243973 MMH AR 8mm Outer Cover 2016.qxp 16/03/2017 23:31 Page 1
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Marshall Motor Holdings plc
Annual Report & Accounts 2016
(cid:129) 24 brands (cid:129) 103 locations (cid:129) 25 counties
www.mmhplc.com
Marshall Motor Holdings plc
Airport House, The Airport, Cambridge, CB5 8RY
© 2017 Marshall Motor Holdings plc
243973 MMH AR 8mm Inner Cover spread imposition.qxp 16/03/2017 23:25 Page 2
Historical Financial Trends
Following our IPO in 2015, 2016 was another
transformational year for the Group and the
Board is delighted to announce another set of
record results
Revenue £m
Gross Profit £m
£1,899.4m
£220.5m
£1,232.8m
£145.3m
£1,085.9m
£940.5m
£126.2m
£113.8m
£794.4m
£93.3m
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
CAGR 24.3%
CAGR 23.8%
Underlying Profit Before Tax* £m
Net Assets £m
£25.4m
£145.7m
£129.9m
£15.8m
£13.1m
£10.2m
£60.7m
£56.0m
£66.2m
£4.6m
2012 2013 2014 2015 2016
2012 2013 2014 2015 2016
CAGR 53.7%
CAGR 27.0%
* underlying profit before tax is presented ex-
cluding non-underlying items (see Note 5)
22
Pg 6
Chairman’s
Statement
Pg 18
Financial
Review
Pg 8
Operating
Review
243973 MMH AR pp03.qxp 16/03/2017 23:35 Page 3
Contents
STRATEGIC REPORT
Chairman’s Statement 6
Operating Review 8
Financial Review 18
Principal Risks and Uncertainties 22
GOVERNANCE
Board of Directors 26
Directors’ Report 28
Corporate and Social Responsibility 30
Corporate Governance Report 34
Audit Committee Report 37
Remuneration Committee Report 39
Directors’ Remuneration Report 40
Statement of Directors’ Responsibilities 47
FINANCIAL STATEMENTS
Independent Auditors’ Report 48
Consolidated Statements
Consolidated Statement of Comprehensive Income 50
Consolidated Statement of Changes in Equity 51
Consolidated Statement of Financial Position 52
Consolidated Cash Flow Statement 53
Notes to the Consolidated Financial Statements 55
Parent Company Financial Statements
Parent Company Statement of Financial Position 94
Parent Company Statement of Changes in Equity 95
Notes to the Parent Company Financial Statements 96
SHAREHOLDERS INFORMATION
Notice of Annual General Meeting 102
Explanatory Notes 103
Company Information 104
3
243973 MMH AR pp04-pp05.qxp 16/03/2017 23:39 Page 1
% 2016
Manufacturer
Market
Share
Retail Franchised Dealerships
6.58
6.78
2.93
11.82
2.19
3.43
1.29
3.32
2.95
0.05
6.31
2.56
5.66
3.66
1.76
2.98
0.45
9.32
7.69
1.73
Beckenham & Bromley, Bexley,
Coulsdon, Exeter, Newbury, Oxford,
Plymouth, Taunton and Wimbledon
Bournemouth, Grimsby (with Motorrad),
Hook, Salisbury and Scunthorpe
Motorrad
Cambridge
Bury St Edmunds, Cambridge
and Kings Lynn
Harrogate, Hull, North Leicester,
South Leicester, Peterborough,
Scarborough and York
Cambridge
Cambridge, Ipswich, Lincoln,
South Oxford and Peterborough
Ipswich, Scunthorpe
Bedford, Cambridge, Ipswich,
Lincoln, Melton Mowbray,
South Oxford and Peterborough
Oxford and Peterborough
Blackburn, Blackpool, Bolton, Chichester,
Portsmouth, Preston, Southampton,
South Lakes and Winchester
Bournemouth, Grimsby,
Hook and Salisbury
Boston, Grantham
and Lincoln
Cambridge, Peterborough
and St Neots
Braintree, Cambridge
and Leicester
Barnstaple, Croydon, Newbury,
Oxford and Reading
Blackpool, Bolton, Portsmouth
and Southampton
Ipswich, Knebworth, Leicester,
Peterborough and Welwyn
Garden City
Barnstaple, Grimsby, Newbury, North Oxford,
South Oxford, Reading, Scunthorpe and Taunton
Bishops Stortford, Cambridge, Grantham,
Milton Keynes, Nottingham, Peterborough,
and Welwyn Garden City
Cambridge
Andover, Fareham,
Poole and Southampton
Bridgwater, Oxford, Reading
and Scunthorpe
Exeter, Mitcham, Old Kent Road / Dartford,
Oxford and Swindon
Cambridge, Grimsby, Peterborough Bodyshops:
Triangle Sprays Newbury and Greenham Prep Centre
Huntingdon
Sydenham
Cambridge, Newbury, Oxford
and Portsmouth
Halesworth Jaguar Land Rover
Approved Repairer
Croydon Service Centre
Commercial Vehicle Dealerships
Vans
Commercial
Vehicles
Commercial
Vehicles
Commercial
Vehicles
Commercial
Vehicles
Other stand-alone Operating Units
TPS
Trade Parts
Specialist
TPS
Trade Parts
Specialist
TPS
Trade Parts
Specialist
TPS
Trade Parts
Specialist
TPS
Trade Parts
Specialist
Bodyshop
Bodyshop
Bodyshop
Triangle
Sprays
Prep
Centre
Leasing
Approved
Centre
Used Car
Centre
Used Car
Centre
Used Car
Centre
Used Car
Centre
Commercial
Vehicles
243973 MMH AR pp04-pp05.qxp 16/03/2017 23:40 Page 2
83.5%
brand coverage
South Lakes
Scarborough
Harrogate
York
Blackpool
Preston
Blackburn
Bolton
Hull
Bodyshop
Scunthorpe
Motorrad
Grimsby
Lincoln
Nottingham
Grantham
Boston
Bodyshop
Melton
Mowbray
Leicester
King’s Lynn
Peterborough
Vans
Leasing
Bodyshop
Huntingdon
Halesworth
Bury St.
Edmunds
St. Neots
Cambridge
Bedford
Milton Keynes
Knebworth
Ipswich
Welwyn Bishop’s
Stortford
Braintree
TPS
Trade Parts
Specialist
TPS
Trade Parts
Specialist
Oxford
TPS
Trade Parts
Specialist
Bodyshop &
Prep Centre
Swindon
Newbury
Barnstaple
TPS
Trade Parts
Specialist
Exeter
DAS WELT
Bridgwater
Commercial
Vehicles
Andover
Salisbury
Reading
Approved
Centre
Hook
Wimbledon
Sydenham
Old Kent Rd
Bexley
Beckenham
& Bromley
TPS
Trade Parts
Specialist
Mitcham
Coulsdon
Croydon
Taunton
Winchester
Southampton
Bournemouth
Poole
Commercial
Vehicles
Fareham Commercial
Portsmouth
Vehicles
Chichester
Commercial
Vehicles
Plymouth
Commercial
Vehicles
103Franchised Dealerships
at 31 December 2016
Marshall Motor Holdings is the 7th largest motor
dealer group in the UK, representing 24 brand
partners across 25 counties.
In addition, the Group operates a number of
aftersales and used car operations.
243973 MMH AR pp06-pp07.qxp 16/03/2017 23:43 Page 6
STRATEGIC REPORT
Chairman’s Statement
(the
Introduction
I am delighted to present our Annual
Report & Accounts for the year ended
31 December 2016
“Year”).
Following our successful admission to the
the London Stock
AIM market of
Exchange in April 2015 (“Admission”),
2016 was another excellent year for the
Group. As a result of acquisition and
continued organic growth, we are now the
7th largest dealer group in the UK and are
well positioned to take advantage of
further opportunities in the future.
Strategy
During the Year we remained focused on
our vision to become the UK’s premier
automotive retail and leasing group and
in May 2016 we took a unique opportunity
for significant growth with our existing
brand partners, completing the £106.9m
strategic acquisition of Ridgeway
Limited
(Newbury)
Garages
(“Ridgeway”). The addition of Ridgeway’s
30 franchises extended the Group’s
footprint
into new and attractive
territories and greatly
geographical
increased our scale with key brand
partners.
Results
The Group has delivered another record
year:
• 54.1% revenue growth.
• 60.4% underlying PBT growth*.
• Basic earnings per share 23.0p
(2015: 19.7p)
• 66.1% underlying basic earnings per
share growth**.
Adjusted net debt*** at 31 December
2016 was £54.5m, in line with our
expectations. The Group’s balance sheet
remains strong, underpinned by £106.5m
of freehold/long leasehold property.
Dividend
As previously stated, the Board intends
to maintain a progressive dividend policy
where dividends are covered between
4 to 5 times by underlying earnings.
The Board is therefore pleased to
recommend a final dividend of 3.70p per
share which, with the interim dividend of
6
6
1.80p per share, gives a total dividend for
the Year ended 31 December 2016 of
5.50p per share.
If approved by shareholders at our AGM
on 23 May 2017, the final dividend will be
paid on 26 May 2017 to shareholders
who are on the Company’s register at
close of business on 21 April 2017.
People and Partnerships
Since Admission, the Group has made
significant progress towards achieving
our vision. This would not be possible
without the continued drive and support
from all our colleagues and business
partners.
The combined strength of Marshall,
Ridgeway and SGS Holdings Limited
(“SGS”) gives us a management team
that augurs well for the future of the
Group.
We continue
to enjoy excellent
relationships with our brand partners and
we will work with them as we seek
further growth opportunities.
AGM
Our annual general meeting will be held
on 23 May 2017 and I look forward to
meeting all shareholders who are able to
attend.
Outlook
Following the UK referendum on EU
membership and the resultant continued
economic uncertainty, the Board remains
cautious on the UK vehicle market in
2017. Our order book for the important
March plate-change period is, however,
encouraging and current trading is in line
with our expectations. Our outlook for the
full year is unchanged.
Finally, I would like to thank the Board,
the Executive team, all of our colleagues
and our brand partners for their part in
delivering these excellent results.
Peter Johnson
Chairman
14 March 2017
Peter Johnson
Chairman
“The acquisition of
Ridgeway was a unique
opportunity for
significant growth with
our existing brand
partners.”
*underlying profit before tax is presented
excluding non-underlying items (as set out in
Note 5)
**2015 comparative calculated utilising 2016
weighted average number of shares in issue
***excluding asset-backed leasing loans (see
page 54)
243973 MMH AR pp06-pp07.qxp 16/03/2017 23:44 Page 7
Marshall Motor Holdings plc | Annual Report & Accounts 2016
Cambridge Jaguar Land Rover Dealership (long leasehold)
• 24 brands • 103 locations • 25 counties
7
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STRATEGIC REPORT
Operating Review
Daksh Gupta
Chief Executive Officer
“The strategic
acquisition of
Ridgeway in May
2016 means the
Group is now the 7th
largest dealer group
in the UK.”
“Our retail segment
has reported
significant growth in
underlying PBT,
up 54.1%.”
“Revenue of £1.9bn
was ahead of last
year by 54.1%.”
Overview
2016 was another transformational year
for the Group. Following our admission
to AIM and the acquisition of SGS in
2015,
the strategic acquisition of
Ridgeway in May 2016 means we are
now the 7th largest dealer group in the
UK.
I am also very pleased to report another
record trading performance during the
Year:
• Revenue of £1.9bn was ahead of
last year by 54.1% with the Group
also enjoying strong like-for-like*
revenue growth of 10.7%.
• Underlying PBT at £25.4m was up
60.4% versus 2015.
• Our
retail
segment
achieved
significant growth in underlying PBT,
up 54.1%, driven by a combination of
contributions from the acquisitions of
SGS and Ridgeway and strong
like-for-like organic growth.
• Our leasing segment continued to
perform strongly in the Year with PBT
of £4.9m.
UK new car registrations of 2.69m
in 2016 were 2.3% ahead of 2015
(including dealer and self-registrations).
Registrations to retail customers were
down 0.2% in 2016 while fleet/business
sales grew by 4.3%. Against this market
back drop, our new car sales
performance was significantly ahead of
the market, with overall new unit sales
increasing by 39.3%, benefitting from the
Ridgeway acquisition and full year
contribution from SGS. Our like-for-like
growth in new vehicle unit sales also
outperformed the wider market, up 5.5%.
Following the UK referendum on EU
membership in June 2016, the overall UK
economy has entered a period of
economic uncertainty. This was reflected
in a slowing of growth of new car
registrations in the second half of 2016,
increasing by 1.2% (H1: 3.2%). Despite
this, our performance in the second half
of the Year strengthened, with like-for-like
new car sales in the second half of the
Year up 8.1% versus the comparable
period in 2015.
Following five consecutive years of
growth, the latest forecast from the
Society of Motor Manufacturers and
Traders (“SMMT”) for 2017 is for 2.56m
UK new car registrations. Whilst this
would be a decline of 5.0% compared to
2016, it would still represent a historically
strong market; the third highest in history.
The acquisition of Ridgeway extended
the Group’s footprint into new and
attractive geographical territories and
has greatly increased the Group’s scale
with key brand partners. The acquisition
added 30 franchises and moved the
Group from 10th to 7th largest dealer
group in the UK.
The Group’s strategic vision is to
become the UK’s premier automotive
and leasing group and this remains
central to everything we do. Our five
strategic pillars which underpin that
vision are class leading returns; putting
our customers first; delivering retailing
excellence
the benefit of our
customers; being people centric by
focusing on employee engagement; and
both
pursuing
organically and
targeted
acquisitions in line with the Group’s
strategy.
strategic
through
growth
for
Class leading returns
During the Year, the Group recorded
strong new vehicle revenue growth of
54.2% (13.1% like-for-like) and used
vehicle revenue growth of 56.4% (8.3%
like-for-like).
As a result of the Group’s positive sales
performance in recent years and an
increasing UK vehicle parc, we have
continued to enjoy strong growth in
aftersales and revenue grew by 58.4%
(5.7% like-for-like). We also benefitted
continuing
from
improve
to
management
productivity and efficiency
in our
aftersales operations.
of
initiatives
number
a
*like-for-like businesses are defined as
those which traded under the Group’s
ownership throughout both the entire year
under
the corresponding
comparative year
review and
8
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Every January the Group
attends the MAVTAs (Marshall
Achievement Values and
Teamwork Awards) at King’s
College, Cambridge.
We recognise colleagues from
across the Group who have
demonstrated their commitment
to living our company values.
Recognising that people are
at the heart of our success.
Twice a year the Group runs incentive programs where high performers and colleagues who live our company values go on an overseas
trip. These pictures are from Tallinn and Cancun where 70 colleagues were winners. (Pictured below - left and middle)
Every year we recognise colleagues who have had long service with the Group with a weekend away with their partners. In June 2016
around 150 colleagues and their partners were invited to the annual loyalty event at the Belfry. (Pictured below - right)
9
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STRATEGIC REPORT
The Group’s leasing segment continued
to perform strongly during the Year with
PBT of £4.9m (2015: £4.9m). At
31 December 2016, the leasing fleet was
6,192 vehicles (31 December 2015:
6,029), a growth of 2.7%.
Customer first
The Group continues to enjoy high levels
of customer advocacy. In 2016 43.4% of
41,928 customers surveyed who visited
our showrooms indicated that they were
either previous customers or were
recommended to us.
is
for mobile and
Our new website was launched in April
2016 and provides additional content
and functionality to support the customer
fully
journey. The new website
optimised
tablet
browsers, reflecting the clear move by
consumers from desktop to mobile and
tablet devices. The Group also acquired
the domain name, “marshall.co.uk”
the
now
which
“marshallweb.co.uk” URL. The new
domain name is expected to help drive
improved search engine optimisation
and is more customer focused.
replaced
has
Through the integration process we have
included all SGS and Ridgeway
franchises on the new Marshall website.
All acquired sites have also been fully
rebranded as Marshall, increasing the
Group’s visibility and presence in the
market place.
Retailing excellence
We continue to utilise technology to drive
efficiencies and improve the customer
journey. I am pleased to report that
during the second half of the Year we
extended the implementation of our
tablet based enquiry management
system to our acquired businesses. This
system will further facilitate a seamless
customer experience and assists
compliance in the marketing and sale of
regulated ancillary products.
During the Year, the second iteration of
the Group’s bespoke management
information (‘MI’) system, Phoenix 2,
was implemented and in the second
half of the Year was rolled out in our
acquired
allowing
businesses,
management to leverage the benefits
of a significantly increased stock
holding. Phoenix 2 also has a number
of new modules developed to assist
management operate their respective
areas of responsibility.
Through the Year, we have continued to
roll out enhanced network services to all
dealerships, providing faster IT networks
and contemporary telephony solutions in
support of enhancing
customer
experience.
Finally, we continue to embrace social
media as a means of connecting with
our customers. Marshall is the most
influential dealer group in the UK on
Twitter with c.34,000 followers across
our various Twitter accounts. We also
have over 80,000 likes on Facebook,
2.15m YouTube views and over 37,000
likes on Instagram. The Group received
recognition for its focus on social media
initiatives by winning
and digital
accolades
Automotive
at
Management awards in February 2017.
the
People centric
Once again, in recognition of the continued
focus on all aspects of colleague
engagement, we were delighted to be
recognised by The Great Place to Work
Institute, being ranked 19th in 2016. This
was the seventh year running we have
been classified as a Great Place to Work
and the second year we have been ranked
in the top 30, amongst the best companies
in the UK including Capital One, Cisco UK,
Hyatt and Hilton Hotels and MBNA.
In May 2016 the Group launched a
number of initiatives to attract new talent
and improve retention of sales executives.
One of these initiatives is to guarantee
sales executive earnings, alongside
retention bonuses, during the first year of
employment to reduce colleague turnover
and attract new talent to the organisation.
We have also implemented a two week
residential orientation course for new
starters, opened a new Marshall Learning
and Development Academy suite and
increased the number of in-house trainers.
Whilst it is still early days, initial feedback
10
from these initiatives has been positive
and we are working on similar
improvements
aftersales
in
businesses.
our
cases
Strategic growth
to grow scale with
Our strategy
in new
existing brand partners
geographical
territories has been
particularly well demonstrated by the
acquisitions of both SGS and
the
In both
Ridgeway.
territories
businesses operated
complementary
to our existing
operations and with attractive brands
we already
represented. These
acquisitions were made with the full
support of our brand partners and we
will continue to work in partnership with
them to execute our growth strategy
moving forward.
in
Retail Segment
Overview
During the Year, the retail segment
achieved a record underlying PBT of
£28.9m, a growth of 54.1% versus the
same period last year.
Following the strategic acquisition of
Ridgeway,
the retail segment now
consists of 103 franchises representing
24 brand partners trading from 89 sites
in 25 counties. In addition, the Group
operates five trade parts specialists, four
used car centres, five standalone body
shops and one PDI centre. The Group
operates a balanced portfolio of volume,
prestige and alternate premium brands
including all of the top 5 premium
brands. The Group’s diverse portfolio
represents manufacturer
means
brands accounting for around 83.5% of
all new vehicle sales in the UK. This
increased scale and diversified spread
of representation helps mitigate the
effect of the cyclical nature of individual
brand performance.
it
Integration of acquisitions
The integration of Ridgeway, which was
acquired on 26 May 2016, is progressing
well. The Group’s operational, financial
and commercial organisation has been
restructured and key management
systems have been
information
BMW 7 series
243973 MMH AR pp08-pp17 (see note regarding footnotes).qxp 16/03/2017 23:47 Page 11
Marshall Motor Holdings plc | Annual Report & Accounts 2016
Pre Ridgeway
Marshall Motor
Holdings was ranked
as the 19th best
Great Place to Work
by the Great Place to
Work Institute.
The Group received
recognition for its
focus on social media
and digital initiatives at
the Automotive
Management Awards
in February 2017.
The acquisition of
Ridgeway was in
complementary
territories to our
existing operations.
Ridgeway
Combined (see pages 4-5)
11
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STRATEGIC REPORT
franchises
implemented such as Phoenix 2. More
recently, all former Ridgeway and SGS
car
have now been
rebranded as ”Marshall” and have a
consistent online and social media
strategy. Key supplier reviews have
been carried out with the aim of
leveraging
harmonising
potential scale benefits.
terms and
The integration of SGS was also
successfully completed during the Year.
acquired
The
have
contributed PBT of £7.7m during the
Year.
businesses
Investment in new retail locations
In addition to the Ridgeway acquisition,
the Group continued its significant
investment in new retail locations with
three key site openings in the Year:
• In October 2016, we completed and
opened a new freehold Jaguar Land
Rover dealership in South Oxford.
This relocation brought together the
existing Land Rover and Jaguar
businesses, which were previously
on separate sites in Oxford, in the
Jaguar Land Rover “Arch” concept.
• In November 2016, we completed
the relocation of Halesworth Land
Rover and Ipswich Jaguar to a new
freehold Jaguar Land Rover site in
Ipswich as part of a strategic market
area reorganisation. The Halesworth
remain open as an
site will
authorised repair centre.
• In December 2016, we completed
the rebuild of Cambridge Jaguar
Land Rover. Following the purchase
of the long-leasehold interest of the
Jaguar Land Rover site in March
2015, the existing site has been fully
redeveloped to meet the Jaguar
Land Rover
concept
requirements.
“Arch”
Development of the new freehold Exeter
Audi retail centre, which will be located in
Marsh Barton, one of Europe’s largest
motor retail parks, is progressing well and
is expected to open in Q4 2017.
Revenue
£m
mix*
Gross Profit
£m
mix
983.3
51.6%
68.9
32.5%
718.3
37.7%
50.7
23.9%
202.6
10.7%
92.3
43.6%
(44.5)
1,859.7 100.0% 211.9 100.0%
Revenue
£m
mix*
Gross Profit
mix
£m
637.8
52.1%
45.7
33.6%
459.2
37.5%
33.3
24.5%
127.8
10.4%
56.9
41.9%
(29.3)
1,195.5
100.0% 135.9 100.0%
• Mercedes-Benz Blackpool, Preston
and South Lakes: aftersales
customer experience refurbishment;
• Bedford Land Rover: new PDI facility
centre opened
the
planned redevelopment of Bedford
Land Rover;
to support
• Mercedes-Benz
Chichester:
showroom refurbishment.
In October 2016, we also acquired a
to
bodyshop business
support our BMW/Mini and Volkswagen
businesses in the area.
in Grimsby
Acquisitions
The acquisitions of SGS and Ridgeway
were in line with our stated strategy to
grow scale with existing brand partners
and extend our geographic footprint into
new regions. This strategy continues. As
with all acquisitions to date, our focus
will remain on ensuring a strong
strategic and financial case for any
opportunity. We have further headroom
to grow with key manufacturing partners
in what we believe will continue to be a
consolidating market.
Twelve months ended 31 December 2016
New Car
Used Car
Aftersales
Internal
Total
Twelve months ended 31 December 2015
New Car
Used Car
Aftersales
Internal
Total
* mix calculation excludes internal sales
Construction of a new long-leasehold
Jaguar Land Rover dealership
in
Newbury, currently an open point, also
commenced in the second half of the
Year and is expected to open in
Q4 2017.
We are encouraged by initial customer
feedback for all our new developments
and following the initial transition, we
expect each to generate additional
revenue and profitability over
the
medium to longer term.
Investment in existing businesses
The Group continues to invest in
to
upgrading existing businesses
enhance the customer experience, in
requirements.
brand
line with
Investments
and
in
refurbishment during the Year included:
upgrade
• Croydon
Mercedes-Benz
Commercial: extension of aftersales
facility;
• Bexley Audi: showroom extension
experience
customer
and
refurbishment;
• Melton Mowbray Land Rover:
significant site expansion;
12
243973 MMH AR pp08-pp17 (see note regarding footnotes).qxp 16/03/2017 23:47 Page 13
Marshall Motor Holdings plc | Annual Report & Accounts 2016
Southampton Mercedes-Benz Dealership
(leasehold)
Grimsby BMW Dealership
(freehold)
Oxford Audi Dealership
(freehold)
13
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STRATEGIC REPORT
New Vehicles
Total New Units
During the Year, the Group outperformed
the UK market
for new car sales,
increasing its new car unit sales by
39.3% (like-for-like 5.5%). This strong
performance was delivered against an
overall year-on-year increase of 2.3% in
new
including
self/dealer registrations, of which the
private registration element of the UK
market decreased by 0.2% with fleet
growing at 4.3%.
registrations
car
Despite tougher market conditions in the
second half of the Year following the UK
referendum on EU membership, the
Group continued to grow new unit sales,
Used Vehicles
Total Used Units
During the Year, the Group increased its
used car unit sales by 36.4% (like-for-like
0.4%). Used car revenues showed
growth of 56.4% and like-for-like growth
of 8.3% driven by a strengthening
premium brand mix and higher average
selling prices.
