2019 Interim Results Presentation - Daksh Gupta Chief Executive Officer - Marshall Motor Holdings plc
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2019 Interim Results Presentation 13th August 2019 Daksh Gupta Chief Executive Officer Richard Blumberger Chief Financial Officer
New Audi SQ8 2
Agenda
• H1 2019 key highlights and market overview
– Daksh Gupta
• Financial review
– Richard Blumberger
• Compliance overview
– Richard Blumberger
• Update on business initiatives, strategy and future outlook
– Daksh Gupta
• Summary
– Daksh Gupta
• Q&A
3
2
New BMW X7 4
Interim highlights and market overview Daksh Gupta Chief Executive Officer
Strong like-for-like outperformance against the market
ADJUSTED
GROSS O P E R AT I N G NET
REVENUE* P B T ** CASH / LEVERAGE
PROFIT %* PROFIT* (DEBT)***
£1,160.6m +0.9% 11.4% -3bps £20.2m -4.1% £15.2m -5.3% £5.8m Nil
FY 18: (£5.1m)
2018: £1,150.0m 2018: 11.4% 2018: £21.1m 2018: £16.0m 2018: Nil
H1 18: £0.9m
N E W R E TA I L AFTERSALES DIVIDEND
FLEET UNITS* USED UNITS*
UNITS* REVENUE* u p 3 2 . 6%
-0.4% -1.1% +7.2% +1.8% Interim 2.85p
vs market -3.2%**** vs market -3.6%**** 2018: 2.15p
* Like-for-like (includes group businesses or activities that have been active or trading for a period of 12 consecutive months and excludes
businesses or activities that do not have 12 months trading activity); ** Reported underlying; *** Non GAAP measure that excludes 6
4
IFRS 16-related lease liabilities; **** SMMT registrations which includes impact of dealer self-registration activity
H1 2019 key highlights
• Revenue up 0.9% to £1,160.6m *
• Gross margin consistent at 11.4% *
• Reported underlying PBT of £15.2m
• Net cash of £5.8m despite continued investment and balance sheet strengthening
• Strong balance sheet with £200.7m of net assets, underpinned by £123.9m of freehold / long
leasehold property
• Acquisition of six ŠKODA retail centres to become UK’s largest retailer for the brand for £3.5m
• £8.8m portfolio investment, including £1.7m freehold acquisition of Northampton ŠKODA
• Ranked as one of the UK’s best workplaces for the 5th continuous year
• Strong like-for-like outperformance against the market for new retail units, new fleet units and used
units
• Interim dividend 2.85p per share, up 32.6% aided by recently revised policy
* Like-for-like 5
7
New car market update
Newly opened Cambridge Ford Store 8
New car market remains challenging
UK Market
UK NEW CAR REGISTRATIONS (m) • 1.27m new cars registered in H1, down 3.4%
• Retail down 3.2%, fleet / business down 3.6%
• Ongoing consumer uncertainty around diesel vehicles
2.5 • Registrations by fuel type:
• Diesel down 19.4% (27.2% share) – lowest since 2002
• Petrol up 3.5% (66.2% share)
2.0 • AFVs up 13.9% (6.6% share), pure EV up 60.3% (0.9% share)
• WLTP continued to impact supply in certain brands
1.5 • July -4.1%, YTD -3.5%
• Latest SMMT forecast for full year 2019 -2.2% to 2.3m
• Implies Aug-Dec -0.1%
1.0
• 1 st September further emissions regulations being introduced
MMH
0.5
• Despite declining markets, MMH outperformed in both new retail
and fleet units versus the market, an excellent result
0.0 • Like-for-like new retail unit sales down 0.4%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F
• Like-for-like fleet unit sales down 1.1%
• Strong like-for-like margin growth to 7.7%, +73bps
Petrol Diesel AFV • PCP remains popular with 81% of new car finance cases
(H1 18: 80%), 72,938 Live PCPs (H1 18: 66,540)
Source: SMMT 6
9Used car market update
