Marshall Motor Holdings plc (LON:MMH), one of the UK’s leading automotive retail groups, has announced today its results for the Year ended 31 December 2020.
CEO Daksh Gupta and CFO Richard Blumberger join DirectorsTalk to discuss todays results. Daksh talks us through some of the highlights, explains how Marshall continually outperforms the overall market while Richard talks us through the financials and with a strong cash position shares his thoughts on the balance sheet strength. Finishing up Daksh discusses further acquisitive growth opportunities.
Financial summary
| 2020 | 2019 | Var % | ||
| Underlying: | ||||
| Like for like revenue (£m) * | 1,866.4 | 2,157.2 | (13.5%) | |
| Underlying profit before tax (£m) ** | 20.9 | 22.1 | (5.4%) | |
| Basic underlying earnings per share (p) | 21.1 | 22.9 | (7.9%) | |
| Reported: | ||||
| Revenue (£m) | 2,154.4 | 2,276.1 | (5.3%) | |
| Profit before tax (£m) | 20.4 | 19.6 | 3.7% | |
| Earnings per share (p) | 17.8 | 19.9 | (10.6%) | |
| Dividend per share (p) | nil | 2.851 | ||
| Adjusted net cash / (debt) (£m) *** | 28.8 | (30.6) | ||
| Reported net debt (£m) | (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 £20.9m (2019: £22.1m), reported profit before tax of £20.4m (2019: £19.6m); |
| • | Reported revenue of £2.2 bn, down 5.3% (2019: £2.3bn) with like-for-like revenue of £1.9 billion, down 13.5% (2019: £2.2bn), 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 £28.8m, an increase of £59.4m 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; |
| • | £120m 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 £20.9m. Our financial position also remains strong, with adjusted net cash at 31 December 2020 of £28.8m.
“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.
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 £2.2 billion (2019: £2.3 billion). Underlying profit before tax* (‘PBT)’ for Year was £20.9m (2019: £22.1m). 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 £28.8m at 31 December 2020 (2019: adjusted net debt of £30.6m). Net assets rose to £215.9m, underpinned by £125.8m 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 £20.9m (2019: £22.1m). Our financial position also remains strong, with adjusted net cash at 31 December 2020 of £28.8m (2019: adjusted net debt of £30.6m).
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 £2.2 billion, down 5.3% (2019: £2.3bn), with like-for-like revenue of £1.9 billion, down 13.5% (2019: £2.2bn), despite significant market decline as a result of national lockdowns; | |
| • | Underlying profit before tax of £20.9m (2019: £22.1m), reported profit before tax of £20.4m (2019: £19.6m); | |
| • | 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 £207.1m, down by 9.5% (2019: £228.8m), reflecting Government and partner support combined with strong management actions; | |
| • | Adjusted net cash at 31 December 2020 of £28.8m, an increase of £59.4m 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 £10.9m being all amounts due under the VAT Payment Deferral Scheme; | |
| • | £120m 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 our 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 £2,500 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®. 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 12th 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 ŠKODA, 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 £47.3m and a loss of £0.1m.
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 £11.7m, a reduction of £7.7m 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 ŠKODA – 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 £110m in its property estate, including corporate identity upgrades, freehold and long-leasehold acquisitions and ongoing maintenance capital expenditure.