The increase in the Group’s scale and
stock holding following the acquisitions
of SGS and Ridgeway have allowed the
Aftersales
Revenue (£m)
During the Year, the Group increased
aftersales
58.4%
(like-for-like 5.7%).
revenue
by
involves
the servicing,
Aftersales
maintenance and repair of vehicles. In
addition to our franchised dealerships,
the Group now operates five standalone
bodyshops, five trade parts centres and
one PDI centre. Aftersales contributed
43.6% of retail gross profit and,
therefore, makes a significant financial
contribution to the Group which is
important in the context of a more
cyclical new car market.
2016
2015
Total
LFL
Growth
48,884
35,103
39.3% 5.5%
achieving further strong like-for-like
growth in the second half of the Year of
8.1% versus market growth of 1.2%.
Group actively manages the renewal
process
to ensure customers are
retained within the Group.
PCP can also partially mitigate the
impact of any price increases seen as a
result of a weakening sterling where the
impact on monthly payments is minimal.
Total gross profit from new vehicles
increased by 50.7%.
zero
Personal Contract Purchase (“PCP”)
with minimal
deposit
or
requirements and affordable monthly
payments continue to be a key driver in
the sales growth. During the Year, over
80% of new vehicle consumer
purchases made on finance from the
Group were made using a PCP product.
The recent strong growth in PCP is
beneficial to the industry due to the
creation of a defined point of
renewal/purchase/replacement. The
2016
2015 Total LFL
Growth
37,787
27,699 36.4% 0.4%
Group to offer more availability and
choice for customers. The Group’s entire
used car stock is visible and available to
all dealerships through the Group’s
bespoke MI platform, Phoenix 2.
using a PCP product. This helps stabilise
and protect residual values which
underpin the PCP financing model as
well as providing further aftersales and
servicing opportunities.
As we have seen in the new car market,
PCP finance penetration is increasing in
the used car market. During the Year,
over 50% of used vehicles purchased
from the Group on finance were made
Total gross profit from used vehicles
increased by 52.5%.
2016
2015
Total
LFL
Growth
202.6
127.8
58.4% 5.7%
visits to the dealership. The cycle of
vehicle replacement on PCP builds
customer relations and improves loyalty.
Gross margin at 45.6% has also seen an
improvement, up from 44.5% in the
same period last year, partly attributable
further
to acquisitions but also
productivity
efficiency
improvements.
and
is highly
The aftersales market
dependent on the UK vehicle parc which
has seen a period of 5 consecutive years
of growth. As such, the UK car parc
currently stands at c.34m vehicles,
increasing over recent years as a result
of the strong new car market.
As well as supporting new and used car
sales, PCP also aids customer retention
in aftersales. Vehicles sold on finance
are frequently sold with service plans
which allow customers to plan and
budget for service costs with a higher
level of certainty and ensuring repeat
14
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Oxford Jaguar Land Rover
Dealership (freehold)
South Oxford Volkswagen Dealership (freehold)
Peterborough Maserati Dealership
(freehold)
15
Summary
The Group has produced another set of
record results in the Year, further building
on our strong historical performance.
2016 was also a strategically important
year for the Group. The acquisition of
in-line with our growth
Ridgeway,
from existing
strategy and
resources,
the Group well
positioned for further long term growth.
funded
leaves
I would like to take this opportunity to
thank our colleagues, Board members,
brand partners and business suppliers
for their hard work and support during
the Year and I look forward to continuing
to work together in the coming year.
Daksh Gupta
Chief Executive Officer
14 March 2017
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STRATEGIC REPORT
Leasing Segment
Additions
Disposals
Fleet
During the Year, the leasing segment
performed strongly with PBT of £4.9m.
The leasing segment continues to focus
on its business-to-business strategy,
providing service-led fleet management,
offering high added value service to
clients. During the Year, the overall fleet
showed steady growth increasing by
2.7%.
Wherever possible, the leasing segment
sources new vehicles and de-fleets end
of lease vehicles via the Group’s retail
segment.
The client base of the leasing segment
remains well diversified and balanced
with no single customer representing
more than 12% of the fleet and with the
top 10 customers accounting for 41% of
the fleet.
Robust risk management and control is
a core discipline of the leasing segment’s
the segment
business model and
employs sophisticated techniques to
monitor and control residual value risk.
As anticipated there has been some
2016
2015
2,185
2,022
6,192
1,771
1,773
6,029
pressure on disposal profitability during
the Year driven in part by the mix of
vehicles de-fleeting.
The leasing fleet continues to be
financed by asset-backed loans secured
against the vehicles. The net book value
of the fleet at 31 December 2016 was
£69.7m against £64.5m of loans (2015:
£62.5m against £51.4m of loans). These
asset-backed loans are disregarded for
the purposes of our external banking
covenants and internal definitions of net
debt.
We believe that our prudent approach to
residual value setting in the leasing fleet
provides a sustainable and resilient
model for the business. The leasing
segment will, therefore, remain focused
on recruiting and retaining clients
through its service-driven offering.
Marshall Minibus - www.marshall-minibus.co.uk
16
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Cambridge Ford Vans Dealership
(freehold)
Milton Keynes Volvo Dealership
(leasehold)
Croydon Skoda Dealership
(leasehold)
17
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STRATEGIC REPORT
Financial Review
Group results
Turnover £1.9bn
2015: £1.2bn
Mark Raban
Chief Financial Officer
“The strategic SGS
and Ridgeway
acquisitions, together
with continued
like-for-like growth,
have driven
underlying PBT
growth of 60.4%.”
“Following the
Ridgeway
acquisition, the
Group’s balance
sheet remains strong.
Net assets per share
of £1.88 were up
11.9% versus last
year.”
Group turnover increased by 54.1% to
£1.9bn (2015: £1.2bn) benefiting from
both the first full year contribution from
SGS (acquired on 16 November 2015)
and 7 months contribution
from
Ridgeway (acquired on 26 May 2016). In
addition
from
acquisitions, I am delighted to report that
like-for-like revenue also showed strong
growth of 10.7%, with new and used
vehicle sales and aftersales all recording
growth.
contributions
to
Gross margin at 11.6% is 18 basis points
below the same period last year (2015:
11.8%).
The Group experienced
underlying margin pressure on both new
and used vehicles which was partly
offset by further margin improvement in
aftersales.
Operating expenses of £191.4m were
50.6% higher than the same period last
year, primarily driven by the impact of
acquisitions. Within our retail segment,
operating overheads on a like-for-like
basis grew by 5.2%, significantly below
revenue growth rate.
Underlying PBT at £25.4m (2015:
£15.8m) was 60.4% ahead of the
comparable period
last year. This
significant increase in profitability was
achieved through a combination of both
organic performance improvements and
contributions from acquisitions. SGS and
Ridgeway contributed an underlying
PBT of £7.7m during the Year.
The
retail segment showed an
underlying PBT growth of 54.1% which
represented another record year. The
leasing segment delivered PBT of £4.9m
(2015: £4.9m). The used car market
remained robust in the Year and the
leasing segment continued to benefit
from good levels of disposal profitability
despite some anticipated pressure.
18
The unallocated segment consists
principally of governance, administrative
and asset management functions which
are not directly attributable to the Group’s
retail or leasing segments. Underlying
central operating costs of £8.4m were
£0.6m above the same period last year.
Last year contained a one-off cost of
£0.7m relating to the settlement of historic
long term incentive plan liabilities which
was more than offset by a full year of costs
related to our public company status,
additional infrastructure investment and
additional interest charges following the
Ridgeway acquisition.
in
of
During the Year, the Group incurred a net
respect of
charge of £3.2m
non-underlying items (see Note 5).
These principally related to Ridgeway
transaction
£2.2m,
costs
post-acquisition restructuring costs of
£1.6m and amortisation of £0.8m in
relation to the acquired customer order
book. These costs were partly offset by
profit on disposal of £0.3m in respect of
three dealership disposals (two Toyota
and one Nissan), a £0.3m gain on
termination of
rate swap
agreements which were acquired with
Ridgeway and a £0.7m gain in relation
to the revaluation of
the Group’s
investment properties. These items are
presented separately on the face of the
income statement and are excluded from
underlying PBT.
interest
Finance costs and
taxation
Finance costs £6.9m
2015: £2.9m
in connection with
Finance costs of £6.9m were £4.0m
higher than the same period last year.
This was driven by a number factors,
principally
the
Ridgeway acquisition. The acquisition
was funded by a combination of cash on
the Group’s balance sheet (£24.1m as at
31 December 2015), the release of
equity from the Group’s previously
unencumbered retail inventory (£49.4m
as at 31 December 2015, the partial
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Lincoln Nissan Dealership
(freehold)
Grimsby MINI Dealership
(freehold)
Scarborough Honda Dealership
(freehold)
19
243973 MMH AR pp18-pp33.qxp 16/03/2017 23:54 Page 20
STRATEGIC REPORT
release of equity from the leasing fleet
(£11.1m at 31 December 2015) and the
first time drawing against the Group’s
previously unutilised £120m revolving
credit facility (“RCF”). In addition, the
Group incurred various arrangement
fees and non-utilisation charges in
relation to the RCF.
At 19.9% (20.3% underlying), the total
effective tax rate was below the 23.8%
reported last year. The lower effective tax
rate is largely driven by the impact of the
UK tax rate change on deferred tax
liabilities which has been adjusted from
19% to 17%.
Acquisitions
Spend (net of cash acquired) £94.5m
2015: £21.5m
On 26 May 2016 the Group acquired the
entire issued share capital of Ridgeway for
£106.9m. The consideration included
approximately £83.6m in respect of net
assets and £23.4m in respect of goodwill
(after adjusting for deferred tax arising on
IFRS conversion). The net assets included
£53.3m in respect of freehold property.
the
time of
As disclosed at
the
acquisition, Ridgeway’s consolidated
statutory accounts for the year ended
31 December 2015 included a contingent
liability note in respect of various historic
film tax planning initiatives. Subsequent
to the Year end, I am pleased to
announce the Group has reached a full
and final settlement agreement with
HMRC for the sum of £4.2m. This
amount has been included as part of the
fair value exercise as set out in Note 12
and will be paid during the course of
2017 and 2018.
As also disclosed at the time of the
acquisition, Ridgeway had brought a
claim against a bank for the mis-selling
of certain historic interest rate swap
products. I am pleased to report that the
Group has now settled that claim which,
net of costs, gave rise to a one-off gain
of £0.3m.
Adjusted net debt
£54.5m
2015: £24.1m (net cash)
Dividends
5.50p per share
2015: 2.98p per share
The Board is pleased to recommend a
final dividend of 3.70p (2015: 2.40p) per
share which, together with the interim
dividend of 1.80p (2015: 0.58p) per
share, gives a total dividend for the Year
of 5.50p (2015: 2.98p) per share.
If approved by shareholders,
the
dividend will be paid on 26 May 2017 to
shareholders who are on the Company’s
register at close of business on
21 April 2017.
intends
The Board
to maintain a
progressive dividend policy whereby
dividends are covered between 4 to 5
times underlying earnings and paid in an
approximate one-third (interim dividend)
and two-thirds (final dividend) split.
Mark Raban
Chief Financial Officer
14 March 2017
Following the Ridgeway acquisition, the
Group’s balance sheet remains strong.
The Group has total net assets of
£145.7m (2015: £129.9m) which equates
to £1.88 per share (2015: £1.68).
The Group incurred £28.8m of retail
capital expenditure during the Year
(2015: £9.7m). I am delighted to report
that our three new flagship freehold / long
leasehold Jaguar Land Rover facilities at
Oxford, Ipswich and Cambridge opened
on time and within budget during the final
quarter of the Year.
Total inventory at 31 December 2016
was £380.0m (2015: £240.6m) of which
£364.7m was subject to vehicle funding
arrangements (2015: £186.2m).
Adjusted net debt (excluding leasing
loans) at 31 December 2016 was
£54.5m (2015: net cash £24.1m).
Including a 7 month post-acquisition
this
contribution
represented an adjusted net debt /
EBITDA of 1.4x. On a pro-forma basis,
including a full 12 month contribution
from Ridgeway, this represented an
adjusted net debt / EBITDA ratio of 1.2x.
from Ridgeway,
A new £120m three year banking facility
was put in place during May 2016 for
general corporate purposes including
acquisitions and working
capital
requirements. The Group is able to
extend the term of the facility by up to
12 months.
The Board continues to believe that it is
the best interest of all stakeholders that
the Group maintains a sound financial
position. In this respect, the Board targets
net bank
(excluding
indebtedness
leasing segment loans) of not more than
1.25x net debt / EBITDA within its future
results. This leverage may rise for a
period of time towards the Group’s
banking facility limit of not more than 3.0x
should an exceptional
investment
opportunity arise.
20
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Cambridge Hyundai Dealership
(leasehold)
Leicester SEAT Dealership
(leasehold)
Peterborough Peugeot Dealership
(freehold)
21
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STRATEGIC REPORT
Principal Risks and Uncertainties
The Group faces a range of risks and
uncertainties. The processes that the
Board has established to safeguard both
shareholder value and the assets of the
Group are described in the Corporate
Governance report. Set out below are
the principal risks and uncertainties the
Directors believe could have the most
the
significant adverse
risks and
Group’s business. The
uncertainties described below are not
intended to be an exhaustive list.
impact on
ECONOMIC CONDITIONS
A deterioration in the economic conditions
in the UK could result in reduced
consumer confidence and spending,
reduced demand
for products and
limitations on the Group’s ability to
increase or maintain its pricing. In
addition, governments may impose taxes
and
to
manage the economic conditions in ways
the Group’s
that adversely affect
business. Any of the foregoing could have
a material adverse effect on the Group’s
prospects, results of operations and
financial condition.
implement other measures
The outcome of the referendum on
23 June 2016 regarding the UK’s
ongoing membership of the European
Union has given rise to a period of
economic uncertainty and current
industry forecasts are for a decline in the
new vehicle market in the UK where the
Group operates. In addition, the fall in
the
the value of Sterling since
referendum result has impacted the
price of new vehicles which may further
impact consumer demand.
A significant number of vehicles are sold
with
financing and, as such, a
deterioration of the economic conditions
in the UK or a rise in interest rates could
lead to a reduction in such finance offers
and increased difficulty for customers to
obtain such financing.
VEHICLE MANUFACTURERS
The Group depends on the successful
performance of its vehicle manufacturer
partners and its continuing relationships
with them. In particular, it relies on the
availability of stock finance facilities
extended by such manufacturers and
other external finance providers. It also
benefits from bonuses paid upon meeting
sales targets and marketing incentives
established by such manufacturers and
external finance providers.
Manufacturers’ performance can be
affected by factors such as general
economic conditions, disruptions to their
business and reputational risks.
The Group’s retail business operates
through
franchise agreements with
vehicle manufacturers. These franchise
agreements are typically for a length of
between two and five years. At any point
in time, therefore, the Group will be in the
process of renewing such agreements,
in common with other
franchise
businesses and the wider motor industry.
Manufacturers may refuse to renew or
terminate their franchise agreements
with the Group.
The loss of a major franchise could result
in a significant reduction in profits due to
the inability to source new vehicles to sell
and earn the manufacturer volume
bonuses associated with the targets set
by each manufacturer.
impact
FLUCTUATIONS IN PRICES IN THE
USED CAR MARKET
The Group’s financial performance may
be affected by fluctuations in prices in
the used car market. Such price
fluctuations could
its retail
business as, due to the nature of its
operations, the Group maintains a
significant inventory of used vehicles.
Such price fluctuations could also impact
the Group’s leasing business, as it could
affect the residual value of the vehicles
at the end of leasing agreements. The
Group operates a robust independent
analysis tool to monitor this area and
seek to manage any exposure should
the trend analysis predict it.
FUNDING STRUCTURE
Liquidity and Credit – One of the Group’s
main sources of cash flows is debt
financing. Although credit availability has
recovered from tighter access conditions
during the past global credit crunch,
a withdrawal of financing facilities or a
failure to renew them as they expire
could still lead to a significant reduction
in the trading ability of the Group or the
need to dispose of assets. The other
main source of funding for the Group’s
operations is manufacturers’ trade credit,
22
which could also be withdrawn or its
conditions
tightened. Should such
manufacturer trade credit be withdrawn
management believe the Group would
be able to access alternative sources of
funding, however, there can be no
guarantee that any alternative sources
of funding could be obtained on similar
terms, therefore this may have an
adverse effect on the Group’s financial
performance.
Interest rates – Fluctuations in interest
rates could
the cost of
increase
borrowing for the Group and have a
financial
negative
impact on
performance. The majority of
the
Group’s funding including the revolving
credit facilities (“RCF”), asset backed
finance and vehicle financing, are linked
to LIBOR.
its
Covenants – The Group’s funding
agreements contain covenants, the
breach of which may trigger default
provisions and acceleration of the
Group’s obligations. For example,
covenants may be breached due to
higher debt servicing costs caused by an
increase in interest rates. Covenants
may also restrict the Group’s business
and funding decisions.
in order
Operating margins – In line with other
businesses in the motor industry, the
Group’s operating margins may be
considered to be low compared to other
industries. A significant portion of the
Group’s operating costs are fixed,
including the costs associated with the
running of its national dealer network.
These fixed costs need to be carefully
the
controlled
profitability of the Group and the
Directors believe they have adequate
procedures in place to monitor the
Group’s on going profitability. Were the
Group to experience a downturn in
sales, these high fixed costs could put
pressure on
financial
resources and could have an adverse
the Group’s business,
effect on
prospects, results of operations and
financial condition.
the Group’s
to ensure
RISKS RELATING TO THE GROUP’S
STRATEGY
The Group’s strategy focuses on a
combination of organic and acquisitive
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Cambridge Citroen Dealership
(leasehold)
Knebworth Vauxhall Dealership
(leasehold)
Nottingham Volvo Dealership
(leasehold)
23
impact
the Group’s
internet or its websites, it does utilise the
internet and its websites significantly in
the marketing of its products and
services, particularly used cars. In
common with other businesses, the
Group is therefore at risk of ‘denial of
service’ attacks on its websites which
could
trading
performance if its websites are affected
for a prolonged period. In addition, the
Group
customer
information electronically and therefore
faces risks associated with unauthorised
access to that data which could have
reputational
regulatory
and/or
consequences for the Group. The Group
monitors
its security policies and
processes in order to mitigate (but can
not eliminate) the risks associated with
cyber security.
certain
stores
STAFF RETENTION
The Group relies on a number of key
employees, both in its management and
its operations, with specialised skills and
extensive experience in their respective
fields. Any failure by the Group to recruit,
replace, retain or motivate suitably
qualified and experienced employees
could impact its growth or its sales
performance, increase its wage costs
and adversely affect its business, results
of operations and financial condition.
This Strategic Report was approved on
behalf of the Board on 14 March 2017.
Mark Raban
Chief Financial Officer
243973 MMH AR pp18-pp33.qxp 16/03/2017 23:55 Page 24
STRATEGIC REPORT
growth. The Group’s acquisition strategy
faces risks in terms of the availability,
quality and price of acquisition targets
and the ability to fund this acquisitive
growth.
ongoing
business
Acquisitions involve numerous risks
including potential disruption of the
and
Group’s
distraction of management, difficulty
integrating the acquired business and
exposure to unknown and/or contingent
or other liabilities arising in connection
with the acquisition. In addition, the
financing of any significant acquisition
may result in changes in the Group’s
capital structure, including the incurrence
of additional indebtedness. The Group
may not be successful in addressing
these risks or any other problems
encountered in connection with any
acquisitions.
REGULATORY COMPLIANCE
The Group is subject to a regulatory
compliance risk which can arise from a
failure to comply fully with the laws,
regulations or codes applicable, for
example, those set out by the Financial
Conduct Authority, Trading Standards,
Vehicle Operators and Services Agency
the
(VOSA),
manufacturers
represent.
Non-compliance can lead to fines,
enforced suspension from sales of
general insurance products or public
reprimand or, in the extreme, closure of
parts of the business.
local authorities and
we
the use of
risk assessment,
HEALTH AND SAFETY
The Group’s operations include the
maintenance and servicing of motor
vehicles which involves both manual
work and
industrial
equipment. The Group must therefore
laws and regulations
comply with
concerning
the
management and control of health and
safety risks, the safety of premises,
physical
equipment,
processes and systems of work. To
mitigate the risk of breach, and in
addition to its own health and safety
assessments, the Group engages third
parties to undertake regular inspections
of its plant and equipment in accordance
with statutory obligations and to assess
the safety of the Group’s working
environments.
locations,
concerning emissions, waste and waste
waters (including trade effluent), vehicle
movements, industrial noise, energy
efficiency, the storage of oil and the
control of other hazardous substances.
Any breach of such laws and regulations
could lead to fines, penalties and/or
compensation and could lead to the
temporary cessation of business
activities at the Group’s premises. In
addition to its own internal assessments,
the Group engages third parties to
undertake inspections of its premises to
assess
risk of breach of
environmental laws and regulations.
the
In addition, some of
the Group’s
premises and former premises are
located on land that, because of
contaminants present, may require
remediation under environmental law.
Investigation or remediation may be
necessary in the event of the discovery
of contamination in on or under such
premises or in the event of leaks or
discharges of hazardous substances or
other environmental incidents. Such
investigation or remediation could give
rise to unexpected liabilities and costs for
the Group.
COMPETITION
The ‘block exemption’ regulations under
EC law suspend normal competition
rules to allow motor manufacturers and
distributors
to operate specialised
distribution and repair outlets. Any
significant change
this position
(including any changes which may occur
as a result of the UK ceasing to be a
member of the European Union) could
have an adverse impact on the Group’s
motor franchise operations.
to
INFORMATION RISK
The Group is dependent on the efficient
and uninterrupted operation of
its
information technology and computer
systems, which are vulnerable
to
damage or interruption from power loss,
telecommunications failures, sabotage,
vandalism or similar misconduct. Whilst
the Group has put in place insurance
cover, and also contingency and disaster
recovery plans, in order to mitigate the
impact of such failures, it can never be
certain that these plans could cover
every eventuality or situation or fully
recompense every loss.
ENVIRONMENTAL
The Group must
comply with
environmental laws and regulations
CYBER SECURITY
Whilst the Group does not complete
vehicle sales to customers via the
24
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Ipswich Kia Dealership
(freehold)
Ipswich JLR Dealership
(freehold)
Cambridge Ford Dealership
(leasehold)
25
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GOVERNANCE
Board of Directors
1
2
3
4
1. Peter Johnson
Non-Executive Chairman and Chair of the Nominations Committee
Peter has over 45 years’ experience in the automotive sector, spending 40 years in senior roles in retail and distribution
with the Rover group, Marshall and Inchcape plc where he was Chief Executive between 1999 and 2005. Peter served
on the Bunzl plc board from 2006 to 2015 as its senior independent director and chairman of its remuneration committee.
He also chaired Rank plc from 2007 to 2012 and served on the Wates Group Limited board from 2003 to 2013. Peter is
the current chair of the Retail Motor Industry Federation and president of BEN, the Motor and Allied Trades Benevolent
Fund. Peter was a non-executive Director of Marshall of Cambridge (Holdings) Limited until 2 April 2015.
2. Daksh Gupta
Chief Executive Officer
Daksh has over 25 years’ experience in the automotive retail sector and joined the Company in 2008 as its Chief Executive
Officer. Daksh was a franchise director for Inchcape for seven years where he was responsible for the Volkswagen, Audi
and Mercedes-Benz brands. Daksh also served as chief operating officer of Accident Exchange Group plc and prior to
joining the Group was Group Managing Director for Ridgeway Group. Daksh was a director of Marshall of Cambridge
(Holdings) Limited until 2 April 2015 and is vice chairman of the UK automotive industry charity, BEN.
