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RNS Number : 4560O
Marshall Motor Holdings PLC
01 June 2020
1 June 2020
MARSHALL MOTOR HOLDINGS PLC
(the "Group")
Trading and COVID-19 Update
Marshall Motor Holdings Plc, one of the UK's leading automotive
retail groups, provides the following operational and financial
update in advance of the re-opening of its retail showrooms from
today.
Key points:
-- Trading significantly ahead of market in period prior to
lockdown closure period.
-- 62 aftersales operations kept open during lockdown closure
period to support emergency services, commercial vehicle
operators and key workers.
-- Maintained retail presence online and by telephone to support
customers.
-- Focus on cost management and cash preservation actions.
-- Adjusted net debt* at 31 May 2020 GBP3.2m (31 December
2019: GBP30.6m) benefitting from a focus on cash management
and significant working capital inflows which are expected
to reverse when trading recommences.
-- Term of GBP120m RCF expected to be extended in coming weeks,
together with covenant amendments to reflect impact of
COVID-19; future interest costs are expected to rise significantly
as a result of increased utilisation and margin in line
with current market rates.
-- Impact of lockdown closure period and a gradual return
to normalised trading levels is anticipated to result in
a loss in H1.
-- All 117 car showrooms re-opened from today as well as all
of the Group's other operating units, under revised, COVID-19
secure, operating procedures
* Unaudited and excluding IFRS16 Leases
Operational update
Trading prior to showroom closures on 23 March 2020
In our full year 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 current financial year.
As a result of our strong trading performance in the run-up to
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 of the year. Like-for-like new unit sales for the 3 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. Like-for-like
used unit sales were down 9.7%, broadly in line with the wider UK
used car market. 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 period.
Operations during closure period
As previously announced, in recognition of the vital role our
aftersales operations 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. Whilst these operations were run
at a small loss, the Board believed it was appropriate for the
Company to continue to offer these services to support the country,
particularly in light of the various COVID-19 Government support
schemes provided to businesses through this period.
In line with the gradual lifting of lockdown restrictions and
Government guidelines, in the past week, we have expanded our
aftersales services being offered, reopening all of the Company's
aftersales facilities for all customers and for all services.
Whilst still early, initial demand is encouraging as we start to
ramp-up our aftersales operations.
In terms of maintaining our retail presence and supporting our
customers, the Group put in place a variety of measures to ensure
that we continued to provide a high level of customer service. We
remained open online and on the telephone to receive and manage
customer enquiries. Customers have been able to browse, enquire
about and order new and used vehicles via our website, by video
chat and by telephone. We also retained our fleet teams to handle
and process fleet enquiries and orders.
In the past week, we have begun the process of fulfilling both
vehicle orders taken during the closure period and those vehicles
sold in March 2020 but which could not be delivered before the
closure of our retail sites.
Trading during showroom closures
Trading during the closure period has inevitably been severely
impacted. The SMMT reported that new vehicle sales declined by
97.3% in April 2020 compared to the prior year. In addition, with
only 62 of our aftersales operations open for a limited categories
of customer, aftersales performance has also been significantly
impacted.
Since 23 March 2020 we have taken orders for over 3,700 new and
used vehicles, including from both retail and fleet customers. As
expected, given the closure of our physical showrooms during this
period, order-take was significantly down on the comparable prior
year period during which c19,000 new and used vehicle orders were
taken.
In terms of retail customers, in line with the wider market,
orders taken during the closure period have been heavily weighted
towards used vehicles. One of the principal reasons for this, we
believe, is that a large proportion of new vehicle sales are
associated with expiring financing agreements which have typically
been extended by vehicle funders during the current crisis. We,
therefore, expect to see some level of pent-up demand for new
vehicles being released over the coming months as those extended
financing arrangements come to an end, albeit we expect consumer
confidence to be generally subdued as the economy gradually
recovers from this crisis. Over the last couple of weeks, we have
seen demand for used vehicles pick up significantly.
In aftersales, we have seen encouraging signs of demand as we
have been re-opening our aftersales facilities to all categories of
customers. Booking levels have been positive, albeit again we
expect some of this to represent pent-up demand for aftersales
services which, in the light of strong Government advice regarding
essential travel only, customers have elected not to access until
now, along with the deferral of MOTs.
