibility of pricing comparison to the market, including regional
and market desirability variations, all of which leads to greater
customer transparency and optimal pricing. The Group continues to
see Phoenix 2 as one of the key drivers behind its market
outperformance.
People Centric
The Group is proud of its people-centric culture and this has
been reflected in the level of support provided to ou r colleagues
during these challenging times. One of our main priorities during
the COVID-19 pandemic has been the safety and wellbeing of our
colleagues. During the first lockdown period the Group furloughed
around 90% of our 4,300 colleagues. Throughout this furlough
period, the Group supplemented the support provided by the CJRS,
enhancing colleague pay during the closure period to 100% for
March, 90% for April and 85% for May and not imposing the CJRS cap
of GBP2,500 per month. Whilst they continued to work throughout,
the Board and other senior members of the management team
voluntarily reduced their pay in line with the reductions for
furloughed colleagues in April and May, and also forfeited holiday
accrued. The Group has also provided additional financial support,
including salary advances through our 'Pay it Forward'
initiative.
In addition to providing financial support to colleagues and
recognising the importance of ongoing communication, regular
management briefings have been issued to all colleagues via video
message from members of the Executive Committee and other members
of the senior management team. This enabled the Company to stay in
touch with everyone and provide updates on the actions the Company
has been taking during the closure period. Furloughed colleagues
were encouraged to complete modules of the Company's bespoke
training programme via its online learning platform. As well as
'business as usual' training programmes relating to financial
services and data protection compliance, all colleagues completed a
mandatory formal training and assessment programme on our revised
operating procedures and social distancing guidelines before
returning to the workplace.
Feedback from colleagues throughout the Year has been extremely
positive, demonstrating why, for the eleventh consecutive year, the
Group has been recognised by Great Place to Work UK as a 'great
place to work' based on colleagues surveyed during 2020. At 79%,
this continues to be significantly ahead of the 65% threshold score
required to be considered a Great Place to Work(R). We also enjoyed
an exceptionally high participation rate of 84%, which compares to
70% nationally, and demonstrates the high degree of trust and
engagement in the organisation. This result is also particularly
pleasing given the number of new businesses the Group has
integrated over recent years.
Based on the results of the 2019 survey and an extensive audit
of people policies, procedures and programmes, the Group was ranked
12(th) in the super large category of the 2020 Best UK Workplaces
programme, which included employers such as Admiral, CISCO, MARS
UK, Deloitte and EY. 2020 was the sixth year running that the Group
was ranked amongst the best employers in the UK.
Strategic Growth
As set out at the time of the Group's IPO and demonstrated since
then, the Group's strategy is to grow scale with existing brand
partners in new geographical territories. As evidenced recently,
there continues to be considerable consolidation in the UK motor
retail market with both Ford and Vauxhall rationalising their
network and Mitsubishi announcing its exit from the European
market. The Group, with its scalable platform, is very well
positioned to take advantage of the opportunities arising given its
strong balance sheet and excellent manufacturer relationships. The
Group continually seeks to maximise return on capital employed and
closely monitors and reviews its portfolio to ensure optimal
returns.
Acquisitions and Disposals
During 2019, 20 new business units were added to our portfolio
through eight acquisitions or start-ups. These additions
significantly expanded our representation with a number of our key
brand partners including KODA, Honda, Volkswagen and Volvo and were
in line with our strategy to grow with key brand partners. Although
trading in these businesses during the Year was impacted by
COVID-19 related lockdowns, we have been very encouraged with the
progress made and anticipate that these businesses will make
positive contributions to the Group's future profitability.
On 10 July 2020, the Group completed the acquisition of
Aylesbury Volkswagen. The Aylesbury business formed part of the
strategic acquisition announced in December 2019 with its
completion being deferred pending resolution of certain property
issues. All deferred consideration has now been paid to the seller,
Jardine Motor Group UK Limited.
The Group announced in October 2020 that it had secured the
opportunity to represent Ford Commercial Vehicles in King's Lynn,
which will operate from our existing Ford freehold site. We also
agreed to represent SEAT at an open point in Oxford, which will
operate from a leasehold site adjacent to the Group's existing
Jaguar Land Rover and Volkswagen businesses. These new businesses
commenced trading in early 2021 following completion of associated
corporate identity upgrades.
The Group has continued to focus on driving operational
efficiencies and responding to a number of its brand partners'
network rationalisation strategies and the ongoing impact of
COVID-19. As a result of a review of its portfolio, and with the
full support and approval of its brand partners, during the Year
the Group announced the closure of four sub-scale franchised
dealerships: Cambridge Hyundai, Bury St Edmunds Ford, Knebworth
Vauxhall and Poole Mercedes-Benz Commercial Vehicles. In the year
ended 31 December 2019, these dealerships made a combined revenue
contribution of GBP47.3m and a loss of GBP0.1m.
The Group now consists of 113 franchises representing 22 brand
partners trading in 28 counties nationwide. In addition, the Group
operates six trade parts specialists, two used car centres, six
standalone body shops and a pre-delivery inspection (PDI) centre.
The Group operates a balanced portfolio of volume, premium and
alternate premium brands including all of the top five premium
brands.
The Group's scale and diversified spread of representation helps
mitigate the effect of the cyclical nature of individual brand
performance. The Group's strategy is to develop strong
relationships with its brand partners, targeting a 5% share or more
of UK sales for each brand partner. We now exceed that threshold
with nine of our key brand partners and our strategy is to increase
that scale further.
Investment in New Retail Locations and Major Developments
As part of our cash preservation actions, the Group's capital
expenditure programme was reviewed and, in collaboration with our
brand partners where necessary, a number of planned projects have
been deferred.
As a result, capital expenditure in the Period was GBP11.7m, a
reduction of GBP7.7m versus 2019.
The Group will continue to review investment requirements
closely and will reinstate the investment programme at the
appropriate time.
Projects undertaken or commenced in the Year include:
-- Newbury Audi - showroom corporate identity and building refurbishment;
-- Wimbledon Audi - completion of Audi's "city concept", the first of its type in the UK;
-- Derby Volvo - site refurbishment to Volvo VRE standards
following purchase in 2019;
-- Welwyn Volvo - purchase of freehold;
-- Oxford Seat - preparation for opening of new franchise
opportunity;
-- King's Lynn Ford CV - preparation for opening of new
franchise opportunity on current freehold site;
-- South London TPS - Relocation from Old Kent Road to new
premises in Deptford in-line with Volkswagen TPS hub and spoke
strategy;
-- Newbury KODA - Relocation of aftersales business to new
premises
In addition to large scale redevelopments, the Group continues
to invest in upgrading existing businesses to enhance the customer
experience, satisfy brand requirements, electrification and
increase sales and aftersales capacities.
Since IPO in 2015, the Group has invested over GBP110m in its
property estate, including corporate identity upgrades, freehold
and long-leasehold acquisitions and ongoing maintenance capital
expenditure.
Market and Business Update
Growth
New Vehicles
2020 2019 Total LFL
Retail Units 27,913 29,249 (4.6%) (16.9%)
Fleet Units 15,021 18,054 (16.8%) (23.2%)
------ ------ --------- --------
Total Units 42,934 47,303 (9.2%) (19.4%)
====== ====== ========= ========
As reported by the SMMT, sales of new vehicles during 2020 were
significantly impacted by COVID-19. During the Year, new car
registrations to retail and fleet customers declined by 26.6% and
31.7% respectively, with total registrations of new vehicles in the
UK (including the impact of dealer self-registration activity)
declining by 29.4%. These declines were predominantly experienced
during April and May 2020 when total UK new registrations were down
97.3% and 89.0% respectively. The key registration month of March
2020 was also heavily impacted by the timing of the first national
lockdown with the market registering c200k fewer units
year-on-year. Some pent-up demand was evident as we exited the
first lockdown but further restrictions including a second national
lockdown in November 2020 and tiered restrictions in December 2020
meant that new vehicle registrations in most months of the Year
were below the comparative months in 2019.
Against this challenging market backdrop, the Group sold a total
of 42,934 new vehicles during the Year, a decrease of 9.2% versus
2019. The Group's like-for-like new unit sales decreased by 19.4%,
a significant outperformance compared to the wider market.
The Group's total sales of new vehicles to retail customers
decreased by 4.6 % in the Year, with like-for-like sales down by
16.9% an outperformance of 9.7% versus the market.
The Group's total sales of new vehicles to fleet customers
decreased by 16.8 % in the Year, with like-for-like sales down by
23.2% an outperformance of 8.5% versus the market.
The Group is increasing its focus on the growing commercial
vehicle segment and appointed a Head of Commercial Vehicle Sales
during the Year. We now have 18 sites which sell commercial
vehicles.
Overall, new vehicle margins declined by 84bps in the Year
versus 2019. This margin reduction was driven by the lower volumes
which in turn impacted the Group's ability to achieve manufacturer
overperformance bonus targets, in particular in the peak trading
month of March 2020. The Group experienced improving margins in the
second half of the Year towards more normalised levels.
Used Vehicles
Growth
2020 2019 Total LFL
------ ------ ------ -------
Total Units 44,505 46,974 (5.3%) (14.6%)
====== ====== ====== =======
The sale of used vehicles is a much larger market than new
vehicles and there are a larger number of market participants,
including franchised dealers, independent traders and private
sellers. The SMMT reported at total market of 6,752,959 units in
2020, representing a decline of 14.9% versus 2019.
The Group is pleased that, against this challenging backdrop,
its used sales decline was contained at 5.3% on a total basis and
14.6% on a like-for-like basis. This was a pleasing result given
the franchised sector was more adversely affected by showroom
closures.
Residual values remained strong throughout the Year due to
increased demand. Following a strong second half, margin
performance full year margins were flat versus 2019.
Aftersales
Growth
2020 2019 Total LFL
----- ----- ------ -------
Revenue (GBPm) 240.6 258.1 (6.7%) (13.5%)
===== ===== ====== =======
Aftersales is a key strategic focus for the Group, providing
future revenue and profit assurance during periods of a more
challenging economic environment and the associated impact on
vehicle sales. In addition to our retail centre-based aftersales
facilities, the Group operates six standalone bodyshops, six trade
parts centres and one PDI centre. 65 of our aftersales businesses
remained open during the first national lockdown to support
critical services and key workers. These businesses operated at a
small loss during that period.
Aftersales contributed 45.8% of total gross profit during the
Year and, therefore, made a significant financial contribution to
the Group which was important in the context of the sharp decline
in vehicle sales in the Year.
Our aftersales performance was impacted by the lockdown periods
due to the closure of a number of our sites, the deferral of MOT
and servicing work in some cases and also fewer miles being
travelled by customers during the lockdown periods.
We were, however, encouraged by the rate at which aftersales
activity levels picked up post-lockdown.
The reduction in aftersales revenue was partially offset by
productivity and efficiency improvements and a greater focus on
higher margin maintenance work with overall aftersales margins
improving by 74bps versus 2019.
Service plans continue to play an important part of our
aftersales retention strategy and also have the benefit of allowing
customers to plan and budget for service costs. These plans are
often included in the monthly payment of a vehicle and are,
therefore, very convenient for customers.
Industry Strategic Landscape
As previously reported, the automotive sector is undergoing an
exciting period of evolution, driven by a combination of
technology, environmental and social change factors. The Group's
strategy anticipates the impact that these macro factors will have
for automotive retailers in the future.
The COVID-19 pandemic has materially disrupted businesses
globally, including those in the automotive sector. Automotive
retailers have responded to these challenges by adapting their
business models, changing the way they interact with customers
(which, by necessity, has moved increasingly online) and
introducing more efficient ways of operating. The COVID-19 pandemic
has, therefore, accelerated many of the industry changes which the
Group's strategy had anticipated occurring over a number of
years.
Macro change factors
Climate change and BEVs
Climate change and the response of international governments to
these issues, in combination with technological developments by
vehicle manufacturers, will have a significant impact on the
automotive sector over the coming years.