3. Mark Raban
Chief Financial Officer
Mark has 25 years’ of general retail experience, including three as the finance director of Inchcape Retail Limited. He
spent three years as Chief Financial Officer for the UK and Ireland at Borders Group and was the interim financial director
at Selfridges Retail Limited. Mark has also held senior finance roles at public companies such as Safeway and Burton.
Mark was appointed as Chief Financial Officer of the Company on 2 April 2015.
4. Alan Ferguson
Senior Independent Director and Chair of the Audit Committee
Alan is a non-executive director of Johnson Matthey plc, Croda International plc and The Weir Group plc. He chairs the
audit committees of each of these companies and is the senior independent director of Johnson Matthey. Alan was chief
financial officer and a director of Lonmin plc until December 2010, prior to which he was Group Finance Director of the
BOC Group plc. Alan spent 22 years in a variety of roles at Inchcape plc, including six years as its Group Finance Director
from 1999. Alan is a chartered accountant and sits on the Business Policy Panel of the Institute of Chartered Accountants
of Scotland. Alan was appointed to the Board on 11 March 2015.
26
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
5. Sarah Dickins
Non-Executive Director and Chair of the Remuneration Committee
Sarah has over 20 years’ HR experience across a broad range of sectors including retail, utilities and financial services.
She spent 16 years at Asda, five of those years as an operating board member responsible for people operations and
customer service for 150,000 colleagues. Sarah joined Provident Financial Group in 2012 as Executive People Director
before becoming Group People Director at Bourne Leisure Limited in 2015. Sarah was appointed to the Board on
11 March 2015.
6. Christopher Sawyer
Non-Executive Director
Christopher developed Deltron Electronics Plc into a European-leading manufacturer and distributor of niche components
and it was sold in during 2006. During 2007 Christopher led the acquisition of Lorien Group PLC. Following restructuring
and disposals, the remaining businesses grew some 300% and were sold during 2014/5 to NYSE/LSE companies.
Christopher is a fellow of the RSA and the IOD, companion of the Charted Management Institute and Past Master The
Worshipful Company of Scientific Instrument Makers. He is also a Trustee of the Think Tank ‘Tomorrow’s Company’.
Christopher has been a non-executive director of Marshall of Cambridge (Holdings) Limited since 2008 and currently chairs
its audit committee. Christopher was appointed to the Board on 2 April 2015 as a nominated director of Marshall of
Cambridge (Holdings) Limited.
7. Christopher Walkinshaw
Non-Executive Director
Christopher joined Marshall of Cambridge (Holdings) Limited in 1983 and has been a director since 1999. He has worked
in all of the principal Marshall businesses, including Marshall Aerospace, Marshall Land Systems and, from 1994 to 2011,
Marshall Motor Holdings. Christopher joined the senior team in Marshall of Cambridge (Holdings) Ltd in 2011 and has
responsibility for external relations and communications. Christopher is Chairman of The Air League Trust, a member of
the Air Cadet Council and Chairman of No. 104 (City of Cambridge) Squadron Air Cadets. Christopher is a Trustee of
the Addenbrooke’s Charitable Trust and a board member of the Bottisham Multi Academy Trust. Christopher was appointed
to the Board on 12 July 2016 as a nominated director of Marshall of Cambridge (Holdings) Limited.
8. Francesca Ecsery
Non-Executive Director
Francesca has 19 years’ directorship experience in both blue chip companies and start-ups in the digital, retail, fast-moving
consumer goods (“FMCG”) and leisure industries. She is a Harvard MBA, fluent in five languages and has special
expertise in multi-platform consumer marketing, branding and commercial strategies. Francesca is also non-executive
director of Foreign & Colonial Investment Trust plc, Share plc and Good Energy Group plc (all of which are listed on AIM
or FTSE) and of VISTA Limited. Her previous executive experience includes McKinsey, PepsiCo, ThornEMI, Thomas
Cook, STA Travel and many other consumer brands. Francesca was appointed to the Board on 25 March 2015.
9. Stephen Jones
Company Secretary
Stephen is a practising Solicitor and spent eight years as a corporate lawyer at Eversheds LLP. He also spent eight years
as group counsel and company secretary at Automotive and Insurance Solutions Group plc. Stephen joined the Company
on 16 March 2015.
5
6
7
8
9
27
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GOVERNANCE
Directors’ Report
The Directors present their annual report on the affairs of the Group, together with the financial statements and independent
auditor’s report, for the year ended 31 December 2016 (the “Year”).
Principal activities
The principal activity of the Company is that of a holding company. The principal activity of its subsidiary undertakings is car and
commercial vehicle sales, leasing, servicing of vehicles and associated activities.
Results and dividends
The results for the Year are set out in the Consolidated Statement of Comprehensive Income. The Directors recommend the
payment of a final dividend of 3.70p per ordinary share to be paid on 26 May 2017 to shareholders who are on the Company’s
register at close of business on 21 April 2017.
Business Review and Future Developments
The review of the business and likely future developments is included within the Strategic Report. This also includes details of
acquisitions and growth plans for the future.
Going concern
After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future and for at least one year from the date of these financial statements.
For these reasons, they continue to adopt the going concern basis in the preparation of these financial statements.
Directors
Details of the current directors are set out on pages 26 to 27. The directors who served during the Year and subsequently are
detailed below.
Current Directors
Non-Executive Directors
Peter Johnson
Alan Ferguson
Sarah Dickins
Francesca Ecsery
Christopher Sawyer
Christopher Walkinshaw
Executive Directors
Daksh Gupta
Mark Raban
(Appointed 12 July 2016)
In accordance with the Articles of Association of the Company adopted on 12 March 2015 (the “Articles”), Peter Johnson will
retire by rotation and offers himself for reappointment at the annual general meeting to be held on 23 May 2017 (the “AGM”).
In addition, having been appointed since the date of the last annual general meeting, Christopher Walkinshaw will also retire by
rotation in accordance with the Articles and offers himself for reappointment at the AGM.
The interests of the Directors and their immediate families in the share capital of the Company, along with details of Directors
share options and awards, are contained in the Directors’ Remuneration Report on pages 39 to 46.
Share Capital
The authorised and issued share capital of the Company, together with the details of shares issued during the Year are shown
in Note 26 to the financial statements. The issued share capital of the Company at 31 December 2016 was 77,392,862 ordinary
shares of 64p each.
Substantial Shareholdings
As at 10 March 2017, the Company had been notified of interests in excess of 3 per cent in the Company’s share capital by the
following shareholders:
Name
Number of Ordinary Shares
Marshall of Cambridge (Holdings) Limited
Union Investments and Development Limited
Schroders plc
Polar Capital LLP
50,390,625
7,005,839
3,907,275
3,087,900
28
Percentage of Existing
Ordinary Shares Held
65.11%
9.05%
5.05%
3.99%
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Share Option Schemes
Details of employee share option schemes are set out in Note 26 to the consolidated financial statements.
Charitable and Political Donations
During the Year, the Group made the following charitable donations: £51,000 (2015: £49,000).
No political contributions were made during the Year (2015: £nil).
Disabled Employees
The Group gives full consideration to applications for employment from disabled persons where the candidate’s particular aptitude
and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees
for training, career development and promotion. Where existing employees become disabled, it is the Group’s policy to provide
continuing employment wherever practicable in the same or an alternative position and to provide appropriate training to achieve
this aim.
Employee Involvement
During the Year the policy of providing employees with information about the Group has been continued through the newsletter
‘Marshall Matters’, team briefings and through our global email network. Regular meetings are held between local management
and employees to allow a free flow of information and ideas. In the weeks following the acquisition of Ridgeway, senior
management held a series of meetings with employees of Ridgeway to welcome them to the Group and to answer questions on
the impact of the acquisition. We also participate in the Great Place to Work Institute’s employee engagement programme.
Further details are set out in the Corporate Social Responsibility Section of this Annual Report.
Disclosure of Information to Auditor
In so far as each of the persons who were Directors at the date of approving these financial statements is aware:
•
•
There is no relevant audit information of which the company’s auditor is unaware; and
Each director has taken all steps that they ought to have taken to make themselves aware of any relevant audit information
and to establish that the auditor is aware of that.
Auditor
A resolution to re-appoint Ernst & Young LLP as auditor will be put to the shareholders at the AGM.
AGM
Notice of the AGM to be held on 23 May 2017 is set out at the end of this Annual Report. The Resolutions proposed at the AGM
are summarised as follows:
•
Resolution 1 – Receiving the annual report and accounts for the year ended 31 December 2016
All quoted companies are required by law to lay their annual accounts before a general meeting of the Company, together
with the directors’ reports and auditors’ report on the accounts. At the AGM, the directors will present these documents to the
shareholders for the financial year ended 31 December 2016.
Resolution 2 – Declaration of dividend
This resolution concerns the Company’s final dividend payment. The directors are recommending a final dividend of
3.70p per ordinary share in respect of the year ended 31 December 2016 which, if approved, will be paid on 26 May 2017
to the shareholders on the register of members on 21 April 2017.
Resolution 3 – Re-appointment of Director
Peter Johnson will retire by rotation and offers himself for reappointment at the AGM in accordance with the Articles.
Resolution 4 – Re-appointment of Director
Having been appointed since the date of the last annual general meeting of the Company, Christopher Walkinshaw will retire
by rotation and offers himself for reappointment at the AGM in accordance with the Articles.
Resolution 5 – Re-appointment of the Auditor
This resolution concerns the re-appointment of Ernst & Young LLP as auditors until the conclusion of the next general meeting
at which accounts are laid.
Resolution 6 – Auditors’ remuneration
This resolution authorises the Directors to fix the auditors’ remuneration
•
•
•
•
•
By order of the Board
Stephen Jones
Company Secretary
14 March 2017
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GOVERNANCE
Corporate and Social Responsibility
Colleagues
Committed to attracting,
developing and retaining the best
talent to help drive our business
forward in line with our values
MARSHALL PEOPLE
Our Values
Everything we do is underpinned by
our values which are woven in to the
fabric of our business and are upheld
by colleagues.
Recruiting, retaining and
developing our people
We have a clear Colleague Value
Proposition to attract the best talent
and support our strategy to be an
employment destination. We use a
range of
tools and assessment
methods to ensure we recruit people
who can deliver their objectives in line
with our values and business strategy.
Every new colleague experiences a
thorough induction programme which
incorporates our history, values, aims
and objectives as well as a structured
programme of training and coaching
relevant to their role, the brand and the
team.
team
dedicated
Our
of HR
professionals support the business,
aided by policies and practices to
ensure we provide the best support,
benefits and career opportunities to
our colleagues.
Our bespoke Marshall Learning &
Development Academy provides
opportunities for our colleagues to
realise their potential and support their
development to ensure they have a
fulfilling career with us.
Recognising our people
Our recognition programmes are
designed to support our colleague
These
engagement
programmes
overseas
incentive trips, long service awards
and awards for demonstrating our
values.
agenda.
include
Our MAVTA programme (Marshall
Achievement, Values and Teamwork
Awards) recognises colleagues who
demonstrate
outstanding
achievements in Customer Service,
Teamwork, Innovation, Leadership,
Services in the Community, Business
Excellence and Environmental.
We expect all our colleagues to act
with integrity and behave ethically in
everything they do. To reinforce this
we have the Marshall Code of Conduct
which is supported by an online
programme which forms part of every
new colleague’s induction.
Engaging our people
We strive to ensure our employment
policies and practices are consistent
with our values and culture, as well as
helping us to achieve our business
objectives through engaged people
and we use an external measure to
help validate this.
to measure
Since 2008 we have worked with the
Great Place to Work Institute’s Best
Workplaces programme. This has
given us the opportunity to seek
feedback from our colleagues each
year
of
engagement. Our scores continue to
build year on year; in 2016 we were
delighted to not only be ranked again
as a Best Workplace but to go from the
26th
to 19th Best Large UK
Workplace.
levels
to maintaining
Communicating with our people
We believe that communication is the
key
colleague
engagement and our employment
brand. We have an ethos of
transparency and sharing news on a
including CEO
regular
communications, weekly bulletins, our
Colleague magazine, intranet and
regular team meetings.
basis
and
ensuring
Diversity and our people
We are committed to encouraging
diversity
that
discrimination has no place in our
business. We want every colleague to
feel respected and able to perform to
the best of their ability. We do not
make assumptions about a person’s
ability to carry out his or her duties
based on ethnic origin, gender, sexual
orientation, marital status, religion or
other philosophical beliefs, age or
disability.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Our committed trainers provide
bespoke training through
our Academy
Apprentice of the Year Award
The group runs weekly induction
programmes for all new starters
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GOVERNANCE
colleagues deliver enhanced performance
and that it is important to give back to our
communities and good causes.
Group Giving
We are actively involved in supporting and
raising awareness for BEN – Motor and
Allied Trades Benevolent Fund. BEN is
the UK’s dedicated charity for those who
work, or have worked, in the automotive
and related industries, as well as their
dependants. Our CEO is a trustee and
current Vice President of BEN for whom
he did a charity skydive in 2016 raising
more than £150,000 in donations.
This year we introduced ‘BEN Week’
which saw every dealership participate
in a creative fundraising event to raise
money for BEN. Our first year was a
huge success raising nearly £17,000.
This is also a tremendous teambuilding
opportunity for both colleagues and
customers.
For
the past 17 years we have
key focus areas and new processes and
is a useful method of communication.
All new managers to the business who
have a direct responsibility to health and
safety at their site are sent a Managers
HSE handbook and given remote training
in their first month in the business.
reviewing
Our Health, Safety & Environmental
Department, which has recently been
strengthened by the appointment of a
new Health & Safety Manager, aims to
provide support and direction to all sites
by
the policies and
procedures and supporting and advising
managers to fulfil their responsibilities.
They coordinate training for first aiders,
fire wardens and risk assessors as
required, as well as monitoring, reporting
and investigating of all incidents.
Health and Safety Statistics in 2016
2016 2015
Number of fatalities 0 0
Major injuries reported
under RIDDOR* 5 14
Dangerous occurrences
reported under RIDDOR* 0 0
Number of enforcement
notices issued by HSE 0 0
Number of prohibition
notices issued by HSE 0 0
*Reporting of Injuries, Dangerous
Occurrences Regulations 2013
32
supported
the Macmillan Coffee
Mornings which enables our businesses
to get involved at a local level, bringing
colleagues and customers together.
We also support national initiatives such
as Red Nose Day, Children in Need and
Wear it Pink for Breast Cancer.
Local Giving
• We encourage our colleagues to get
involved with local causes which
support the communities in which
they work. By way of example:
• Our Head Office
colleagues
supported Wear it Pink for Breast
Cancer and braved a winter barbeque
in fancy dress.
• One of our Technicians at Bridgwater
Volkswagen had his head shaved in
the showroom in aid of MIND
• Our IT Manager took part in a
gruelling 100-mile cycle ride for
Macmillan Nurses
Environmental
Embracing our environmental
responsibilities
MARSHALL GOING GREEN
The Marshall LEAF (Lowering Energy to
Aid the Future) aims to lower the impact
we have on the environment.
In line with our regulatory responsibilities,
agreements are in place for the safe
disposal of displaced fluids, scrap metal,
parts and related waste products.
All dealerships which required a permit for
the operation of a vehicle refinishing
installation under
the Environmental
Permitting (England & Wales) Regulations
2007 have achieved this. On-going
monitoring is in place to ensure we remain
compliant with the permit issued.
We ensure that all relevant sites are
compliant with the requirement to hold a
Trade Effluent Consent.
We also have recycling initiatives in
every site for more general waste such
as ink cartridges, batteries and paper.
Community
Striving to have a positive
impact on the communities in
which we serve
MARSHALL MAKING A DIFFERENCE
As a values-based business, encouraging
our colleagues to make a difference is
important to us and our culture.
We focus on creating an environment
where colleagues enjoy coming to work
and contribute to meeting our business
objectives. We believe that highly engaged
Health & Safety
Making Health & Safety an
integral part of Marshall’s day
to day operation
MARSHALL EMBRACING SAFETY
We seek to adopt a consistent approach
to health and safety for all work activities
across our business.
Our Health and Safety policy gives clear
lines of responsibility and is reviewed
regularly to promote high standards of
health, safety and welfare to meet our
legal responsibilities.
A Health & Safety newsletter
is
published regularly highlighting relevant
information
to
communicate and bring to their attention
any issues or concerns that relate to
their health, safety and welfare.
colleagues
to
A quarterly bulletin is sent out to all site
management who have a responsibility
for health and safety. This highlights any
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Staff supporting the Motor and Allied Trades Benevolent Fund (BEN)
Health and safety is an integral part of Marshalls day to day operation
Lowering Energy to Aid the Future (LEAF)
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GOVERNANCE
Corporate Governance
PRINCIPLES OF CORPORATE GOVERNANCE
The Board recognises that applying sound governance principles in the running of the Group is essential. The Company is listed
on AIM and is therefore not required to comply with the UK Corporate Governance Code. However, in recognising the value and
importance of high standards of corporate governance the Company has, since Admission, adopted the QCA Corporate
Governance Code for Small and Mid-Size Quoted Companies so far as it is practicable having regard for the size and nature of
the Group.
An explanation of how these principles have been applied during the Year is set out below.
THE BOARD
The table below sets out details of all directors who have served during the Year and their membership of Board Committees.
This includes details of each member’s attendance at the ten board meetings during the Year. There are separate attendance
statements in respect of the Audit and Remuneration Committees on pages 38 and 40.
Director
Date appointed
Role
Committees
(C = current chair)
Board
attendance
Peter Johnson
27 June 2014
Non-Executive Chairman
Nomination Committee (C)
Alan Ferguson
11 March 2015
Senior Independent Director
Francesca Ecsery
25 March 2015
Independent Non-Executive
Sarah Dickins
11 March 2015
Independent Non-Executive
Christopher Sawyer* 2 April 2015
Non-Executive
Audit Committee (C)
Remuneration Committee
Nomination Committee
Audit Committee
Remuneration Committee
Nomination Committee
Audit Committee
Remuneration Committee (C)
Nominations Committee
Audit Committee
Remuneration Committee
Nomination Committee
Christopher
Walkinshaw*
12 July 2016
Non-Executive
Daksh Gupta
1 October 2008
Chief Executive Officer
Mark Raban
2 April 2015
Chief Financial Officer
n/a
n/a
n/a
10/10
10/10
10/10
10/10
10/10
4/4**
10/10
10/10
* Christopher Sawyer and Christopher Walkinshaw are nominated directors of Marshall of Cambridge (Holdings) Limited.
** Appointed 12 July 2016
Board decisions are generally on matters of strategy (including acquisitions), policy, people, performance, budgets and significant
capital expenditure. Each director receives information on matters to be discussed (including Board reports from the Chief
Executive, Chief Financial Officer and Company Secretary) in advance of each Board meeting to ensure that there is a full debate
at Board level and in particular so that the non-executive directors can contribute fully.
The Board has formally reserved specific matters for its determination and has approved terms of reference for all Board
Committees.
All directors have access to independent professional advice, if they have the need to seek it. There is an induction process for
new directors and training is available when required.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Chairman, Chief Executive Officer and Senior Independent Director
Peter Johnson is Non-Executive Chairman and the Chief Executive Officer is Daksh Gupta. There is a formal division of
responsibilities between the Chairman and the Chief Executive Officer. The Senior Independent Director is Alan Ferguson.
Board balance
The Company currently has eight directors, of which three are independent non-executives.
Under the terms of a Relationship Agreement (“Relationship Agreement”) with Marshall of Cambridge (Holdings) Limited (“MCHL”)
(details of which are set out below), MCHL is entitled to appoint two nominated directors to the Board, so long as it holds 30%
or more of the Company’s ordinary shares. MCHL appointed Christopher Sawyer as one of its nominated directors on 2 April
2015 and appointed Christopher Walkinshaw as its second nominated director on 12 July 2016.
Performance evaluation
Given that the current Board was established on Admission in 2015, it is considered that 2017 is the appropriate time for the
Board to conduct an internal performance evaluation. In addition, the non-executive directors have met without the presence of
the executive directors, during which the performance of executive directors was assessed and without the presence of the
Chairman (to assess the performance of the Chairman).
Re-election
In accordance with the Company’s Articles, Peter Johnson will retire by rotation and offers himself for reappointment at the AGM.
In addition, having been appointed since the date of the last annual general meeting of the Company, Christopher Walkinshaw
will retire by rotation and offers himself for reappointment at the AGM.
BOARD COMMITTEES
Nomination Committee
The Company has established a Nomination Committee which comprises Peter Johnson (Chair of the Committee), Alan
Ferguson, Sarah Dickins, Francesca Ecsery and Christopher Sawyer.
The Nomination Committee is responsible for reviewing the structure, size and composition of the Board, preparing a description
of the role and capabilities required for a particular appointment and identifying and nominating candidates to fill Board positions
as and when they arise.
The Nomination Committee met once during the Year to discuss the appointment of Christopher Walkinshaw as a non-executive
director.
Audit Committee
The Company has established an Audit Committee, which comprises Alan Ferguson (Chair of the Committee), Sarah Dickins,
Francesca Ecsery and Christopher Sawyer.
Further information on the Audit Committee is set out on pages 37 to 38.
Remuneration Committee
The Company has established a Remuneration Committee which comprises Sarah Dickins (Chair of the Committee),
Alan Ferguson, Francesca Ecsery and Christopher Sawyer.
Further information on the Remuneration Committee is set out on pages 39 to 46.
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GOVERNANCE
RELATIONS WITH SHAREHOLDERS
The Group is committed to maintaining good relations with all its shareholders through the provision of Interim and Annual
Reports, other trading statements and the Annual General Meeting. The Company also meets with its institutional shareholders
regularly.
In light of MCHL’s aggregate shareholding in the Company, on Admission the Company entered into the Relationship Agreement
with MCHL in order to regulate the relationship between MCHL and the Company and enable the Company to act independently
of MCHL and its affiliates. Under the terms of this agreement MCHL has the right, for so long as it owns 30% or more of the
Ordinary Shares in the capital of the Company, to appoint two directors to the Board and one director to each of the committees
of the Board, including the Audit, Remuneration and Nomination Committee. The Relationship Agreement will terminate in the
event that MCHL ceases to own 30% or more of the ordinary shares in the capital of the Company.
Further details of the Relationship Agreement can be found in the Company’s AIM Admission Document which is available on
the Company’s website at www.mmhplc.com.
ANNUAL GENERAL MEETING
The Annual General Meeting provides an opportunity for all shareholders to be updated on the Group’s progress and ask
questions of the Board.
FINANCIAL REPORTING
The Board has ultimate responsibility for both the preparation of accounts and the monitoring of systems of internal financial
control. The Board seeks to present a fair, balanced and understandable assessment of the Group’s position and its prospects
and present price-sensitive information in an appropriate way.
INTERNAL CONTROL
The Board has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness. However, any
such system of internal control can provide only reasonable but not absolute, assurance against material misstatement or loss.
The Board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Group.
The principal elements of the Group’s internal control system include:
• management of the day to day activities of the Group by the executive Directors; aided by the Group’s bespoke management
•
•
•
•
•
•
•
information system, Phoenix 2;
an organisational structure with defined levels of responsibility;
an annual budgeting process which is approved by the Board;
detailed weekly and monthly reporting of performance against budget and the prior year using Cognos;
central control over key areas such as capital expenditure authorisation, contracts and financing facilities;
formal accounting policies and procedures which are regularly reviewed and publicised in the business; and
an internal audit department which monitors compliance of Company processes and procedures and whose programme of
work is overseen by the Audit Committee.
a Retail FCA Committee to monitor, review and deal with general FCA matters and an FCA Oversight Committee to oversee
the Retail FCA Committee and the Group’s compliance with FCA legislation.
The Group continues to review its system of internal control to ensure compliance with best practice, whilst also having regard
to its size and the resources available.
The principal risks and uncertainties identified by the Board are set out on pages 22 to 24.
