Marshall Motor Holdings Trading significantly ahead of market in period prior to lockdown

Marshall Motors

Marshall Motor Holdings plc (LON:MMH), one of the UK’s leading automotive retail groups, provided today 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 £3.2m (31 December 2019: £30.6m) benefitting from a focus on cash management and significant working capital inflows which are expected to reverse when trading recommences.
Term of £120m 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 £2,500 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 £30.6m.  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 £3.2m.  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 £120m 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.


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, Marshall Motor Holdings 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.”

Find more news, interviews, share price & company profile here for:
Marshall Motor Holdings

Good news travels fast (but only if you make that happen). Share on:

Share on twitter
Share on linkedin
Share on facebook
Share on email
Share on reddit
Find more news, interviews, share price & company profile here for:
Marshall Motor Holdings

AIM All Share Index