The global response to the issue of climate change, including
the Paris Agreement target for carbon neutrality by 2050, has
instigated a shift from traditional internal combustion engines
('ICE') to battery electric vehicles ('BEVs'). That process is now
well underway, driven by regulatory interventions such as the Clean
Air for Europe programme ('CAFE'). 2020 saw the introduction of
punitive financial penalties for those vehicle manufacturers which
did not achieve significantly reduced fleet average Co2
emissions.
Vehicle manufacturers have responded to these changes with the
launch, active promotion and attractive consumer offers on a wide
range of new BEV and hybrid vehicles in 2020. In particular, the
Jaguar iPace, Mercedes' EQ range, BMW's 'i' range and the
much-anticipated Volkswagen ID.3 were extremely popular choices in
2020. 2021 will see the launch of a host of further new electric
and hybrid vehicles, including the Volkswagen ID.4, the Audi e-tron
GT and Q4 e-tron, the BMW iX3 and the KODA Enyaq.
BEV registrations accounted for 6.6% of registrations in the UK
in 2020, up from 1.6% in 2019 and this proportion of sales will
continue to grow, driven by a combination of both consumer demand
and manufacturer 'push' given the severe financial implications of
not meeting CAFE targets. In addition, national governments,
including the UK, are setting their own targets for the cessation
of sales of new ICE vehicles (including hybrids) over the next
15-20 years.
All major vehicle manufacturers have, and continue to invest
heavily in the development, and launch of hybrids and BEVs. The
substantial investment requirements of these developments has
already led to significant collaboration and consolidation between
vehicle manufacturers, including the acquisition of Vauxhall Opel
by Groupe PSA, the merger of Fiat Chrysler Automobiles and Groupe
PSA and the alliance between Volkswagen Group and Ford in relation
to the development of future commercial vehicles.
Connected Cars
Other technological developments will also have an increasing
influence on the automotive sector in the future. Connected car
capabilities have existed for a number of years and have
facilitated a variety of new sharing and subscription models of
vehicle use. In addition, autonomous technologies, whilst still
many years away in terms of the potential for fully autonomous
vehicles, have introduced a range of comfort and safety features to
modern motor vehicles.
Digital Consumers
The COVID-19 pandemic has accelerated progress towards a more
integrated digital and physical approach to retailing in the
automotive sector. Many of these developments were already well
underway at the start of the pandemic but during lockdown periods,
automotive retailers were reliant on their ability to interact
effectively with their customers, utilising and developing their
online presence, using video to showcase products and moving the
buying process, including vehicle financing, online.
Consumers are increasingly comfortable undertaking elements of
the vehicle purchasing process remotely, particularly in terms of
research, advice, price comparison and negotiation and the
completion of associated paperwork. Nevertheless, experience from
the COVID-19 pandemic has also demonstrated a strong preference
amongst many consumers for making final purchasing decisions after
the opportunity to physically view and test drive vehicles,
particularly used vehicles.
This consumer preference for an omni-channel approach to
retailing in the automotive sector has been demonstrated by recent
moves of supposedly 'online-only' used vehicle retailers investing
significantly in physical retail and aftersales support
infrastructure to augment their online sales channels. A recent
YouGov survey commissioned by The Motor Ombudsman showed that
nearly two thirds of UK drivers would prefer to visit a retailer in
person to buy a new or used car, rather than completing the entire
vehicle ordering and purchase process on online.
As such, the distinction between these new entrants and
traditional retailers has become far less marked: traditional
retailers have embraced the efficiencies and consumer preferences
for a digital sales experience and new entrants have recognised the
requirement and consumer demand for a physical presence.
Regulatory Change
As previously reported, in the past two years the FCA has
introduced a number of changes which have impacted motor retailers.
First, changes introduced following the FCA's thematic review of
general insurance distribution chains have impacted commission
arrangements between insurance providers and insurance
intermediaries such as the Group in relation to the sale of
vehicle-related insurance products (including GAP). Secondly,
changes have been recently introduced which affect, inter alia,
commission arrangements between credit brokers such as the Group
and the providers of motor vehicle finance.
The combined impact of these changes has been to reduce the
proportion of profitability for new and used vehicle sales which
are attributable to the sale of finance and insurance products. In
each of these reviews, the FCA has acknowledged that retailers are
not making excessive profits overall but expected the balance
between the profitability of the vehicle sale itself and the sale
of ancillary financial and insurance products, to be realigned.
Impact and opportunities for automotive retailers
The macro change factors outlined above present a number of
potential challenges and opportunities for motor retailers in the
future:
-- The increasing proportion of BEVs in the vehicle parc is likely to
impact traditional aftersales activities, including the sale of parts
and oil products. However, these new technologies, and the associated
expertise and facilities required to service them, can also offer
opportunities for certain franchised dealers. Close partnerships with
vehicle manufacturers and the ability to invest in infrastructure,
training and expertise required to service BEVs, differentiates their
franchised dealers from much of the independent aftersales sector.
-- Connected car technology will provide further opportunities for manufacturers,
through their franchised dealer networks, to improve retention rates
for older vehicles within their aftersales networks.
-- Ancillary revenue streams including digital services, the sale of
charging points and tyres (given increased replacement cycles for
BEVs) are also areas of opportunity for retailers able and willing
to invest.
-- The impact of regulatory changes following the FCA's review of motor
finance is yet to been seen but, as stated above, the FCA expects
the balance between the profitability of vehicle sales itself and
the sale of ancillary financial and insurance products, to be realigned
and the sector as whole will be working through these changes in 2021.
-- A number of vehicle manufacturers have announced plans to move towards
an agency model for new vehicle sales, either across their entire
ranges or for certain models. Whilst this would impact dealers' reported
revenues, there are potentially significant benefits for dealers of
an agency model for new vehicle sales, including a material reduction
in vehicle stocking costs.
-- The franchised sector's close partnerships and symbiotic relationships
with vehicle manufacturers, the ability to sell new vehicles supported
by manufacturer sales and financing incentives and the opportunity
to fulfil vehicle manufacturers' sales and aftersales retention strategies
(including the opportunities presented by connected car capabilities)
are important differentiators from the independent sector.
-- Further consolidation of vehicle manufacturers and the anticipated
reduction of retail networks by up to c25% over the coming years should
assist in higher throughput and profitability per retail location.
Marshall Strategy
The Board believes that the Group's long-standing strategy of
partnering with the right brands in the right locations has
positioned it well to benefit from the changes ahead.
The Group's key manufacturer partners are strong and are taking
leading positions in the development of future mobility
technologies. With its strong investment in both technology and
colleague training the Group will benefit from the continued
success of their brands.
The Board also believes that the Group's portfolio of
dealerships are in the right locations and markets to benefit from
the expected rationalisation and consolidation of dealer networks
in the UK.
The Group is supportive of the changes introduced by the FCA,
both in terms of the extension of SMCR to solo-regulated firms such
as the Group and the changes made in connection with the sale of
finance and insurance products. The Group believes these changes
will be embraced by well-established retailers such as the Group
which have the scale to invest in effective, professional internal
compliance expertise and recognises the benefits and confidence it
will bring to our customers.
Finally, and importantly, the Group's growing scale and depth of
relationships with its manufacturer partners will help to ensure it
remains a relevant and important part of their future retail and
aftersales strategies.
Summary and Outlook
The unprecedented political, economic and social impact of the
COVID-19 pandemic in 2020 challenged governments, businesses and
individuals across the world. Whilst this resulted in a record
fourth consecutive year of decline in the new vehicle market in the
UK, the automotive retail sector also benefited from a number of
unforeseen tailwinds and demonstrated great resilience in
comparison to many other sectors, including some other areas of
retail.
The Board recognises the impact of these sector tailwinds,
one-off market distortions and significant Government support
measures to the Group's strong financial performance in 2020. It
also recognises the contribution made by the Group's response to
the challenges of 2020: its strengthening market outperformance;
its operational and financial discipline; and its flexibility to
adapt to a new trading environment, including the highly effective
adoption of 'click and collect' retailing for new and used
cars.
The SMMT's latest forecast for the new car market in 2021 is an
increase of 15.7% on 2020 to 1.887m registrations but it is
important to note this remains down 18.3% on 2019. The national
lockdown from the beginning of 2021 has impacted the market in the
build up to the important March plate-change month.
As a result, the Board anticipates the first half of 2021 to
once again be dominated by the immediate impact of COVID-19 and is
also mindful of the likely longer-term economic impact of the
pandemic. The Board also notes the potential impact of the changes
introduced by the FCA in relation to motor finance commissions and
the possibility of some continued new vehicle supply constraints.
The Board welcomes the positive resolution of negotiations
regarding the UK's future trading relationship with the European
Union which had created uncertainty for the sector over the past
five years.
In relation to current trading, whilst both vehicle sales and
aftersales have inevitably been impacted by the current national
lockdown, the Board has been encouraged by demand for remote and
'click and collect' vehicle sales and the Group continued to
outperform the wider new car market in both January and February
2021. Understandably, the current national lockdown has impacted
our order bank for the important plate-change month of March 2021.
Based on experience from 2020, the Board anticipates an element of
pent-up demand release once physical car showrooms are able to
reopen (currently expected to be 12 April 2021) with the outlook
for the remainder of the year correlating to the nationwide easing
of COVID-19 restrictions.
The Group's balance sheet remains strong and we continue to be
well positioned to take advantage of further growth and
consolidation opportunities as they arise. Our resilient business
model, ability to adapt to changing consumer behaviours, such as
those enforced by showroom closures, together with our
exceptionally strong relationships with our brand partners, gives
us confidence in the Group's future prospects and success.
On behalf of the Board, I would like to thank our brand and
business partners for their exceptional support throughout 2020. I
would also like to give special thanks to our team of outstanding
colleagues across the Group who, throughout this extremely
challenging period, once again demonstrated their dedication and
commitment both to our business and our customers.
Daksh Gupta
Chief Executive Officer
8 March 2021
Financial Review
Overview
I am pleased to present the Group's 2020 annual results.
Due to the impact of COVID, 2020 has been a difficult and
turbulent year, but a year where once again our colleagues have
risen to the challenges, helping deliver a very creditable
financial performance. Key for us during the Year was to ensure we
contributed towards containing the pandemic but also to keep the
country moving. This has seen us invest significantly in making our
businesses COVID-19 secure for our colleagues and our customers,
but also to keep our essential aftersales businesses open to
support the massive effort of the nation in response to
COVID-19.
Despite the tumultuous environment, I am pleased to confirm that
we successfully renegotiated our revolving credit facility ("RCF")
in July 2020, securing our facility for a further 2.5 years through
to January 2023. This is testament to the strength of the Group and
gives us significant firepower to continue capitalising on
opportunities as they arise.
During the Year, given the uncertainties, we focused on
conserving capital and therefore our investment in acquisitive
growth and capital expenditure in 2020 was lower than in previous
years. Nevertheless, where we could and deemed it appropriate, we
continued to invest in our business, with the acquisition of
Aylesbury Volkswagen in July 2020 which completed the Volkswagen
acquisitions from 2019.
Despite the difficult trading environment, the contribution from
the acquisitions made in 2019 was very encouraging. These
investments will deliver long term shareholder value.
We have also invested in two business start-ups for key brand
partners at open points. We now represent SEAT in Oxford which will
operate from a leasehold site adjacent to the Group's existing
Jaguar Land Rover and Volkswagen businesses and Ford Commercial
Vehicles in King's Lynn, which will operate from our existing
King's Lynn Ford freehold site. We also finalised our capital
expenditure programmes at our Audi businesses in Newbury and
Wimbledon, commenced our investment at Derby Volvo, which we
acquired in 2019, and took the opportunity to acquire the freehold
of our Volvo Welwyn site.
We continuously review our portfolio and, due to a lack of
overall scale with the brand, we decided to exit our Hyundai
business in Cambridge in September, as well as closing some sub
scale, loss-making dealerships during the Year. It is imperative
for us, in ensuring we best utilise our capital, that we continue
to review our portfolio on an ongoing basis.
Reported revenue for the Year was down 5.3% versus 2019, with
like-for-like revenue down 13.5% as a consequence of COVID-19.