By order of the Board
Stephen Jones
Company Secretary
14 March 2017
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Audit Committee Report
•
for
the
review arrangements
Company’s employees to raise
concerns, in confidence, about
possible wrongdoing in financial
reporting or other matters;
• monitor
and
review
the
effectiveness of the internal audit
function, review and approve the
internal audit function’s planned
work and meet privately with the
head of internal audit without the
presence of management; and
• make recommendations
to
the
Board in relation to the appointment
of the external auditor and oversee
the relationship with the external
auditor,
including approving the
annual audit plan, assessing audit
quality and effectiveness and
approving the audit fee.
The Audit Committee’s responsibilities,
its procedures and its authority are set
terms of reference
formal
out
approved by the Board.
in
Audit Committee Meetings
The Audit Committee has an annual
agenda of matters to be considered and
is scheduled to meet three times each
year and at any other time when it is
appropriate to consider and discuss
audit and accounting related issues.
Audit Committee meetings are attended
(at the discretion and invitation of the
Committee’s Chair), by the Chairman,
executive directors, head of internal
audit and
the
Company’s external auditor.
representatives of
Alan Ferguson
Senior Independent Director
and Chair of the Audit Committee
Audit Committee Members
The Company’s Audit Committee was
established
and
comprises myself, Sarah Dickins,
Francesca Ecsery and Christopher
Sawyer.
on Admission
the exception of Christopher
With
Sawyer
(given his position as a
nominated director of MCHL), all
members of the Audit Committee are
considered to be independent.
It is considered that the Audit Committee
possesses the necessary skills and
experience to fulfil its responsibilities
effectively with its members, through
their other business activities, having a
wide range of financial and commercial
expertise. In particular, as set out on
pages 26 and 27, my background was
as an experienced Finance Director who
served on the boards of a number of
large
throughout my
executive career. I am the current chair
of the audit committees of Johnson
Matthey plc, Croda International plc and
The Weir Group plc.
companies
Audit Committee Responsibilities
The Audit Committee’s principal
responsibilities are to:
• monitor
the
integrity of
the
Company’s
financial statements
(including its annual and interim
reports,
interim management
statements, results’ announcements
formal
and
announcement
its
to
financial performance);
other
relating
any
•
•
review significant financial reporting
issues
as
described in Note 2 of the financial
statements;
judgements
and
keep under review the effectiveness
of
risk
internal controls and
management systems;
37
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GOVERNANCE
During the Year, the Audit Committee
met formally three times, each member’s
attendance at those meetings being set
out below:
Committee
Member
Role
Attendance
record
Alan
Ferguson
Chair of the
Committee
Sarah
Dickins
Non-Executive
Director
Francesca
Ecsery
Non-Executive
Director
Christopher Non-Executive
Sawyer
Director
3/3
3/3
3/3
3/3
Between the end of the Year and the
date of this report there was a further
meeting of the Audit Committee which
was attended by all members.
Activities during the period
During the period since the last annual
report to the date of this report, the Audit
Committee has:
•
•
•
•
reviewed and amended its terms of
reference
in
accordance with an annual agenda
of matters to be considered by it;
operated
and
reviewed the public announcements
relating to its financial position
including the accounting issues, key
accounting judgments and going
concern assessment in connection
with the full year and Interim results
announcements;
considered the accounting issues
arising as a result of the acquisition
of Ridgeway;
including
for 2016,
reviewed, and after challenge,
approved the external auditor’s audit
plan
their
proposed fee and statement of
Audit
independence.
Committee also reviewed the quality
the external audit and
of
the
recommended
The
•
•
•
•
•
•
re-appointment of
auditor;
the external
reviewed non audit fees paid to the
external auditors in the Year. These
fees totalled £36k and related solely
to the review of the Group’s interim
results;
overseen the appointment of a new
external audit partner during the
Year;
subsequently
considered and
recommended,
the taking of an
audit exemption in respect of the
year ending 31 December 2016
pursuant to S.479A Companies Act
2006
subsidiary
certain
companies as set out on page 76;
for
approved the programme of work
for the internal audit department in
2016 and considered the output of
that work. In addition, it approved
the internal audit plan for 2017;
the Group’s
considered
risk
management process and its
effectiveness; and
reviewed
Company’s
the
arrangements to enable employees
to raise concerns about possible
improprieties confidentially including
independent
the use of an
organisation
a
provide
to
confidential ‘whistleblowers’ hotline.
The Committee receives reports from
executive directors and also receives
reports from, and periodically meets
with, the external auditor and the head
of internal audit in the absence of
management. In addition, as the chair of
the Audit Committee I also meet with the
external and internal auditor outside of
the formal meetings.
Alan Ferguson
Chair of the Audit Committee
14 March 2017
38
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Remuneration Committee Report
Sarah Dickins
Non-Executive Director
and Chair of the
Remuneration Committee
ANNUAL STATEMENT FROM THE
CHAIR OF THE REMUNERATION
COMMITTEE
I am pleased to present, on behalf of the
Board, the Remuneration Committee’s
(the “Committee”) Remuneration Report
providing details of the remuneration of
the Directors for the financial year ending
31 December 2016 (“Year”) and of our
remuneration policy and principles.
Remuneration policy
that we had
I advised
Last year
undertaken a
review of our
full
remuneration policy on Admission. Since
Admission, we have continued to take into
account the current regulation and best
practice of main market listed companies
in our remuneration policy. This Year we
have also ensured our approach reflects
the significant growth in the Group and
the impact of the strategic acquisitions of
SGS and Ridgeway. We continue to keep
remuneration policy under close review
and consider our policy to be appropriate
to our strategy.
Remuneration outcomes for the
period to 31 December 2016
As outlined in the operating review, the
Company has reported another record
year of results resulting in the Group
becoming the 7th largest motor retailer in
the UK which is a significant stride
towards our collective ambition to become
the UK’s premier automotive and leasing
include
group. Financial highlights
like-for-like revenue growth of 10.7% and
underlying PBT of £25.4m representing
an increase of 60.4% on 2015.
As set out in the remuneration report last
year, for the Year under review, base
salaries, annual bonus opportunity and
Performance Share Plan
(“PSP”)
opportunities for both Daksh Gupta and
Mark Raban remained the same as the
previous year.
Annual bonus opportunity during the
Year was based on the achievement of
profit after tax (“PAT”) targets with
bonuses of
93.0% of maximum
awarded to the Chief Executive and the
Chief Financial Officer in respect of
performance in the Year.
The Executive Directors also received a
PSP Award under the Company's PSP
which is subject to demanding three year
39
earnings per share (“EPS”) targets,
re-based post the Ridgeway acquisition.
Subject to the performance condition
being met, PSP awards will vest on the
third anniversary of grant with any
vested shares required to be held for a
further 12 months post vesting.
Key remuneration decisions for the
year to 31 December 2017
As already stated,
the Committee
believes that the remuneration policy
adopted
remains
on Admission
appropriate and having reviewed base
salaries for the Chief Executive Officer
and Chief Financial Officer in the context
of increases for the wider workforce, the
Committee has approved increases of
2%. The maximum annual bonus
potential for 2017 will be 125% of salary
for the Chief Executive Officer and 100%
of salary for the Chief Financial Officer.
To more closely align with the business
KPIs and reflect market practice, targets
for 2017 are based on PBT in line with the
stretching business plan.
The Committee intends to make awards
in 2017 under the PSP subject to a
maximum of 125% of salary in respect of
the Chief Executive Officer and 100% of
salary in respect of the Chief Financial
Officer. Vesting will be subject to the
achievement of demanding three year
EPS targets. Any shares awarded this
year to Executive Directors that vest under
the PSP must be retained for a further
12 months before they can be sold.
principles
Conclusion
The directors’ remuneration policy which
follows this annual statement sets out
the Committee’s
on
remuneration for the future and the
annual report on remuneration provides
details of remuneration for the Year. The
Committee will continue to be mindful of
shareholder views and interests, and we
believe that the Directors’ remuneration
policy is aligned with the achievement of
the Company’s business objectives.
By order of the Board
Sarah Dickins
Chair of Remuneration Committee
14 March 2017
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GOVERNANCE
Directors’ Remuneration Report
REMUNERATION GOVERNANCE
Throughout the Year, the Committee comprised three independent Non-Executive Directors: Sarah Dickins (Chair of the
Committee), Alan Ferguson, Francesca Ecsery alongside Christopher Sawyer who is an appointed representative of MCHL.
The table below sets out each member’s attendance record at Committee meetings during the Year.
Committee member Role Attendance record
Sarah Dickins Chair of the Committee 6/6
Alan Ferguson Non-Executive Director 6/6
Francesca Ecsery Non-Executive Director 5/6
Christopher Sawyer Non-Executive Director 5/6
The Chairman of the Board, members of the management team, as well as the Committee’s advisers, are invited to attend
meetings as appropriate, unless there is any potential conflict of interest.
The Remuneration Committee: responsibilities
The terms of reference of the Committee cover such issues as: committee membership; frequency of meetings; quorum
requirements; and the right to attend meetings. In addition, the Committee has responsibility for, amongst other things:
• making recommendations to the Board on the Company’s policy on remuneration for the Group;
•
•
•
•
determining and monitoring specific remuneration packages for the Chairman, each of the Executive Directors and certain
senior management in the Group, including pension rights and any compensation payments;
recommending and monitoring the level and structure of remuneration for senior management;
recommending and overseeing the implementation of share related schemes, including scheme grants;
ensuring the Committee has access to independent remuneration advice including responsibility for appointing a suitably
qualified adviser.
The Board remains responsible for the approval and implementation of any recommendations made by the Committee. The
remuneration of Non-Executive Directors other than the Chairman is determined by the Chairman of the Board and the Executive
Directors.
The Committee’s advisers
The Committee engages external advisers to assist it in meeting its responsibilities. During the Year, the Committee undertook a
competitive selection process following which Willis Towers Watson was appointed to provide independent remuneration advice
to the Committee. Willis Towers Watson are a signatory to the Remuneration Consultants’ Code of Conduct, and the Committee
is satisfied that the advice that it receives is objective and independent.
40
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
REMUNERATION POLICY
The overall aim of our remuneration policy is to provide appropriate incentives that reflect the Group’s performance culture and
values, through a number of specific remuneration components (detailed in the table on the following pages). In summary, we
aim to:
•
•
•
•
attract, retain and motivate high calibre, senior management and to focus them on the delivery of the Group’s strategic and
business objectives;
set base pay having had due regard to the competitive talent market in which the Company operates with incentive pay
structured so that top quartile pay can be achieved for top quartile performance;
be simple and understandable, both externally and to colleagues; and
achieve consistency of approach across the senior management population to the extent appropriate.
In determining the practical application of the policy, the Committee considers a range of internal and external factors, including
pay and conditions for employees generally, shareholder feedback, and appropriate market comparisons with remuneration
practices in FTSE-listed, AIM-listed and other automotive-based companies.
The Committee is satisfied that this policy successfully aligns the interests of Executive Directors, senior managers, and other
employees with the long-term interests of shareholders, by ensuring that an appropriate proportion of total remuneration is
directly linked to the Group’s performance over both the short and the long term.
41
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GOVERNANCE
Future policy table
The main elements of the remuneration package of Executive Directors are set out below:
Purpose and link to
strategy
BASIC SALARY
Operation
Maximum opportunity
Performance metrics
Attract and retain high calibre
Executive Directors to deliver
strategy.
Paid in 12 equal monthly
instalments during the Year.
None
Reviewed annually to reflect role,
responsibility and performance
of the individual and the Group,
and to take into account rates of
pay for comparable roles in
companies. When
similar
selecting comparators,
the
Committee has regard to, inter
alia,
revenue,
profitability, market worth and
business sector. There is no
prescribed maximum increase.
Annual rates are set out in the
annual report on remuneration
for the current year and the
following year.
the Group’s
ANNUAL BONUS
Incentivise achievement of
by
business
providing
for
performance against annual
financial targets.
objectives
reward
Paid in cash after the end of
the financial year to which it
relates.
Recovery and withholding
provisions apply.
is
the policy of
It
the
Committee to cap maximum
annual bonuses. The levels of
such caps are
reviewed
annually and are set at an
appropriate percentage of
annual salary. Currently the
maximum bonus is 125% of
base salary in respect of the
Chief Executive Officer and
100% in respect of the Chief
Financial Officer.
LONG-TERM INCENTIVES – MMH PERFORMANCE SHARE PLAN
Alignment of interests with
shareholders by providing
long-term incentives designed
to incentivise and recognise
execution of the business
strategy over the longer-term.
Grant of £nil cost options under
the PSP. Options normally vest
3 years from grant subject to
the
of
achievement
performance conditions and
continued employment.
A 12 months post-vesting
holding period applies
for
awards made from 2016.
150% of base salary (up to
200% of base salary
in
exceptional circumstances) in
any financial year.
Current award levels are set
out in the Annual Report on
Remuneration.
42
Performance
is normally
measured over one year,
based solely on
financial
targets (e.g. PBT).
The Committee sets threshold
and maximum targets on an
annual basis.
threshold
A sliding scale operates
between
and
maximum performance. No
bonus
is payable where
performance is below the
threshold.
Payment of any bonus is
subject
the overriding
discretion of the Committee.
to
Vesting is subject to continuous
employment and targets linked
to the strategy of the business.
Current targets are based on
in
achievement of growth
earnings per share, but the
Committee may vary
the
targets. 25% vests for achieving
threshold performance,100%
vests for achieving maximum
performance.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Purpose and link to
strategy
Operation
Maximum opportunity
Performance metrics
LONG-TERM INCENTIVES – MMH PERFORMANCE SHARE PLAN (CONTINUED)
BENEFITS
Provide benefits consistent
with role and in support of the
personal health and wellbeing
of employees.
PENSION
Attract and retain Executive
Directors for the long term by
providing
for
retirement.
funding
dividend
A
provision applies.
equivalent
Recovery and withholding
provisions apply at
the
discretion of the Committee
within three years of vesting.
Currently these consist of
holiday entitlement, health
life assurance
insurance,
premiums
income
and
insurance. The
protection
Committee reviews the level
of benefit provision from time
to time and has the flexibility
to add or remove benefits to
reflect changes in market
practices or the operational
needs of the Group.
All Executive Directors are
entitled to participate in the
Company’s defined contribution
pension scheme or to receive a
cash allowance in lieu of
pension contributions.
Only
pensionable.
base
salary
is
SHARE OWNERSHIP GUIDELINES
Increase alignment between
the Executive Directors and
shareholders.
Executive Directors
are
expected to retain 50% of the
net of tax vested PSP shares
until the guideline level is met.
NON-EXECUTIVE DIRECTOR FEES (“NED”)
The cost of providing benefits
is borne by the Company and
varies from time to time.
None
The Chief Executive receives a
16%
salary
of
contribution.
base
None
The Chief Financial Officer
participates in the Company’s
defined contribution pension
scheme whereby the Company
makes an 8% of base salary
contribution, conditional upon the
Chief Financial Officer making a
matched contribution of 8%.
At least 100% of base salary
for Executive Directors.
None
To attract NEDs who have a
broad range of experience
and skills to oversee the
implementation
our
strategy and provide strong
performance stewardship.
of
NED fees are determined by
the Board (excluding NEDs)
within the limits set out in the
Articles of Association and
are paid in 12 equal monthly
instalments during the Year.
report
Annual rate set out in the
annual
on
remuneration for the current
year and the following year.
No prescribed maximum
annual increase.
None
43
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GOVERNANCE
Directors’ service contracts, notice periods and termination payments
Provision
Details
Notice periods in Executive Directors’
service contracts
Maximum of 12 months by Company or Executive Director.
Executive Directors may be required to work during the notice period.
Compensation for loss of office
In the event of termination, service contracts provide for payments of base salary,
pension and benefits only over the notice period.
Treatment of annual bonus on
termination
Treatment of unvested PSP awards
Outside appointments
There is no contractual right to any bonus payment in the event of termination
although in certain "good leaver" circumstances the Remuneration Committee
may exercise its discretion to pay a bonus for the period of employment and based
on performance assessed after the end of the financial year.
The default treatment for any Ordinary Share-based entitlements under the PSP
is that any outstanding awards lapse on cessation of employment. However, in
certain prescribed circumstances, or at the discretion of the Committee “good
leaver” status can be applied. In these circumstances a participant’s awards vest
subject to the satisfaction of the relevant performance criteria and, ordinarily, on
a time pro-rata basis, with the balance of the awards lapsing.
Other directorships are permitted with prior agreement:
– Daksh Gupta is a director of BEN – Motor and Allied Trades Benevolent Fund.
– Mark Raban is a director of Precise Finance Limited. Precise Finance Limited
is a company owned by Mr Raban and used to provide consultancy services
prior to his appointment to Marshall Motor Holdings plc.
Non-executive directors
All Non-Executives are subject to re-election every three years. No compensation
is payable if they are required to stand down.
In the event of the negotiation of a compromise or settlement agreement between the Company and a departing Director, the
Committee may make payments it considers reasonable in settlement of potential legal claims. Such payments may also include
reasonable reimbursement of professional fees in connection with such agreements.
The Committee may also include the reimbursement of fees for professional or outplacement advice in the termination package,
if it considers it reasonable to do so. It may also allow the continuation of benefits for a limited period.
Dates of appointment
Director
PW Johnson
D Gupta
MD Raban
AM Ferguson
DSM Dickins
FE Ecsery
CJ Sawyer
CMH Walkinshaw
Date of appointment
27 June 2014
1 October 2008
2 April 2015
11 March 2015
11 March 2015
25 March 2015
2 April 2015
12 July 2016
Copies of Directors’ service contracts and letters of appointment are available for inspection at the Company’s registered office.
44
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Annual Report on Remuneration
Single total figure of remuneration
The table below sets out the single total figure of remuneration and breakdown for each Director in respect of the 12 month
period ending 31 December 2016.
Basic
salary
£’000
400
250
650
-
-
-
-
-
-
-
Executive Directors
D Gupta
MD Raban
Total
Non-Executive Directors
PW Johnson
AM Ferguson
DSM Dickins
FE Ecsery
CJ Sawyer
CMH Walkinshaw3
Total
Aggregate directors
emoluments
650
130
55
45
40
40
18
328
328
Fees
£’000
Benefits1
£’000
Pension
£’000
Annual
bonuses
£’000
Long term
incentives2
£’000
19
4
23
-
-
-
-
-
-
-
64
21
85
-
-
-
-
-
-
-
465
233
698
-
-
-
-
-
-
-
252
42
294
-
-
-
-
-
-
-
Total
£’000
1,200
550
1,750
130
55
45
40
40
18
328
23
85
698
294
2,078
1 The benefits above include items such as medical cover, life assurance premiums and income protection insurance.
2 Long term incentives in the table above reflect the value of share options exercised during the Year.
3 Christopher Walkinshaw is a nominated director of Marshall of Cambridge (Holdings) Ltd with the fee payable in respect of his undertakings as a Non-Executive
Director payable to Marshall of Cambridge (Holdings) Ltd. The amount set out above in respect of fees for his services relates to the period from his appointment
on 12 July 2016 to 31 December 2016.
LTIP awards
The movement in directors’ LTIP Awards during the Year are as follows:
Number at
1 January 2016
Number lapsed Number granted Number exercised
during the year
during the year
Number at
during the Year 31 December 2016
D Gupta
MD Raban
1,073,824
335,570
-
-
242,718
121,359
(134,228)
(22,371)
1,182,314
434,558
Details of LTIP Awards granted during the Year are as follows:
D Gupta
MD Raban
Scheme
2016 LTIP award1
2016 LTIP award1
Date of
grant
Earliest
exercise
date
Exercise
price
(pence)
13-Jun-16
13-Jun-19
13-Jun-16
13-Jun-19
£Nil
£Nil
Market
value on
date of
grant
(pence)
197.5
197.5
Number of
options
granted
242,718
121,359
1 The performance condition applying to LTIP awards is explained in Note 26 to the Consolidated Financial Statements.
45
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GOVERNANCE
Statement of directors’ shareholding
Our Executive Directors are expected to build up and maintain a 100% of salary shareholding in the Company and are expected
to retain 50% of the net of tax vested PSP shares until the guideline level is met. The Directors who held office at 31 December
2016 and their connected persons had interests in the issued share capital of the Company as at 31 December 2016 as follows:
Number of Number of
ordinary ordinary LTIP Interests
shares Options Market shares With Without
beneficially exercised purchases Disposals beneficially performance conditions performance conditions Total
held as at during the during the during the held as at Vested but Vested but interest in
31/12/15 Year Year Year 31/12/16 Unvested unexercised Unvested unexercised shares
PW Johnson 150,328 - 25,000 - 175,328 - - - 175,328
D Gupta 693,510 134,228 15,400 - 843,138 913,858 - 268,456 - 2,025,452
MD Raban 39,355 22,371 - - 61,726 389,815 - 44,743 496,284
AM Ferguson 33,557 - 25,000 - 58,557 - - - - 58,557
DSM Dickins 6,711 - - - 6,711 - - - - 6,711
FE Ecsery 2,013 - - - 2,013 - - - - 2,013
CJ Sawyer 214,498 - - - 214,498 - - - - 214,498
CMH Walkinshaw - - - - - - - - - -
1 The performance conditions applying to LTIP awards are explained in Note 26 to the Consolidated Financial Statements.
The middle market price of the shares as at 30 December 2016 was 138p and the range in respect of the 12 month period
ending 31 December 2016 was 132.65p to 212p.
Implementation of remuneration policy for the year ending 31 December 2017
The annual salaries and fees to be paid to directors in the year ending 31 December 2017 are set out below, together with any
increase expressed as a percentage.
PW Johnson
D Gupta
MD Raban
AM Ferguson
DSM Dickins
FE Ecsery
CJ Sawyer
CMH Walkinshaw2
31 December 2017 31 December 2016
£’000
£’0001
Increase
%
132.6
408
255
57.5
47.5
40
40
40
130
400
250
55
45
40
40
-
2
2
2
4.5
5.5
-
-
-
1 Following a review of the fee payable to the Chairman it was decided to increase the fee paid by 2%. The significant contribution made by Peter Johnson to the
business and the importance of his ongoing strong stewardship was noted. Having reviewed the Non-Executive Director fees it was also decided to increase the
fee payable for chairing the remuneration and audit committee by £2,500 to reflect the increasing responsibilities associated with these roles as a listed company.
All other fees remain unchanged.
2 Christopher Walkinshaw is a nominated director of Marshall of Cambridge (Holdings) Ltd with the fee payable in respect of his undertakings as a Non-Executive
Director payable to Marshall of Cambridge (Holdings) Ltd.
The maximum annual bonus for the year ending 31 December 2017 will be 125% of salary for the CEO and 100% of salary for
the CFO. Awards are determined based on PBT targets. Recovery and withholding provisions will apply.
The Committee intends to grant options under the PSP in 2017. These options will be £nil cost options over a value of shares
subject to a maximum of 125% of salary in respect of the Chief Executive Officer and 100% of salary in respect of the Chief
Financial Officer where the vesting is subject to targets based on the achievement of earnings per share targets.
By order of the Board
Sarah Dickins
Chair of the Remuneration Committee
14 March 2017
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations.
The Directors are required to prepare Consolidated financial statements for each financial year in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The Directors have elected to prepare the parent
company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the Group and Company and of the profit and loss of the Group for that
period. In preparing those Consolidated financial statements, the Directors are required to:
•
•
•
•
select and apply accounting policies in accordance with IAS 8;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial
performance; and
state that the group has complied with IFRS, subject to any material departures disclosed and explained in the financial
statements.
In preparing the Company financial statements, the Directors are required to:
•
select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent;
•
•
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
prepared the financial statements on a going concern basis unless it is inappropriate to presume that the company will not
continue in business.
The Directors are responsible for keeping adequate accounting records which are sufficient to disclose with reasonable accuracy
at any time the financial position of the Company and enable them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
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FINANCIAL STATEMENTS
Independent Auditors’ Report to the members
of Marshall Motor Holdings plc
What we have audited
We have audited the financial statements of Marshall Motor Holdings plc for the year ended 31 December 2016 which comprise:
Group Parent company
Consolidated Group Statement of Comprehensive Income
Consolidated Group Statements of Changes in Equity Parent Company Statements of Changes in Equity
Consolidated Group Statement of Financial Position, Parent Company Balance Sheet
Consolidated Group Statement of Cash Flows
Related notes 1 to 30 to the financial statements Related notes 1 to 10 to the Parent company financial statements
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework
that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at
31 December 2016 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of
Ireland”; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
•
based on the work undertaken in the course of the audit
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit, we have
identified no material misstatements in the Strategic Report or Directors’ Report
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in
our opinion:
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Independent Auditors’ Report to the members
of Marshall Motor Holdings plc
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 47, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and
express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report is made solely to the parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the parent company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and
have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information
in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications
for our report.
