Marshall Motor Holdings plc (LON:MMH), one of the UK’s leading automotive retail groups, issued its pre-close statement ahead of the release on 14 March 2018 of its full year results for the year ended 31 December 2017 (“FY17”).
In the second half of FY17 (“H2”), the Group continued to build on the record financial performance reported during the first half of FY17 (“H1”) and performed well against the background of a more challenging UK new vehicle market.
As a result, the financial performance of the Group during FY17 is expected to be ahead of our previously upgraded pre and post-tax expectations.
Retail Segment
The SMMT has reported that the overall UK new car market in FY17 decreased by 5.7%, with retail sales declining by 6.8% and fleet sales declining by 4.7%.
During H1, total UK new vehicle registrations to retail customers decreased by 4.8%. In H1 the Group outperformed the UK market reporting a marginal 0.4% decline in like-for-like* unit sales to retail customers.
In H2, the UK new vehicle market declined further with total new vehicle registrations to retail customers decreasing by 9.2%. The Group maintained its outperformance of the market given its brand portfolio, locations and people. As anticipated, during H2 the Group also experienced some margin pressure on sales of new vehicles to retail customers. Consistent with H1, the Group experienced a like-for-like decline in new unit sales to fleet customers in H2 following a commercial decision to withdraw from some low margin business.
During H2, as the market returned to more normalised levels, many of our brand partners reacted accordingly with a number of positive actions. We value our brand partner relationships and will continue to work in partnership with them in delivering our shared objectives.
In H1, the Group reported a 5.8% increase in like-for-like used unit sales. In H2, the Group continued to perform well, supported by a disciplined stocking policy.
The Group’s aftersales revenues remained stable with like-for-like revenue growth in H2 broadly consistent with the 2.3% growth reported in H1.
Discontinued Leasing Segment
On 21 September 2017 we announced the strategic disposal of the Group’s wholly-owned leasing segment, Marshall Leasing Limited (“MLL”) to N.I.I.B Group Limited, a wholly owned subsidiary of Bank of Ireland (UK) plc for a gross consideration of £42.5m. As previously announced this transaction completed on 24 November 2017.
Unallocated Segment and exceptional items
Unallocated central costs in FY17 are expected to be in line with expectations. It is anticipated that the Group will recognise a net exceptional gain of approximately £37m on the disposal of MLL, partly offset by approximately £6m of closure costs and provisions in respect of certain business closures as announced on 21 November 2017.
Financial position
During FY17, management actions significantly strengthened the Group’s balance sheet. At 30 June 2017 the Group had total net debt of £101.1m. Following the disposal of MLL, this has been effectively eliminated with the Group having a small net debt position at 31 December 2017. Together with the Group’s committed £120m revolving credit facility, the Group remains in a very strong financial position and well positioned to exploit future growth opportunities.
Outlook
The Group reported a record financial performance during H1 and continued to build on that in H2 despite the challenging market backdrop. The Group has a strong brand mix, attractive geographic territories and excellent brand partner relationships as a result of which the financial performance of the Group in FY17 is expected to be ahead of our previously upgraded expectations.
The Board notes the latest SMMT UK new car market forecasts for a decline of 5.4% in 2018, driven by political and economic uncertainty. The Board therefore remains cautious about the UK car market in 2018 as it returns to a more normalised level. During the first quarter of 2017, the market benefitted from the impact of one-off changes to vehicle excise duties which led to some consumers accelerating purchase decisions to avoid higher excise duties and this will not be repeated in the first quarter of 2018.
The strategic disposal of MLL allows the Group to focus on its core motor retail business and is well placed to continue to outperform the UK new car market.
Full Year Results
The Group will publish its full year results for the twelve months ended 31 December 2017 on 14 March 2018.
Daksh Gupta, Marshall Motor Holdings plc Chief Executive Officer commented: “I am delighted to report that the financial performance of the Group during 2017 is expected to be ahead of our previously upgraded expectations despite the market backdrop. Following the disposal of MLL we are now focused exclusively on our motor retail business and our balance sheet has been further enhanced. We therefore approach 2018 from a position of increased financial strength and with the ongoing support of our brand partners.”