Overall like-for-like unit sales were down 17.1% which was a very
strong market outperformance. New retail unit sales were down 16.9%
on a like-for-like basis, which was up 9.7% versus the market and
used unit sales were down 14.6%, marginally ahead of the
market.
We experienced a strong bounce-back after the first national
lockdown fuelled by pent-up demand, in-part driven by previously
extended vehicle finance agreements coming to an end and first-time
buyers who have lost confidence in public transport. New car
margins were impacted in the first six months of 2020 due to site
closures in the critical March plate change month affecting our
ability to overachieve targets which in turn affected manufacturer
bonuses. Overall margins experienced a recovery in the second half,
in part due to overachieving of targets but also as a result of
factory closures in the early part of 2020 which led to supply
shortages, positively impacting demand for used cars.
Overall, the Group delivered an underlying profit before tax of
GBP20.9m which was only marginally down on 2019, but was
significantly supported by COVID-19 support measures provided both
from Central and Local Governments of GBP27.6m. Without this
support, the Group may have had to consider taking more significant
structural mitigating actions. The Group remains grateful for the
Government's intervention with the furlough scheme and the many
jobs this has protected, as well as the support from our brand and
other business partners. Reported PBT of GBP20.4m was GBP0.8m up on
2019.
Cash was also impacted by the unique and unprecedented trading
environment we faced in 2020. A working capital inflow of GBP43.2m,
combined with reduced capital expenditure, disposal of
non-operating properties, proactive cash management and no
dividends declared, resulted in a strong Adjusted Net Cash position
of GBP28.8m at 31 December 2020. During the Year, the Group
utilised the VAT deferment scheme available for Q1 2020 but given
our strong trading following the first national lockdown, we
voluntarily paid these deferred amounts back early in September
2020, up to18 months before we were required to.
Despite the further national lockdown at the start of 2021, the
Group remains in an excellent position to capitalise on growth
opportunities.
COVID-19 Impact on Results
There have been a significant number of external and internal
COVID-related factors impacting our financial performance in the
Year, both from a profit and loss and cash perspective as
summarised below.
-- The national lockdowns and tier system, which required our showrooms
to close for prolonged periods, reduced our revenue significantly. Like-for-like
units were down by 17.1% in the Year having previously delivered like-for-like
growth every year since being listed;
-- the Group claimed GBP20.4m under the Government Job Retention Scheme
against salary costs of furloughed employees of GBP22.4m, leaving a net
GBP2.0m enhancement funded by the Company;
-- the Group benefited from the Government's business rates holiday scheme
with net savings of GBP7.2m during the Period;
-- GBP1.2m of expenditure relating to personal protective equipment ensuring
that are businesses were COVID secure;
-- working capital benefits of revised vehicle stocking payment periods
implemented by our brand partners and other funding providers to support
dealer networks;
-- replanning of capital expenditure programme;
-- cancellation of the 2019 final dividend and non-declaration of the 2020
interim dividend.
Reported Financial Performance
2020 2019 Var %
Revenue 2,154.4 2,276.1 (5.3%)
Gross profit 238.2 260.8 (8.7%)
Operating expenses* (207.1) (228.8) 9.5%
---------------------- -------- -------- -------
Operating Profit* 31.1 32.0 (2.8%)
---------------------- -------- -------- -------
Net finance costs (10.2) (9.9) (2.3%)
---------------------- -------- -------- -------
PBT underlying* 20.9 22.1 (5.2%)
---------------------- -------- -------- -------
Non-underlying items (0.6) (2.4) 75.8%
---------------------- -------- -------- -------
PBT reported 20.4 19.6 3.6%
---------------------- -------- -------- -------
Tax (6.4) (4.1) (58.3%)
---------------------- -------- -------- -------
PAT reported 13.9 15.6 (10.6%)
---------------------- -------- -------- -------
*excludes non-underlying items
As a result of the COVID pandemic, reported revenue (including
2019 acquisitions) decreased by 5.3% to GBP2,154.4m. This was a
pleasing performance given a 29.4% decline in the new vehicle
market.
The Group's operating profit, on an underlying basis, was
GBP31.1m compared to GBP32.0m in 2019. Underlying PBT in the Year
was GBP20.9m compared to GBP22.1m in 2019. This decline was driven
by a combination of reduced trading as a result of sustained
periods of lockdown and margin pressures. These declines were
partially offset by Government and business partner support,
together with other decisive cost control actions.
Our reported PBT of GBP20.4m (2019: GBP19.6m) included one-off
non-underlying items of GBP0.6m (2019: GBP2.4m) as set out in note
5 to this announcement.
Analysis of Reported Revenue and Gross Profit
The segmental mix, on a reported basis, is shown in the table
below, with like-for-like analysis covered later in this
report.
Twelve months ended 31 December 2020
Revenue Gross Profit
GBPm mix(*) GBPm mix
New Vehicles 988.1 44.9% 65.1 27.4%
Used Vehicles 971.1 44.1% 63.7 26.8%
Aftersales 240.6 11.0% 108.6 45.8%
Internal/Other (45.4) - 0.8 -
Total 2,154.4 100.0% 238.2 100.0%
----------------- ---------------- ------------- --------------- ------------------
Twelve months ended 31 December 2019
Revenue Gross Profit
GBPm mix(*) GBPm mix
New Vehicles 1,079.5 46.4% 80.1 30.8%
Used Vehicles 986.7 42.5% 65.5 25.2%
Aftersales 258.1 11.1% 114.6 44.0%
Internal/Other (48.2) - 0.6 -
Total 2,276.1 100.0% 260.8 100.0%
--------------- ---------------- ------------- --------------- ------------------
* mix calculation excludes Internal / Other Sales
Finance Costs
Net finance costs increased by GBP0.3m in the Year to GBP10.2m
(2019: GBP9.9m). Increases in bank financing costs have been
partially offset by savings in stock financing charges due to
reduced inventory levels.
Shareholder Returns
Profit before tax and non-underlying items was GBP20.9m (2019:
GBP22.1m), GBP20.4m after non underlying items (2019: GBP19.6m).
The total reported effective tax rate was 31.6 % ( 21.1 % on an
underlying basis), further details are included in tax section
below. Profit from continuing operations after tax was GBP13.9m
(2019: GBP15.6m), resulting in reported basic continuing earnings
per share of 17.8p, a decrease of 10.6% on the prior year. Basic
underlying earnings per share was 21.1p (2019: 22.9p).
The Group's strategy of organic growth incorporating cost
control and sound working capital management, combined with
strategic acquisitions, provides a platform for further improving
shareholder returns.
Non-Underlying Items
The Income Statement includes a separate presentation of
non-underlying items to provide a consistent understanding of the
performance of the Group year on year.
Non-underlying items in the Year comprise the following:
GBPm 2020 2019
Acquisition costs - 0.8
Restructuring costs 2.1 2.1
Gain on revaluation of investment properties - (0.6)
(Profit) / loss on disposal of investment
property / assets held for resale (1.7) 0.1
Goodwill impairment 0.2 -
Total 0.6 2.4
---------------------------------------------- ------ ------
During the Year, following a review of current profitability and
prospects, we decided to close four of the Group's sites. The costs
associated with these closures are included in restructuring costs
in non-underlying items and represent redundancy costs, asset
impairment, and unavoidable costs associated with contracts which
related to these sites. In addition to these costs, the goodwill
held in respect of our Vauxhall businesses has been impaired in
full.
Consistent with our property strategy, the Group sold two
freehold properties (including one investment property) during the
Year, realising a gain on disposal net of costs of GBP1.7m which
has been included in non-underlying items.
Classification of COVID-19 related costs
At the time of reporting our interim results, it was anticipated
that the impact of COVID-19 and the associated costs of providing a
COVID secure environment for our colleagues and customers would be
relatively short-term. Since then the country experienced a tiering
system and further lockdowns both of which have materially impacted
our business. It is now considered likely that COVID-19 and the
impact on businesses and ways of working are not one off in nature
but more medium term. As a consequence of this we have reclassified
COVID-related costs into our underlying trading result.
Like-for-Like Performance
Basis of Comparatives
Due to the unprecedented impact of COVID-19 on the Group's
results described above, comparatives are significantly distorted.
To enable some degree of meaningful comparison of the Group's
year-on-year performance, units and revenue are shown on a
like-for-like basis, excluding the impact of acquisitions and
closures during 2019 and 2020. However, given the distortions in
the gross and operating profit measures, for the 2020 annual report
there will be no Alternative Performance Measures other than units
and revenue as it would not give the users of the accounts any more
insight or interpretation. The full definition of an Alternative
Performance Measure can be found in Note 1 to this
announcement.
Like-for-Like Unit Analysis
2020 2019 Growth
New Retail Units 22,428 27,003 (16.9%)
New Fleet Units 13,545 17,642 (23.2%)
------------------ ------- ------- --------
Total New Units 35,973 44,645 (19.4%)
------------------ ------- ------- --------
Used Units 36,709 43,003 (14.6%)
The market for new car registrations to retail and fleet
customers declined by 26.6% and 31.7% respectively, with total
registrations of new vehicles in the UK (including the impact of
dealer self-registration activity) declining by 29.4% in the Year.
The Group's like-for-like new unit sales volumes outperformed the
overall market, by 9.7% in new retail units and 8.5% in fleet unit
sales.
Like-for-like used unit sales declined by 14.6% versus an
overall market decline of 14.9%. It should be noted that the
overall market includes all used vehicle sales including private
sales which continued during the first national lockdown period at
a time when commercial operators were required to close.
Like-for-like Revenue
2020 2019
GBPm Mix* GBPm Mix* Var %
New Vehicles 869.0 45.4% 1,035.7 47.0% (16.1%)
Used Vehicles 834.9 43.7% 928.8 42.1% (10.1%)
Aftersales 208.3 10.9% 240.9 10.9% (13.5%)
Internal/Other (45.8) - (48.3) - -
---------------- -------- ------ -------- ------ --------
Total 1,866.4 100% 2,157.1 100% (13.5%)
---------------- -------- ------ -------- ------ --------
* mix calculation excludes Internal / Other sales
Like-for-like revenue in the Year was GBP1,866.4m (2019:
GBP2,157.2m), a decline of 13.5% and heavily impacted by the
COVID-19 pandemic. Faced with significant market declines in both
the new and used markets, this was a pleasing result.
As expected, new vehicle revenues suffered the sharpest
declines, falling by 16.1% to GBP869.0m (2019: GBP1,035.7m). This
decline was significantly lower than the overall new car market
decline of 26.6%.
Revenue relating to the sale of used vehicles, whilst faring
better than new revenues, was still down 10.1% at GBP834.9m (2019:
GBP928.8m), a strong performance against a used vehicle market
which experienced a unit declined of 14.9%. We believe that the
franchise dealership model, with its strong links to the vehicle
manufacturers, provides customers with a degree of assurance when
purchasing a used vehicle. This has been particularly evident
during a year in which first-time vehicle owners moved away from
public transport and purchased their first cars.
Like-for-like aftersales revenue decreased by 13.5% to GBP208.3m
(2019: GBP240.9m). Our aftersales businesses were heavily impacted
during the first lockdown where a high proportion were closed.
Those remaining open focused on supporting emergency services,
transport companies and key workers. Deferrals of MOTs, servicing
and routine maintenance work as a result of reduced vehicle usage
during lockdown periods also had an impact, however, we have been
encouraged by the rate at which activity levels improved once out
of lockdown.
Shareholder Returns
For the reasons described in the Chairman's statement, the Board
is not recommending the payment of a final dividend for 2020. The
Board understands the importance of dividends to shareholders and
intends to resume the payment of dividends as soon as conditions
allow and will consider the position next at the time of release of
its interim results in August 2021 .
ROCE
Return on capital employed, defined as Underlying Operating
Profit Before Tax divided by average capital employed, was 14.9%
(2019: 16.2%).