Nigel Meredith (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Cambridge
14 March 2017
49
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FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Revenue
Cost of sales
Gross profit
Operating expenses
Group operating profit
Finance costs
Profit before taxation
Analysed as:
Underlying profit before tax
Non-underlying items
Taxation
Profit for the year
Attributable to:
Owners of the parent
Non-controlling interests
Note
3
4
8
5
9
2016
£’000
2015
£’000
1,899,405
1,232,761
(1,678,949)
(1,087,452)
220,456
145,309
(191,402)
(127,063)
29,054
18,246
(6,903)
22,151
(2,883)
15,363
25,400
(3,249)
(4,397)
17,754
15,838
(475)
(3,649)
11,714
17,762
11,721
(8)
(7)
17,754
11,714
Total comprehensive income for the year net of tax
17,754
11,714
Attributable to:
Owners of the parent
Non-controlling interests
17,762
11,721
(8)
(7)
17,754
11,714
Earnings per share (expressed in pence per share)
Basic earnings per share
Diluted earnings per share
10
10
23.0
22.3
19.7
19.2
50
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Consolidated Statement of Changes in Equity
Note
Share
capital
£’000
2,250
Equity
attributable
to
Share
Non-
Retained owners of controlling
interests
£’000
premium earnings the parent
£’000
£’000
£’000
63,870
66,120
11,721
11,721
36
(7)
Total
equity
£’000
66,156
11,714
Balance at 1 January 2015
Profit for the year
Total comprehensive income
Transactions with owners
Dividends paid
Issue of share capital
Share based payment charge
Deferred tax on share based
payments
-
-
-
-
-
-
-
11
26
26
24
47,181
19,672
-
-
-
-
11,721
11,721
(7)
11,714
(15,448)
(15,448)
-
556
82
66,853
556
82
-
-
-
-
(15,448)
66,853
556
82
Balance at 31 December 2015
49,431
19,672
60,781
129,884
29
129,913
Profit for the year
Total comprehensive income
Transactions with owners
Dividends paid
Issue of share capital
Share based payments charge
Deferred tax on share based
payments
-
-
-
100
-
-
11
26
26
24
-
-
-
-
-
-
17,762
17,762
17,762
17,762
(8)
(8)
17,754
17,754
(3,251)
(3,251)
(100)
1,313
-
1,313
(70)
(70)
-
-
-
-
(3,251)
-
1,313
(70)
Balance at 31 December 2016
49,531
19,672
76,435
145,638
21
145,659
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FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
At 31 December 2016
Assets
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Investment property
Investments
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Shareholders’ equity
Share capital
Share premium
Retained earnings
Equity attributable to owners of the parent
Share of equity attributable to non-controlling interests
Total equity
Non-current liabilities
Loans and borrowings
Trade and other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Loans and borrowings
Trade and other payables
Provisions
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2016
£’000
2015
£’000
12
13
14
15
24
18
19
20
26
26
22
21
23
24
22
21
23
122,033
201,811
2,590
10
36
40,787
107,285
1,920
10
58
326,480
150,060
380,016
95,073
83
475,172
801,652
49,531
19,672
76,435
240,632
42,724
24,130
307,486
457,546
49,431
19,672
60,781
145,638
129,884
21
29
145,659
129,913
41,364
7,462
1,450
20,803
71,079
77,730
497,340
5,242
4,602
584,914
655,993
801,652
24,677
8,269
289
4,324
37,559
26,700
260,321
762
2,291
290,074
327,633
457,546
The financial statements on pages 50 to 93 were approved for issue by the Board of Directors on 14 March 2017.
Daksh Gupta
Chief Executive Officer
Mark Raban
Chief Financial Officer
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Consolidated Cash Flow Statement
For the year ended 31 December 2016
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation and amortisation
Finance costs
Share based payment charge
Profit on disposal of property, plant & equipment
Profit on disposal of dealerships
Increase in fair value of investment properties
Changes in working capital:
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Note
12/13
8
26
4
4/5
5/14
Increase/(decrease) in provisions
23
Tax paid
Interest paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant, equipment and software
Acquisition of businesses, net of cash acquired
12/13
12
Net cash flow from sale of businesses
Proceeds from disposal of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Issue of share capital net of costs
Net cash inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at period end
22
22
11
26
53
2016
£’000
2015
£’000
22,151
15,363
24,233
6,903
1,313
(38)
(285)
(670)
21,087
2,883
556
(61)
-
-
53,607
39,828
(14,814)
(77,621)
(271)
56,299
(2,940)
38,274
(4,669)
(6,903)
80,309
(61,927)
(94,495)
3,145
11,418
(141,859)
85,444
(44,690)
(3,251)
-
37,503
(24,047)
24,130
83
30,457
38,465
1,051
(7,648)
(3,804)
(2,883)
25,493
(39,573)
(21,498)
-
8,646
(52,425)
28,642
(30,811)
(15,448)
66,853
49,236
22,304
1,826
24,130
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FINANCIAL STATEMENTS
Net Debt Reconciliation
For the year ended 31 December 2016
Reconciliation of net cash flow to movement in (net debt)/cash
(Reduction)/increase in net cash and cash equivalents
Proceeds from drawdown of RCF
Repayment of asset backed borrowings
Proceeds of asset backed borrowings
Repayment of other borrowing
Debt acquired with acquisitions
Derivatives acquired with acquisitions
Movement in net debt
Opening net debt
Net debt at period end
Note
2016
£’000
2015
£’000
22
22
12
12
(24,047)
(35,000)
37,308
(50,444)
7,382
(25,705)
(1,258)
(91,764)
(27,247)
(119,011)
22,304
-
30,811
(28,642)
-
-
-
24,473
(51,720)
(27,247)
Asset backed finance within leasing segment
(64,513)
(51,377)
Adjusted (net debt)/cash at year end (non GAAP measure)
(see note 1)
(54,498)
24,130
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
1. Accounting policies
Basis of preparation
Marshall Motor Holdings plc is a Public Limited Company which is listed on the Alternative Investment Market (“AIM”) and is
incorporated and domiciled in the United Kingdom. The address of the registered office is Airport House, The Airport, Cambridge,
CB5 8RY. The registered number of the Company is 2051461. The consolidated financial statements of Marshall Motor Holdings
plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs
as adopted by the EU), and the Companies Act 2006. The consolidated financial statements have been prepared on the going
concern basis under the historical cost convention as modified by the revaluation of investment properties. The consolidated
financial statements include the results of all subsidiaries of Marshall Motor Holdings plc as listed on pages 97 and 98 of the
annual report.
The financial statements are prepared in sterling which is the presentational and functional currency of the Group and rounded to
the nearest £’000 except where otherwise indicated.
Like for like business are defined as those which traded under the Group’s ownership throughout both the period under review and
the whole of the comparative period.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and
judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are set
out in note 2. The Directors consider that the accounting policies set out below are the most appropriate and have been consistently
applied.
Standards and interpretations adopted by the Group in the year ended 31 December 2016
The following standards, amendments and interpretations were in issue, but were not yet effective at the balance sheet date. These
standards have not been early adopted by the Group.
•
•
•
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Amendments to IFRS 9 are due to take effect from accounting periods commencing from 1 January 2018.The Directors do not
anticipate that the adoption of IFRS 9, where relevant in future periods, will have a material impact on the Company’s financial
statements.
IFRS 15 is due to take effect from accounting periods commencing from 1 January 2018. This new revenue standard may lead to
new treatments resulting from considerations of transfer of control, variable consideration, the time value of money, and allocation
of transaction prices based on relative stand-alone selling prices. The Directors are currently assessing the impact of IFRS 15
and do not anticipate that it will have a material impact on either revenues or profit.
IFRS 16 is due to take effect from accounting periods commencing from 1 January 2019 and makes substantial changes to how
lease arrangements are accounted for and will specifically result in many of the group’s lease arrangements coming on balance
sheet. The Directors are currently assessing IFRS 16 which is likely to have a significant impact upon both non-current assets and
liabilities and impact certain measures of profitability. Details of the Group’s lease commitments are provided in note 27.
Going concern
After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future and for at least one year from the date that these financial statements are signed.
For these reasons they continue to adopt the going concern basis in preparing the Group’s financial statements.
55
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Basis of consolidation
(i)
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern
the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control potential voting rights
that presently are exercisable or convertible are taken into account. Control is generally accompanied by a shareholding of more
than one half of the voting rights. The financial information of subsidiaries is included in the consolidated financial information
from the date that control commences until the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity
interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree
on an acquisition by acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised
amounts of acquiree’s identifiable net assets.
Acquisition related costs are expensed as incurred and are not reported within underlying profit before tax.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39
in profit or loss. Contingent consideration that is classified as equity is not re-measured and its subsequent settlement is accounted
for within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as
goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less
than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised
directly in the income statement.
(ii) Transactions eliminated on consolidation
Intragroup balances and any gains and losses or income and expenses arising from intragroup transactions, are eliminated in
preparing the consolidated financial information. Losses are eliminated in the same way as gains but only to the extent that there
is no evidence of impairment.
(iii) Disposal of subsidiaries
When the Group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control
is lost. The change in carrying amount is recognised in profit or loss. The fair value is the initial carrying amount for the purposes
of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts
previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income
are reclassified to profit or loss.
(iv) Subsidiary audit exemption
As disclosed on page 77, certain subsidiaries have taken exemption from audit for the year ended 31 December 2016 by virtue of
s479 of the Companies Act 2006.
Segmental reporting
Operating segments are reported in a manner consistent with the internal management reporting provided to the chief operating
decision makers. The chief operating decision maker who is responsible for allocating resources and assessing performance of
the operating segments has been identified as the Chief Executive Officer.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Property, plant and equipment
Investment properties
Land and buildings are shown at fair value based on formal valuations by external independent valuers performed at least every
three years and updated each year for the Directors’ estimate of value. Valuations are performed with sufficient regularity to ensure
that the fair value of a revalued asset does not differ materially from its carrying amount. Investment property is not depreciated.
Any surplus or deficit on revaluation is taken to profit or loss and is not included within underlying profit before tax.
Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes the
original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.
When parts of an item of property, plant and equipment have different useful lives those components are accounted for as separate
items of property, plant and equipment. Assets under construction are not depreciated until they come into use when the physical
construction is complete.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the
income statement.
Leased assets
Leases under which the Group assumes substantially all the risks and rewards of ownership of an asset are classified as finance
leases. Property, plant and equipment acquired under finance leases are recorded at fair value or, if lower, the present value of
minimum lease payments at inception of the lease, less depreciation and any impairment.
Each finance lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in the other long-term payables. The interest element of the finance cost is charged to the Income
Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
Depreciation
Depreciation is charged to profit or loss on a straight line basis over the estimated useful lives of each part of an item of property,
plant and equipment. Estimated residual values are included in the calculation of depreciation.
The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and
the lease term. The estimated useful lives of property, plant and equipment are set out below.
•
•
•
•
•
Leasehold improvements – depreciated over shorter of term of lease or 10 years
Fixture and fittings – 4 years
Computer equipment – 2-5 years
Freehold buildings – 50 years
Freehold land is not depreciated
The residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the
fair value of the identifiable net assets acquired.
Other intangible assets
Other intangible assets, when acquired separately from a business combination, include computer software and licences. Cost
comprises purchase price from third parties and amortisation is calculated on a straight line basis over the assets’ expected
economic lives, which varies depending on the nature of the asset. Licenses are amortised over the length of the licence and
software is amortised between 3-5 years.
Other intangible assets, acquired as part of a business combination, include franchise agreements, favourable leases and order
backlog. These items are capitalised separately from goodwill if the asset is separable and if the fair value can be measured
reliably on initial recognition. Such assets are stated at fair value less accumulated amortisation which is calculated on a straight
line basis. Favourable leases are amortised over 3 years, order backlog is amortised as the orders are fulfilled and franchise
agreements have an indefinite life. Intangible assets with an indefinite useful life are tested annually for impairment. Amortisation
is included within administrative expenses in the Statement of Comprehensive Income.
Measurement period adjustment
The Group assesses the fair value of assets acquired and finalises purchase price allocation within the measurement period
following acquisition and in accordance with IFRS 3. This includes an exercise to evaluate other material separately identifiable
intangible assets such as franchise agreements, favourable leases and order backlog.
The finalisation of purchase price allocations may result in a change in the fair value of assets acquired.
In accordance with IFRS 3 measurement period adjustments are reflected in the financial statements as if the final purchase price
allocation had been completed at the acquisition date.
Impairment of non-financial assets
Assets not subject to amortisation are tested annually for impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets
other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
Goodwill and intangible assets are not subject to amortisation but are assessed for impairment. For the purpose of impairment
testing, goodwill acquired in a business combination is allocated to each of the cash generating units (“CGUs”), or groups of
CGUs, that are expected to benefit from the synergies of the combination. The group of CGUs to which the goodwill is allocated
(being groups of dealerships connected by manufacturer brand) represents the lowest level within the entity at which the goodwill
is monitored for internal management purposes.
Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. The carrying value of goodwill is compared to the recoverable amount which is the higher of value in use or fair value
less costs of disposal. Value in use calculations are performed using cash flow projections, discounted at a pre-tax rate which
represents the time value of money and asset specific risks.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Financial assets
Classification
The Group classifies its financial assets as loans and receivables. Management determines the classification of its financial assets
at initial recognition.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that arise principally through the
provision of services to customers. They are initially recognised at fair value and are subsequently stated at amortised cost using
the effective interest method. They are included in current assets except for maturities greater than 12 months after the end of the
reporting period. Loans and receivables comprise mainly cash and cash equivalents and trade and other receivables.
Impairment of financial assets
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the
counterparty, or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the
terms receivable. The amount of such a provision is the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable.
For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being
recognised within other operating costs in the Income Statement. On confirmation that the trade receivable will not be collectable
the gross carrying value of the asset is written off against the associated provision.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally
enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle
the liability simultaneously.
Inventories and purchases of inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location
and condition are included and cost is based on price including delivery costs less specific trade discounts. Net realisable value is
based on estimated selling price less further costs to be incurred to disposal. Provision is made for obsolete, slow-moving or
defective items where appropriate.
Inventories held on consignment are recognised on the balance sheet with a corresponding liability when the terms of a
consignment agreement and industry practice indicate that the principal benefit of owning the inventory (the ability to sell it) and
principal risks of ownership (inventory financing charges, responsibility for safekeeping and some risk of obsolescence) rest with
the Group. Inventory financing charges from manufacturers and other vehicle funding facilities are presented within finance costs.
These charges are expensed over this period that vehicles are funded.
The Group finances the purchase of new and used vehicle inventories using vehicle funding facilities provided by various lenders
including the captive finance companies associated with brand partners. These finance arrangements generally have a maturity
of 90 days or less and the Group is normally required to repay amounts outstanding on the earlier of the sale of the vehicles that
have been funded under the facilities or the stated maturity date. Amounts due to finance companies in respect of vehicle funding
are included within trade payables and disclosed under vehicle financing arrangements. Related cash flows are reported within
cash flows from operating activities within the Consolidated Statement of Cash Flows. Vehicle financing facilities are subject to
LIBOR-based (or similar) interest rates. The interest incurred under these arrangements is included within finance costs and
classified as inventory holding interest.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Cash, cash equivalents and net debt
Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. Bank
overdrafts which form an integral part of the Group’s cash management are included as a component of cash and cash equivalents
for the purpose of the statement of cash flows and are presented in current liabilities.
Net debt as presented in the cash flow statement comprises asset backed finance and bank borrowings net of cash balances.
Adjusted net debt is defined as debt finance, net of cash balances, excluding asset backed finance relating to the leasing segment.
Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business. These are
classified as current liabilities if payment is due in one year or less. If payment is due at a later date they are presented as
non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate
method.
Trade payables include the liability for vehicles held on consignment with the corresponding asset included within inventories.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Income
Statement over the period of the borrowings using the effective interest method.
Provisions
A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as
a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect
is material provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, when appropriate, the risks specific to the liability. The increase in the provision due
to the passage of time is recognised in finance costs.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds.
Share based payments
The Group allows employees to acquire shares in the Company through share option schemes. The fair value of share options
granted is recognised as an employee expense within underlying earnings, with a corresponding increase in equity. The Group
operates a number of equity-settled, share-based compensation plans. The total amount to be expensed over the vesting year is
determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for
example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of
options that are expected to vest. At each balance sheet date the entity revises its estimates of the number of options that are
expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement with a corresponding
adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
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Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Revenue
Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for goods
supplied, stated net of discounts, returns and value added taxes. The Group recognises revenue when the amount of revenue
can be reliably measured, when it is probable that future economic benefits will flow to the entity, and when specific criteria have
been met for each of the Group’s activities, as described below.
Revenue comprises sales and charges for vehicles sold and services rendered during the year including sales to other Marshall
of Cambridge (Holdings) Limited group companies but excluding inter-company sales within the Group. Revenue from the sale of
new and used vehicles is recognised at the point at which a customer takes possession of a vehicle. Revenue in respect of other
services is recognised once the service has been provided.
The income received in respect of warranty policies sold and administered by the Group is recognised over the period of the policy
on a straight line basis. Revenue also comprises commissions receivable for arranging vehicle financing and related insurance
products. Commissions are based on agreed rates and the income is recognised when the vehicle is recognised as sold. The
Group acts as agent on behalf of principals and the commission earned is also recorded at an agreed rate when the transaction
has occurred.
Vehicles leased out under finance leases, which are leases where substantially all the risks and rewards of ownership of the assets
are passed to the lessee and hire purchase contracts, are both shown as debtors in the balance sheet at the amount of the net
investment in the lease. The interest elements of the rental obligations are credited to the profit and loss over the period of the
lease and are apportioned based on a pattern reflecting a constant periodic rate of return. Finance lease income is presented in
revenue.
Vehicles leased out under operating leases are held within property, plant and equipment at their cost to the Group and are
depreciated to their residual values over the terms of the leases.
Rental income from finance leases is recognised in revenue over the period of the lease. These assets are transferred into inventory
at their carrying amount when they cease to be rented and they become available for sale as part of the Groups ordinary course
of business
Deferred income
Where the Group receives an amount in advance of future income streams the value of the receipt is amortised over the period
of the contract as the services are delivered. The unexpired element is disclosed in other liabilities as deferred revenue.
Rebate income
The Group receives income in the form of rebates from suppliers and other partners. These are generally based on achieving
certain objectives such as specific volumes. Rebate income is recognised as a credit to cost of sales at the point when it is
reasonably certain that the targets have been achieved and when income can be measured reliably based on the terms of the
contract. The accrued value at the reporting date is included within trade receivables.
Dividend distribution
Final dividends to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in
which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when they are paid.
Leases
The costs associated with operating leases are taken to the income statement on an accruals basis over the period of the lease.
Where the Group enters into a lease which entails taking substantially all the risks and rewards of ownership of an asset the lease
is treated as a “finance lease”. The accounting policy for leased assets is disclosed in ‘Property, plant and equipment’ above.
Rental payable under operating leases is charged to profit and loss on a straight line basis over the lease term.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Net finance costs
Finance costs
Finance costs comprise interest payable on borrowings, stock financing charges and other interest.
Finance income
Finance income comprises interest receivable on funds invested. Interest income is recognised in the income statement as it
accrues using the effective interest method.
Income tax
Income tax for the years presented comprises current and deferred tax. Income tax is recognised in profit or loss except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of other assets or
liabilities that affect neither accounting nor taxable profit; nor differences relating to investments in subsidiaries to the extent that
they are unlikely to reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the
balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be
realised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred tax
liabilities where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future.
Employee benefits: Pension obligations
Employees of the Group participate as members of two pension schemes; the Marshall Group Executive Pension Plan (“the Plan”)
which is operated by Marshall of Cambridge (Holdings) Limited and has two sections, one of which operates on a defined benefit
basis and one of which operates on a defined contribution basis. The second is a defined contribution scheme (Marshall Motor
Holdings Defined Contribution Pension Scheme).
For the defined contribution arrangements, the Group charges contributions to the Statement of Comprehensive Income as they
become payable in accordance with the rules of the scheme. For the defined benefit section of the Plan, the Group accounts for
its contributions as if it were a defined contribution scheme. There is no contractual agreement or stated policy for charging the
net defined benefit cost between the individual companies within the Marshall of Cambridge (Holdings) Limited Group.
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Notes to the Consolidated Financial Statements
1. Accounting policies (continued)
Alternative performance measures
Certain items recognised in reported profit or loss before tax can vary significantly from year to year and therefore create volatility
in reported earnings which does not reflect the Group’s underlying performance. The Directors believe that the ‘underlying profit
before tax’ and ‘underlying basic earnings per share’ measures presented provide a clear and consistent presentation of the
underlying performance of the Group’s on-going business for shareholders. Underlying profit is not defined by IFRS and therefore
may not be directly comparable with the ‘adjusted’ profit measures of other companies.
Non-underlying items which are not included within underlying profit before tax and may include:
Acquisition costs
Profit/losses arising on closure or disposal of businesses
–
–
– Restructuring and reorganisation costs – these are one-off in nature and do not relate to the Group’s underlying performance.
Investment property fair value movements – these reflect the difference between the fair value of an investment property at
–
the reporting date and its carrying amount at the previous reporting date
– One-off tax charges and pension costs
–
Asset impairments
2. Critical accounting judgements and estimates
The Group makes estimates and judgements concerning the future. The estimates and judgements that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities are discussed below:
Valuation of goodwill and other indefinite life assets
The Group reviews the goodwill and intangible assets arising on the acquisition of subsidiaries or businesses and values each
identifiable asset separately. Intangible assets are then allocated to cash generating units (‘CGUs’), however this allocation exercise
requires a high level of judgement and the Group consults with independent experts as required.
Estimated useful life of intangible assets, property, plant and equipment and impairment testing
The Group estimates the useful life and residual values of intangible assets, property, plant and equipment and reviews these
estimates at each financial year end. The Group also tests for impairment when a trigger event occurs or annually as appropriate.
The impairment review is performed by projecting the future cash flows, excluding finance and tax, based upon budgets and plans
and making appropriate judgements about rates of growth and discounting these using a rate that takes into account the time
value of money and the risk inherent in the business. If the present value of the projected cash flows is less than the carrying
value of the underlying net assets and related goodwill an impairment charge would be taken to the profit or loss in the Income
Statement unless the fair value less cost of disposal of the related asset is higher than the carrying value.
Pension benefits
As described in notes 1 and 29 the Group accounts for any contributions payable to the Plan and the Marshall Motor Holdings
Defined Contribution Pension Scheme as defined contribution schemes. The Group has paid all of its contributions due under the
current recovery plan to remove the funding deficit on a technical provisions basis in the defined benefit section of the Plan revealed
by the actuarial valuation as at 31 December 2013. The next actuarial valuation of the Plan is due as at 31 December 2016 and
the extent of any future cash contributions by the Group will be considered once the valuation has been performed during 2017.
As described on page 62, on the basis that there is no contractual agreement or stated policy for changing net defined benefit cost
between the individual companies within the Marshall Group, it is accounted for as if it were a defined contribution scheme.
Inventory valuation
Motor vehicle inventories are stated at the lower of cost and net realisable value (fair value less costs to sell). Fair values are
assessed using reputable industry valuation data which is based upon recent industry activity and forecasts. Whilst this data is
deemed representative of current value it is possible that ultimate sales values can vary from those applied.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Critical accounting judgements and estimates (continued)
Assets held for contract hire
Vehicles are depreciated on a straight line basis to residual values which mirror those utilised in the creation of the original client
contract. Care is taken to minimise the risk of an exposure to losses at contract end, and the entire portfolio is reassessed utilising
an independent valuation tool throughout the life of the underlying contracts.
Tax
Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. Judgement is
used when assessing the extent to which deferred tax assets should be recognised with consideration given to the timing or level
of future taxable income.