Colleague arrangements during closure period
During the temporary closure of our physical retail showrooms
and many of our aftersales centres, the Group furloughed around 90%
of our 4,300 colleagues across the business. The Group acknowledges
the welcome support provided by Government through the Coronavirus
Jobs Retention Scheme (CJRS) which has enabled the Company to
support its furloughed colleagues.
The Group has worked hard to support its colleagues during this
period of uncertainty. During the furlough period, the Group has
supplemented the support provided by the CJRS, enhancing colleague
pay to 100% for March, 90% for April and 85% for May and not
imposing the CJRS cap of GBP2,500 per month. In addition, whilst
they continued to work throughout the closure period, the Board and
other senior members of the management team voluntarily reduced
their pay in line with the reductions for furloughed colleagues.
The Board will continue to review remuneration of both Board
members and other senior members of the management team as the
business begins the process of returning to a more normal trading
environment and furloughed colleagues return to the business. Other
colleagues working during the closure period continued to receive
100% of normal pay.
In addition to providing financial support to colleagues and
recognising the importance of ongoing communication, bi-weekly
management briefings have been issued to all furloughed colleagues
via video message from members of the executive committee and other
members of the senior management team. This has enabled the Company
to stay in touch with furloughed colleagues and provide updates on
the actions the Company has been taking during the closure
period.
Furloughed colleagues have been 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 will have completed a mandatory formal training and
assessment programme on our revised operating procedures and social
distancing guidelines before returning to the workplace.
The feedback from colleagues on our communications during this
period has been extremely positive, demonstrating why, in May 2020,
the Company was once again confirmed as being a 'Great Place to
Work' by the Great Place to Work Institute. This was the tenth
consecutive year that the Company has been so recognised and the
sixth consecutive year that it has been ranked.
Re-opening of Showrooms from 1 June 2020
As announced on 26 May 2020, the Board welcomed the confirmation
from the Government that car showrooms would be permitted to
re-open from 1 June provided they have taken all necessary steps to
ensure they were COVID-19 secure in line with current Health and
Safety legislation.
All our 117 car showrooms and all other operating units will
therefore be open with effect from today, operating in accordance
with our revised operating procedures. Initially, the number of
colleagues returning to our businesses will be limited, both to
ensure that we are able to safely operate in accordance with social
distancing guidelines and to enable the Company to match resource
to consumer demand. Therefore, we will be operating with
approximately 50% of colleagues returning to work. The health and
wellbeing of our colleagues and customers remains our priority.
We expect the return to a more normalised trading levels to be a
gradual process over the coming months.
Financial Update
Cost mitigation and cash preservation actions
The Group has taken a range of actions to manage and mitigate
costs and protect its cash position during this period. Through a
combination of Government support schemes and a series of
management actions, the Group has been able to reduce ongoing
operating expenses during the closure period by approximately
50%.
These actions have included utilisation of CJRS as referred to
above, business rates relief for retail businesses, reductions in
marketing and other discretionary expenditure and agreeing
appropriate and mutually beneficial arrangements with suppliers and
a number of the Group's landlords, coupled with voluntary salary
reductions by the Board and other members of the senior management
team.
In addition, the Group's capital expenditure programme has been
reviewed and, with the support of our brand partners where
necessary, a number of planned projects have been deferred. As
announced on 23 March 2020, the Board also suspended the previously
announced final dividend for 2019.
The Board also acknowledges the proactive actions taken by many
of the Group's key suppliers, including our manufacturer brand
partners, who have supported the Group through a range of
initiatives during this period.
Financial position
The Group's adjusted net debt position (excluding the impact of
IFRS16 Leases) at 31 December 2019 was GBP30.6m. As reported in our
results statement in March, this was driven in part by positive
fleet volumes at the end of 2019.
During the closure period, the Group's working capital position
has benefited from significant working capital inflows. Together
with the Group's focus on cost mitigation and cash preservation, at
31 May 2020 the Group's adjusted net debt was GBP3.2m. The
recommencement of trading will see the current low level of working
capital return to more normalised levels.
Funding position
The Group's principal funding arrangements are its GBP120m
revolving credit facility (RCF) with Barclays and HSBC, together
with its vehicle stock funding facilities. All funders have been
extremely supportive of the Group during this period.