Reported Balance Sheet
GBPm 2020 2019
Goodwill and intangibles 119.5 119.3
Freehold land and buildings 125.8 124.9
Right-of-use assets 98.8 108.0
Other 35.4 39.5
Fixed assets 379.5 391.6
---------------------------------- ------- -------
Inventory 362.9 470.7
Trade / other receivables 65.8 87.5
Cash & equivalents 33.8 0.1
Assets held for sale 0.7 0.8
Current tax assets 0.3 -
---------------------------------- ------- -------
Current assets 463.5 559.1
---------------------------------- ------- -------
Vehicle funding (364.9) (443.7)
Trade / other payables (132.4) (140.6)
Lease liabilities (99.3) (108.1)
Bank / other debt (5.0) (30.7)
Other liabilities (25.5) (25.2)
---------------------------------- ------- -------
Total liabilities (627.1) (748.4)
---------------------------------- ------- -------
Net assets 215.9 202.3
---------------------------------- ------- -------
Adjusted net cash / (debt) (GBPm) 28.8 (30.6)
Goodwill and Other Intangible Assets
Consistent with the requirements of accounting standards, the
Group has carried out an impairment assessment of the carrying
value of goodwill and other intangible assets. This assessment,
which is based upon the Group's annual budget and medium-term plan,
indicated an impairment of the goodwill of GBP0.2m held in respect
of the Group's Vauxhall businesses as a result of the decision made
during the Year to close one of the Group's three remaining
Vauxhall dealerships.
Following the completion of the acquisition of Aylesbury
Volkswagen in July 2020, goodwill and other intangible assets
increased by GBP1.1m, being GBP0.4m associated with the Aylesbury
business and GBP0.7m which was related to the seven other
Volkswagen and KODA businesses acquired as part of the same
acquisition in 2019, payment of which was contingent on the
completion of the acquisition of the Aylesbury business.
During 2020 the BMW business has shown substantial improvement
despite the trading uncertainty experienced during the year. A
number of the performance improvement initiatives have been
successfully delivered and the cash flow projections for the CGU
indicate a continued improvement over the plan period as other
management and manufacturer initiatives are delivered.
Acquisitions
The Group acquired Aylesbury Volkswagen during the Year after
resolution of certain property matters. This transaction was part
of the larger Volkswagen acquisition completed during December
2019.
Trading in the businesses acquired during 2019 has been impacted
by COVID-19 related lockdowns. However, we have been very
encouraged with the progress made and anticipate that these
businesses will make significant future contributions to the
Group's profitability.
Freehold Land and Buildings
The Group incurred a total of GBP10.3m capital expenditure
during the Year, including GBP2.6m in respect of the purchase of
the freehold of our Volvo Welwyn business (previously leasehold
site).
The net book value of the Group's property, plant and equipment
at 31 December 2020 was GBP158.3m (2019: GBP159.3m), of which
GBP123.7m related to freehold land and buildings (2019:
GBP123.2m).
Our property strategy continues to be a key component of the
Group's success, with targeted freehold purchases reducing ongoing
operating costs, together with the disposal of surplus properties
delivering significant profits, including GBP1.6m during the
Year.
Strong Working Capital Management
Given the significant challenges we faced in the Year,
disciplined capital allocation and cash management was an even
greater focus area for management. During the Year, the Group
benefited from a working capital inflow of GBP43.2m, supported by
extended stock facilities and strong working capital
management.
Inventory, net of provisions, at GBP362.9m reduced by 22.9%
(GBP107.8m) versus 2019. This significant reduction was largely due
to automotive factory closures during 2020. At 31 December 2020,
inventory was funded by GBP364.9m of vehicle finance, a level of
100.6%, in part caused by a changing sales profile due to lockdown,
versus 94.3% at the end of 2019. This high level of funding is
expected to reduce during 2021 as stock levels returns to more
normalised levels.
A decline in trade and other receivables of GBP21.7m in the Year
was driven by a combination of a lower level of fleet debtors at
the end of Year, combined with a greater focus on debt
collection.
Trade and other payables remained stable across the Year. The
Group voluntarily repaid all amounts from which it benefitted under
the Government's VAT Payment Deferral Scheme which were not due to
be fully paid until March 2022. All other suppliers have been paid
in the normal course of business.
Cash Conversion
Despite the turbulent year, the Group was able to deliver a
strong cash generation performance with cash flow from operations
during the Year of GBP96.0m (2019: GBP53.3m). This performance was
driven by a strong second half EBITDA, the deferral of non-critical
capital expenditure, reductions in stock holding, and tightened
controls over the collection of receivables and the provision of
credit to trade customers.
The Group continues to use operating cash flow conversion (being
total cash flow generated by operations divided by operating profit
from continuing operations before interest, tax, depreciation,
amortisation and depreciation on right-of-use assets) as a key
metric for managing operational performance. During the Year, total
cash inflows from operations represented an operating cash
conversion ratio of 183% (2019: 108%).
Net Debt and Facilities
At 31 December 2020, the Group's adjusted net cash was GBP28.8m
(2019: adjusted net debt of GBP30.6m).
The Group's current finance facilities include a GBP120m
revolving credit facility, which was extended in July 2020 and is
committed until January 2023 with a mutual option to step down by
up to GBP20m at the first anniversary.
Net debt (including IFRS 16 lease liabilities) at 31 December
2020 was GBP70.5m (2019: GBP138.6m).
Tax
Consistent with its published Tax Strategy, the Group focuses on
ensuring that tax compliance risks are managed and, therefore, the
Group pays the appropriate amount of tax. The Group's Tax Strategy
is reviewed at least annually and is approved by the Board.
The Group's tax charge before non-underlying items for the Year
was GBP4.4m (2019: GBP4.2m), an effective tax rate of 21.1% (2019:
18.9%). The effective tax rate for the year end 31 December 2019
was lower due to the one-off benefit of certain tax losses to
offset in year profits.
The Group's effective tax rate including non-underlying items
was 31.6% (2019: 20.7%). The effective tax rate for 2020 increased
due to the revaluation of the Group's deferred tax liabilities
following a change in the rate of corporation tax from 17% to 19%
which was enacted in the Finance Bill 2020 in July 2020.
Pensions
The Group has no current commitments to defined benefit pension
schemes, with all Group pension plans being on a defined
contribution basis.
During the previous financial year, the Group settled the
residual liability of GBP5.6m to the Marshall Group Executive Plan,
a defined benefit pension scheme in which the Group ceased to be a
participating employer during the year ended 31 December 2018.
Richard Blumberger
Chief Financial Officer
8 March 2021
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Non-underlying Non-underlying
Underlying items items Total Underlying items items Total
2020 2020 2020 2019 2019 2019
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 3 2,154,415 - 2,154,415 2,276,129 - 2,276,129
Cost of sales (1,916,225) - (1,916,225) (2,015,328) - (2,015,328)
Gross profit 238,190 - 238,190 260,801 - 260,801
----------------- ------------------ ----------------- ----------------- ------------------ -----------------
Net operating
expenses (207,068) (590) (207,658) (228,772) (2,443) (231,215)
----------------- ----------------- ----------------- ------------------ -----------------
Operating profit 31,122 (590) 30,532 32,029 (2,443) 29,586
----------------- ------------------ ----------------- ----------------- ------------------ -----------------
Net finance costs 6 (10,176) - (10,176) (9,943) - (9,943)
----------------- ----------------- ----------------- ------------------ -----------------
Profit before
taxation 4 20,946 (590) 20,356 22,086 (2,443) 19,643
----------------- ------------------ ----------------- ----------------- ------------------ -----------------
Taxation 7 (4,425) (2,011) (6,436) (4,177) 112 (4,065)
----------------- ----------------- ----------------- ------------------ -----------------
Profit from
continuing
operations after
tax 16,521 (2,601) 13,920 17,909 (2,331) 15,578
================= ================== ================= ================= ================== =================
Total
comprehensive
income for the
year net of tax 16,521 (2,601) 13,920 17,909 (2,331) 15,578
================= ================== ================= ================= ================== =================
Earnings per share
(EPS) attributable
to equity
shareholders of
the parent (pence
per share)
Basic 8 21.1 17.8 22.9 19.9
Diluted 8 20.6 17.4 22.6 19.7
All activities of the Group in both the current and prior period
are continuing.
Consolidated Balance Sheet
At 31 December 2020
2020 2019
Note GBP'000 GBP'000
Non-current assets
Goodwill and other intangible assets 10 119,533 119,260
Property, plant and equipment 11 158,303 159,293
Right-of-use assets 12 98,832 107,967
Investment property 1,498 3,638
Non-current financial assets 1,334 1,442
Total non-current assets 379,500 391,600
-------- --------
Current assets
Inventories 362,879 470,700
Trade and other receivables 65,780 87,462
Cash and cash equivalents 33,844 110
Assets classified as held for sale 703 797
Current tax assets 295 -
Total current assets 463,501 559,069
-------- --------
Total assets 843,001 950,669
-------- --------
Non-current liabilities
Loans and borrowings 4,383 5,024
Lease liabilities 12 88,383 97,396
Trade and other payables 6,008 6,371
Provisions 540 299
Deferred tax liabilities 22,715 20,134
Total non-current liabilities 122,029 129,224
-------- --------
Current liabilities
Loans and borrowings 641 25,641
Lease liabilities 12 10,961 10,689
Trade and other payables 491,248 578,010
Provisions 2,190 3,085
Current tax liabilities - 1,704
Total current liabilities 505,040 619,129
-------- --------
Total liabilities 627,069 748,353
-------- --------
Net assets 215,932 202,316
======== ========
Shareholders' equity
Share capital 50,068 50,068
Share premium 19,672 19,672
Share-based payments reserve 1,586 1,025
Own shares reserve (12) (12)
Retained earnings 144,618 131,563
-------- --------
Total equity 215,932 202,316
======== ========
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Note Share Share Share-based Own shares Retained Total
capital premium payments reserve earnings equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January
2019 49,834 19,672 1,570 - 122,962 194,038
======== ======== =========== ========== ========= =======
Profit for the year - - - - 15,578 15,578
Total comprehensive income - - - - 15,578 15,578
-------- -------- ----------- ---------- --------- -------
Transactions with owners
Dividends paid 9 - - - - (7,223) (7,223)
Issue of share capital 234 - - (234) - -
Exercise of share options - - (1,675) 385 246 (1,044)
Acquisition of own shares - - - (163) - (163)
Share-based payments
charge - - 1,130 - - 1,130
Balance at 31 December
2019 50,068 19,672 1,025 (12) 131,563 202,316
======== ======== =========== ========== ========= =======
Change in accounting
policy 2 - - - - (865) (865)
Balance at 1 January
2020 50,068 19,672 1,025 (12) 130,698 201,451
======== ======== =========== ========== ========= =======
Profit for the year - - - - 13,920 13,920
Total comprehensive income - - - - 13,920 13,920
-------- -------- ----------- ---------- --------- -------
Transactions with owners
Share-based payments
charge - - 561 - - 561
Balance at 31 December
2020 50,068 19,672 1,586 (12) 144,618 215,932
======== ======== =========== ========== ========= =======
Consolidated Cash Flow Statement
For the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
Operating profit 30,532 29,586
Adjustments for:
Depreciation and amortisation 4 22,515 19,995
Share-based payments charge 668 1,282
Profit on disposal of assets classified
as held for sale 4 (1,563) -
Loss on disposal of property plant and equipment 4 402 411
Profit on disposal and remeasurement of
right-of-use assets and lease liabilities 4 (318) (403)
Loss on impairment of goodwill and other
intangible assets 4 193 -
Loss on impairment of right-of use assets 4 527 1,081
Loss on impairment of property, plant and
equipment 4 25 708
(Profit) / loss on disposal of investment
property 4 (148) 72
Gain on revaluation of investment properties - (610)
Cash flows from operating activities before
working capital 52,833 52,122
--------- ---------
Decrease / (increase) in inventories 109,154 (69,893)
Decrease / (increase) in trade and other
receivables 20,640 (7,677)
(Decrease) / increase in trade and other
payables (85,978) 83,946
(Decrease) / increase in provisions (654) 379
Settlement of defined benefit pension scheme - (5,567)
Total cash flows generated by operations 95,995 53,310
--------- ---------
Tax paid (5,700) (4,698)
Interest paid on lease liabilities (3,103) (3,068)
Other net finance costs (7,073) (6,875)
Net cash inflow from operating activities 80,119 38,669
--------- ---------
Investing activities
Purchase of property, plant, equipment and
software 10/11 (11,722) (19,433)
Acquisition of businesses, net of cash acquired 10 (2,944) (27,397)
Lease payments received under finance lease 185 201
Interest received under finance leases 83 63
Net proceeds from disposal / (purchase)
of investment property 2,288 (72)
Proceeds from disposal of property, plant
and equipment 329 420
Proceeds from disposal of assets classified 2,360 -
as held for sale
Net cash outflow from investing activities (9,421) (46,218)
--------- ---------
Financing activities
Proceeds from borrowings 40,000 70,000
Repayment of borrowings (65,641) (45,641)
Repayment of lease liabilities (11,323) (9,780)
Dividends paid 9 - (7,223)
Purchase of own shares - (163)
Settlement of exercised share awards - (708)
Net cash (outflow) / inflow from financing
activities (36,964) 6,485
--------- ---------
Net increase / (decrease) in cash and cash
equivalents 33,734 (1,064)
Cash and cash equivalents at 1 January 110 1,174
Cash and cash equivalents at year end 33,844 110
========= =========
Net Debt Reconciliation
For the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
Reconciliation of net cash flow to movement
in net debt
Net increase / (decrease) in net cash
and cash equivalents 33,734 (1,064)
Proceeds from drawdown of RCF (40,000) (70,000)
Repayment of drawdown of RCF 65,000 45,000
Repayment of other borrowings 641 641
Change in lease liability commitments (2,582) (30,223)
Repayment of lease liabilities 11,323 9,780
Decrease / (increase) in net debt 68,116 (45,866)
Opening net debt (138,640) (92,774)
Net debt at year end (70,524) (138,640)
========== ==========
Lease liabilities 12 (99,344) (108,085)
Adjusted net cash / (debt) at year end
(non GAAP measure) 28,820 (30,555)
========== ==========
Net debt at year end consists of:
Cash and cash equivalents 33,844 110
Loans and borrowings (5,024) (30,665)
Lease liabilities 12 (99,344) (108,085)
Closing net debt (70,524) (138,640)
========== ==========
Notes to the Consolidated Financial Statements
1. General information
Marshall Motor Holdings plc (the Company) is incorporated and
domiciled in the United Kingdom. The Company is a public limited
company, limited by shares, whose shares are listed on the
Alternative Investment Market (AIM) of the London Stock Exchange.