3. Segmental information
Management has determined the operating segments based on the operating reports reviewed by the Chief Executive Officer
that are used to assess both performance and strategic decisions. These results have been determined using consistent accounting
policies as the overall financial statements. Management has identified that the Chief Executive Officer is the chief operating
decision maker in accordance with the requirements of IFRS 8 Operating Segments.
The business is split into two main operating segments generating revenue and a third support segment. No significant judgements
have been made in determining the reporting segments.
•
•
•
Retail – sales and servicing of motor vehicles and ancillary services
Leasing – leasing of vehicles to end consumers and fleet customers
Unallocated – administrative and asset management functions in support of the wider business
All segment revenue, profit before taxation, assets and liabilities are attributable to the principal activity of the Group being the
provision of car and commercial vehicle sales, leasing, vehicle service and other related services. All revenue is generated in the
UK. Depreciation presented in the segmental note is restricted to assets other than assets held for contract rental, on the basis
that depreciation on our leasing fleet is presented within cost of sales.
For the year ended 31 December 2016
Revenue
Total revenue
Total revenue from external customers
Depreciation and amortisation
Segment operating profit/(loss)
Finance cost
Underlying profit before tax
Non-underlying items
Retail
(see below)
£’000
1,859,734
1,859,734
(6,862)
32,637
(5,319)
28,900
(1,582)
Leasing
£’000
Unallocated
£’000
Total
£’000
39,349
39,349
(6)
5,653
(749)
4,904
-
322
322
1,899,405
1,899,405
(22)
(6,890)
(9,236)
(835)
(8,404)
(1,667)
29,054
(6,903)
25,400
(3,249)
Profit/(loss) before taxation
27,318
4,904
(10,071)
22,151
Total assets
Total liabilities
620,365
91,512
89,775
801,652
417,622
73,454
164,917
655,993
Additions in the period (including acquisitions)
Property, plant, equipment and software assets
94,344
35,537
-
129,881
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
3. Segmental information (continued)
For the year ended 31 December 2015
Revenue
Total revenue
Total revenue from external customers
Depreciation and amortisation
Segment operating profit/(loss)
Finance cost
Underlying profit before tax
Non-underlying items
Profit/(loss) before taxation
Total assets
Total liabilities
Retail
(see below)
£’000
Leasing
£’000
Unallocated
£’000
Total
£’000
1,195,506
1,195,506
37,022
37,022
233
233
1,232,761
1,232,761
(3,801)
20,258
(1,498)
18,760
-
18,760
297,195
225,572
(8)
(18)
(3,827)
6,001
(1,125)
4,876
-
4,876
74,691
60,356
(8,013)
(260)
(7,798)
(475)
18,246
(2,883)
15,838
(475)
(8,273)
15,363
85,660
457,546
41,705
327,633
Additions in the period (including acquisitions)
Property, plant,equipment and software assets
16,585
29,738
-
46,323
Retail revenue is derived from a number of service lines, principally being new vehicle sales and aftersales, as set out below.
New
Used
Aftersales & other
Internal
Total
2016
£’000
983,314
718,329
202,568
2015
£’000
637,774
459,235
127,840
(44,477)
(29,343)
1,859,734
1,195,506
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
4. Operating expenses
Employee costs (note 7)
Depreciation on property, plant and equipment (note 13)
Amortisation of other intangibles (note 12)
Profit on disposal of business units
Profit on disposal of property, plant and equipment
Operating lease rentals – property
Management charges from Marshall of Cambridge (Holdings) Limited
Auditors’ remuneration (note 6)
Legal and professional charges (including acquisition costs of £2,163,000)
Other expenses
2016
£’000
101,170
5,838
1,052
(285)
(38)
10,324
199
366
3,152
69,624
191,402
2015
£’000
64,562
3,600
227
-
(61)
6,907
1,127
355
1,100
49,246
127,063
£982,000 of the management charges from Marshall of Cambridge (Holdings) Limited in the year ended 31 December 2015 are
related to pre-Admission costs. Ongoing charges from Marshall of Cambridge (Holdings) Limited relate to various property and
facilities related activities. Acquisition costs of £2,163,000 were incurred in connection with the acquisition of Ridgeway Garages
(Newbury) Limited.
5. Non-underlying items
Acquisition costs
Profit on disposal of business units
Amortisation of acquired order book
Gain on interest rate swap termination
Restructuring costs
Investment property fair value movements (see note 14)
2016
£’000
2,163
(285)
769
(294)
1,566
(670)
3,249
2015
£’000
475
-
-
-
-
-
475
–
–
At the point of the acquisition, Ridgeway had a claim in progress in respect of the alleged mis-selling of certain historic interest
rate swap products, which have since been settled, giving rise to a gain on termination of £294,000.
Amortisation of acquired order book is considered non-underlying by virtue of its nature, having been recognised as an
intangible asset on acquisition and realised as orders were fulfilled.
– Restructuring and reorganisation costs relate to one-off costs of integration and reorganisation which have been necessary
following the acquisitions of Ridgeway and SGS. The costs, which are mostly people related, have been recognised have
been expensed/paid for during the year or provided for in line with IAS 37.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
6. Auditor’s remuneration
Fees payable to the Company’s auditors for the audit of the parent Company and
consolidated financial statements
Fees payable to the Company’s auditors for other services
– audit of Group’s subsidiaries
– review of interim financial statements
7. Employees and directors
a)
Employee costs for the Group during the year
Wages and salaries
Social security costs
Other pension costs
Employee costs are included in:
Cost of sales
Operating expenses
Average number of people (including Executive Directors) employed:
Retail
Leasing
Unallocated
2016
£’000
2015
£’000
251
79
36
366
2016
£’000
101,678
10,613
1,714
114,005
2016
£’000
12,835
101,170
114,005
2016
3,567
43
316
3,926
245
70
40
355
2015
£’000
67,219
7,051
1,229
75,499
2015
£’000
10,937
64,562
75,499
2015
2,115
40
214
2,369
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
7. Employees and directors (continued)
b) Directors’ emoluments
The Directors’ aggregate emoluments in respect of qualifying services were:
Aggregate emoluments
Pension contribution
Highest paid Director
Aggregate emoluments including pension contribution
2016
£’000
1,993
85
2,078
2016
£’000
1,200
2015
£’000
1,480
64
1,544
2015
£’000
862
Prior to Admission, the cost of Directors’ services was met by a management charge to the parent company, Marshall of Cambridge
(Holdings) Limited. The management charge in 2015 was £1,127,000 inclusive of £656,000 in respect of historic LTIP liabilities
for the highest paid director which crystallised when the Company’s shares were admitted to AIM. The Directors’ emoluments set
out above include Directors’ salaries since the Admission.
The 2015 comparative data represents Directors’ remuneration from the date of Admission (2 April 2015) to 31 December 2015.
The highest paid Director exercised 134,228 share options during the year.
c) Key management compensation
The following table details the aggregate compensation paid in respect of key management personnel – which comprises both
senior management who sit on the operational board and statutory directors.
Wages and salaries
Post-employment benefits
Compensation for loss of office
Share based payments
Details of the share option schemes are provided in note 26.
8. Finance costs
Interest income on short term bank deposits
Interest payable on asset backed finance
Stock financing charges and other interest
Interest payable on bank borrowings
Net finance costs
68
2016
£’000
3,600
175
83
1,313
5,171
2016
£’000
(40)
749
3,958
2,236
6,903
2015
£’000
2,855
311
290
556
4,012
2015
£’000
(33)
1,125
1,498
293
2,883
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
9. Taxation
Current tax
Current tax on profits for the year
Adjustments in respect of prior years
Total current tax
Deferred tax
Origination and reversal of temporary differences
Impact of change in tax rates
Adjustments in respect of prior years
Total deferred tax (note 24)
Total taxation charge
2016
2016
Non-
Underlying underlying
£’000
£’000
2016
£’000
5,598
316
5,914
(18)
(1,334)
(165)
(1,517)
4,397
2015
2016
Non-
2015
Total Underlying underlying
£’000
£’000
£’000
2015
£’000
4,258
210
4,468
(840)
(223)
244
(819)
3,649
2015
Total
£’000
Profit before taxation
Taxation
Effective tax rate
25,400
5,153
(3,249)
22,151
(756)
4,397
15,838
3,649
(475)
15,363
-
3,649
20.29%
23.27%
19.85%
23.04%
0.00%
23.75%
The tax charge for the year differs from the standard rate of corporation tax in the UK of 20.0% (2015: 20.25%). The differences
are explained below.
Profit before tax
Profit multiplied by the rate of corporation tax of 20.0% (2015: 20.25%)
Effects of:
Other expenses not deductible
Acquisition costs
Adjustments in respect of prior years
Utilisation of brought forward losses
Impact of change in tax rate
Total taxation charge
2016
£’000
22,151
4,430
717
433
151
-
(1,334)
4,397
2015
£’000
15,363
3,111
239
96
454
(51)
(200)
3,649
The applicable tax rate for the current year is 20.0% (2015: 20.25%) following the reduction in the main rate of UK corporation tax
from 21.0% to 20.0% with effect from 1 April 2015.
A reduction to the corporation tax rate to 19.0% (effective from 1 April 2017) was substantively enacted on 26 October 2016 and
a further reduction to 17.0% (effective from 1 April 2020) was substantively enacted on 9 September 2016.
69
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
10. Earnings per share
Basic and diluted earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted
average number of ordinary shares during the year and the diluted weighted average number of ordinary shares in issue in the
year after taking account of the weighted average dilutive impact of shares under option of 2,380,040 at 31 December 2016 (2015:
1,929,528). (See note 26).
Underlying earnings per share are based on basic earnings per share adjusted for the impact of non-underlying items.
The diluted earnings per share are based on the weighted average number of shares.
Profit for the year
Non-controlling interests
Basic earnings
Weighted average number of ordinary shares in issue for the basic earnings
per share
Diluted weighted average number of shares in issue for diluted earnings
per share
Basic earnings per share (in pence per share)
Diluted earnings per share (in pence per share)
Non-underlying items
Underlying earnings per share (non GAAP measure)
11. Dividends
2016
£’000
17,762
(8)
2015
£’000
11,721
(7)
17,754
11,714
77,326,970
59,425,171
79,500,548
60,886,960
23.0
22.3
3.2
26.2
19.7
19.2
0.8
20.5
A final dividend of £1,858,000 for the year ended 31 December 2015 was paid in May 2016. This represented a payment of 2.40p
per ordinary share in issue at that time.
An interim dividend in respect of the year ended 31 December 2016 of £1,393,000, representing a payment of 1.80p per ordinary
share in issue at that time, was paid on 23 September 2016.
A final dividend of 3.70p per share in respect of the year ended 31 December 2016 is to be proposed at the annual general meeting
on 23 May 2017. The ex-dividend date will be 20 April 2017 and the associated record date will be 21 April 2017. This dividend
will be paid subject shareholder approval on 26 May 2017 and these financial statements do not reflect this final dividend payable.
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Notes to the Consolidated Financial Statements
12. Intangible assets
Franchise
Goodwill agreements
£’000
£’000
Software
£’000
Favourable
leases
£’000
Order
backlog
£’000
Cost
At 1 January 2015
Additions (restated – see below)
Adjustments
Disposals
Transfers
At 31 December 2015
Additions
Additions on acquisition
Disposals
At 31 December 2016
Accumulated amortisation
At 1 January 2015
Charge for the year
Disposals
At 31 December 2015
Charge for the year
Disposals
At 31 December 2016
Net book amount
At 31 December 2015
At 31 December 2016
22,055
4,777
(50)
-
-
-
13,552
-
-
-
26,782
13,552
-
-
23,516
58,563
(1,222)
-
-
159
-
(58)
522
623
506
-
(50)
49,076
72,115
1,079
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,782
49,076
13,552
72,115
-
227
(57)
170
250
(44)
376
453
703
-
-
-
-
-
-
-
172
-
172
-
-
-
-
33
-
33
-
139
Total
£’000
22,055
18,488
(50)
(58)
522
40,957
506
83,020
(1,272)
-
-
-
-
-
-
-
769
-
769
123,211
-
-
-
-
769
-
769
-
227
(57)
170
1,052
(44)
1,178
-
-
40,787
122,033
Acquisitions and disposals – 2015
On 16 November 2015 the Company acquired the entire share capital of (“SGS”). SGS itself is the holding company of 9 wholly
owned subsidiary companies, SG Smith Automotive Limited, SG Smith (Motors) Limited, SG Smith (Motors) Beckenham Limited,
SG Smith (Motors) Forest Hill Limited, SG Smith (Motors) Crown Point Limited, SG Smith (Motors) Sydenham Limited, SG Smith
(Motors) Croydon Limited, SG Smith Trade Parts Limited and Prep-Point Limited. The companies acquired operate Audi, Skoda
and Mercedes-Benz Commercial dealerships and service centres in Kent, Surrey and London.
The net assets at the date of acquisition are stated at their fair value as set out below.
Intangible assets*
Deferred tax on acquired intangible assets (note 24)
Property, plant & equipment
Inventories
Trade receivables and other current assets
Cash and cash equivalents
Trade and other payables*
Net assets acquired
Deferred tax liability arising on transition to IFRS (note 24)
Goodwill*
Total cash consideration
*
restated as described on page 72
71
71
SG Smith
Holdings
Limited
£’000
13,552
(2,439)
6,750
24,195
5,548
2,477
(29,982)
20,101
(903)
4,777
23,975
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
12. Intangible assets (continued)
Acquisitions and disposals – 2015
The Group recognised in the 2015 financial statements a provisional fair value of net assets acquired of £9,092,000 and a
provisional fair value for goodwill of £15,786,000, in respect of the acquisition of S.G. Smith Holdings Limited (“SGS”).
Within the measurement period following acquisition of SGS and in accordance with IFRS 3, the purchase price allocation has
been finalised. This included an exercise to search for other material separately identifiable intangible assets such as franchise
agreements, favourable leases and order backlog. As a result of this, a value of £13,552,000 has been ascribed to franchise
agreements reflecting the ability to sell manufacturer vehicles and to offer manufacturer standard aftersales services in a particular
geographic area. This amount has been reclassified from goodwill to franchise agreements, and a corresponding deferred tax
liability of £2,439,000 (note 24) has been recognised. The Directors’ judgement is that this intangible asset has an indefinite useful
life and therefore will be reviewed for impairment on an annual basis.
The finalisation of the completion accounts exercise also resulted in an increase in the fair value of trade and other payables
acquired of £104,000 (note 21).
In accordance with IFRS 3, the measurement period adjustment has been reflected in these financial statements as if the final
purchase price allocation had been completed at the acquisition date. The impact of this was to increase the value of goodwill by
£2,543,000, increase the value of trade payables by £314,000 and increase the value of deferred tax liabilities by £2,439,000 from
the figures previously reported at 31 December 2015.
Acquisition costs of £475,000 were charged to the consolidated income statement for the year ended 31 December 2015.
Acquisitions and disposals – 2016
During the period, the business disposed of two Toyota dealerships and one Nissan dealership (goodwill of £1,222,000 associated
with the Nissan CGU).
On 25 May 2016 the Company acquired the entire share capital of Ridgeway Garages (Newbury) Limited (“Ridgeway”). Ridgeway
itself is the parent company of six wholly owned subsidiary companies, Pentagon Limited, Pentagon South West Limited, Ridgeway
TPS Limited, Ridgeway Bavarian Limited, Wood in Hampshire Limited and Wood of Salisbury Limited.
£59,504,000 of separately identifiable intangible assets were acquired on 25 May 2016 as part of the acquisition of Ridgeway. A
valuation of these intangible assets has been performed by Globalview Advisors, an independent external specialist. The franchise
agreements identified have been assigned indefinite lives on the basis that these arrangements are expected to be renewed for
the foreseeable future. The goodwill arising on the acquisition of the above company is attributable to the anticipated profitability
of the distribution of the Group’s products in new markets and the anticipated operating synergies derived from the combination.
72
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
12. Intangible assets (continued)
The estimated net assets at the date of acquisition are stated at their provisional fair value as set out below.
NBV at
31 May 2016
£’000
Fair value
adjustment
£’000
Ridgeway
Garages
(Newbury)
Limited
Acquisition
balance sheet
at 31 May
2016
£’000
-
59,504
(10,728)
64,978
123,400
51,627
12,664
(2,600)
59,504
(10,728)
(436)
(724)
-
-
(3,249)
(178,290)
-
(25,705)
(5,026)
(6,645)
-
30,096
(5,026)
(7,599)
(1,258)
83,567
23,380
106,947
Goodwill
Intangible assets
Deferred tax on acquired intangible assets
Property, plant & equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Debt
Provisions
Deferred tax
Derivatives
Net assets acquired
Goodwill
Total cash consideration
2,600
-
-
65,414
124,124
51,627
12,664
(175,041)
(25,705)
-
(954)
(1,258)
53,471
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
12. Intangible assets (continued)
As disclosed at the time of acquisition, Ridgeway’s consolidated statutory accounts for the year ended 2015 included a contingent
liability note in respect of various film tax planning initiatives. Settlement of this liability has been agreed subsequent to the year
ended 31 December 2016 and the liability of £4.2m is included as a fair value adjustment in the preceding table and is carried
within provisions at 31 December 2016. Fair value adjustments also include provisional adjustments for property related matters,
inventory valuations, deferred tax, intangible assets and goodwill.
Acquisition costs of £2,163,000 have been charged to the consolidated income statement for the year ended 31 December 2016.
The table below summarises the amount of revenue and profit or loss of the acquiree since the acquisition date included in the
consolidated income statement for the period since acquisition.
Ridgeway Garages (Newbury) Limited
Revenue
£’000
414,643
Profit
before tax
£’000
5,557
On 2 November 2016 Marshall Motor Group Limited acquired the trade and assets of Scratch Match Accident Repair Centre from
RLMO Limited. The net assets at the date of acquisition are stated at their provisional fair value as set out below.
Property, plant & equipment
Net assets acquired
Goodwill
Total cash consideration
Scratch Match
Accident Repair
Centre
£’000
76
76
136
212
The table below summaries the amount of revenue and profit or loss of the acquiree since the acquisition date included in the
consolidated income statement for the period since acquisition.
Scratch Match Accident Repair Centre
Revenue
£’000
38
(Loss)
before tax
£’000
(72)
The table below summarises the amount of the revenue and profit or loss of the combined entity for the current reporting period
as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the
annual reporting period.
Marshall Motor Holdings plc
Revenue
£’000
2,228,157
Profit
before tax
£’000
25,212
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
12. Intangible assets (continued)
Impairment testing
For the purpose of impairment testing goodwill and intangible assets are allocated to each cash generating unit (“CGU”), or groups
of CGUs, that are expected to benefit from the synergies of the combination. CGUs are groups of dealerships connected by
manufacturer brand. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within the entity
at which the goodwill is monitored for management purposes.
Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. Impairment reviews have been performed for all CGU groups for the years ending 31 December 2016 and 2015.
The recoverable amounts of all CGUs have been determined based on value in use calculations. These calculations use projections
based on financial budgets approved by management which are extrapolated using the estimated long term growth rates. The
budgets were prepared to 31 December 2017 and then projected for a further 4 years. A discounted cash flow model was prepared
taking into account management’s assumptions for growth in EBITDA and the long term growth rate for the industry. These
assumptions are based on past experience of growth rates in both existing and new markets. The discount rate used is 10%
(2015: 10%) and the perpetual EBITDA growth rate beyond 5 years is assumed as 2% (2015: 2%) to arrive at a terminal value.
Management has prepared separate sensitivity analyses on the basis that the discount rate increases to 12% and that EBITDA
decreases by 50% and has concluded that there is no impairment.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
13. Property, plant and equipment
Freehold
and long Assets
leasehold held for Assets
land and Leasehold Plant and contract under
buildings improvement equipment rental construction Total
£’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 January 2015 33,017 3,645 25,863 95,636 - 158,161
Additions at cost 2,670 4,609 2,403 29,732 - 39,414
Additions on acquisition 4,137 1,636 977 - - 6,750
Disposals - (19) (648) (28,478) - (29,145)
Transfers (2,443) 2,501 (1,418) - - (1,360)
At 31 December 2015 37,381 12,372 27,177 96,890 - 173,820
Additions at cost 1,370 236 3,545 35,537 23,633 64,321
Additions on acquisition 53,276 2,872 5,007 - 3,899 65,054
Disposals (1,397) (278) (3,443) (30,483) - (35,601)
Transfers 17,857 (187) 2,840 - (20,510) -
At 31 December 2016 108,487 15,015 35,126 101,944 7,022 267,594
Accumulated Depreciation
At 1 January 2015 9,361 1,210 19,181 37,372 - 67,124
Charges for the year 313 701 2,586 17,210 - 20,810
Disposals - - (408) (20,153) - (20,561)
Transfers (553) 629 (914) - - (838)
At 31 December 2015 9,121 2,540 20,445 34,429 - 66,535
Charges for the year 934 1,146 3,758 17,343 - 23,181
Disposals (1,103) (259) (3,057) (19,514) - (23,933)
Transfers 44 (44) - - - -
At 31 December 2016 8,996 3,383 21,146 32,258 - 65,783
Net book amount
At 31 December 2015 28,260 9,832 6,732 62,461 - 107,285
At 31 December 2016 99,491 11,632 13,980 69,686 7,022 201,811
As at 31 December 2016, the Group had capital commitments totalling £11.7m relating to new retail sites at Newbury Jaguar Land
Rover and Exeter Audi.
76
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
14. Investment property
Fair value at 1 January
Change in fair value (see note 5)
Fair value at 31 December
2016
£’000
1,920
670
2,590
2015
£’000
1,920
-
1,920
Investment properties are stated at fair value. The Group’s leasehold investment property was valued on a fair value basis as at
31 December 2016 at £590,000 and the Group’s freehold investment property on a fair value basis as at 31 December 2016 at
£2,000,000. A revaluation surplus of £670,000 has been taken to the Statement of Comprehensive Income in 2016 and is included
in non-underlying items in note 5. The valuations were undertaken at 31 December 2016 by Rapleys, Chartered Surveyors on an
open market value basis.
The Group policies in relation to investment property are included in note 1. The properties are rented out to third parties. Rental
income of £322,000 was recognised in 2016 (2015: £233,000). There are no restrictions on the Group’s ability to dispose of the
investment property or use any funds arising on disposal. There are no contractual commitments for further development of the
investment properties.
15. Investments
The consolidated financial statements include the results of all subsidiaries owned by Marshall Motor Holdings plc as listed on
pages 97 and 98 of the annual report. Certain of these subsidiaries, which are listed below have taken the exemption from an
audit for the year ended 31 December 2016 by virtue of s479A of the Companies Act 2006. In order to allow these subsidiaries
to take the audit exemption, the parent company, Marshall Motor Holdings plc, has given a statutory guarantee of all the outstanding
liabilities as at 31 December 2016 of the subsidiaries listed below. Where this audit exemption has been taken, it is in anticipation
of the completion of a corporate entity reorganisation programme.
The subsidiaries which have taken an exemption from audit for the year ended 31 December 2016 by virtue of s479A of the
Companies Act 2006 are:
Tim Brinton Cars Limited S.G. Smith (Motors) Limited
Marshall of Scunthorpe Limited S.G. Smith (Motors) Beckenham Limited
CMG 2007 Limited S.G. Smith (Motors) Forest Hill Limited
S.G. Smith Automotive Limited S.G. Smith (Motors) Crown Point Limited
Exeter Trade Parts Specialists LLP S.G. Smith (Motors) Sydenham Limited
Astle Limited Prep-Point Limited
Crystal Motor Group Limited S.G. Smith Trade Parts Limited
A list of all subsidiary undertakings as at 31 December 2016 and 31 December 2015 is given in note 3 of the Marshall Motor
Holdings plc company only financial statements (pages 97 and 98).
77
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
16. Finance leases – Group as lessor
Lease agreements in which the other party, as lessee, is to be regarded as the economic owner of the leased assets give rise to
accounts receivable in the amount of the discounted future lease payments. At 31 December 2016 these receivables amounted
to £494,000 (2015: £572,000) and will bear interest income until their maturity dates.