Honda e prototype 10Used car market: Q2 residual value (‘RV’) pressure
UK USED CAR MARKET (m) UK Market
9.0 • Q1 used car transactions down -0.6% to 2.0m
8.0 • Q2 experienced residual value pressure
• 2019 full year forecast transactions down 2% to 7.8m
7.0
(still fourth highest on record)
6.0 MMH
5.0 • Highest ever used unit sales performance
• Like-for-like used unit sales up 7.2%
4.0
• Like-for-like revenue up 6.8%
3.0
• Like-for-like margin down 62bps to 6.6%
2.0 • Continued 56 day stocking policy and use of data /
technology remain key differentiators
1.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F • PCP penetration of used finance cases broadly
stable at 59% (H1 18: 63%)
Source: SMMT and Cox Automotive 7
11New Hyundai Kona Hybrid 12
Q2 RV pressure expected to normalise in H2
CUMULATIVE CAP BLACK BOOK LIVE % MOVEMENTS 2015-19
• Used car market robust. Tailwinds driven by WLTP-related new car supply issues and associated move towards car allowances
2018
• Prices inflated, with petrol values particularly strong
• Prices drop from beginning of year. No Q1 strength as in previous years
H1 2019 • “Perfect storm” from April onwards: High volumes from 2015/16 registrations, March 2019 plate change, WLTP delays normalising,
timing of Easter and May bank holidays
• CAP HPI predict a more normalised position, with recent heavy drops in value unlikely to continue
H2 2019
• Longer term, market expected to be reasonably healthy. Whilst Brexit is a big unknown, it is not expected to adversely impact values
Source: CAP HPI 8
13
7.2Financial review Richard Blumberger Chief Financial Officer
H1 2019 key financials
• Like-for-like revenue up 0.9% to £1,160.6m
• Strong like-for-like outperformance against the market for new retail units, new fleet units and used units
• Gross margin remains strong at 11.4%
• Like-for-like net operating expenses up 1.6%, excluding the impact of lease disposals up 2.0%
• Reported underlying PBT of £15.2m, in line with our expectations
• Net assets of £200.7m, £2.57 per share
• £123.9m of freehold / long leasehold property
• Adjusted net cash £5.8m, up £10.8m from the year end
• £6m to settle all historic defined benefits pension liability
• £3.5m acquisition of six ŠKODA retail centres
• £8.8m capital expenditure including £1.7m freehold acquisition of Northampton ŠKODA
• £1.7m increased dividend payments to shareholders
• Interim dividend 2.85p per share, up 32.6%
• First time adoption of IFRS 16
• Fully retrospective method, prior year adjusted
• Reported net debt £82.2m (H1 2018: £92.7m)
1
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50Jaguar I-Pace 16
Strong performance in challenging market conditions
Reported (£m) H1 19 H1 18 Var • Reported revenue benefitted
from acquisitions
Revenue 1,183.3 1,162.9 1.8%
• EPS down due to lower profit
Underlying PBT 15.2 16.0 (5.3%) and higher effective tax rate
Underlying EPS 15.0 16.1 (6.8%) • Return on capital employed
impacted by ŠKODA loss
ROCE 11.7% 12.7% (97bps) making acquisitions
• Like-for-like gross margin
Like-for-like (£m) H1 19 H1 18 Var remains strong, driven by strong
new car margin performance
Revenue 1,160.6 1,150.0 0.9% offsetting margin pressure in
used vehicle and aftersales
Gross profit 132.5 131.6 0.7%
Gross profit % 11.4% 11.4% (3bps)
Operating expenses (112.3) (110.5) (1.6%)
Operating profit 20.2 21.1 (4.1%)
ROS 1.7% 1.8% (9bps)
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17New Kia XCeed 18