The Company is registered in England under the Companies Act 2006
(registration number 02051461) with the address of the registered
office being; Airport House, The Airport, Cambridge, CB5 8RY,
United Kingdom.
The financial statements of Marshall Motor Holdings plc were
authorised for issue by the Board of Directors on 8 March 2021.
The financial information presented in this preliminary
announcement has been extracted from the Group's Annual Report and
Accounts for the year ended 31 December 2020 and is prepared in
accordance with the recognition and measurement requirements of
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and as adopted by
the EU and those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The principal accounting policies adopted in the preparation of
the financial information in this preliminary announcement are
unchanged from those used in the Group's consolidated financial
statements for the year ended 31 December 2019 and are consistent
with those that the Group has applied in its consolidated financial
statements for the year ended 31 December 2020.
The financial information contained within this preliminary
announcement does not constitute the Company's statutory accounts
for the current or prior year. Statutory accounts for the year
ended 31 December 2020 have been reported on by the Independent
Auditor. The independent auditor's report for the year ended 31
December 2020 was unqualified, did not draw attention to any
matters by way of emphasis, and did not contain a statement under
Section 498(2) or 498(3) of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2019 have been filed with
the Registrar of Companies. The statutory accounts for the year
ended 31 December 2020 will be delivered to the Registrar following
the Company's AGM. A copy of the full Group financial statements
for the period ended 31 December 2020 that comply with IFRS will be
made available at www.mmhplc.com .
Alternative performance measures
Non-underlying items
Certain items recognised in reported profit or loss before tax
can vary significantly from year to year, therefore, these create
volatility in reported earnings which does not reflect the Group's
underlying performance. The Directors believe that the 'underlying
profit before tax' and 'underlying basic earnings per share'
measures presented provide a clear and consistent presentation of
the underlying performance of the Group's on-going business for
shareholders. Underlying profit is not defined under IFRS,
therefore, it may not be directly comparable with the 'adjusted'
profit measures of other companies.
Non-underlying items are defined as follows:
- Acquisition costs;
- Profits/losses arising on closure or disposal of businesses;
- Restructuring and reorganisation costs - these are one-off in
nature and do not relate to the Group's underlying performance;
- Investment property fair value movements - these reflect the
difference between the fair value of an investment property at the
reporting date and its carrying amount at the previous reporting
date;
- One-off tax items and pension charges; and
- Asset impairments.
Like-for-like
Similarly, the Directors believe that the impact of acquisitions
and disposals distorts the value of comparative information
provided. Therefore, the measure of 'like-for-like' financial
performance is used to present consistent, comparative information.
Results on 'like-for-like; basis include only the Group's
businesses that have been active and trading for a period of 12
consecutive months.
Businesses that are excluded from the definition of
'like-for-like' are those sites that have recently commenced
operation, therefore do not have a 12-month trading history, as
well as any businesses that were closed and market segments or
activities that were ceased during the current or previous
year.
Adjusted net debt
The Directors believe that the impact of the adoption of IFRS 16
Leases distorts the value of reported net debt. Therefore, the
measure of 'adjusted net debt' is used to present consistent,
comparative information.
Going Concern
The consolidated financial statements are prepared on a going
concern basis. After making appropriate enquiries, the Directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for the foreseeable future and
for at least one year from the date that these consolidated
financial statements are signed. For these reasons they continue to
adopt the going concern basis in preparing the consolidated
financial statements. Accordingly, these financial statements do
not include any adjustments to the carrying amount or
classification of assets and liabilities that would result if the
Group were unable to continue as a going concern.
The Directors have considered the future prospects and
performance of the Group including the potential for further
disruption arising from the restrictions put in place by the UK
Government to control the spread of COVID-19 and the potential for
longer lasting economic impacts both from COVID-19 and from any
consequences of the EU trade deal. In preparing this assessment the
Directors have considered the overall economic context, the
principle risks, the Group's business plans, the impact of any
acquisitions, future cash flows and availability of core and
auxiliary financing facilities. Details of the assessment conducted
by the Directors is set out below.
At the date of approval of the consolidated financial
statements, the UK is coming to the end of a national lock down
under which the Group's on-site trading activities are restricted,
but have to a large extent been able to continue through the use of
"click & collect" for sales of new and used vehicles. During
the period of restrictions the Group has been able to successfully
match the sales activity levels with staffing levels by continuing
to utilise the Coronavirus Job Retention Scheme.
As set out in the Operating Review and the Financial Review, the
response to the COVID-19 pandemic has had an impact on the Group's
trading and cash flows, both positive and negative, for the year
ended 31 December 2020. The Group has taken (and is continuing to
take) actions to conserve cash and mitigate losses where these
arise as well as drawing on the applicable support measures
introduced by the UK Government, including the Coronavirus Job
Retention Scheme, the Expanded Retail Discount 2020/21 for business
rates, and the deferral of VAT payments. While this support has
been beneficial, the better-than-expected performance in the second
half of 2020 permitted the Group to repay all deferred VAT amounts
in full during September 2020, ahead of the due date.
Banking facilities and funding position
At 31 December 2020 the Group had GBP120m of committed but
undrawn banking facilities made available under a facility
agreement due to expire in January 2023. The Group's banking
facilities were renegotiated during the Year, with a new agreement
being successfully concluded on 29 July 2020. In recognition of the
potential for trading volatility at the time the new agreement was
entered into, an amended covenant package was agreed for the period
up to and including 30 June 2021. This amended covenant package
included a suspension of testing of the core leverage and interest
cover ratios.
The profitability and cash generation of the Group since the new
funding agreement was signed has permitted a mutually agreed return
to normal covenant testing from 31 March 2021, three months earlier
than originally envisaged.
The Group has not made use of any borrowing under the COVID-19
Corporate Financing Facility or the Coronavirus Large Business
Interruption Loan Scheme.
In addition to its core banking facilities, the Group has access
to vehicle inventory funding arrangements of which GBP364.9m was
utilised at 31 December 2020.
Assessment of the Group's financial position
During the 12 months covered by these consolidated financial
statements, the Group has, in common with most businesses,
experienced substantial disruption arising as a result of the
measures taken in respect of the COVID-19 pandemic. Further details
of the impacts are set out in the Operating Review and the
Financial Review.
The Directors have assessed the potential on-going impact of the
measures intended to counter the COVID-19 pandemic. In addition,
consideration has been given to longer-term risks arising from the
economic impact of the pandemic restrictions, as well as the now
concluded trade deal with the EU.
The Directors acknowledge that there remains uncertainty
regarding the timing of a full resumption of normal economic
activity globally, the lifting of restrictions in the UK and the
potential for some further disruption to the UK economy as
individuals and businesses adapt to the trade deal with the EU.
The Group has demonstrated significant resilience to issues
faced during 2020. The ability to adapt and accelerate the business
model to carry out more distance selling, the strength of the
balance sheet, and the renegotiation of the core funding facilities
have all contributed to enhancing the business during 2020 and into
2021. In addition, the support received from OEM partners, the UK
Government and other key partners has all helped to strengthen the
financial position, leaving the Group in a strong position to cope
with any further disruption.
The Group does not expect ongoing material disruption to its
supply chains, either as a result of further factory shutdowns or
issues with the importation of vehicles and parts. The Group's
access to labour and skills is not expected to be materially
adversely impacted by the end of the free movement of labour
between the UK and the EU.
To support the assessment of the Group's ability to continue as
a going concern, the following scenarios have been modelled:
-- An upside scenario where there is a rapid economic recovery.
Under this scenario, performance in 2021 returns to the level
anticipated in the original Board approved budget which was
prepared prior to the announcement of additional lockdown measures
during the final quarter of 2020.
-- A short-term downside scenario, where the lockdown continues
for the whole of the first quarter of 2021. This results in 25%
loss of sales in January and February and 45% loss of sales in
March, this is partially offset by a 10% saving in overhead costs
during the lockdown period, supported by the Coronavirus Job
Retention Scheme. There is then a return to normal trading
performance for the remainder of 2021 and into 2022.
-- A medium-term downside scenario, in which there is a lockdown
for the first quarter of 2021 with the impact described above,
followed by further lockdown for the whole of the last quarter of
2021. The lockdown in the last quarter results in a 25% loss of
sales. These losses are offset by a 10% saving in overhead costs
during both lockdown periods. There is then a return to normal
trading performance in 2022.
-- A longer-term downside scenario, in which there are further
lockdowns. The associated trading impacts are as set out under the
"medium-term downside" scenario described above and in addition,
earnings for the whole of 2022 are 50% lower due to the
macro-economic conditions arising from the disruption experienced
during 2020 and forecast for 2021. Normal trading performance then
returns in 2023.
Under the upside scenario and short-term downside scenario, the
Group is forecast to be able to continue to operate within the bank
facility limits and to comply with the banking covenants set out in
the funding agreements.
Under the medium-term downside scenario and longer-term downside
scenario, which the Directors consider to be remote possibilities,
the Group would have sufficient finance facilities available to
continue to trade but would breach the banking covenants set out in
the funding agreements. Based upon the significant resilience the
business has demonstrated both operationally and financially, as
well as the level of support shown by funders to date, including a
previous amendment to covenant requirements and reduction in the
covenant package under the new funding agreement for the period up
to 30 June 2021, the Directors believe that in either of these
scenarios, appropriate amendments to covenant requirements would be
provided by the Group's funders.
The Directors have therefore concluded that Company is able to
continue as a going concern through to March 2022.
2. Changes in accounting policies and disclosures
Except where disclosed otherwise in this note, the accounting
policies adopted in the preparation of the consolidated financial
statements are consistent with those applied when preparing the
consolidated financial statements for the year ended 31 December
2019.
