Marshall Motor Holdings plc, (LON:MMH) one of the UK’s leading automotive retail groups, issued today its pre-close trading statement ahead of the release on 14 August 2018 of its half year results for the six months ended 30 June 2018.
Despite a challenging UK new vehicle market during H1, the Group has delivered a positive performance. Underlying profit before tax from continuing operations is expected to be marginally ahead of the record performance reported in the corresponding period last year. This has been driven by robust trading disciplines, tight control of discretionary costs and the positive impact of the previously announced closure of six loss making sites.
As widely expected, during the first five months of 2018 the UK new car market declined further. Including the impact of dealer self registration activity, total registrations of new vehicles in that period declined by -6.8%. New vehicle registrations to retail and fleet customers declined by -5.7% and -7.8% respectively.
Over the same period, the Group’s like-for-like sales of new retail units were in line with the new car retail market, although there remained ongoing margin pressure. As reported in 2017, the Group made the commercial decision to withdraw from certain low margin fleet business. This is reflected in the Group’s relative performance versus the new car fleet market. Excluding this, the Group’s overall new car unit sales performance in the first five months of 2018 was ahead of market.
The Group’s like-for-like sales of used units during H1 were consistent with the corresponding period last year. Robust operating controls, underpinned by the Group’s disciplined used car stocking policy, enabled the Group to deliver a strong improvement in used vehicle profitability and reduce inventory holding and associated costs during the Period.
The Group has achieved further like-for-like growth in aftersales revenues in H1. This has been offset by margin pressure as a result of an increased mix of lower margin parts revenues compared with service revenues.
Given the challenging UK new car market, the Group has continued to focus on all aspects of discretionary cost control. This has enabled the Group, on a like-for-like basis, to partly offset fixed, structural and general inflationary cost increases.
As announced on 21 November 2017, the Group closed 6 loss making and sub-scale sites (five franchised dealerships and one used car centre). During the year ended 31 December 2017, these sites contributed combined revenues of approximately £40m and a pre tax loss of £1.3m. During the Period, the Group successfully completed the disposal of a surplus freehold property in relation to one of the closures for a consideration of £1.0m. The Group is making progress on dealing with the remaining surplus property and further updates will be provided in due course.
Discontinued Leasing Segment
On 24 November 2017 the Group announced the completion of the strategic disposal of Marshall Leasing (“MLL”). In the first half of 2017, MLL contributed £2.4m of underlying profit before tax to the overall Group result. The financial statements for the year ended 31 December 2017 contained a profit on the disposal of MLL of £36.9m including a retention for certain historic pension liabilities of £1.5m. During the Period these pension liabilities were determined, agreed and settled at £0.9m. Therefore a further profit on disposal will be recognised in non-underlying items in the H1 financial statements.
The Group’s balance sheet is strong, underpinned by a freehold/long leasehold property portfolio of c£120m. We expect to have a small net debt position at 30 June 2018, in line with our internal forecasts. During the Period, the Group exercised its option to extend its £120m RCF for a further twelve months until 3 June 2021, to provide us with increased financial flexibility to take advantage of opportunities if and when they arise.
The Group has delivered a positive performance in the year to date. In the light of continued economic uncertainty, ongoing consumer confusion around diesel product and possible new vehicle supply constraints in the lead up to the implementation of the Worldwide Harmonised Light Vehicle Testing Procedures (WLTP) on 1 September 2018, the Board believes it is right to remain cautious regarding H2 2018.
Nevertheless, given the Group’s positive performance in H1, the Board’s current outlook for the full year is now expected to be at the upper end of its expectations.
The Group will announce its interim results for the six months ended 30 June 2018 on 14 August 2018.
Daksh Gupta, Marshall Motor Holdings plc Chief Executive Officer commented: “The Group has delivered a positive performance to date against an ongoing background of a challenging UK new car market. We remain cautious but given our performance to date, our expected outlook for the full year is improved. With the support of our brand partners, excellent portfolio, robust operating disciplines and strong balance sheet, I am confident the Group remains very well positioned for the future.”