Like-for-like: Focus on growth to offset market pressures
Margin: -0.5m
Volume: +1.5m
£m
Volume Margin
12
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14Range Rover Velar SVAutobiography Dynamic Edition 20
Class Leading
Returns
Strong like-for-like outperformance to the market
Like-for-like Like-for-like
H1 19 H1 18 Var H1 19 H1 18 Var
revenue (£m) unit sales
New 559.7 580.7 (3.6%) New retail 15,586 15,653 (0.4%)
Used 498.8 467.0 6.8% Fleet 9,167 9,271 (1.1%)
AFS 127.1 124.9 1.8% New 24,753 24,924 (0.7%)
Other (25.0) (22.7) (10.2%) Used 23,630 22,053 7.2%
Total 1,160.6 1,150.0 0.9% Total 48,383 46,977 3.0%
Like-for-like Like-for-like
H1 19 H1 18 Var H1 19 H1 18 Var
gross profit (£m) gross profit (%)
New 43.0 40.3 6.6% New 7.7% 7.0% 73bps
Used 32.8 33.7 (2.5%) Used 6.6% 7.2% (62bps)
AFS 56.5 57.5 (1.6%) AFS 44.5% 46.0% (154bps)
Other 0.2 0.1 43.9%
Total 132.5 131.6 0.7% Total 11.4% 11.4% (3bps)
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21
12Maserati Levante 22
Like-for-like: Proactive cost management
Cost headwinds Management actions
£m
23
14
14.3New Mercedes-Benz EQC 400 4MATIC 24
Class Leading
Returns
Impact of IFRS 16
£m 30 June 2018 • Newly introduced accounting standard has no
As originally IFRS 16
Restated
economic benefit or disbenefit and no cash impact
presented Transition
Balance sheet extract • Banking covenants unaffected
Right-of-use assets - 85.3 85.3
Freehold / long leasehold 114.9 (4.3) 110.6 Balance sheet
Other 630.3 0.5 630.8
• H1 19 right-of-use asset (£83.2m; H1 18: £85.3m)
Total assets 745.2 81.5 826.7
and lease liability (£88.0m; H1 18: £93.6m)
Lease liabilities - 93.6 93.6 • New standard treats additional lease liability as
Other 544.0 (6.0) 538.0 debt. Adjusted net (debt) / cash position shown
Total liabilities 544.0 87.6 631.6
Income statement
Net assets 201.2 (6.1) 195.1
• IFRS 16 applied on a fully retrospective basis (H1
Net cash / (debt) 0.9 (93.6) (92.7) 18: -£0.4m PBT impact, FY 18: -£0.9m)
• Operating lease rental charges in the income
statement are replaced by interest charges and
Underlying P&L extract depreciation expenses
Revenue 1,162.9 - 1,162.9
Cost of sales (1,029.9) - (1,029.9) • Operating profit increases
Gross profit 133.0 - 133.0
• Interest charge increases
Net operating expenses (113.3) 1.2 (112.1)
Operating profit 19.7 1.2 20.9 • PBT earnings dilutive early years
Net finance costs (3.3) (1.6) (4.9)
Profit before taxation 16.4 (0.4) 16.0
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15Mercedes-Benz Arocs 26
Balance sheet with a strong asset base
£m H1 19 H1 18 • Continued investment in freehold / long
Intangible 115.5 121.5 leasehold property including:
Freehold / long leasehold 123.9 116.6 • Northampton ŠKODA
Right-of-use assets 83.2 85.3 • Lincoln JLR
Other 34.3 30.9 • Cambridge Ford Store
Fixed assets 356.9 354.3
• Lincoln Nissan
Inventory 376.4 351.4
Trade / other receivables 113.1 113.3 • Net assets increased by £5.6m
Cash & equivalents 11.9 7.7
Assets held for sale 0.8 - • Strong inventory management continues
Current assets 502.2 472.4
• Total inventory down £7.5m versus
Vehicle funding (361.2) (324.3)
December 2018 despite
Trade / other payables (177.9) (175.8)
acquisitions, like-for-like down
Lease liabilities (88.0) (93.6)
£17.3m, 4.5%
Bank / other debt (6.1) (6.8)
Other liabilities (25.1) (31.1) • Used car stock turn of 9.3 versus
Total liabilities (658.4) (631.6) 6.5 for 56 day policy
Net assets 200.7 195.1
16
27Interior of the new Mini Clubman 28
Class Leading
Returns