New standards, amendments and interpretations adopted by the
Group
The following amendments to existing standards became effective
on 1 January 2020 and have been adopted in the consolidated
financial statements for the first time during the year ended 31
December 2020. These have been assessed as having no financial or
disclosure impact on the numbers presented.
-- IAS 1 Presentation of Financial Statements
-- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
-- IFRS 3 Business Combinations
The following amendment to an existing standard was issued on 28
May 2020. The amendment applies to annual reporting periods
beginning on or after 1 June 2020. Earlier application is
permitted; the Group has applied this amendment to its annual
reporting period that commenced on 1 January 2020. The impact of
the adoption of this amended standard is disclosed below.
-- Amendments to IFRS 16 Leases - COVID-19-Related Rent Concessions
Three other amendments to existing standards apply for the first
time with effect from 1 January 2020; however, they are not
applicable to the consolidated financial statements of the
Group.
Impact on current period of the adoption of new standards,
amendments and interpretations
IFRS 16 Leases transition adjustment
The Group applied IFRS 16 for the first time during the year
ended 31 December 2019 using the full retrospective approach. As a
result, the comparative period was restated with a cumulative
transition adjustment being recognised through the opening
comparative retained earnings balance as at 1 January 2018. During
the year ended 31 December 2020 it was identified that this
transition adjustment to retained earnings was understated by
GBP865,000 (being the impact of the derecognition of certain rent
prepayments and accruals relating to leases previously classified
as operating leases, net of the associated GBP203,000 deferred tax
credit).
Due to the nature of this adjustment, prior year balances have
not been restated. This adjustment has been recognised directly in
retained earnings in the Consolidated Statement of Changes in
Equity for the year ended 31 December 2020.
Amendments to IFRS 16 Leases - COVID-19-Related Rent
Concessions
In response to the ongoing COVID-19 pandemic, on 28 May 2020 the
IASB issued an amendment to IFRS 16 Leases - COVID-19-Related Rent
Concessions. These were formally adopted by the European Union on
12 October 2020. These amendments add a practical expedient to
provide lessees with relief from lease modification accounting
requirements where the lessee has received rent concessions granted
as a result of COVID-19. The practical expedient applies to all
rent concessions that provide relief for payments that were
originally due on or before 30 June 2021. These amendments are
applicable for all accounting periods beginning on or after 1 June
2020. The Group has adopted these amendments for the first time in
the consolidated financial statements for the year ended 31
December 2020 in accordance with the early application permitted
for all financial statements not authorised for issue as at the
date the amendments were issued.
The Group has applied this practical expedient to all leases in
its property portfolio under which either deferred rent payments or
forgiven rent payments have been successfully negotiated during the
period from March 2020 to December 2020. Accounting for the rent
concessions as lease modifications would have resulted in the Group
remeasuring the lease liability to reflect the revised
consideration using a revised discount rate, with the effect of the
change in the lease liability being recorded against the
right-of-use asset. As a result of applying this practical
expedient, the Group is not required to determine a revised
discount rate and the effect of the change in the lease liability
is recognised as a profit of GBP109,000 in net operating expenses
in the Consolidated Statement of Comprehensive Income.
3. Segmental Information
IFRS 8 Operating Segments requires operating segments to be
consistent with the internal management reporting provided to the
Chief Operating Decision Makers who are responsible for allocating
resources and assessing the performance of the operating segments.
The Group considers the Chief Executive Officer to be the Chief
Operating Decision Maker.
The Group has identified its key product and service lines as
being its operating segments because both performance and strategic
decisions are analysed at this level. The IFRS 8 aggregation
criteria have been met as a result of the Group's key product and
service lines sharing common characteristics such as; similar types
of customer for the products and services, similar nature of the
product and service offerings, similar methods used to distribute
the products and provide the services and similar regulatory and
economic environment. As a result of these criteria being
satisfied, the Group's operating segments constitute one reportable
segment (retail) and all segmental information has been disclosed
as such. The retail segment includes sales of new and used
vehicles, together with the associated ancillary aftersales
services of; servicing, body shop repairs and parts sales.
The Group has concluded that rental income arising from
investment properties does not meet the quantitative thresholds
required to constitute a reportable segment as defined in IFRS 8.
Due to the non-material nature of these amounts, they are combined
with the retail segment rather than being disclosed separately. As
a result, all of the Group's activities are disclosed within the
one reportable segment - the retail segment.
Geographical information
Revenue earned from sales is disclosed by origin and is not
materially different from revenue by destination. All of the
Group's revenue is generated in the United Kingdom.
Information about reportable segment
All segment revenue, profit before taxation, assets and
liabilities are attributable to the principal activity of the Group
being the provision of car and commercial vehicle sales, vehicle
service and other related services.
The following tables show the disaggregation of revenue by major
product/service lines for continuing operations:
For the year ended 31 December 2020 Revenue Gross profit
GBP'000 mix* GBP'000 mix*
New Vehicles 988,093 44.9% 65,086 27.4%
Used Vehicles 971,135 44.1% 63,712 26.8%
Aftersales 240,589 11.0% 108,573 45.8%
Internal / Other (45,402) - 819 -
Total 2,154,415 100% 238,190 100%
========= ===== ======= =====
For the year ended 31 December 2019 Revenue Gross profit
GBP'000 mix* GBP'000 mix*
New Vehicles 1,079,474 46.4% 80,148 30.8%
Used Vehicles 986,718 42.5% 65,456 25.2%
Aftersales 258,087 11.1% 114,572 44.0%
Internal / Other (48,150) - 625 -
Total 2,276,129 100% 260,801 100%
========= ===== ======= =====
*mix calculation excludes Internal / Other
4. Profit before taxation
Profit before taxation is arrived at after charging /
(crediting):
2020 2019
GBP'000 GBP'000
Depreciation of property, plant and equipment (note 11) 10,719 10,217
Amortisation of other intangibles (note 10) 448 421
Profit on disposal of assets classified as held for sale (1,563) -
Loss on disposal of property plant and equipment 402 411
Impairment of property, plant and equipment (note 11) 25 708
(Profit) / loss on disposal of investment property (148) 72
Intangible assets impairment (note 10) 193 -
Depreciation of right-of-use assets (note 12) 11,348 9,357
Profit on disposal and remeasurement of right-of-use assets and lease liabilities (note 12) (318) (403)
Impairment loss on right-of-use assets (note 12) 527 1,081
Income received from subleasing right-of-use assets (note 12) (185) (201)
======= =======
5. Non-underlying items
2020 2019
GBP'000 GBP'000
Continuing operations
Post-retirement benefits charge - (23)
Acquisition costs (13) (835)
Net recognition of restructuring costs (2,070) (2,123)
Profit on disposal of assets classified as
held for sale 1,563 -
Profit / (loss) on disposal of investment
property 148 (72)
Loss on impairment of goodwill and other
tangible assets (218) -
Gain on revaluation of investment properties - 610
------- -------
(590) (2,443)
======= =======
Details of current and deferred tax arising in relation to all
income and expenditure classified as Non-Underlying Items are
disclosed in Note 7 'Taxation'.
Post-retirement benefits charge
See Note 13 'Pensions' for further details of the transaction
giving rise to the post-retirement benefits charge.
Acquisition costs
See Note 10(a) 'Goodwill and Other Intangible Assets' for
further details of transactions giving rise to the acquisition
costs.
Net recognition of restructuring costs
Restructuring costs are a continuation of items disclosed in
previous periods and relate to the closure of four of the Group's
franchised dealerships in 2020. Restructuring costs include closed
site related costs of GBP1,127,000 (2019: GBP323,000), redundancy
costs of GBP631,000 (2019: GBP303,000), tangible asset impairment
reversals of GBP275,000 (2019: charge of GBP708,000), tangible
asset loss on disposal of GBP134,000 (2019: GBPnil), right-of-use
asset impairments and remeasurements of GBP406,000 (2019:
GBP268,000) and other redundancy costs in the year totalled
GBP47,000 (2019: GBP521,000).
Profit on disposal of assets classified as held for sale
In June 2020 the Group sold the freehold property classified as
held for sale for a profit of GBP1,563,000 (2019: GBPnil).
Profit / (loss) on disposal of investment property
In November 2020 the Group sold a freehold investment property
for a profit of GBP148,000 (2019: GBPnil). During 2019 additional
legal fees of GBP72,000 were incurred in relation to the disposal
of an investment property in 2018.
Loss on impairment of goodwill and other tangible assets
See Note 10(b) 'Goodwill and Other Intangible Assets' for
further details of the transaction giving rise to the loss on
impairment of goodwill and other intangible assets.
Gain on revaluation of investment properties
A revaluation surplus of GBP610,000 was recognised in 2019.
6. Net finance costs
2020 2019
GBP'000 GBP'000
Finance lease interest receivable (83) (63)
Stock financing charges and other interest 5,417 5,944
Interest payable on lease liabilities 3,103 3,068
Interest payable on bank borrowings 1,739 994
Net finance costs 10,176 9,943
======= =======
7. Taxation
2020 2019
GBP'000 GBP'000
Current tax
Current tax on profits for the year 3,855 4,201
Adjustments in respect of prior years (154) 31
Total current tax charge 3,701 4,232
------- -------
Deferred tax
Origination and reversal of temporary differences 256 23
Impact of change in tax rates 2,380 -
Adjustments in respect of prior years 99 (190)
Total deferred tax charge / (credit) 2,735 (167)
------- -------
Total taxation charge 6,436 4,065
======= =======
The income tax charge in both the current and prior year is
attributable to profit from continuing operations.
The analysis of the Group's effective tax rate between
underlying and non-underlying activities is as follows:
2020 2020 2020 2019 2019 2019
Underlying Non-underlying Total Underlying Non-underlying Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit before taxation 20,946 (590) 20,356 22,086 (2,443) 19,643
Taxation 4,425 2,011 6,436 4,177 (112) 4,065
Effective tax rate 21.13% (340.85%) 31.62% 18.91% 4.58% 20.69%
========== ============== ======= ========== ============== =======
Non-recurring items
The Group's total effective tax rate for 2020 of 31.62% was
influenced by the deferred taxation charge arising due to the
remeasurement of the Group's deferred taxation balances, required
following the legislative change substantively enacted during the
year. The total effective tax rate was also impacted by the
non-deductible goodwill impairment charge and profits on disposal
of freehold property. Excluding the impact of these items, the
total effective tax rate for 2020 would have been 21.18%. This is
consistent with the Group's underlying effective tax rate of
21.13%.
The Finance Act 2016 announced a reduction to the corporation
tax rate to 17% with effect from 1 April 2020. In the Budget of 11
March 2020, the Chancellor of the Exchequer announced that this
planned rate reduction to 17% would no longer be taking effect. The
changes announced during the Budget of 11 March 2020 were
substantively enacted as at the balance sheet date, therefore, all
opening deferred taxation balances have been remeasured at 19%. The
deferred taxation charge of GBP2,380,000 arising due to this
remeasurement is presented in Non-Underlying Items on the basis
that this charge is a consequence of a one-off, legislative
change.
The prior year total effective tax rate of 20.69% was influenced
by non-deductible acquisition costs and the impact of a return to
provision true-up in relation to assets held for sale in 2018.
Excluding the impact of these, the total effective tax rate for
2019 would have been 18.75%. This is consistent with the Group's
underlying effective tax rate of 18.91%.
8. Earnings per share
Basic and diluted earnings per share are calculated by dividing
the earnings attributable to equity shareholders by the weighted
average number of ordinary shares during the year and the diluted
weighted average number of ordinary shares in issue in the year
after taking account of the dilutive impact of shares under option
of 2,926,659 at 31 December 2020 (2019: 2,002,304).
Underlying earnings per share are based on basic earnings per
share adjusted for the impact of non-underlying items.