The Group's RCF is due to expire in June 2021 and the Group has
been in positive and constructive discussions with the RCF banks
over an extension to the current facility which is anticipated to
be concluded in the coming weeks. As part of these discussions, the
Group has agreed with the RCF banks the basis on which financial
covenants until the end of 2020 will be amended to reflect the
current trading environment, with these amendments to be
incorporated in the RCF extension documentation.
Due to the impact of COVID-19, the Group is expecting to see
both an increased utilisation of the RCF and an increased margin in
line with current market rates, therefore, the Group's interest
costs are expected to increase significantly.
The Group's vehicle stock funding providers have all been
similarly supportive with certain facility levels being increased
and stocking periods being extended to reflect the fact that our
car showrooms have been temporarily closed.
Annual General Meeting
The Company was originally scheduled to hold its Annual General
Meeting (AGM) on 21 May 2020. In light of the COVID-19 restrictions
and in consultation with a number of the Group's shareholders, the
decision was made to defer the AGM date.
The Company now plans to hold its AGM on 16 July 2020. Formal
notice will be dispatched to shareholders in due course.
In light of ongoing Government advice to restrict all
non-essential travel and social contact, the AGM will take place at
the Company's office in Milton Keynes with the minimum quorum of
shareholders facilitated by the Company. Physical attendance by
other shareholders will not be permitted, however, shareholders
will be encouraged to vote of on the AGM resolutions electronically
and will also have an opportunity to submit questions on the AGM
resolutions electronically before the meeting.
Outlook
We are pleased to be re-opening our dealership sites and
welcoming both colleagues and customers back to our businesses.
Operationally, our priority is ensuring that our businesses operate
in a safe, COVID-19 secure manner in line with Government
guidelines. As the country as a whole begins the gradual process of
exiting the lockdown period, we anticipate a gradual return to a
more normalised level of trading. We will remain focused on cost
mitigations and cash preservation in light of uncertain demand
levels and expected working capital outflows as trading
increases.
Given the continued uncertainty over the economic and trading
environment, financial guidance for the year ending 31 December
2020 will remain suspended at this stage. However, the significant
impact of both the temporary closure of the Group's physical retail
showrooms during the current crisis and a gradual return to a more
normalised trading environment, is anticipated to result in a loss
before tax for the six months ending 30 June 2020.
The Group will announce its interim results for the six months
ending 30 June 2020 in August 2020, the date of which will be
announced in due course.
Daksh Gupta, Chief Executive Officer, said:
"On behalf of the Board, I would like to thank our brand and
business partners for their continuing support as we collectively
and in partnership, navigate through this period of national
crisis. We are also grateful for the support provided by Government
to both the business sector as a whole and the automotive sector in
particular. Initiatives such as the Coronavirus Jobs Retention
Scheme and business rates relief have enabled us to take the right
long term decisions and to protect jobs today in this vitally
important sector for the UK economy.
Finally, I would like to pay special thanks to my colleagues
throughout our businesses for their hard work and support during
this difficult time. Those colleagues who continued to work during
the temporary closure of our dealerships, including my senior
management team, have demonstrated great dedication and commitment
to the Company. We are also extremely grateful for the messages of
support and encouragement for the actions the Company has taken
from our furloughed colleagues. I am delighted to see so many of
them begin to return to work to reactivate our businesses and I
look forward to remaining furloughed colleagues re-joining us over
the coming weeks and months."
ENDS
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 117
franchises covering 24 brands, operating from 98 locations 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 12(th) best place to work in the UK
(super large company category). This was the tenth year in
succession that the Group has achieved Great Place to Work status
and the sixth year in succession that it has been named as one of
the UK's best work places.
LEI number: 213800BP3HZWHDWXAY78
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of the Group is Stephen Jones, Group Company Secretary.
This report contains certain forward-looking statements with
respect to the financial condition, results of operations, and
businesses of the Group. These statements and forecasts involve
risk, uncertainty and assumptions because they relate to events and
depend upon circumstances that will occur in the future. There are
a number of factors that could cause actual results or developments
to differ materially from those expressed or implied by these
forward-looking statements. These forward-looking statements are
made only as at the date of this announcement. Nothing in this
announcement should be construed as a profit forecast. Except as
required by law, the Group has no obligation to update the
forward-looking statements or to correct any inaccuracies
therein.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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