Cash generative business
£m H1 19 H1 18 • Focus on working capital resulted in £10.8m inflow
Operating profit after non underlying 19.8 21.1
• Tax benefits from capital allowances project
Depreciation 9.9 8.8
Other 0.1 0.2 • £5.0m paid in dividends, up £1.7m on H1 2018, aided
Cashflows from operating activities 29.8 30.1 by revised dividend policy
Working capital 10.3 (4.0)
• £6m to extinguish all defined benefit pension liability
Cashflows generated by operations 40.1 26.1
Capital expenditure (7.8) (8.6) • £5.6m spent in relation to acquisitions
Dividends (5.0) (3.3)
Tax / interest (6.5) (7.7)
Other (10.1) (3.7)
Cashflow 10.8 2.8 Working capital H1 19 H1 18
Inventory 10.1 49.8
Adjusted net cash 5.8 0.9 Trade and other receivables (34.1) (21.9)
Stock funding (9.6) (56.4)
Trade and other payables 49.6 25.0
Other (5.7) (0.7)
Total 10.3 (4.0)
17
29New Peugeot 208 30
Class Leading
Returns
Other full year 2019 guidance items
Previous guidance Movement
• 2019 capital expenditure £24m - £26m £5m deferred to 2020
• Well documented structural cost headwinds to continue Unchanged at 2.5 - 3.5%
• Dividend cash outflows to shareholders to increase by c.£2.2m Unchanged
• Full year effective tax rate c.21 - 22% Increased to 22 - 23%
• IFRS 16 1 - 2% dilutive to PBT Increased to 3 - 4%
18
31
19Seat Cupra Formentor concept 32
Compliance overview Richard Blumberger Chief Financial Officer
ŠKODA Vision iV concept 34
Compliance at Marshall
Effective
Knowledge
governance
Culture of regulatory
and
requirements
assurance
Right Training and
systems and continuous
processes improvement
35
20smart EQ fortwo cabrio edition nightsky 36
Compliance and the regulatory environment
Financial Services Regulation Health, Safety and Environmental
• Well established governance structure in place • Agenda item on every PLC Board meeting
• Agenda item at every PLC Board meeting • Oversight by dedicated central HSE team
• Independent compliance team headed by experienced • On-site Risk Assessors and risk assessments
Head of Compliance reporting to Group Counsel and
Company Secretary and the PLC Board • Comprehensive HSE induction training for all
colleagues and one-to-one support for managers
• Compliance committee meets monthly; comprised of
operations, finance, HR and training, franchise, F&I, • Online live handbooks and guidance documents
with Head of Compliance in attendance • Monthly reporting at dealership, division and group
• Compliance oversight committee meets quarterly; level
comprised of CEO, CFO, Group Counsel and
Company Secretary, with a non executive director in
attendance. Reports to the PLC Board every meeting
• Annual compliance agenda approved by oversight
committee Data Protection
• Assurance through audit checks • Managed by independent compliance team
• Culture of continual improvement focusing on: • Agenda item at compliance committee
• systems and documentation • Robust process to implement and embed GDPR
• sales process • Clear GDPR guidelines
• awareness, training and assessment • Ongoing training and awareness raising
• compliance monitoring
• complaints handling with root cause analysis
21
37
1New Lincoln Nissan retail centre 38
Update on business initiatives, strategy and future outlook Daksh Gupta Chief Executive Officer
Phoenix 2 – Group’s bespoke MI system 40
Phoenix: The Group’s bespoke MI system
Phoenix provides live MI to management to
optimise margins, costs and working capital, as
well as increasing efficiency and productivity.