2020 2019
GBP'000 GBP'000
Underlying net profit attributable to equity
holders of the parent 16,521 17,909
Non-underlying items after tax (2,601) (2,331)
Net profit attributable to equity holders
of the parent 13,920 15,578
========================================= ======================
2020 2019
Thousands Thousands
Number of shares
Weighted average number of ordinary shares
for the purpose of basic EPS 78,232 78,097
Effect of dilutive potential ordinary shares:
share options 1,882 1,178
Weighted average number of ordinary shares
for the purpose of diluted EPS 80,114 79,275
2020 2019
Pence Pence
Basic underlying earnings per share 21.1 22.9
Basic earnings per share 17.8 19.9
Diluted underlying earnings per share 20.6 22.6
Diluted earnings per share 17.4 19.7
9. Dividends
In light of the circumstances resulting from the ongoing
COVID-19 pandemic, the previously proposed final dividend of 5.69p
per share for the year ended 31 December 2019 was cancelled.
The Group similarly suspended the payment of an interim dividend
in respect of the year ended 31 December 2020. (2019: An interim
dividend of GBP2,228,000, representing a payment of 2.85p per
ordinary share in issue at that time, was paid in September
2019.)
The Board is mindful of the importance of dividends to its
shareholders and intends to resume the payment of dividends as soon
as conditions allow.
10. Goodwill and other intangible assets
Franchise
Goodwill agreements Software Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
Balance at 1 January 2019 48,629 72,137 1,631 122,397
Additions - - 982 982
Additions on acquisition 1,525 5,036 - 6,561
Disposals - - (82) (82)
At 31 December 2019 50,154 77,173 2,531 129,858
---------------- ---------------------- --------------------- -----------------
Additions - - 108 108
Additions on acquisition 724 350 - 1,074
Disposals - - (632) (632)
At 31 December 2020 50,878 77,523 2,007 130,408
---------------- ---------------------- --------------------- -----------------
Accumulated amortisation and
impairment
Balance at 1 January 2019 9,302 - 918 10,220
Charge for the year - - 421 421
Impairment - - (43) (43)
At 31 December 2019 9,302 - 1,296 10,598
---------------- ---------------------- --------------------- -----------------
Charge for the year - - 448 448
Disposals - - (364) (364)
Impairment 193 - - 193
At 31 December 2020 9,495 - 1,380 10,875
---------------- ---------------------- --------------------- -----------------
Net book value
At 1 January 2019 39,327 72,137 713 112,177
---------------- ---------------------- --------------------- -----------------
At 31 December 2019 40,852 77,173 1,235 119,260
At 31 December 2020 41,383 77,523 627 119,533
================ ====================== ===================== =================
a) Acquisitions - current period
On 10 July 2020, the Group acquired the trade and assets of a
Volkswagen dealership in Aylesbury. Acquisition of this dealership
brought to a successful conclusion the strategic acquisition of
eight Volkswagen Group UK franchises announced in December 2019.
This acquisition is part of the Group's stated strategy to grow
with existing brand partners in new geographic territories by
adding further sites in excellent locations.
The estimated identifiable assets and liabilities at the date of
acquisition are stated at their provisional fair value as set out
below. The goodwill arising on acquisition is attributed to the
expected synergies and benefits associated with the increased brand
representation which has resulted in the Group becoming Volkswagen
Group UK's largest partner by number of locations.
Fair value of net assets acquired
GBP'000
Intangible assets 350
Property, plant and equipment 569
Right-of-use assets 670
Inventories 1,333
Trade and other receivables 26
Cash and cash equivalents 1
Deferred tax liabilities (49)
Trade and other payables (9)
Lease liabilities (670)
---------------------------------
Net assets acquired 2,221
Goodwill 81
Total cash consideration 2,302
=================================
The completion payment for the Aylesbury VW business included
the consideration of GBP2,302,000 as set out above, and a further
payment of GBP643,000 held back from the acquisitions completed in
December 2019 as an incentive to the vendor to complete the
Aylesbury sale. Had the Aylesbury sale not been completed this
further payment would not have been due.
The results of the acquired dealership were consolidated into
the Group's results from 10 July 2020. For the period from
acquisition to 31 December 2020, the revenues and the loss before
tax generated by these dealership were immaterial in the context of
the Group's revenues and profit before tax.
If the acquisition had taken effect at the beginning of the
reporting period in which the acquisition occurred (1 January
2020), on a pro forma basis, the change in revenue and profit
before tax of the combined Group for the year ended 31 December
2020 would have been immaterial in the context of the Group.
Transaction costs arising on acquisitions in 2020 totalled
GBP13,000. These costs have been recognised in net operating
expenses in the Consolidated Statement of Comprehensive Income and
are part of operating cash flows in the Consolidated Cash Flow
Statement.
a) Acquisitions - prior period
The following acquisitions are part of the Group's stated
strategy to grow with existing brand partners in new geographic
territories by adding further sites in excellent locations that are
contiguous to the Group's existing sites.
The Group acquired the trade and assets of the following
dealerships:
-- KODA Leicester and Nottingham on 31 January 2019;
-- KODA Northampton, Bedford, Letchworth and Harlow on 28 February 2019;
-- Honda Reading and Newbury on 2 September 2019; and
-- Volvo Derby on 20 December 2019.
The fair value of the net assets at the date of the acquisition
are as set out below.
Fair value of net assets acquired
GBP'000
Intangible assets 1,985
Property, plant and equipment 907
Right-of-use assets 6,020
Inventories 3,886
Trade and other receivables 12
Trade and other payables (460)
Lease liabilities (5,870)
Provisions (552)
Deferred tax liabilities (7)
Net assets acquired 5,921
Goodwill 1,244
Total cash consideration 7,165
=================================
The results of the acquired KODA, Honda and Volvo dealerships
were consolidated into the Group's results from the relevant date
of acquisition. For the period from acquisition to 31 December
2019, the revenues and the loss before tax generated by these
dealerships were immaterial in the context of the Group's revenues
and profit before tax.
If the acquisitions had taken effect at the beginning of the
reporting period in which the acquisition occurred (1 January
2019), on a pro forma basis, revenue of the combined Group for the
year ended 31 December 2019 would have been increased by
GBP40,857,000 and profit before tax would have been reduced by
GBP266,000.
On 17 December 2019, the Group acquired the trade and assets of
five Volkswagen dealerships, a Volkswagen commercial vehicle
franchise and body shop and one KODA dealership.
Fair value of net assets acquired
GBP'000
Intangible assets 3,051
Property, plant and equipment 3,681
Right-of-use assets 20,388
Inventories 12,916
Cash and cash equivalents 2
Trade and other payables (655)
Lease liabilities (18,487)
Provisions (225)
Deferred tax liabilities (720)
Net assets acquired 19,951
Goodwill 281
Total cash consideration 20,232
=================================
The results of the acquired dealerships were consolidated into
the Group's results from 18 December 2019. For the period from
acquisition to 31 December 2019, the revenues and the loss before
tax generated by these dealerships were immaterial in the context
of the Group's revenues and profit before tax.
If the acquisition had taken effect at the beginning of the
reporting period in which the acquisition occurred (1 January
2019), on a pro forma basis, revenue for the combined Group for the
year ended 31 December 2019 would have been increased by
GBP167,749,000 and profit before tax would have been reduced by
GBP1,657,000.
Transaction costs arising on acquisitions in 2019 totalled
GBP835,000. These costs have been recognised in net operating
expenses in the Consolidated Statement of Comprehensive Income and
are part of operating cash flows in the Consolidated Cash Flow
Statement.
b) Impairment testing
For the purpose of impairment testing, goodwill and franchise
agreements are allocated to a cash generating unit ("CGU"), or to
the smallest group of CGUs where it is not possible to apportion
the goodwill or intangible assets at the individual CGU level. Each
CGU or group of CGUs to which the goodwill is allocated represents
the lowest level within the entity at which the goodwill is
monitored for management purposes. Goodwill and intangible assets
arising on business combinations are allocated to CGUs by
determining which CGU is expected to benefit from the synergies of
the business combination.
The Group's CGUs are groups of dealerships connected by
manufacturer brand. The allocation of goodwill and indefinite lived
intangible assets to the CGU groups is as follows:
Franchise
Goodwill Agreements
GBP'000 GBP'000
Volkswagen Group* 17,766 35,597
BMW/MINI 1,461 8,345
Jaguar/Land Rover 8,003 14,358
Mercedes-Benz/Smart 11,182 19,201
Other 2,971 22
Total 41,383 77,523
======== ===========
*Volkswagen Group includes Volkswagen, Audi, KODA and SEAT
brands
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate that the
carrying amount may not be recoverable and a potential impairment
may be required. Impairment reviews have been performed for all
groups of CGUs for the years ended 31 December 2020 and 2019 and
for the six months ended 30 June 2020.
Valuation basis
The recoverable amount of the Group's CGUs is determined by
reference to their value-in-use to perpetuity calculated using a
discounted cash flow approach, with a pre-tax discount rate applied
to the projected, risk-adjusted pre-tax cash flows and terminal
value. Where higher, the fair value of groups of CGUs, less costs
of disposal, is taken as the recoverable amount.
Period of specific projected cash flows
The value-in-use of each CGU is calculated using cash flow
projections for a five-year period; from 1 January 2021 to 31
December 2025.
These projections (the "Base Case") are developed from the Board
approved budget for the year ending 31 December 2021 which, as
described under "Going Concern" in Note 1, has been updated to
reflect the expected impact of the additional trading restrictions
in response to the COVID-19 pandemic which were announced during
December 2020.
The key assumptions in the forecast on which the cash flow
projections are based relate to expectations of sales volumes and
margins and expectations around changes in the operating cost base.
The assumptions made are based on the management's current
understanding the extent and duration of the COVID-19 related
trading restrictions imposed by the UK Government, the current
macro-economic context and outlook, past experience adjusted for
expected changes, and external sources of information. The cash
flows include ongoing capital expenditure required to maintain the
Group's dealership network but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Discount rate
The cash flow projections have been discounted using a rate
derived from the Group's pre-tax weighted average cost of capital
adjusted for industry and market risk. The discount rate used is
7.8% (2019: 8.0%).
Terminal growth rate
The cash flows after the forecast period are extrapolated into
the future over the useful economic life of the group of CGUs using
a steady or declining growth rate that is consistent with that of
the product and industry. These cash flows form the basis of what
is referred to as the terminal value. The growth rate to perpetuity
beyond the initial budgeted cash flows applied in the value-in-use
calculations to arrive at a terminal value is 2% (2019: 2%).
Terminal growth rates are based on management's estimate of future
long-term average growth rates.
Conclusion
Under the Base Case the Group's CGUs all have significant
headroom in respect of the carrying value of goodwill and
intangible assets with the exception of the Vauxhall CGU which is
included with the "Other" CGU Group. Goodwill of GBP193,000 is
assigned to the Vauxhall CGU.
Vauxhall
Following the closure of the Group's Knebworth Vauxhall site and
a further deterioration in the performance of the two remaining
sites the projected cash flows are no longer sufficient to support
the carrying value of the assigned goodwill and intangible
assets.
Therefore at 31 December 2020 the Group recorded a non-cash
impairment charge of GBP218,000 (2019: GBPnil). This impairment
charge is split as GBP193,000 of Goodwill and GBP25,000 of Plant
& Equipment assigned to the Vauxhall CGU and is recorded within
net operating expenses in non-underlying items in the Consolidated
Statement of Comprehensive Income.
Update on BMW/MINI
The Group's BMW/MINI franchises have faced several challenges in
recent years brought about largely due to an oversupply of vehicles
and the disruption caused by vehicle recalls.
During 2020 the business has shown substantial improvement
despite the trading uncertainty experienced during the year. A
number of the performance improvement initiatives have been
successfully delivered and the cash flow projections for the CGU
indicate a continued improvement over the plan period as other
management and manufacturer initiatives are delivered.
Following the improvement delivered in 2020 the Board has
approved the forecast which supports the carrying value of the
BMW/MINI goodwill as at 31 December 2020. Inherent in this
assessment are a number of assumptions related to the timing of the
lifting of the COVID-19 related trading restrictions, the severity
and duration of the resulting economic down-turn, the speed and
sustainability of the subsequent recovery, and the continued
successful delivery of the local management and manufacturer
initiatives.
Sensitivity to changes in key assumptions
Impairment testing is dependent on estimates and judgements,
particularly as they relate to the forecasting of future cash
flows, the discount rates selected and expected long-term growth
rates.