Within 1 year
Between 1 and 5 years
Within 1 year
Between 1 and 5 years
Total future
payments
£’000
234
308
542
Total future
payments
£’000
214
411
625
2016
Unearned
interest
income
£’000
3
45
48
2015
Unearned
interest
income
£’000
11
42
53
Present
value
£’000
231
263
494
Present
value
£’000
203
369
572
The Group leases out vehicles under finance leases mainly through one of its subsidiaries Marshall Leasing Limited.
The majority of the leases typically run for a non-cancellable period of one and five years. Under the contracts, title either passes
to the lessee at the conclusion of the lease period, or the arrangements include an option to purchase the leased equipment after
that period.
17. Operating leases – Group as lessor
The Group has entered into non-cancellable operating leases, as lessor, on a number of its assets held for contract rental included
in property, plant and equipment and property included in investment property. The terms of these leases vary.
Future minimum lease payments receivable for assets held for contract rental under non-cancellable operating leases are as set
out below.
Within 1 year
Between 1 and 5 years
2016
£’000
26,408
71,891
98,299
Future minimum lease payments receivable for property under non-cancellable operating leases are as set out below.
Within 1 year
Between 1 and 5 years
After 5 years
2016
£’000
275
813
908
1,996
78
2015
£’000
23,105
63,142
86,247
2015
£’000
233
825
1,108
2,166
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
18. Inventories
Work in progress
Finished goods
Less: Provisions
Inventory (Net)
2016
£’000
688
388,684
(9,356)
380,016
2015
£’000
424
244,863
(4,655)
240,632
Finished goods include new and used vehicles held for resale, vehicle parts and other inventory. As at 31 December 2016
£364,695,000 (2015: £186,185,000) of finished goods are held under vehicle financing arrangements (see note 21).
Inventory recognised in cost of sales during the year as an expense was £1,630m (2015: £1,038m).
The 2015 comparative for stock provision has been restated for provision amounts of £789,000 which were previously included in
finished goods. There is no change to the total inventory balance as previously stated.
19. Trade and other receivables
Amounts falling due within one year:
Trade receivables due but not past due
Trade receivables past due
Trade receivables past due but impaired
Trade receivables – net
Other receivables
Amounts due from related undertakings (note 28)
Prepayments
2016
£’000
54,509
18,441
(1,944)
71,006
13,648
7
10,412
95,073
2015
£’000
25,669
4,091
(839)
28,921
8,961
311
4,531
42,724
Trade and other receivables are all due within 12 months and any fair value difference is not material. Trade receivables are
considered to be past due once they have passed their contracted due date and are reviewed for impairment if they are past due
beyond 30 days.
Other receivables include finance lease and hire purchase receivables of £494,000 (2015: £572,000). Of these £283,000
(2015: £396,000) are amounts due in more than one year. The comparative for 2015 included £7,467,000 manufacturer bonus
debtors within other receivables. These are now included within trade receivables. There is no change to the total trade and other
receivables balance.
Movements on the provision for impairment of trade receivables were as follows:
At 1 January
Additional provision for receivables impairment
Receivables written off during the year as uncollectable
At 31 December
2016
£’000
839
1,915
(810)
1,944
2015
£’000
444
1,014
(619)
839
The creation and release of provision for impaired receivables have been included in ‘Other expenses’ (note 4). Amounts charged
to the allowance account are generally written off when there is no expectation of recovering the amount due.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
20. Cash and cash equivalents
Cash at bank and in hand
21. Trade and other payables
Trade payables:
– vehicle financing arrangements
– other trade payables
Amounts owed to related undertakings (note 28)
Other tax and social security payable
Other payables
Accruals and deferred income
Trade and other payables due within 1 year
Trade and other payables due after 1 year
2016
£’000
83
2015
£’000
24,130
2016
£’000
2015
£’000
364,695
85,206
102
3,601
10,634
40,564
186,185
34,490
654
2,472
10,944
33,845
504,802
268,590
497,340
7,462
504,802
260,321
8,269
268,590
Trade and other payables, excluding social security and other taxes, are designated as financial liabilities carried at amortised
cost. Their fair value is deemed to be equal to their carrying value.
The Group finance the purchases of new and use vehicle inventories using vehicle funding facilities’ provided by various lenders
including the captive finance companies associated with brand partners. These finance arrangements generally have a maturity
of 90 days or less and the Group is normally required to repay amounts outstanding on the earlier of the sale of the vehicles that
have been funded under the facilities or the stated maturity date.
Amounts due to finance companies in respect of vehicle funding are included within trade payables and disclosed under vehicle
financing arrangements. Related cash flows are reporting within cash flows from operating activities within the Consolidated
Statement of Cash Flows.
Vehicle financing facilities are subject to LIBOR-based (or similar) interest rates. The interest incurred under these arrangements
is included within finance costs and classified as stock holding interest.
Management considers the carrying amount of trade and other payables to approximate to their fair value. Long-term payables
have been discounted where the time value of money is considered to be material.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
22. Loans and Borrowings
Non-current
Asset backed financing (leasing)
Bank borrowings
Current
Asset backed financing (leasing)
Bank borrowings
Total borrowings
2016
£’000
33,833
7,531
41,364
30,680
47,050
77,730
119,094
2015
£’000
24,677
-
24,677
26,700
-
26,700
51,377
Total borrowings include bank borrowings which are unsecured, except as described below, and asset backed financing, which is
secured by a fixed charge over specific vehicles held for leasing. The related finance comprises chattel mortgages.
Interest rate profile of interest bearing borrowings
2016
Average
effective
interest rate
1.94
1.75
1.85
2016
Fair
value
£’000
32,032
5,254
Fixed rate borrowings
Asset backed financing
Bank borrowings
Weighted average cost of drawn borrowings
Debt
£’000
64,513
54,581
119,094
The carrying amounts and fair value of the non-current borrowings are as below.
Asset backed financing
Bank borrowings
Carrying
amount
£’000
33,833
7,531
The fair values are based on cash flows discounted using the prevailing rates.
Borrowings have the following maturity profile:
6 months or less
6 – 12 months
1 – 5 years
Over 5 years
2015
Average
effective
interest rate
2.39
0.00
2.39
2015
Fair
value
£’000
23,030
-
2015
£’000
13,770
12,930
24,677
-
Debt
£’000
51,377
-
51,377
Carrying
amount
£’000
24,677
-
2016
£’000
57,484
20,246
36,340
5,024
119,094
51,377
The Group has access to banking facilities amounting to £120,000,000 represented by a revolving credit facility of £95,000,000
(of which £35,000,000 was drawn at 31 December 2016) and an overdraft facility of £25,000,000 (of which £12,707,000 was
drawn at 31 December 2016). These facilities are available for general corporate purposes including acquisitions or working capital
requirements. Interest is chargeable on the amounts drawn under the facilities at between 1.2% and 2.0% above LIBOR. The
facilities are secured by cross guarantees granted by the certain members of the Group. The facility is available until 25 August
2019.The Group is also able to extend the term of the facility by up to 12 months. More information in respect of principal risk
management is provided in note 25.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
23. Provisions
Tax Closed sites Dilapidations
£’000
£’000 £’000
At 1 January 2016 - 122
Acquired provisions 4,242 12
Charged to income statement
in the year - 194
Utilised during the year - (133)
As at 31 December 2016 4,242 195
649
310
450
(315)
1,094
Provisions have been allocated between current and non-current as below.
Current
Non-current
Tax
Onerous
leases and
vacant
property
£’000
280
462
428
(9)
1,161
2016
£’000
5,242
1,450
6,692
Total
£’000
1,051
5,026
1,072
(457)
6,692
2015
£’000
762
289
1,051
As described in note 12, the tax provision above relates to tax liabilities for film tax planning initiatives which were acquired
with Ridgeway
Closed sites
The Group manages its portfolio carefully and either closes or sells sites which no longer fit with the Group’s strategy. When sites
are closed or sold provisions are made for any residual costs or commitments.
Dilapidations
The Group operates from a number of leasehold premises under full repairing leases. The provision recognises that repairs are
required to put the buildings back into the state of repair required under the leases.
Onerous leases and vacant property
Where property commitments exist at sites which are closed or closing the Group provides for the unavoidable cost of those leases
post closure.
24. Deferred tax
The analysis of deferred tax assets and deferred tax liabilities is as below.
Deferred tax assets:
– Deferred tax asset
Deferred tax liabilities:
– Deferred tax liability to be recovered after more than 12 months (2015 restated)
Deferred tax liabilities (net)
82
2016
£’000
2015
£’000
36
58
(20,803)
(20,767)
(4,324)
(4,266)
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
24. Deferred tax (continued)
The gross movement on the deferred tax account is as below.
At 1 January
Deferred tax arising on IFRS conversion of acquisition (note 12) (2015 restated)
Deferred tax acquired
Income statement charge (note 9)
Credited directly to equity
At 31 December
2016
£’000
(4,266)
(17,373)
(563)
1,517
(82)
2015
£’000
(1,689)
(3,342)
(136)
819
82
(20,767)
(4,266)
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as below.
Deferred tax liabilities
At 1 January 2015
Charged to the income statement
Impact of corporation tax rate reduction
Acquisition of subsidiaries (note 12) (2015 restated)
At 31 December 2015
Charged/(credited) to the income statement
Impact of corporation tax rate reduction
Acquisition of subsidiaries (note 12)
At 31 December 2016
Deferred tax assets
At 1 January 2015
Credited/(charged) to the income statement
Impact of corporation tax rate reduction
Credited directly to equity
Acquisition of subsidiaries
At 31 December 2015
Credited/(charged) to the income statement
Impact of corporation tax rate reduction
Charged/(credited) directly to equity
Acquisition of subsidiaries
At 31 December 2016
Other
£’000
2,734
735
(271)
3,342
6,540
(122)
(1,471)
17,373
22,320
Other
£’000
159
473
(8)
82
-
706
(264)
(19)
(82)
289
630
Total
£’000
2,787
682
(271)
3,342
6,540
(122)
(1,471)
17,373
22,320
Total
£’000
1,098
1,279
(49)
82
(136)
2,274
61
(137)
(82)
(563)
1,553
Accelerated
tax
depreciation
£’000
-
-
-
-
-
-
-
-
-
Fair
value
gains
£’000
53
(53)
-
-
-
-
-
-
-
Accelerated
tax
depreciation
£’000
Fair
value
gains
£’000
94
(31)
(5)
-
-
58
(16)
(6)
-
-
36
845
837
(36)
-
(136)
1,510
341
(112)
-
(852)
887
83
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
24. Deferred tax (continued)
Deferred income tax assets are recognised for tax loss as carried forward to the extent that the realisation of the related tax benefit
through future taxable profits is probable. The Group did not recognise deferred income tax assets of £263,000 (2015: £359,000)
in respect of losses amounting to £1,549,000 (2015: £1,887,000) that can be carried forward against future taxable income. These
losses do not have an expiry date.
25. Financial instruments – risk management
The Group’s activities expose it to a variety of financial risks, including the effects of changes in debt market prices and interest
rates. The Group’s treasury management programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group.
The Board adopts an on-going process for identifying, evaluating and managing the significant risks faced by the Group.
Market risk – cash flow interest rate risk
The Group’s interest rate risk arises from long-term borrowings, which are issued at various rates that expose the Group to cash
flow interest rate risk. The Group’s borrowings are denominated in sterling.
The interest rate exposure of the Group is managed within the constraints of the Group’s business plan and the financial covenants
under its facilities.
Credit risk
Credit risk arises from cash and deposits with banks as well as credit exposures to customers. Individual customer risk limits are
set based on external credit reference agency ratings and the utilisation of these credit limits is regularly monitored. Further
disclosure on credit exposure is given in note 19.
Liquidity risk
Ultimate responsibility for liquidity risk rests with the Board of Directors, which has built an appropriate liquidity risk management
framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The
Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously
monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Disclosed within
note 22 are the undrawn banking facilities that the Group has at its disposal in order to further reduce liquidity risk.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
balance sheet date to contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
All borrowings are denominated in sterling.
Borrowings (note 22)
Trade and other payables
(excluding other taxes and social security)
At 31 December 2016
Less than
one year
£’000
Greater than
one year
£’000
Total
£’000
77,730
41,364
119,094
493,739
571,469
7,462
48,826
501,201
620,295
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
25. Financial instruments – risk management (continued)
Borrowings (note 22)
Trade and other payables
(excluding other taxes and social security)
At 31 December 2015
Capital risk management
Less than
one year
£’000
Greater than
one year
£’000
26,700
24,677
Total
£’000
51,377
257,849
284,549
8,269
32,946
266,188
317,495
The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders.
The Group must ensure that sufficient capital resources are available for working capital requirements and meeting principal and
interest payment obligations as they fall due.
Consistent with others in this industry, the Group monitors capital on the basis of the gearing ratio, which is calculated as adjusted
net debt divided by total capital. Adjusted net debt is calculated as total borrowings, excluding asset backed finance within the
leasing segment (including current and non-current borrowings as shown in the consolidated balance sheet) less cash and cash
equivalents. Total capital is calculated as total shareholders’ equity.
The Group had adjusted net debt of £54,498,000 at 31 December 2016 as disclosed in the Net debt reconciliation (2015: Net
cash of £24,130,000).
Financial instruments by category
The table below analyses financial instruments by type. All such financial assets and liabilities are carried at amortised cost. For
all financial assets and liabilities fair value equals carrying value except for long term borrowings as disclosed in note 22.
Group assets
Assets as per the balance sheet
Trade and other receivables excluding prepayments (note 19)
Cash and cash equivalents (note 20)
Total
Group liabilities
Liabilities as per the balance sheet
Borrowings (note 22)
Trade and other payables excluding non-financial liabilities (note 21)
Total
2016
£’000
2015
£’000
84,661
83
84,744
38,193
24,130
62,323
119,094
501,201
620,295
51,377
268,590
319,967
85
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
25. Financial instruments – risk management (continued)
Credit quality of financial assets
Counterparties without external credit rating
Group 1
Group 2
Total unimpaired trade receivables
Cash at bank and short-term bank deposits
A (Negative)*
* Standard & Poor’s rating (long term)
2016
£’000
701
83,960
84,661
2015
£’000
133
38,060
38,193
83
24,130
Group 1 – new customers/related parties (less than 6 months).
Group 2 – existing customers/related parties (more than 6 months) with no defaults in the past.
26. Called up share capital and share premium
At 1 January 2015
Issued 27 March 2015
Subdivision
Issued 2 April 2015
At 31 December 2015
Issued 27 May 2016
At 31 December 2016
Number
of shares
2,250,000
30,000,000
18,140,625
26,845,638
77,236,263
156,599
77,392,862
Ordinary
shares
£’000
Share
premium
£’000
2,250
30,000
-
17,181
49,431
100
49,531
-
-
-
19,672
19,672
-
19,672
Total
£’000
2,250
30,000
-
36,853
69,103
100
69,203
On 27 March 2015 30 million ordinary shares of 100p each were issued at par and subsequently the entire share capital of the
company was subdivided into 50,390,625 ordinary shares of 64p each.
On 2 April 2015 26,845,638 new ordinary shares of 64p each were issued at 149p each. The premium arising on issue is shown
net of transaction costs amounting to £3.1 million.
On 27 May 2016 156,599 ordinary shares of 64p each were issued as part of the IPO Restricted share option scheme.
All shares issued are fully paid.
86
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
26. Called up share capital and share premium (continued)
Share option schemes
Under the Company’s equity settled share option scheme, share options may be granted to executive Directors and selected
employees and grants were made on Admission of the Company to AIM and during the year to 31 December 2016. Share options
comprise IPO Performance Awards, IPO Restricted Share Awards and 2016 Performance Awards. The extent of vesting of awards
granted to executive Directors of the Company (other than an IPO Restricted Share Award) will be subject to performance conditions
set by the Remuneration Committee. The extent of vesting of awards granted to other participants may be subject to performance
conditions set by the Remuneration Committee.
The weighted average remaining period until expiry for the awards outstanding at 31 December 2016 is 8.6 years (2015: 9.3 years).
The fair value of nil cost awards granted under both the IPO Performance Awards and IPO Restricted Awards is the market value
of the related shares at the time of grant.
The weighted average fair value at 31 December 2016 is £1.65 (2015: £1.49)
All options issued are nil cost awards and therefore there is no range of weighted average exercise price, as all are nil.
As at 31 December 2016, outstanding share options under the IPO Performance Awards and 2016 Performance Awards were
as below.
Award date
2 April 2015
13 June 2016
2016 Performance Award
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Outstanding as at 31 December
IPO Performance Award
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Outstanding as at 31 December
Exercisable as at 31 December
No of shares
over which
options are
outstanding
1,406,040
660,801
2016
No.
-
675,364
(14,563)
660,801
Exercise
price
Nil
Nil
2016
WAEP
Date from
which
exercisable
Expiry
date
2 April 2018
2 April 2025
13 June 2020
13 June 2026
2015
No.
2015
WAEP
-
-
-
-
-
-
-
-
2015
No.
-
1,486,575
(26,845)
1,459,730
-
-
-
-
-
2015
WAEP
-
-
-
-
-
2016
No.
2016
WAEP
1,459,730
-
(53,690)
1,406,040
-
-
-
-
-
-
The performance condition applying to the IPO Performance Awards and 2016 Performance Awards is based on the growth in the
Company’s underlying basic Earnings Per Share (EPS). In respect of IPO Performance Awards 25% will vest for achieving growth
in underlying basic EPS of CPI plus 4% per annum increasing on a straight line basis up to 100% vesting for achieving growth of
CPI plus 10% per annum between 2014 and 2017. 50% of the IPO Performance Awards vest on the third anniversary of Admission
and the remaining 50% vest on the fourth anniversary subject to continued employment. In respect of the 2016 Performance
Awards 25% will vest for achieving underlying basic EPS of CPI plus 3% per annum increasing on a straight line basis up to 100%
vesting for achieving CPI plus 8% per annum between 2016 and 2018. A 12 month holding period applies to the 2016 Performance
Awards.
87
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
26. Called up share capital and share premium (continued)
As at 31 December 2016, outstanding share options under the IPO Restricted Share Awards were as below.
Award date
2 April 2015
IPO Restricted Share Award
Outstanding as at 1 January
Granted during the year
Exercised
Outstanding as at 31 December
Exercisable as at 31 December
No of shares
over which
options are
outstanding
Exercise
price
Date from
which
exercisable
Expiry
date
313,199
Nil
2 April 2016
2 April 2025
2016
No.
2016
WAEP
2015
No.
2015
WAEP
469,798
-
(156,599)
313,199
-
-
-
-
-
-
-
469,798
-
469,798
-
-
-
-
-
-
The IPO Restricted Share Awards vest in three equal tranches on the first, second and third anniversaries of Admission.
The fair value of options granted during the year was £2.06 (2015: £1.49). The fair value of equity settled share options granted
was based on market value on 13 June 2016 when the share options were granted.
A share based payment charge of £1,313,000 (2015: £556,000) has been recognised during the period.
See note 8 of the Company only financial statements on page 100 for further details of the share option schemes.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
27. Commitments and contingencies
Operating lease commitments
The Group, as lessee, has non-cancellable operating lease agreements. The lease terms vary and the majority of lease agreements
are renewable at the end of the lease period at market rate.
The lease expenditure charged to the income statement during the year is disclosed in note 4.
The future aggregate minimum lease payments under non-cancellable operating leases are set out below.
Within 1 year
Later than 1 year and less than 5 years
After 5 years
28. Related party transactions
Key management compensation is given in note 7.
2016
£’000
11,494
40,909
72,578
124,981
2015
£’000
7,804
29,206
62,031
99,041
Details of Directors’ interests in shares of the Company are set out in the Directors’ Remuneration Report.
During 2015 and 2016 the Directors were members of a car purchase loan scheme under which the following transactions were
made in the year. The Directors purchased 14 cars in 2016 (2015: 15) at a price of £983,000 (2015: £1,043,000) and sold back
14 (2015: 13) at a price of £994,000 (2015: £899,000).
The following table shows the aggregate transactions with companies within Marshall of Cambridge (Holdings) Limited other than
those of Marshall Motor Holdings plc.
2016
Entities with significant influence over the entity
Marshall of Cambridge (Holdings) Limited
Other related parties
Marshall of Cambridge Aerospace Limited
Marshall Thermo King Limited
Marshall Fleet Solutions Limited
Marshall Group Properties Limited
Aeropeople Limited
Marshall Land Systems Limited
Sales
£’000
Purchases
£’000
Year-end
balance
£’000
83
106
695
-
134
7
31
337
315
28
13
1,312
-
-
(24)
(78)
7
-
-
-
-
1,056
2,005
(95)
89
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
28. Related party transactions (continued)
2015
Entities with significant influence over the entity
Marshall of Cambridge (Holdings) Limited
Other related parties
Marshall of Cambridge Aerospace Limited
Marshall Thermo King Limited
Marshall Fleet Solutions Limited
Marshall Group Properties Limited
Aeropeople Limited
Marshall Land Systems Limited
Marshall Specialist Vehicles Limited
MGPH Limited
29. Pensions
Post-employment benefits
Sales
£’000
Purchases
£’000
Year-end
balance
£’000
70
112
538
-
402
14
42
18
10
1,206
1,127
490
3
19
1,700
-
-
-
158
3,497
(110)
(59)
34
(8)
(147)
-
-
-
(55)
(345)
As detailed in accounting policy note 1, the Group accounts for all of its pension contributions as if they were part of a defined
contribution scheme.
The actuarial valuation for the defined benefit section of the Marshall Group Executive Pension Plan revealed a deficit on a technical
provisions basis of £1.5 million as at 31 December 2013. Marshall of Cambridge (Holdings) Limited has paid all of its contributions
(£1.24 million) as at 31 December 2016 under the current recovery plan. The contributions by Marshall Motor Holdings plc to this
plan during 2016 were £nil (2015: £41,000).
The next actuarial valuation of the Marshall Group Executive Plan is expected as at 31 December 2016. The extent of any future
cash contributions by the Group will then be considered.
In line with the disclosure requirements of IAS 19, for group schemes where there is no contractual agreement for charging the
net defined benefit cost between individual companies the information below details information about the defined benefit section
of the Marshall Group Executive Plan. The information in the note that follows will be included in the 2016 Annual Report of
Marshall of Cambridge (Holdings) Limited. These are disclosure items only and are not reflected in the Statement of Financial
Position of Marshall Motor Holdings plc.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
29. Pensions (continued)
2016 2015
£’000 £’000
2014
£’000
2013
£’000
Balance sheet obligations
– Fair value of assets at end of year 36,975 34,546
– Present value of obligations at end of year (54,485) (46,062)
– Deficit at 31 December 2016 (17,510) (11,516)
34,119
(46,968)
(12,849)
32,005
(39,961)
(7,956)
Defined pension benefits
– Related deferred tax asset 2,977 2,073
Liability in the balance sheet (14,533) (9,443)
2,570
(10,279)
1,591
(6,365)
Income statement charge included in operating profit
– For defined pension benefits (947) (858)
(947) (858)
(741)
(741)
(818)
(818)
Marshall of Cambridge (Holdings) Limited operates the Plan which has a section which provides defined benefits to members in
the form of a guaranteed level of pension payable for life. The level of benefits provided depends on members’ length of service
and their salary in the final years leading up to retirement. In the Plan, pensions in payment are generally updated in line with the
retail price index. The board of trustees must be composed of representatives of Marshall of Cambridge (Holdings) Limited and
plan participants in accordance with the Trust Deed and Rules and legislation.
The significant actuarial assumptions were as set out below.
Discount Rate
RPI Inflation
CPI Inflation
Salary Growth Rate
Pension Growth Rate – RPI min 0%, max 5%
Pension Growth Rate – RPI min 3%
Pension Growth Rate – RPI min 2.7%, max 5%
Pension Growth Rate – RPI min 0%, max 8.5%
Post retirement mortality
Post retirement improvements
Discount Rate
RPI Inflation
CPI Inflation
Salary Growth Rate
Pension Growth Rate – RPI min 0%, max 5%
Pension Growth Rate – RPI min 3%
Pension Growth Rate – RPI min 2.7%, max 5%
Pension Growth Rate – RPI min 0%, max 8.5%
Post retirement mortality
Post retirement improvements
2016
2.54%
3.31%
2.31%
3.06%
3.31%
3.36%
3.31%
3.31%
2015
3.60%
3.00%
2.00%
2.60%
3.00%
3.35%
3.21%
3.00%
73%S1PXA
73%S1PXA
CMI 2013 table with 1.25% p.a.