AA10 AAA
Developed over 10 years and fully expensed
through P&L
• Continued in-house development
• Future strategy and development plans
• Reduce dependency on third party
providers where possible
• Further integration of our operating
platforms, eliminating multiple log-ins and
simplifying processes
• Continued use of data to increase
customer retention and service levels
• Further external market data integration
• Two new developments
• Phoenix Deal File
• Enhanced stock visibility
41
23Top 100 Great British Women – Rising Stars 2019
7 colleagues nominated from Marshall 42Our people and culture at the heart of our success
MMH score
9 Years 5 Years 11th No.1 79%
Running Running ranked Best UK Automotive
Top 30 vs UK average
GPTW status workplace employer
55%
Culture
of continual
improvement
Ongoing people
initiatives
progressing well
43
24Industry leading online presence 44
Continued progress in our online presence
www.marshall.co.uk Sector Leading Social Media
46,157 Followers
+17.9%
116,012 Likes
+24.3%
12,043 Followers
+48.9%
15 industry digital marketing accolades in a little over 2 years
3.0m 12.8m
visits page views
Marshall brand UK’s 6th most
Automotive Management Motor Trader Awards
consistency visited franchise
Awards Winner - “Social Media”
website Winner - “Best Use of category
Social Media”
Source: Google analytics, internal management information 25
45New Vauxhall Corsa-e 46
Long term track record of successful M&A integrations
2 2 2 2 2 3 1 1 1 2
TRANSACTIONS TRANSACTIONS TRANSACTIONS TRANSACTIONS TRANSACTIONS TRANSACTIONS TRANSACTION TRANSACTION TRANSACTION TRANSACTIONS
& 4 START-UPS & 1 START-UP & 1 START-UP & 1 START-UP
ACQUISITIONS / STARTUPS
*
* *
*
*
* Ridgeway integration
£75m capex investment
*
Leasing disposal
Balance sheet strengthened
1ST 2ND 3RD 4TH STRATEGIC
CORPORATE
EXIT FROM
GERMAN GERMAN GERMAN GERMAN MARSHALL
BRAND ADDED BRAND ADDED BRAND ADDED BRAND ADDED LEASING
MERCEDES VOLKSWAGEN AUDI BMW
-BENZ
MMH LISTS
ON THE
LSE
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EXITS
EXIT OF 40 NON-CORE, SUBSCALE OR LOSS MAKING OPERATIONS
*Start-up 26
47
28ŠKODA integrations nearing completion 48
Integration in action: Six ŠKODA sites acquired in 2019
Integrations progressing well and nearing completion:
Pre-completion
• Comprehensive due diligence
Day 1
• CEO on-site welcome
• Phoenix go-live
Week 1
• Rolled out MMH best practice for stock management – 56 day policy
Month 1
• All sites rebranded
• All colleague inductions conducted
• Compliance audits completed and MMH accounting policies in place
• Key supplier contracts renegotiated
• Increased depth and width of new and used car stock pool
Barnstaple Newbury
By end of month 3
Bedford Northampton
• New and used car volumes increased significantly
Croydon Nottingham
• Stock turn increased
Harlow Oxford
• Management team in place; with 4 key senior roles filled internally
Leicester Reading
(bringing MMH expertise into new sites)
Letchworth
• 16 key additional people recruited, mirroring MMH proven structures
c.8-9% of UK volumes
27
49
29New Volkswagen Passat Estate R-Line 50
Current trading and outlook
• 2019 new car market expected to decline 2.2%*, implies Aug to Dec -0.1%
• September 2018 impacted by WLTP supply constraints, market down 20.5%
• Diesel expected to continue to lose share
• WLTP introduction on commercial vehicles 1 September 2019
• RDE 2 implementation 1 September 2019
• WLTP and RDE 2 could impact supply, however too early to form any conclusions
• Whilst early, September order bank building as anticipated
• September key underpin to full year result
• 2019 full year used car market forecast to decline 2%**
• Given political and economic uncertainty, Board continues to remain cautious
• Outlook for the full year remains unchanged
* Source: SMMT, ** Source: Cox Automotive 28
51
30New Volvo S60 52
Summary
• Strong H1 results despite challenging market backdrop
• Like-for-like revenue growth underpinned by market outperformance across core KPIs
• Excellent cash generation in the period, adjusted net cash £5.8m despite
investments
• Interim dividend of 2.85p, up 32.6%
• Strong balance sheet with £200.7m of net assets, equating to £2.57 per share
• Significant firepower to take advantage of future opportunities in a challenging and
consolidating market
• Strategic acquisition of six ŠKODA dealerships to become UK’s largest retailer for the
brand
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