The Group has performed a sensitivity analysis on the impairment
tests under the Base Case using four scenarios:
-- where the discount rate decreases by 100 basis points.
-- where the discount rate increases by 100 basis points.
-- where the terminal value growth rate decreases by 50 basis points.
-- where the terminal value growth rate increases by 50 basis points.
In order to assess the possibility of future impairments, the
Group has performed additional scenarios analysis, using the
forecasts prepared to support the Directors' consideration of the
going concern basis of preparation. The scenario cases are as
follows:
-- An upside case where performance in 2021 returns to the level
anticipated in the original Board approved budget.
-- A short-term downside case, where the lockdown continues for
the whole of the first quarter of 2020, resulting in 25% loss of
sales in January and February and 45% loss of sales in March offset
by a 10% saving in overhead costs during the lockdown period. There
is a return to normal trading performance in 2022.
-- A medium-term downside case, in which there is a lockdown for
the first quarter with the impact described above, followed by
further lockdown for the whole of the last quarter of 2021. The
lockdown in the last quarter results in a 25% loss of sales. These
losses are offset by a 10% saving in overhead costs during both
lockdown periods. There is a return to normal trading performance
in 2022.
-- A long-term downside case, in which there are lockdowns, and
the associated trading impacts as set out under the "medium-term
downside" case described above, in earnings in 2022 are 50% lower
due to the macro-economic conditions arising from the disruption
seen during 2020 and forecast for 2021. There is then a return to
normal trading performance in 2023.
Of all of the above sensitivity and scenario cases, the only one
which would result in the recognition of an impairment charge is an
increase in the discount rate by 100 basis points. Under this
sensitivity, a minimal impairment of GBP143,000 would be indicated
against the BMW/MINI CGU. The Directors consider the increase in
risk expressed by such a significant increase in the discount rate
to be a remote possibility.
11. Property, plant and equipment
Freehold Assets
land and Leasehold Plant and under
buildings improvements equipment construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
Balance at 1
January 2019 118,781 22,040 39,909 9,501 190,231
Additions at
cost 4,937 418 4,519 8,827 18,701
Additions on
acquisition 1,991 734 1,863 - 4,588
Disposals - (595) (3,042) - (3,637)
Transfers to
investment
property (441) - - - (441)
Transfers 10,353 4,372 1,918 (16,643) -
At 31
December
2019 135,621 26,969 45,167 1,685 209,442
---------------------------------- ---------------------------- ----------------------- ------------------- ------------------
Additions at
cost 3,247 312 2,613 4,179 10,351
Additions on
acquisition - 439 130 - 569
Disposals - (2,628) (8,832) - (11,460)
Transfers to
asset held
for sale (1,325) - - - (1,325)
Transfers 25 2,274 1,506 (3,805) -
At 31
December
2020 137,568 27,366 40,584 2,059 207,577
---------------------------------- ---------------------------- ----------------------- ------------------- ------------------
Accumulated
depreciation
and
impairment
Balance at 1
January 2019 10,596 6,166 25,310 - 42,072
Charge for
the year 1,850 2,137 6,230 - 10,217
Disposals - (184) (2,661) - (2,845)
Impairment - 502 206 - 708
Transfers to
investment
property (3) - - - (3)
At 31
December
2019 12,443 8,621 29,085 - 50,149
---------------------------------- ---------------------------- ----------------------- ------------------- ------------------
Charge for
the year 2,002 2,488 6,229 - 10,719
Disposals - (2,474) (8,523) - (10,997)
Impairment - - 25 - 25
Transfers to
asset held
for resale (622) - - - (622)
At 31
December
2020 13,823 8,635 26,816 - 49,274
---------------------------------- ---------------------------- ----------------------- ------------------- ------------------
Net book
value
At 1 January
2019 108,185 15,874 14,599 9,501 148,159
---------------------------------- ---------------------------- ----------------------- ------------------- ------------------
At 31
December
2019 123,178 18,348 16,082 1,685 159,293
---------------------------------- ---------------------------- ----------------------- ------------------- ------------------
At 31
December
2020 123,745 18,731 13,768 2,059 158,303
================================== ============================ ======================= =================== ==================
As at 31 December 2020, the Group had capital commitments
totalling GBP4.5m (2019: GBP6.9m) relating to ongoing construction
projects.
2020
Transfers to assets held for sale
In October 2020, the Group ceased commercial activities at two
of its freehold properties. As the properties were no longer being
used for the commercial activity of the business and are actively
being marketed for sale, the assets have been transferred to assets
classified as held for sale.
2019
Impairments
The impairment loss of GBP708,000 represents the impairment of
leasehold improvements and plant and equipment in the franchised
dealership which closed in October 2019 and the franchised
dealership due to close in 2020. On closure of these dealerships
these assets ceased to have any value. This loss was recognised in
the Consolidated Statement of Comprehensive Income in net operating
expenses.
12. Leases
a) Group as lessee
The Group has lease contracts for land and buildings and
vehicles. Leases of land and buildings have an average term of
between 20 and 25 years. Leases of vehicles have an average term of
3 years.
The following are amounts recognised in the Consolidated
Statement of Comprehensive Income:
2020 2019
GBP'000 GBP'000
Depreciation of right-of-use assets 11,348 9,357
Profit on disposal and remeasurement of right-of-use assets and lease liabilities (318) (403)
Impairment loss on right-of-use assets 527 1,081
Expenses relating to short-term leases 295 209
Expenses relating to leases of low-value assets 744 847
Interest payable on lease liabilities 3,103 3,068
Total amount recognised in profit or loss 15,699 14,159
======= =======
The Group had total cash outflows in respect of leases in the
year of GBP11,323,000 (2019: GBP9,780,000). The Group also had
non-cash additions to right-of-use assets and lease liabilities of
GBP3,627,000 (2019: GBP28,778,000).
Set out below are the carrying amounts of the right-of-use
assets recognised and the movements during the year:
Land and buildings Vehicles Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2019 126,072 856 126,928
Additions 2,248 122 2,370
Additions on acquisition 26,408 - 26,408
Disposals (1,206) (234) (1,440)
Remeasurement 5,324 - 5,324
At 31 December 2019 158,846 744 159,590
----------------------------------------- ------------------------------------ -------
Additions 2,662 295 2,957
Additions on acquisition 670 - 670
Disposals (6,655) (367) (7,022)
Remeasurement (867) - (867)
At 31 December 2020 154,656 672 155,328
----------------------------------------- ------------------------------------ -------
Accumulated depreciation and
impairment
At 1 January 2019 41,101 400 41,501
Charge for the year 8,991 366 9,357
Disposals (82) (234) (316)
Impairment 1,081 - 1,081
At 31 December 2019 51,091 532 51,623
----------------------------------------- ------------------------------------ -------
Charge for the year 11,059 289 11,348
Disposals (6,635) (367) (7,002)
Impairment 527 - 527
At 31 December 2020 56,042 454 56,496
----------------------------------------- ------------------------------------ -------
Net book value
At 31 December 2019 107,755 212 107,967
At 31 December 2020 98,614 218 98,832
========================================= ==================================== =======
2020
Impairments
The premises used by the franchised dealerships closed in
October 2020 became vacant on cessation of trade. The right of-use
assets have therefore been fully impaired. This impairment loss of
GBP527,000 was recognised in the Consolidated Statement of
Comprehensive Income in net operating expenses.
2019
Impairments
The premises used by the franchised dealership closed in October
2019 became vacant on cessation of trade. The right-of-use asset
has therefore been fully impaired. This impairment loss of
GBP1,081,000 was recognised in the Consolidated Statement of
Comprehensive Income in net operating expenses.
The maturity analysis of the Group's lease liabilities is as
follows:
2020 2019
GBP'000 GBP'000
Within 1 year 10,961 10,689
Between 1 and 5 years 39,416 40,215
After 5 years 48,967 57,181
Total lease liabilities 99,344 108,085
======= =======
The percentages in the table below reflect the current
proportions of lease payments that are either fixed or
variable.
31 December 2020 Lease contracts number Fixed payments % Variable payments %
Property leases with payments
linked to inflation 9 - 13%
Property leases with fixed
payments 112 85% -
Vehicle leases 81 2% -
202 87% 13%
========================= ================================== =======================
31 December 2019 Lease contracts number Fixed payments % Variable payments %
Property leases with payments
linked to inflation 9 - 12%
Property leases with fixed
payments 111 85% -
Vehicle leases 104 3% -
224 88% 12%
========================= ================================== =======================
b) Group as lessor - finance leases
The Group has non-cancellable leases, as intermediate lessor, of
leases for properties. The terms of these leases vary. The
following are amounts recognised in the Consolidated Statement of
Comprehensive Income:
2020 2019
GBP'000 GBP'000
Income received from subleasing right-of-use
assets (185) (201)
Finance income on net investment in leases (83) (63)
Total amount recognised in profit or loss (268) (264)
======= =======
Future minimum lease payments receivable for property under
non-cancellable finance leases are set out below:
2020 2019
GBP'000 GBP'000
Within 1 year 185 185
Between 1 and 2 years 185 185
Between 2 and 3 years 185 185
Between 3 and 4 years 185 185
Between 4 and 5 years 185 185
After 5 years 969 1,154
------- -------
Total undiscounted lease payments receivable 1,894 2,079
Unearned finance income (452) (535)
Net investment in the lease 1,442 1,544
======= =======
2020 2019
GBP'000 GBP'000
Current 108 102
Non-current 1,334 1,442
Total finance lease receivable 1,442 1,544
======= =======
c) Group as lessor - operating leases
The Group has entered into non-cancellable operating leases, as
lessor on property included in investment property and as an
intermediate lessor on head leases of property assets. The terms of
these leases vary. Future minimum lease payments receivable for
property under non-cancellable operating leases are as set out
below.
2020 2019
GBP'000 GBP'000
Within 1 year 93 326
Between 1 and 2 years 54 246
Between 2 and 3 years - 208
Between 3 and 4 years - 154
Between 4 and 5 years - 154
After 5 years - 602
147 1,690
======= =======
13. Pensions
a) Defined contribution pension schemes
The Group makes contributions to defined contribution pension
schemes; contributions paid are calculated by reference to a
percentage of each employee's salary. All defined contribution
schemes into which the Group makes contributions are managed by
third party providers. The only obligation of the Group with
respect to these schemes is to make the specified contributions.
The total income statement charge for contributions for the year
ended 31 December 2020 was GBP2,993,000 (2019: GBP2,732,000).
The total unpaid pension contributions outstanding at the year
end were GBP539,000 (2019: GBP526,000).
b) Defined benefit pension schemes
Cessation of Participation in the Plan and Provision for Section
75 Employer Debt
Following the sale of Marshall Leasing Limited in 2017, the
Group no longer had any current employees who were members of the
defined benefit section of the Plan. As a result of the Group's
strategic review of its existing pension arrangements on 31
December 2018, the Group ceased to be a participating employer in
the Plan as a result of it no longer employing any active members
of the defined contribution section of the Plan. Accordingly, on 31
December 2018, a debt was triggered under Section 75 of the Pension
Act 1995 on the Group ("Employer Debt").
On 7 February 2019 the Plan's actuary issued a certificate for
the purposes of Regulation 5(18) and Regulation 6(8) of the
Occupational Pension Schemes (Employer Debt) Regulations 2005
confirming that the Employer Debt at 31 December 2018 was
GBP5,541,000.
On 25 February 2019 the Group paid the Employer Debt (together
with Trustee expenses of GBP25,000) to the Trustees of the Plan and
entered in to a Deed of De-Adherence with the Trustees and Marshall
of Cambridge (Holdings) Limited confirming the discharge of the
Group from the trusts of the Plan and from any further obligations
in relation to the Plan with effect from that date. Accordingly,
with effect from that date, the Group has no further commitments or
participation in any defined benefit pension plans.
Principal Employer's IAS 19 Disclosures
Details of the full scheme are included in the Annual Report and
Accounts of Marshall of Cambridge (Holdings) Limited which can be
obtained from: Airport House, The Airport, Cambridge CB5 8RY.
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