CMI 2013 table with 1.25% p.a.
and 1.0% p.a. long term improvement
and 1.0% p.a. long term improvement
trend for males and females
trend for males and females
respectively (rebased to 2008)
respectively (rebased to 2008)
2014
3.50%
3.16%
1.96%
2.90%
3.16%
3.29%
3.21%
3.16%
2013
4.50%
3.33%
2.13%
3.74%
3.33%
3.41%
3.35%
3.33%
73%S1PXA
73%S1PXA
CMI 2013 table with 1.25% p.a.
CMI 2013 table with 1.0% p.a.
and 1.0% p.a. long term improvement
trend for males and females
respectively (rebased to 2008)
91
long term improvement
trend (rebased to 2008)
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
29. Pensions (continued)
Plan assets are comprised as follows:
2016
UK Equities
Overseas Equities
Property
Liability Driven Investments
Dynamic Asset Allocation
Cash and Net Current Assets
Insured Pensions
Total
2015
UK Equities
Overseas Equities
Property
Liability Driven Investments
Dynamic Asset Allocation
Cash and Net Current Assets
Insured Pensions
Total
2014
UK Equities
Overseas Equities
Property
Liability Driven Investments
Dynamic Asset Allocation
Cash and Net Current Assets
Insured Pensions
Total
2013
UK Equities
Overseas Equities
Property
Liability Driven Investments
Dynamic Asset Allocation
Cash and Net Current Assets
Insured Pensions
Total
Quoted
£’000
5,320
12,216
6,850
4,311
5,860
120
-
34,677
Quoted
£’000
4,737
10,165
7,159
4,280
5,895
129
-
32,365
Quoted
£’000
9,871
5,041
6,543
4,223
5,997
155
-
31,830
Unquoted
£’000
-
-
-
-
-
-
2,298
2,298
Unquoted
£’000
-
-
-
-
-
-
2,181
2,181
Unquoted
£’000
-
-
-
-
-
-
2,289
2,289
Quoted
£’000
Unquoted
£’000
-
-
-
-
-
-
2,232
2,232
9,335
4,406
5,713
4,478
5,889
-
-
29,821
92
Total
£’000
5,320
12,216
6,850
4,311
5,860
120
2,298
36,975
Total
£’000
4,737
10,165
7,159
4,280
5,895
129
2,181
34,546
Total
£’000
9,871
5,041
6,543
4,223
5,997
155
2,289
34,119
Total
£’000
9,335
4,406
5,713
4,478
5,889
-
2,232
32,053
%
14
33
19
12
16
-
6
100%
%
14
30
21
12
17
-
6
100%
%
29
15
19
12
18
-
7
100%
%
29
14
18
14
18
-
7
100%
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Consolidated Financial Statements
29. Pensions (continued)
Through the defined benefit pension plan, the Group is exposed to a number of risks, the most significant of which are detailed
below:
Asset volatility
The Plan holds 80% growth assets and these will not provide a hedge to the movement in the discount rate.
Consequently, the difference in the values of the assets and liabilities will be quite volatile. Similarly returns
on scheme assets will be affected by changes in gilt yields.
Inflation risk
The majority of benefits are linked to inflation and so increases in inflation will lead to higher liabilities (although
in most cases there are caps in place which protect against extreme inflation).
Life expectancy
Increases in life expectancy will increase plan liabilities, the inflation linkage of the benefits also means that
inflationary increases result in a higher sensitivity to increases in life expectancy.
30. Ultimate parent company
The parent undertaking of the largest group of undertakings for which group financial statements are drawn up and of which the
Company is a member is Marshall of Cambridge (Holdings) Limited. This is both the immediate parent undertaking and the ultimate
parent undertaking. In light of its aggregate shareholding in the capital of the Company, Marshall of Cambridge (Holdings) Limited
has entered into a relationship agreement in order to regulate the relationship between it and the Company and enable the
Company to act independently of Marshall of Cambridge (Holdings) Limited and its affiliates.
Copies of the group financial statements for Marshall of Cambridge (Holdings) Limited can be obtained from Airport House, The
Airport, Cambridge, CB5 8RY.
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FINANCIAL STATEMENTS
Company Financial Statements
Statement of Financial Position
As at 31 December 2016
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: Amounts falling due within one year
Net current (liabilities)/assets
Net assets
Capital and reserves
Called-up equity share capital
Share premium
Profit and loss account
Shareholders’ funds
Note
2016
£’000
2015
£’000
3
4
6
7
163,194
54,084
7,104
1,329
8,433
(82,753)
(74,320)
88,874
49,531
19,672
19,671
88,874
18,543
19,638
38,181
(7,992)
30,189
84,273
49,431
19,672
15,170
84,273
No profit and loss account is presented by the Company, as permitted under section 408 of the Companies Act 2006. The profit
of the Company for the year ended 31 December 2016 was £6,539,000 (2015: £21,951,000).
The financial statements were approved for issue by the Board of Directors and authorised for issue on 14 March 2017
M.D. Raban
Director
14 March 2017
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Company Financial Statements
Statement of Changes in Equity
At 1 January 2015
Loss for the financial year
Dividends received
Total comprehensive income for the year
Equity dividends paid
New shares issued
Share based payment charge
At 31 December 2015
Loss for the financial year
Dividends received
Total comprehensive income for the year
Equity dividends paid
New shares issued
Share based payment charge
At 31 December 2016
Note
9
9
8
Share
capital
£’000
2,250
-
-
-
-
Share
premium
£’000
-
-
-
-
-
47,181
19,672
-
-
Profit
and loss
account
£’000
8,111
(3,049)
25,000
21,951
(15,448)
-
556
49,431
19,672
15,170
-
-
-
-
100
-
-
-
-
-
-
-
49,531
19,672
(5,961)
12,500
6,539
(3,251)
(100)
1,313
19,671
Total
£’000
10,361
(3,049)
25,000
21,951
(15,448)
66,853
556
84,273
(5,961)
12,500
6,539
(3,251)
-
1,313
88,874
95
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FINANCIAL STATEMENTS
Notes to the Company Financial Statements
1. Basis of preparation & statement of compliance
Marshall Motor Holdings plc is a Public Limited Company incorporated in England. The registered office is Airport House, The
Airport, Cambridge, CB5 8RY. The parent company financial statements have been prepared in compliance with FRS 102, the
Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland.
The financial statements are prepared in sterling which is the presentational and functional currency of the company and rounded
to the nearest £’000.
The company accounts have also adopted the following disclosure exemptions as permitted by FRS 102:
–
–
–
Presentation of a cash-flow statement and related notes
Financial instrument-related disclosures
Key management personnel compensation disclosures
The Company is part of the consolidated financial statements of Marshall Motor Holdings plc.
The auditors’ remuneration for audit and other services was £3,000 (2015: £3,000).
2. Accounting policies
Investments
Investments in subsidiaries are recognised at cost less any impairment. Impairments are recognised directly through profit and
loss.
Share based payments
The Company allows employees to acquire shares in the Company through share option schemes. The fair value of share options
granted is recognised as an employee expense with a corresponding increase in equity. The Company operates a number of
equity settled, share based compensation plans. The total amount to be expensed over the vesting year is determined by reference
to the fair value of the options granted, excluding the impact of any non-market vesting conditions. Non-market vesting conditions
are included in assumptions about the number of options that are expected to vest. At each balance sheet date the entity revises
its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if
any, in the income statements with a corresponding adjustment to equity.
Taxation
Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting
periods using the tax rates and laws that have been enacted or substantively enacted by the reporting date.
Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated.
Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred
tax liabilities or other future taxable profits.
If and when all conditions for retaining tax allowances for the cost of a fixed asset have been met, the deferred tax is reversed.
A deferred tax liability or asset is recognised for the additional tax that will be paid or avoided in respect of assets and liabilities
that are recognised in a business combination. The amount attributed to goodwill is adjusted by the amount of deferred tax
recognised.
Deferred tax is calculated without discounting using the tax rates and laws that have been enacted or substantively enacted by the
reporting date that are expected to apply to the reversal of the timing difference.
With the exception of changes arising on the initial recognition of a business combination, the tax expense/(income) is presented
either in the income statement, other comprehensive income or equity depending on the transaction that resulted in the tax
expense/(income).
96
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Company Financial Statements
2. Accounting policies (continued)
Financial instruments
The company has non-derivative financial instruments comprising trade and other receivables, cash and cash equivalents, loans
and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value. The company has no non-derivative financial instruments
measured at fair value.
Dividend distribution
Final dividends to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in
which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when they are paid.
Deferred tax liabilities are presented within provisions for liabilities and deferred tax assets within debtors. Deferred tax assets and
deferred tax liabilities are offset only if:
–
–
the company has a legally enforceable right to set off current tax assets against current tax liabilities, and
the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or
to realise the assets and settle the liabilities simultaneously.
3.
Investments
Cost
At 1 January 2016
Additions
At 31 December 2016
Subsidiary
undertakings
£’000
54,084
109,110
163,194
The Company owns directly or indirectly the whole of the issued and fully paid ordinary share capital of the following subsidiary
undertakings.
Additions in the period include £2,163,000 of acquisition costs which have been capitalised.
Name of Undertaking
Marshall Motor Group Limited
Marshall of Cambridge (Garage Properties) Limited
Marshall Leasing Limited
Gates Contract Hire Limited
Tim Brinton Cars Limited* (reg no. 01041301)
Marshall of Ipswich Limited**
Marshall of Peterborough Limited**
S.G. Smith Holdings Limited
S.G. Smith Automotive Limited* (reg no. 00622112)
S.G. Smith (Motors) Limited* (reg no. 00287379)
S.G. Smith (Motors) Beckenham Limited* (reg no. 00648395)
S.G. Smith (Motors) Forest Hill Limited* (reg no. 00581710)
S.G. Smith (Motors) Crown Point Limited* (reg no. 00581711)
S.G. Smith (Motors) Sydenham Limited* (reg no. 00660066)
S.G. Smith (Motors) Croydon Limited
S.G. Smith Trade Parts Limited* (reg no. 01794317)
97
Country of
incorporation
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Principal activity
Franchised motor dealership
Property holding
Motor vehicle leasing
Dormant
Property holding
Franchised motor dealership
Franchised motor dealership
Holding company
Holding company
Property holding
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Dormant
Motor parts sales
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FINANCIAL STATEMENTS
Notes to the Company Financial Statements
3.
Investments (continued)
Name of Undertaking
Prep-Point Limited* (reg no. 00660067)
Marshall of Stevenage Limited**
Marshall Commercial Vehicles Limited
Marshall North West Limited
Marshall of Scunthorpe Limited* (reg no. 01174004)
Silver Street Automotive Limited
Exeter Trade Parts Specialists LLP* (reg no. OC329331)
Audi South West Limited
Hanjo Russell Limited
CMG 2007 Limited* (reg no. 06275636)
Astle Limited* (reg no. 01114983)
Crystal Motor Group Limited* (reg no. 04813767)
Ridgeway Garages (Newbury) Limited
Pentagon Limited
Pentagon South West Limited
Ridgeway TPS Limited
Ridgeway Bavarian Limited
Wood in Hampshire Limited
Wood of Salisbury Limited
Country of
incorporation
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Principal activity
Maintenance and
repair of motor vehicles
Franchised motor dealership
Dormant
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Motor parts sales
Dormant
Dormant
Holding company
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Dormant
Motor parts sales
Franchised motor dealership
Dormant
Dormant
The registered office for all subsidiary companies listed above is Airport House, The Airport, Cambridge, CB5 8RY. All listed
subsidiaries are included within the Group consolidation on pages 50 to 93.
* subsidiaries for which exemption from audit by virtue of s479A of the Companies Act 2006 has been taken for the year ended
31 December 2016.
** these subsidiaries are 99% owned by the Group.
4. Debtors
Trade debtors
Amounts owed by Group undertakings
Other debtors
VAT
Prepayments and accrued income
Deferred tax asset (note 5)
2016
£’000
1
6,219
252
10
310
312
2015
£’000
-
17,470
700
54
197
122
7,104
18,543
Amounts owed by Group undertakings are unsecured, bear no interest and have no fixed repayment date.
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Company Financial Statements
5. Deferred taxation
At 1 January
Changes in provision
At 31 December
The balance of the deferred tax asset consists of the tax effect of the timing differences in respect of:
Other timing differences
Total deferred tax (note 4)
6. Creditors: Amounts falling due within one year
Bank loan
Trade creditors
Amounts owed to Group undertakings
Corporation tax
Other taxes and social security
Other creditors
Accruals and deferred income
2016
£'000
122
190
312
2016
£'000
312
312
2016
£’000
35,000
56
45,224
1,765
59
6
643
82,753
2015
£'000
-
122
122
2015
£'000
122
122
2015
£’000
-
24
2,478
1,965
58
2,517
950
7,992
The bank loan of £35,000,000 relates to a drawdown of the revolving credit facility as described in note 22 of the Group Financial
Statements.
7. Share capital
77,392,862 (2015:77,236,263) ordinary shares of 64p each
Ordinary shares
At 1 January
Issued on 27 March 2015
Issued on 2 April 2015
Issued on 27 May 2016
2016
£’000
49,531
2016
£’000
49,431
-
-
100
49,531
2015
£’000
49,431
2015
£’000
2,250
30,000
17,181
-
49,431
On 27 March 2015, 30 million ordinary shares of 100p each were issued at par and subsequently the entire share capital of the
Company was subdivided into 50,390,625 ordinary shares of 64p each.
On 2 April 2015 26,845,638 new ordinary shares of 64p each were issued at 149p each. The premium arising on issue is shown
net of transaction costs amounting to £3.1 million.
On 27 May 2016 156,599 ordinary shares of 64p each were issued as part of the IPO Restricted share option scheme.
99
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FINANCIAL STATEMENTS
Notes to the Company Financial Statements
8. Share-based payments
Under the Company’s equity settled share option scheme, share options are granted to executive Directors and to selected
employees and were granted on admission of the Company to AIM. The extent of vesting awards granted to executive Directors
of the Company (other than the IPO Restricted Share Award) will be subject to performance conditions set by the remuneration
committee. The extent of vesting of awards granted to other participants may be subject to performance conditions set by the
Remuneration Committee.
The weighted average remaining period until expiry for the awards outstanding at 31 December 2016 is 8.6 years (2015: 9.3 years).
The fair value of nil cost awards granted under both the IPO Performance Awards and IPO Restricted Awards is the market value
of the related shares at the time of grant.
The weighted average fair value at 31 December 2016 is £1.65 (2015: £1.49)
All options issued are nil cost awards and therefore there is no range of weighted average exercise price, as all are nil.
2016 Performance Award
The performance condition applying to the 2016 Performance Awards is based on the growth in the Company’s underlying basic
Earnings Per Share (EPS). 25% will vest for achieving growth in underlying basic EPS of CPI plus 3% per annum increasing on
a straight line basis up to 100% vesting for achieving growth of CPI plus 8% per annum between 2016 and 2018. A 12 month
holding period applies to the 2016 Performance Awards.
IPO Performance Award
The performance condition applied to the IPO Performance Award will be based on the growth in the Company’s underlying basic
earnings per share from 2014 to 2017. 25% of each IPO Performance Award will vest for achieving growth in adjusted earnings
per share of CPI plus 4% per annum increasing on a straight-line basis up to 100% vesting for achieving growth in adjusted
earnings per share of CPI plus 10% per annum. 50% of the IPO Performance Award vest on the third anniversary of Admission
and the remaining 50% vest on the fourth anniversary subject to continued employment. The contractual life of the option is
10 years and there are no cash settlement alternatives.
IPO Restricted Share Award
The IPO Restricted Share Award vests in three equal tranches on the first, second and third anniversaries of Admission.
The expense recognised for share-based payments in respect of employee services received during the year to 31 December
2016 is £1,313,000 (2015: £556,000).
The following tables illustrate the number and weighted average exercise price (WAEP) of, and movements in, share options during
the year.
2016
No.
2016
WAEP
2015
No.
2015
WAEP
2016 Performance Award
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Outstanding as at 31 December
IPO Performance Award
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Outstanding as at 31 December
Exercisable as at 31 December
-
675,364
(14,563)
660,801
-
-
-
-
2016
No.
2016
WAEP
1,459,730
-
(53,690)
1,406,040
-
100
-
-
-
-
-
-
-
-
-
2015
No.
-
1,486,575
(26,845)
1,459,730
-
-
-
-
-
2015
WAEP
-
-
-
-
-
243973 MMH AR pp94-pp101 FN.qxp 17/03/2017 00:06 Page 101
Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notes to the Company Financial Statements
8. Share-based payments (continued)
IPO Restricted Share Award
Outstanding as at 1 January
Granted during the year
Exercised
Outstanding as at 31 December
Exercisable as at 31 December
2016
No.
2016
WAEP
2015
No.
2015
WAEP
469,798
-
(156,599)
313,199
-
-
-
-
-
-
-
469,798
-
469,798
-
-
-
-
-
-
The fair value of options granted during the year was £2.06 (2015: £1.49). The fair value of equity settled share options granted
was based on market value on 13 June 2016 when the share options were granted.
9. Dividends
Paid during the year
Final dividend for 2014
Interim dividend for 2015
Final dividend for 2015
Interim dividend for 2016
2016
£’000
-
-
1,858
1,393
2015
£’000
15,000
448
-
-
A final dividend of £15,000,000 for the year ended 31 December 2014 was paid in March 2015 before Admission representing a
payment of 666.67p per ordinary share in issue and 426.67p per share after adjustment to reflect the impact of the sub-division
of shares described in note 7.
A final dividend of £1,858,000 for the year ended 31 December 2015 was paid in March 2016. This represented a payment of
2.40p per ordinary share in issue at that time.
An interim dividend in respect of the year ended 31 December 2016 of £1,393,000 representing a payment of 1.80p per ordinary
share in issue at that time was paid on 23 September 2016. An interim dividend in respect of the year ended 31 December 2015
of £448,000 representing a payment of 0.58p per ordinary share in issue at that time was paid on 25 September 2015.
A final dividend of 3.70p per share in respect of the year ended 31 December 2016 is to be proposed at the annual general meeting
on 23 May 2017. The ex-dividend date will be 20 April 2017 and the associated record date will be 21 April 2017. This dividend
will be paid subject shareholder approval on 26 May 2017 and these financial statements do not reflect this final dividend payable.
10. Transactions with related parties
The Company has taken advantage of exemption, under the terms of Section 33 of FRS 102, not to disclose related party
transactions with subsidiaries within the Group
The parent undertaking of the largest group of undertakings for which group financial statements are drawn up and of which the
Company is a member is Marshall of Cambridge (Holdings) Limited and is therefore considered to be the ultimate parent company.
Copies of the group financial statements for Marshall of Cambridge (Holdings) Limited can be obtained from Airport House, The
Airport, Cambridge, CB5 8RY.
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SHAREHOLDERS INFORMATION
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting (the “AGM”) Marshall Motor Holdings Plc (the “Company”) will be held at
Airport House, the Airport, Cambridge CB5 8RY on 23 May 2017 at 11.00 a.m. for the following purposes of considering and, if
thought fit, passing the following resolutions which will all be proposed as ordinary resolutions:
1. Report and accounts
To receive the audited annual accounts of the Company for the year ended 31 December 2016 together with the directors’ reports
and the auditors’ report on those annual accounts.
2. Declaration of dividend
To declare a final dividend of 3.70p per ordinary share for the year ended 31 December 2016 payable on 26 May 2017 to
shareholders who are on the register of members of the Company on 21 April 2017.
3. Re-appointment of director
To re-appoint Peter Jonson as a director, who retires by rotation in accordance wit the Company’s articles of association and offers
himself for reappointment.
4. Re-appointment of director
To re-appoint Christopher Walkinshaw as a director, who, having been appointed since the last annual general meeting of the
Company, retires in accordance with the Company’s articles of association and offers himself for reappointment.
5. Re-appointment of auditors
To re-appoint Ernst & Young LLP as auditors of the Company to hold office from the conclusion of this Annual General Meeting
until the conclusion of the next general meeting at which accounts are laid before the Company.
6. Auditors’ remuneration
To authorise the directors to determine the remuneration of the auditors.
Dated 20 March 2017
By Order of the Board
Stephen Jones
Company Secretary
Registered Office:
Airport House
The Airport
Cambridge
CB5 8RY
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Marshall Motor Holdings plc | Annual Report & Accounts 2016
Notice of Annual General Meeting (continued)
Notes
1. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), only those members registered
in the register of members of the Company at close of business on 19 May 2017 (or if the AGM is adjourned at close of
business, two working days before the time fixed for the adjourned AGM) shall be entitled to attend and vote at the AGM in
respect of the number of shares registered in their name at that time. Any changes to the register of members after such time
shall be disregarded in determining the rights of any person to attend or vote at the AGM.
2.
3.
If you wish to attend the AGM in person, you should make sure that you arrive at the venue for the AGM in good time before
the commencement of the meeting. You may be asked to prove your identity in order to gain admission.
In the case of joint holders of shares, the vote of the first named in the register of members who tenders a vote, whether in
person or by proxy, shall be accepted to the exclusion of the votes of other joint holders.
4. A member that is a company or other organisation not having a physical presence cannot attend in person but can appoint
someone to represent it. This can be done in one of two ways: Either by the appointment of a proxy (described in Note 6
below) or of a corporate representative. Members considering the appointment of a corporate representative should check
their own legal position, the Company’s articles of association and the relevant provision of the Companies Act 2006.
5. Copies of the executive directors’ service contracts with the Company and any of its subsidiary undertakings are available for
inspection at the registered office of the Company during the usual business hours on any weekday (Saturday, Sunday or
public holidays excluded) from the date of this notice until the conclusion of the AGM and will also be available for inspection
at the place of the AGM from 9 a.m. on the day of the AGM until its conclusion.
6. CREST members who wish to appoint a proxy or proxies through the CREST proxy appointment service may do so for the
Meeting (and any adjournment thereof) by following the procedures described in the CREST Manual. CREST personal
members or other CREST sponsored members (and those CREST members who have appointed a voting service provider)
should refer to their CREST sponsor or voting service provider, who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a
“CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (“Euroclear”)
specifications and must contain the information required for such instructions, as described in the CREST Manual. The
message (regardless of whether it relates to the appointment of a proxy or to an amendment to the instruction given to a
previously appointed proxy) must, in order to be valid, be transmitted so as to be received by Capita Registrars, RA10, by
11.00 a.m. on 19 May 2017. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which Capita Registrars is able to retrieve the message by
enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
CREST members (and, where applicable, their CREST sponsors or voting service providers) should note that Euroclear does
not make available special procedures in CREST for any particular messages. Normal system timings and limitations will
therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned
to take (or if the CREST member is a CREST personal member or sponsored member or has appointed a voting service
provider, to procure that his CREST sponsor or voting service provider takes) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members
(and, where applicable, their CREST sponsors or voting service providers) are referred, in particular, to those sections of the
CREST Manual (available at www.euroclear.com/CREST) concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncertificated Securities Regulations 2001 (as amended).
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SHAREHOLDERS INFORMATION
Company Information
Registered Office:
Company websites:
Nominated Adviser and Broker:
Auditors:
Joint Bankers:
Legal Advisers to the Company:
Registrar:
Airport House
The Airport
Cambridge CB5 8RY
www.mmhplc.com
www.marshall.co.uk
www.marshall-leasing.co.uk
Investec Bank plc
2 Gresham Street
London EC2V 7QP
Ernst & Young LLP
One Cambridge Business Park
Cambridge CW4 0WZ
Barclays Bank plc
1 Churchill Place
London E14 5HP
HSBC Bank plc
8 Canada Square
London E14 5HQ
Dentons UKMEA LLP
One Fleet Place
London EC4M 7WS
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
104
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Marshall Motor Holdings plc
Annual Report & Accounts 2016
(cid:129) 24 brands (cid:129) 103 locations (cid:129) 25 counties
www.mmhplc.com
Marshall Motor Holdings plc
Airport House, The Airport, Cambridge, CB5 8RY
© 2017 Marshall Motor Holdings plc